A New Federal Pilot Program for Small and Emerging Pension Fund Managers

This month, the federal Pension Benefit Guaranty Corporation (PBGC) introduced the Smaller Manager Pilot Program.  This exciting opportunity opens the door for emerging manager (EM) and other smaller firms to manage up to $250 million in U.S. core fixed Income federal pension funds.  EMs are generally defined as ethnic minority fund managers (or fund of fund managers) whose funds typically fall below $2 billion.  The new pilot program will allow EMs to compete in a request for proposal (RFP) that opened on June 15th and closes at the end of July.  The review process will identify up to five firms that will be granted fund management contracts for fixed Income portions of the PBGC funds sometime in mid to late 2016.

Emerging manager funds often outperform larger non-diverse funds across studies by both public and private entities.¹ By utilizing emerging managers, funds can potentially Increase and diversify investments into high-growth demographic sectors, while fostering innovation and healthy competition.

The Minority Business Development Agency (MBDA) supports the work of minority business enterprises (MBEs) across the country and offers specific support for minority-owned service companies, including legal, accounting, human resources, and financial firms. When it comes to having access to fund management opportunities, MBDA works through a national network of 44 MBDA Business Centers to connect MBEs to such opportunities.  MBDA Business Centers have had great success in doing this with both private and public funds in New York and other locations.

For more information on the PBGC Smaller Asset Managers Pilot Program, including the RFP, please visit: 
https://www.fbo.gov/spg/PBGC/CMO/PD/PBGC01-RP-15-0025/listing.html

On June 8, PBGC hosted a pre-bidder's conference to help smaller asset managers understand the process that the agency uses to select money managers. A video is available for firms that could not attend.

1 Chartered Alternative Investment Analyst (CAIA) Association. AllAboutAlpha.com. Smaller Hedge Fund Managers Outperform: A Study of Nearly 3,000 Equity Long/Short Hedge Funds. Retrieved from http://allaboutalpha.com/blog/2013/02/18/smaller-hedge-fund-managers-outperform-a-study-of-nearly-3000-equity-longshort-hedge-fundson June 29, 2015.