Michigan Small Emerging Manager Program launched

Michigan Gov. Gretchen Whitmer and State Treasurer Rachael Eubanks on Thursday announced the launching of a new program that provides smaller investment fund managers an opportunity to grow by managing state pension fund dollars.

The Michigan Small Emerging Manager Program will expand access to capital for emerging small private-market investment managers, focusing on generating returns and increasing the diversity of investments with a broader range of managers.

The program’s preference will be to invest with Michigan-based investment managers, assuming they can achieve market rates of return.

“I am proud to announce the Michigan Small Emerging Manager Program,” Whitmer said. “This program will provide opportunities to small businesses and fund managers who are underrepresented in the investment sector and also benefit Michigan’s public school and state employee retirees. It’s an all-around win for our state.”

The State of Michigan Retirement Systems (SMRS) is providing a $300 million commitment that will be co-managed by two industry leading fund managers.

Global investment fund managers Barings and GCM Grosvenor will manage the program, providing expertise and assistance to smaller investment fund managers
with the ability to closely monitor their portfolios. Both investment firms run similar programs more broadly across the country.

“This is an area of the market that we don’t often access and we view as a strategic investment opportunity,” Eubanks said. “When managing a large and growing retirement fund like Michigan’s, managers that are running small funds may be unintentionally overlooked. This program changes that. We’re looking for teams eager to make great returns and potentially grow and graduate into a larger manager.”

Over the next few years, Barings and GCM Grosvenor will look for emerging, small private market investment managers that meet the target criteria, conduct thorough diligence, negotiate market terms, provide capital to managers and manage the portfolio.

Industry data suggests that small managers perform well when compared to established managers. Small managers can be nimbler and more focused, often well-motivated to build their businesses.

“Barings has a 30-year history of investing with emerging managers, and we are excited to partner with SMRS on this important initiative,” said Mina Nazemi, managing director of Barings. “We have strong conviction that investing with small and emerging managers can fuel job growth in local economies and can also generate attractive investment returns. We are honored to be able to provide access to this segment of the market.”

“We are thrilled to be part of Michigan’s emerging manager program,” said Jon Levin, president of GCM Grosvenor. “We believe our experienced and deep team can add value to the partnership by leveraging its wide network to identify and invest with top small emerging managers.”

The Michigan Department of Treasury’s Bureau of Investments provides investment management services and serves as a fiduciary to the SMRS trust funds. The SMRS collectively contains the retirement assets for all state-level public pension funds on behalf of retired and active public-school employees, state employees, state police and judges.

The SMRS invests in various assets to meet or exceed the actuarial rate of return over the long term and diversifies assets to reduce risk.

Smaller managers interested in the program should visit the Michigan Small Emerging Manager Program website at www.msemprogram.com.