ICYMI: Massachusetts Treasurer Says Emerging Manager Program 'Win-Win' for Everybody
Treasurer Deborah Goldberg helped write a law that lets Massachusetts pension plans back emerging firms with diverse leadership
BY: Preeti Singh- Wall Street Journal
In early May, the largest state pension manager in Massachusetts laid out plans for creating an emerging manager program to increase its engagement with diverse fund sponsors.
State Treasurer Deborah Goldberg, a Democrat who leads the Massachusetts Pension Reserves Investment Management Board, helped state Rep. Chynah Tyler and Sen. Paul Feeney, both fellow Democrats, write a bill mandating the program, which became law earlier this year. Ms. Goldberg is chair of Mass PRIM, as the board is known, overseeing the $90 billion Massachusetts Pension Reserves Investment Trust.
Mass PRIM aims to increase the diversity of the investment managers and consultants it hires by allocating at least 20% of the system's assets to diverse emerging managers. In addition, the plan is designed to expand Mass PRIM's roster of diverse consultants to at least 20% of the total.
Ms. Goldberg, who was first elected treasurer in 2014, spoke to WSJ Pro Private Equity on the importance of expanding economic opportunities for diverse investment managers and how the new law helps achieve that goal. Responses have been edited for clarity and length.
WSJ: Why did you advocate for this bill?
Ms. Goldberg: I have tried to create economic opportunity and stability for everyone in Massachusetts and I identified a lot of challenges and issues for diversity and inclusion in investments, based on my own experiences as a woman and through conversations with other state treasurers and people. We were planning on filing the bill last spring before the murder of George Floyd, and we advocated strongly after the event to ensure it passed.
Our Massachusetts legislature reserves the right to make certain changes at PRIM. For instance, the divestment in South Africa [in 1983] was done by the legislature. Currently, [PRIM] cannot and will not divest from fossil fuels till the legislature instructs [it] to do so. With this new [law], we can now [diversify our investment managers] in a more structured way.
WSJ: How does the new law enable Mass PRIM to expand its investments based on diversity and inclusion?
Ms. Goldberg: 'If you build it, they will come'--it's a phrase which is kind of corny but reflects what the [law] tries to achieve. The PRIM investment guidelines created a barrier that could not be surpassed. For instance, [PRIM] wanted to work with people who had a prior history of working together successfully. So if you were a person of color at a private-equity firm and decided to leave and work with your friend who worked at an investment bank and another who worked at a venture fund, you didn't fit the risk profile at Mass PRIM, even though you had a fabulous team.
We are pulling every lever we can that will give opportunities to firms formed by women, people of color and people with disabilities who face discrimination. When these firms are allowed to grow and succeed and become aggressive competition for the larger firms, the others are at a risk [of] sitting on their laurels. So we will create competition.
WSJ: Does this interfere with the fiduciary duties of PRIM to deliver the best returns for its beneficiaries?
Ms. Goldberg: The data shows that organizations that have more people of color and more women are more financially successful. Period. There is no violation of the gold-line standard of fiduciary duty. There's no imbalance of the fiduciary duty. We are educating people on new ways of looking at things that may be looked at as social goals but are not really social goals. They are win-win for everybody.
WSJ: Did you look for guidance from other state treasurers in writing this measure?
Ms. Goldberg: I have a very strong relationship with Illinois Treasurer Michael Frerichs and Connecticut Treasurer Shawn Wooden and talked a lot to Michael on the outcomes of their investment programs for diverse asset managers. We looked a lot at the language in their bill when we were writing up our own.