MA Pension Board to Ponder Economically Targeted Investments

August 14, 2003 ( - The Massachusetts pension board will consider investing up to 2% of its $28 billion in assets in housing and business-development projects that could produce economic and social benefits for the state.

The proposals could include restarting a low-cost mortgage program for state and local government employees; providing venture capital-like funding to small companies in overlooked industries, such as manufacturing and services; and investing in loans to Massachusetts small businesses that are guaranteed by the federal government, according to the Boston Globe.

The practice is called “economically targeted investments,” and is being pushed by state Treasurer Timothy Cahill, who is chairman of the Massachusetts Pension Reserves Investment Management Board.

Cahill said the board will consider a policy that requires each project to meet five criteria before the board will invest in it. Chief among them:

  • they must have equal or better returns than similar investments
  • they should be run by seasoned investment managers with direct experience in the field
  • they should target companies, industries, or regions suffering a so-called capital gap, meaning they can’t get conventional sources of funding
  • the entire portfolio must be diversified across investment classes.

Cahill said the initial investments, if approved by the board, would likely be in conservative, lower-risk projects that produce modest economic or social benefits. “We’re not trying to change the world, but if we can improve the Massachusetts economy even a little bit with this, then it shows why managing a large sum of money can be beneficial, not only to retirees, but to the general taxpayers,” he told the Globe.

More than half of the public pension systems in the United States do some kind of economically targeted investing, with mixed results.