Little-Known RhumbLine Advisers in Line for $1 Billion PRIM Allocation

An overallotment for State Street becomes a windfall for the female- and minority-owned firm.

When the $95.7 billion Massachusetts Pension Reserves Investment Management (Mass PRIM) fund reported its investment performance last week, all the attention was on the record 29.5% return by the fund’s portfolio for fiscal year 2021. But the results, which were the highest in the pension fund’s 35-year history, overshadowed what was also a big day for little known Boston-based investment management firm RhumbLine Advisers.

At the investment committee meeting, Mass PRIM staff recommended that the fund approve an initial allocation of up to $1 billion to the RhumbLine Passive S&P 500 Index. The move was made to reduce the concentration of assets managed by State Street Global Advisors, as it is the pension fund’s policy that no firm should manage more than 25% of its assets and State Street’s share had grown to 25.9%.

PRIM staff members describe RhumbLine as a diverse, female- and minority-owned institutional investment management firm and said the allocation falls under its FUTURE Initiative to increase diversity and equity.

In February, the Act Enabling Partnerships for Growth was signed into Massachusetts state law, setting goals to increase the diversity of PRIM’s investment managers and other vendors to at least 20%. And in March, Mass PRIM’s board voted to increase its diversity standards, which included a new policy that requires at least 20% of suppliers, contractors, and vendors used by a company be minority-owned businesses, and at least 20% of suppliers, contractors, and vendors used by a company to be woman-owned businesses.

PRIM says it has $5.3 billion in assets, or nearly 6% of the fund, allocated to diverse investment managers as of the end of March, up from $1 billon five years ago. If approved, the RhumbLine allocation would boost that to at least $6.3 billion.

With $92.4 billion in assets under management (AUM) and a total staff of just 24, RhumbLine is a fraction of the size of State Street Global Advisors, which has $3.5 trillion in AUM and more than 2,500 employees.

As of the end of June, RhumbLine invested in 60 index products for 287 clients in 38 states and offered commingled funds to qualified clients with at least $5 million in assets and separately managed accounts. The firm, which was founded in 1990, has also more than tripled its AUM over the past 10 years.

RhumbLine says it uses three different strategies to construct portfolios: replication, sampling, and optimization. The firm also describes its investment process as quantitative and model-driven, and it reviews every portfolio daily using automated management reports.

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