MA PRIM Pulls Back $315M from Fidelity Equity Management

February 7, 2006 ( - Trustees of Massachusetts' $40.2-billion state pension fund have given final approval to an emergency move made last year to fire Fidelity Investments as one of the fund's stock pickers.

According to a Reuters news report, the Pension Reserves Investment Management (PRIM) board’s latest decision affirms the one made in December 2005 to pull back the $315 million the world’s biggest mutual fund firm had invested in domestic large cap equities for the fund. The reason: fund manager Steven Kaye who was in charge of the retirees’ account had left his post.

Kaye managed pension money for the Massachusetts fund and Fidelity’s $31 billion Growth & Income fund. He is currently on sabbatical from the firm, Fidelity spokeswoman Anne Crowley told Reuters.

While the pension fund had in previous years warned that it might review its relationship with Fidelity because of Kaye’s performance and an investigation into a gifts scandal, this decision was based only on the personnel change, Michael Travaglini, executive director of the PRIM board told Reuters (See  MA Could Sack Fidelity for Subpar Performance ).  Even with the state’s decision, Fidelity still manages $365 million in high yield bonds for the pension fund, Travaglini said.

But Fidelity may see the pension fund pull away more money later this year when it reduces its investment in high-yield bonds to 5% from 9%, Travaglini said.

Many pension funds are required to review allocations when significant changes are made to the lineup of their investment professionals, and so the Massachusetts fund had to act in December before its next regularly scheduled meeting at which manager changes are traditionally discussed and approved, according to the news report.