MA's PRIM Fires Goldman from Equity Mandate

February 6, 2008 ( - The Massachusetts Pension Reserves Investment Management (PRIM) board on Tuesday fired Goldman Sachs Asset Management (GSAM) from a $1.2-billion equity mandate.

Reuters reported that PRIM officials made the decision at a meeting in Boston after being told that GSAM was delivering lackluster returns and that it had reorganized some of its money managers in a way that concerned PRIM staff. The PRIM board manages the Bay State’s $53.7 billion pension fund.

Pension fund staff members discovered last fall that Goldman planned to merge its quantitative research group with money managers who worked with hedge funds. The new group would have employed about 130 people, but Goldman quickly cut about 20 positions, Chief Investment Officer Stan Mavromates said, according to Reuters.

The pension fund was especially unhappy with how the new group would be run, with a new head to be named from the hedge fund unit. “We feel very uncomfortable with the changes GSAM is making and we didn’t want to wait around for them,” Mavromates said, according to Reuters.

At the same time, the Goldman money managers were only producing 2.86% returns on the equity holdings compared to a 5.29% S&P 500 showing during a comparable period.

Staff members told trustees at a regularly scheduled meeting that their dissatisfaction grew after a meeting last month with Goldman in New York, which they said did not go well.By the time Mavromates and his colleagues returned to Massachusetts, Goldman had called to report even more changes. “Overnight they had information that they didn’t have the day before? That sounded odd,” Mavromates said.

“We had an unimpressive visit with GSAM and recommend that they be terminated,” Mavromates told trustees . The trustees voted for the termination after the meeting.