The board of Massachusetts PRIM (Pension Reserves Investment Management), the state pension fund, today voted to outsource some of its foreign-exchange transactions to Russell Implementation Services, The Boston Globe has reported. The decision comes as the pension accuses its custodian, BNY Mellon, of overcharging the fund on foreign exchange transactions over a decade-long period.
The pension hopes contracting Russell as a third-party FX provider will help to cut costs on small currency trades related to overseas stock investments, the newspaper reported.
Russells agency foreign exchange model has been operating since 2003 and is designed to cut transaction costs through a cost-effective alternative process to traditional foreign exchange execution services. It is also designed to increase transparency around the pricing of foreign exchange transactions.
The secretary of state in Massachusetts has filed a lawsuit against BNY Mellon on behalf of the pension to recover some $29 million he says the custodian overcharged the fund on FX transactions. BNY Mellon denies any wrongdoing.
It is just the latest development in a series of lawsuits by state pension funds against their custodians over the pricing of foreign transaction fees. See below for more from Global Custodian:
Pension Funds Take On Custodians Nov. 29, 2009
Global Custodian Cover Story: Conspiracy of Silence? March 3, 2010
BNY Mellon Sued By Virginia, South Carolina Jan. 31, 2011
Massachusetts Pension Reportedly Investigating BNY Mellon FX Fees May 31, 2011
CalPERS To Pay $1 Million More Per Year for New State Street Custody Contract July 7, 2011
New York Attorney General Sues BNY Mellon for $2 Billion Oct. 4, 2011
BNY Mellon Loses Bid to Dismiss $1 Billion Virginia FX Lawsuit Nov. 21, 2011
(CG)