Audit of the Pension Reserves Investment Management Board

This is a state performance audit of the Massachusetts Pension Reserves Investment Management Board, covering July 1, 2019 through January 15, 2022.

“This report details the audit objectives, scope, methodology, findings, and recommendations for the audit period, July 1, 2019 through January 15, 2022.”

Auditors checked whether PRIM followed its own emerging-manager investment target and whether it made a plan to increase use of investment managers owned by minorities, women, or people with disabilities.

“We also determined whether the PRIM Board developed a plan to ensure that not less than 20% of its investment managers2 are owned by minorities, women, or people with disabilities,3 in accordance with Section 23(8)(a–c) of Chapter 32 of the General Laws.”

PRIM manages investments for major public retirement funds, so its decisions affect money set aside for public employee pensions and retiree benefits.

“The PRIT Fund, established by the same legislation, is the investment portfolio for the assets of the Massachusetts State Employees’ Retirement System, the Massachusetts Teachers’ Retirement System, the State Retiree Benefits Trust Fund, and other Massachusetts retirement systems that elect to invest in the fund.”

If you are a Massachusetts taxpayer, public employee, teacher, retiree, or someone covered by one of these retirement systems, this audit gives a check on whether the state pension investment board followed key investment and diversity-related rules.

“As of June 30, 2021, there were 100 retirement systems with investments in the PRIT Fund.”

The auditors answered yes to both audit questions: PRIM met its emerging-manager investment objective and developed the required plan for diverse managers.

“Did the PRIM Board develop a plan to ensure that not less than 20% of its investment managers are owned by minorities, women, or people with disabilities, in accordance with Section 23(8)(a–c) of Chapter 32 of the General Laws?”

PRIM must keep reporting yearly on its progress toward the law’s investment manager goals.

“Annually, not later than January 15 of each year, PRIM shall file with the house and senate committee on ways and means and with the joint committee on public service a report detailing its progress toward implementing the policies and goals outlined [in Section 23(8)(b)].”

The audit is significant because PRIM oversees a very large pension investment fund, with nearly $95.7 billion in net assets in fiscal year 2021.

“Net assets in the PRIT Fund totaled $74,985,759,000 for fiscal year 2020 and $95,698,845,000 for fiscal year 2021.”

An “emerging manager” generally means a smaller or newer investment manager, or one that is minority-owned or women-owned.

“According to the PRIM Board’s Investment Policy Statement, emerging managers are “investment managers with less than $2 billion of assets under management that may have shorter track records or investment managers that are minority-owned or women-owned.””