The Pension Benefit Guaranty Corporation (PBGC) selected five investment management firms to participate in its pilot program for Smaller Asset Managers.
The Smaller Asset Managers Pilot Program, announced last year, was created to reduce barriers that smaller investment firms face when competing for the agency’s business. Before the pilot program, these contracts were out of reach because the minimum required assets under management, often in the billions, were too large for small firms to qualify.
Each of the firms will be responsible for investing $175 million in U.S. core fixed income instruments. PBGC selected U.S. core fixed income as the initial asset class for the pilot because research indicates that smaller asset managers are likely to add value relative to the benchmark with these assets. Additionally, the majority of PBGC’s assets are invested in fixed income.
The firms are:
- C. S. McKee, LP, Pittsburgh, Pennsylvania;
- LM Capital Group, LLC, San Diego, California;
- Longfellow Investment Management Co., LLC, Boston, Massachusetts;
- New Century Advisors, LLC, Chevy Chase, Maryland; and
- Pugh Capital Management, Inc., Seattle, Washington.
The firms will be evaluated on their performance, after fees, against the portfolio benchmark (Barclays Capital US Aggregate Bond Index) over a full market cycle of highs and lows at an acceptable level of risk.To be considered for the program, firms had to manage a minimum of $250 million in assets, have a five-year performance history, and undergo the same competitive evaluation as other PBGC money managers. Additionally, PBGC limited its allocations to no more than 20% of a firm’s assets under management, which the agency says is in keeping with industry standards.