Biden Win Welcomed As Positive for Markets

November 16, 2020 PIonline.com $16 an issue / $350 a year

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Angela Weiss/AFP Biden win welcomed as positive for markets

Managers say lack of Democratic RELATED NEWS two runoff Senate elections are held. For now, mandate good news for investors n Changing of the guard the Senate remains puts Department of under Republican By HAZEL BRADFORD Labor proposals on the control, while Demo- clock. Page 3 crats control the The most expensive election in U.S. history re- n Managers and plan House. sulted in the White House changing hands but not sponsors weigh in post- Even the presiden- much else so far, which for markets at least could election. Page 10 tial election won’t be be a good thing, observers say. finalized until states An estimated $14 billion was spent on the 2020 certify election results and Congress counts the election cycle, nearly half of which was for the pres- electoral votes, which is expected in January. idential race, according to political spending re- The lack of dramatic change in Congress means search group Center for Responsive Politics. It did that President-elect Joe Biden may be able to ful- not do much for the political stalemates that will fill some campaign promises — like rejoining the WORK TO DO: President-elect Joe Biden is expected to move quickly to undo some Trump policies. continue at least until January, when Georgia’s SEE ELECTION ON PAGE 26

Investing SPECIAL REPORT INDEX MANAGERS ESG laggards ETF growth becomes big could discover plus for index managers debt drying up Indexed assets up 5.4%; MORE ON INDEX MANAGERS fixed-income strategies n ESG indexes grow in tandem with Investors see way to coerce see boost from pandemic rising awareness. Page 20 those ignoring climate change n For the full report, go to pionline. By TRILBE WYNNE com/indexmanagers20

By SOPHIE BAKER Despite a global pandemic that trillion the previous year. upended markets early this year, Worldwide indexed assets man- Companies that fail to align their busi- worldwide indexed assets under aged in exchange-traded funds and BIG CHANGES: Armando nesses to commitments necessary to management rose for the fourth exchange-traded notes continued to Senra believes the achieve the goal of the Paris Agreement on consecutive year, increasing 5.4% to grow in 2020, rising 11.6% to $4.81 growth of fixed-income climate change may soon find themselves $15.35 trillion on the strength of trillion as of June 30. Over the five ETFs with managers and being denied capital they want to raise on ETF growth for money managers years ended June 30, passively man- asset owners is a major bond markets. that participated in Pensions & In- aged assets in ETFs and ETNs have shift in the market. A handful of investors have started im- vestments’ annual survey. increased 124.5%, while worldwide plementing or are considering a new man- U.S. institutional tax-exempt in- indexed assets under management tra: Deny the debt. Discussed in academic dex assets rose to $4.85 trillion as of grew 55.5% over the same period. circles over recent years, the idea is a way June 30, a 3.5% increase from $4.69 CONTINUED ON PAGE 18 for institutional investors to express their climate change views and requirements of portfolio companies in their bond hold- Pension Risk Transfer ings. By refusing to give their cash to companies looking to raise funds on the primary bond markets, they hope to force Vincent Ricardel Buyout activity up again after pandemic-induced pause climate-related progress. The Paris Agreement is a global pact to By ROB KOZLOWSKI RELATED NEWS the quarter ended June 30, down limit the rise in global temperatures this from $4.2 billion in the second century to well below 2 degrees Celsius — U.S. corporate pension plan buy- n Insurers being forced to add more quarter of 2019, according to the and ideally below 1.5 degrees Celsius. out volume is picking up again after risk to gain better returns. Page 3 LIMRA Secure Retirement Insti- The importance of denying funding and a drop in activity in the second tute’s most recent survey of the 17 refinancing to certain companies cannot be quarter as plan sponsors shifted should total about $25 billion, down insurers that make up the U.S. pen- underestimated, and pledges to invest in their attention to addressing the from $28 billion in 2019, according sion risk transfer market. green capital is not enough, sources said. economic effects of the pandemic, to experts. For the first half of 2020, deal vol- “A necessary condition for Paris align- STOP SIGN: Ari Jacobs said the industry experts said. Much of that expected drop is ume totaled $7 billion compared with ment is actually defunding or closing the liftout market was completely Still, even with a spate of recent the result of a slow second quarter. $9 billion in the first half of 2019. SEE DENIED ON PAGE 28 shut down for most of March. activity, overall volume for 2020 Buyout sales totaled $2.3 billion in SEE PRT ON PAGE 31 SOUND BITE Winning strategies revealed for year VOYA’S JOHN SIMONE: ‘Insurance companies don’t For the top managers in do anything radical. It’s like moving the direction Morningstar’s separate of an aircraft carrier. But they are making account/CIT database, go changes.’ Page 3 to PIonline.com/top- managers 2 | November 16, 2020 Pensions & Investments

IN THIS ISSUE Money Management

VOLUME 48, NUMBER 23 Defined contribution Manager assets continue to bounce back The Department of Labor finalized a rule ter was the worst since the fourth establishing requirements for registering as 24 publicly traded firms quarter of 2008, when total assets a pooled plan provider for pooled employer Ng Kevin see AUM increase 17.6% fell 11.5%. plans, known as PEPs. Page 6 All but two of the 24 reporting since first-quarter fall managers saw AUM growth during Election the latest quarter. In the quarter Pennsylvania Treasurer Joe Torsella was By CHRISTINE WILLIAMSON ended June 30, all managers saw a unseated in his re-election bid, while rise in total assets, but only two incumbent treasurers in North Carolina, Aggregate assets under manage- eked out a positive growth in the Oregon and Vermont each secured another ment by the 24 publicly traded first quarter of 2020. term. Page 27 money managers tracked by Pen- Markets were favorable in the sions & Investments grew to $28.35 third quarter, with the S&P 500 in- ESG trillion at the end of the third quar- dex returning 8.9% while the MSCI An initiative by the Sustainability Accounting ter as global markets and managers ACWI ex-U.S. index was up 6.3%. Standards Board to go deeper on human continued to recover from the ef- Fixed-income returns were muted, capital management practices has fects of the COVID-19 pandemic in with the Bloomberg Barclays U.S. investors encouraged. Page 4 the first quarter of 2020. Aggregate Bond index up 0.6% and The total AUM for the universe the Bloomberg Barclays U.S. Long Discussions of social issues and diversity as of Sept. 30 was 5.9% higher than Treasury Total Return (Value Un- were front and center at recent industry the $26.76 trillion in assets as of hedged) index up 0.1%. conferences. Page 21 June 30 and up 17.6% from the Managers benefited from “the The COVID-19 pandemic is accelerating $24.11 trillion managed as of March uplift in markets,” which buoyed insurers’ moves toward adopting stricter 31. The Sept. 30 figure is also 5% both assets and revenues into the and more defined environmental, social and higher than the high of $27.01 tril- fourth quarter, said Michael J. Cy- governance policies. Page 30 lion as of Dec. 31, 2019. prys, senior equity analyst covering PAYING OFF: Jennifer M. Johnson said Franklin Resources is already The 10% decline in the first quar- SEE EARNINGS ON PAGE 26 reaping the benefits from its recent acquisition of Legg Mason. Special report: Index managers Money Management

Managers with the largest percentage of Cutler Dave worldwide assets measured against ESG- specific indexes further increased those COVID causing allocations in 2020. Page 20 Washington Americans will no longer be able to invest concerns, shifts in Chinese companies that support Chinese military or intelligence activity under an executive order signed Nov. 12 by President in recruitment Donald Trump. Page 6 By DANIELLE WALKER Departments At deadline ��28 Frontlines ��8 Asset manager CEOs and other senior leader- By the numbers ��14 Hirings ��22 ship are navigating new workforce concerns Classified ��24 Opinion ��10 caused by the pandemic, including a pause on in- DC roundup ��16 RFPs ��24 person recruitment of early career professionals. Some executives say they are concerned Plan sponsor survey about how the talent pipeline from colleges and in progress universities will be impacted going forward, Pensions & Investments is accepting late while others see an opportunity to broaden their responses to the annual survey of the recruitment to a more diverse pool of candidates, largest U.S. retirement funds. Sponsors sources told Pensions & Investments. with combined U.S. pension and defined Mario J. Gabelli, founder, chairman and CEO of GAMCO Investors Inc. in Rye, N.Y., is con- contribution plan assets of $1.3 billion cerned that the pipeline from which GAMCO or more are eligible. Results will run typically recruits will be trimmed by the effects Feb. 8. of the coronavirus. To request a survey or obtain further He also questions how recruitment will be af- information, please contact Anthony fected now that firms are not able to visit cam- Scuderi at [email protected] or SEE RECRUITING ON PAGE 25 212-210-0140, or visit www.pionline. com/section/surveys. Defined Contribution

Entire contents ©2020 Crain Communications Inc. All rights reserved. Pensions & Investments (ISSN 1050-4974) is published biweekly by Crain Communications Inc., 150 N. Michigan Ave., Chi- Plans tackle problem of racial disparity in savings cago, Ill. 60601-7593. Periodicals postage paid at Chicago, Ill. and at additional mailing offices. Postmaster: Send address changes to Pensions & Investments, Circulation Dept., 1155 Gratiot Avenue, By MARGARIDA CORREIA median of $23,000 and of Illinois’ Gies College of Detroit, Mich. 48207-2912. $16 per issue; $350 per year in the Black families saving a me- Business in Urbana-Cham- U.S.; $375 per year in Canada; all other countries $475. ‘‘Canadian Amid the nation’s soul searching over ra- dian of $29,200, compared paign. The racial wealth gap Post International Publications Mail Product (Canadian Distribution) Sales Agreement No. 0293539’’ GST #136760444. Printed in U.S.A. cial, economic and social justice, some plan with $79,500 for white non- in retirement savings is not sponsors are turning greater attention to Hispanic families. due to racist behavior on the racial disparities in savings and participa- The gap not surprisingly part of plan sponsors but CRAIN COMMUNICATIONS INC tion rates in the retirement plans they offer is showing up in the retire- rather a complicated set of Keith E. Crain, Chairman employees. ment readiness of minority factors, including the make- Mary Kay Crain, Vice Chairman KC Crain, President “It certainly has gained a lot more inter- groups as measured by the up of the workforce itself, Mr. Chris Crain, Senior Executive Vice President est recently,” said Neil Lloyd, partner and National Retirement Risk Brown said. Lexie Crain Armstrong, Secretary head of U.S. defined contribution and finan- Index published by the “It’s not that any given em- Bob Recchia, Chief Financial Officer cial wellness research at Mercer in Vancou- Center for Retirement Re- ployer is saying, ‘I’m not go- G.D. Crain Jr., Founder (1885-1973) ver, British Columbia. search at Boston College. ing to cover somebody or I Mrs. G.D. Crain Jr., Chairman (1911-1996) The statistics plan sponsors are seeing More than 3 in 5 Hispanic am going to cover somebody indeed are sobering. More than two-thirds households (61%) and more MAKING LESS: Meredith Jones because of race,’” he said. Published every other Monday by Crain Communications Inc. Boston: 101 Federal St., Suite 1615A, 02110; Chicago: 150 N. Michigan Ave., 19th Floor, of white non-Hispanic families (68%) have than half of Black house- believes minority pay disparity is “They’re playing by the rules. 60601; London: 11 Ironmonger Lane, EC2V 8EY; El Segundo, Calif.: 400 Continental Blvd., 6th retirement account savings, compared with holds (54%) are at risk of a major factor in not saving They’re following the plan Floor, 90245-5074; New York: 685 Third Ave., 10017; San Francisco: 71 Stevenson St., Suite 41% for Blacks and 35% for Hispanics, ac- inadequate income in re- enough for retirement. qualification requirements.” 400, 94105; Washington D.C.: 601 13th St. NW, Suite 800 South, 20005. cording to the Economic Policy Institute, an tirement compared with Mr. Brown said one reason Address all subscription correspondence to Pensions & Investments, 1155 Gratiot Ave., Detroit, Mich. 48207-2912 or email [email protected]. independent non-profit think tank. Black 48% for whites. for “differential impact by race” is that re- Member of Business Publications Audit of Circulation and Hispanic families also lag their white Plan sponsors are not deliberately doing tirement plans typically do not to cover www.pionline.com peers in terms of how much they’ve been anything wrong, said Jeffrey Brown, profes- part-time workers, who tend to be dispropor- able to save, with Hispanic families saving a sor of business and dean of the University SEE DISPARITIES ON PAGE 25 Pensions & Investments November 16, 2020 | 3

Investing Virus, low rates pushing Arnold Adler insurers to take on risk

Illiquid private markets eyed MORE ON institutions group in INSURANCE the Americas at as good way to boost returns COMPANIES BlackRock in New York. “You see insur- n COVID-19 ers talking about in- By JAMES COMTOIS pandemic moving creasing their risk ex- insurers toward The COVID-19 pandemic and near-zero stricter ESG posure to find interest rate environment are driving insur- policies. Page 30 incremental yield. ance companies to turn to more illiquid as- And just generally sets within the private markets to capture speaking, there’s yield. been a focus on how to find yield in a lower- In a recent survey of global insurers con- rate environment.” ducted by BlackRock Inc., nearly half of in- Insurers are historically conservative and surers (47%) are looking to increase risk cautious investors that typically invest in in- within their portfolios, while roughly three- vestment-grade fixed income. But with rates quarters (73%) of respondents believe the being lower for longer, and since they are de- coronavirus pandemic will lead to funda- pendent on investment returns for income mental industrywide changes. and profitability and to match liabilities, in- “The low-interest-rate environment has surance companies are increasingly turning insurers really worried,” said Daniel Dunay, to riskier assets than they have traditionally managing director and head of the financial SEE INSURANCE ON PAGE 30 SPEEDING UP: John Simone said business from insurers has grown significantly over the course of 2020.

Regulation Pension Funds Changing of the guard puts U.K. superfund consolidators still see roadblocks DOL proposals on the clock By PAULINA PIELICHATA U.K. superfund consolidators could still face ob-

By BRIAN CROCE partner with Davis & Harman LLP Gerald Aberneithie stacles when helping plan sponsors with outsourc- in Washington. ing pension fund assets and liabilities despite When President-elect Joe Biden The Labor Department, which trustees receiving a long-awaited green light from is sworn in on Jan. 20, federal reg- has been busy in recent months the financial regulator. ulators, including the Department with a flurry of guidance and rule- The superfund idea, in which consolidating ve- of Labor, will have new marching making proposals on topics like hicles bring defined benefit assets as well as liabil- orders. proxy voting and fiduciary invest- ities of many smaller plans together, has been Some of recent regulatory ef- ment advice, has not determined teased by the U.K. Department for Work and Pen- forts made under the current ad- what rules will be finalized and in sions since 2018. Consolidators were seen as a good ministration may not come to frui- effect come Jan. 20. idea because they could ready smaller plans for an tion. Typically, when the White “The window is closing,” said Ju- insurance buyout that they were unlikely to achieve House shifts parties, the incoming lie K. Stapel, a Chicago-based part- on their own. president’s first regulatory act is to ner at law firm Morgan, Lewis & But even though some consolidators such as direct all federal agencies not to Bockius LLP. Clara-Pensions Ltd. and The Pension SuperFund publish any new regulations and Under the Administrative Proce- had appeared in the market, it wasn’t until Oct. 21 delay the effective dates for any dure Act, final rules have to be pub- that the U.K. Pensions Regulator moved closer to rules not yet in effect. “They put a lished in the Federal Register at clarifying how such consolidators could practically team in place to look at the pending least 30 days before taking effect. operate in the market. regulations and determine which That gives the Labor Department The regulator has now permitted plan sponsors ones they want to allow to move and other regulators until Dec. 20 to HOW IT’S DONE: Adam Saron said Clara will run assets using a fidu- to move corporate plans to consolidators — which forward,” said Michael L. Hadley, a SEE LABOR ON PAGE 30 ciary manager, with the end goal of purchasing insurance buyouts. SEE SUPERFUNDS ON PAGE 28

MLPs down, but not out? Plan sponsors began to allocate to master limited partnerships regularly in 2011. There were 50 consecutive hires for more than $3.3 billion without any terminations through 2016, according to P&I data. The unique space in the energy industry seemed more resilient to the ups and downs of oil and other energy price swings. Investors since 2014 have experienced signi cant losses. What now?

Buy high, sell low: Some pension funds that allocated to MLPs have now pulled the Distributions down: After consistent Value, or value trap? plug. Returns were disappointing to say the least. Based on P&I reporting dates, one pension levels, including many years of growth, MLPs MLPs, along with the entire energy fund allocated to MLPs in 2014 and sold in 2020. The fund’s total return would have been have seen an erosion of their distributions sector, have seen valuations and around -60% while the S&P returned more than 40% and bonds returned more than 20%. over the past year. However, according to share prices collapse in 2020. If Alerian’s Stacey Morris, “Most constituents distributions can stabilize at MLP index and reported mandates/termination are well positioned to afford their payouts current levels, there is a 2,000 $1,000 given their strong nancial positioning or signi cant valuation gap in MLPs

1,800 $800 prudent cuts already made.” compared with their history and on an absolute basis. 1,600 $600 Quarterly Alerian MLP index distribution percentage EV/EBITDA as of Sept. 30 1,400 $400 6% Current 10-year average 4% 1,200 $200 Alerian MLP Infrastructure index 2% 8.0 1,000 $0 0% 11.6 800 -$200 -2% Alerian Midstream Energy Select index Alerian MLP total return -4% 9.4 600 -$400 index (left axis) -6% 12.3 400 Size of reported mandate/ -$600 -8% termination (in millions; S&P 500 -10% 13.5 200 right axis) -$800 -12% 10.2 0 -$1,000 -14% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Utilities -16% 11.5 $40 $480 $925 $1,149 $255 $90 $384 -$39 $834 -$512 -$37 Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3 NET ANNUAL FLOWS (MILLIONS) 2015 2016 2017 2018 2019 2020 9.7 Sources: Alerian and industry reports Compiled and designed by Aaron M. Cunningham and Gregg A. Runburg 4 | November 16, 2020 Pensions & Investments

ESG Looking after employees becoming next big thing Pandemic steps up calls ing Standards Board. Human capital management for closer eye on human “has always been in the back- ground, but not as strong a voice as capital management this year. Investors are saying we want this information, we want dis- By HAZEL BRADFORD closure. Companies know that and are trying to figure it out. They are Investor demand for companies aware that this is on investors’ ra- to disclose how they manage hu- dars, so now they are spending man capital is getting a boost from time on how to track and disclose the events of 2020 and a new proj- it,” said Kelli Okuji Wilson, SASB ect at the Sustainability Account- analyst, sector lead-health care and head of the human capital research project. Launched in Janu- ary, the project gained greater weight almost immediately due to the COVID-19 crisis and renewed calls for social justice. The first phase of the SASB project, researching how to assess the respective human capital themes in all 77 industries covered by current SASB standards, is expected to wrap up by mid-2021, followed by

MORE RELEVANT: Kelli Okuji Wilson said the human capital project gained greater weight because of the COVID-19 crisis.

an industry heat map and ultimately development of a new standard framework. Along with determining the materiality of various human capital issues, the project will assess which issues are industry-specific or cut DWS—A DIFFERENT NAME, SAME LONG-STANDING across industries, create key issue categories and produce recommen- RREEF REAL ESTATE HERITAGE dations for a standard. SASB developed 77 industry standards designed to evolve along For 50 years, our rm has built upon its strong RREEF legacy to establish the size, with investors’ needs and to con- reputation and long-standing relationships that open doors for real estate opportunities. nect the measures to corporate performance. SASB also offers a mate- Local teams in key markets around the world provide a hands-on approach to identify riality map for the standards that long-term value potential. lets users compare disclosure topics in different industries and sectors, an engagement guide for in- That’s a heritage that may make a dierence in writing a story of success in real estate vestors and an implementation guide for companies. investing. Learn more at dws.com/institutional-realestate. Human capital issues are woven throughout the industry standards to address three financially materi- The Alphabet of Asset Management al issues related to human capital management: employee health and safety; employee diversity, inclusion and engagement; and labor practices. However, the relevant standards with those issues only apply to about 60% of industries, while other issues such as labor conditions in the supply chain and human rights are covered in separate SASB standards. All investments involve risks, including possible loss of principal. Certain DWS products and services may not be available in every region or SASB officials are now working country for legal or other reasons, and information about these product s or services is not directed to those investors residing or located in any to expand human capital manage- such region or country. The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries, such as DWS Distributors, Inc., which oers investment products, or DWS Investment Management Americas, Inc. and RREEF America L.L.C., which oer advisory services. ment metrics to more industries so © 2020 DWS Group GmbH & Co. KGaA. All rights reserved. ALT2011430 (10/20) I-060447-4 that both companies and investors can better measure the financial exposure from those issues. There is strong investor and corporate SEE HUMAN ON PAGE 29 Alternative Pension Social Investments Reform Security

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Defined Contribution Washington Trump bans investing in 31 Chinese companies DOL releases its final By HAZEL BRADFORD en the United States homeland and United States forces overseas, including by developing and deploy- Americans will no longer be able to invest in Chi- ing weapons of mass destruction, advanced conven- registration rule for nese companies that support Chinese military or in- tional weapons, and malicious cyber-enabled ac- telligence activity under an executive order signed tions,” Mr. Trump said in the order. Nov. 12 by President Donald Trump. He went on to say that China’s “ostensibly private The order applies to individuals or companies economy” is compelled to support its military and in- pooled plan providers owning shares or through funds holding shares in 31 telligence activities. “At the same time, those compa- Chinese companies that the White House identified nies raise capital by selling securities to United as helpful to China’s People’s Liberation Army. The States investors that trade on public exchanges both By BRIAN CROCE tration filing and supplemental fil- ban applies to transactions beginning Jan. 11, 2021. here and abroad, lobbying United States index pro- ings to report any changes, infor- “(T)he People’s Republic of China is increasingly viders and funds to include these securities. ... In that The Department of Labor final- mation about each specific pooled exploiting United States capital to resource and to way, the PRC exploits United States investors to fi- ized a rule Nov. 12 establishing re- employer plan before initiating op- enable the development and modernization of its nance the development and modernization of its quirements for registering as a erations, and information on speci- military, intelligence, and other security apparatuses, military,” said the order, which declared the threat a pooled plan provider for pooled fied reportable events. which continues to allow the PRC to directly threat- national emergency. n employer plans, known as PEPs. It also requires a final filing The rule requires an initial regis- once the last pooled employer plan has been terminated and ceased operations. PEPs were created with the sign- ing of the SECURE Act in Decem- ber, which made it easier for employers in unrelated businesses to join open multiple employer retirement plans for their employees. Employers were previously dis- couraged from doing so because they would each still have to file separate Form 5500s and conduct separate annual audits, requirements that were eliminated with the new legislation. PEPs will be available starting Jan. 1 and each PEP must have a pooled plan provider designated as a named fiduciary, plan admin- istrator and the person responsible for specified administrative duties. The SECURE Act stipulates that pooled plan providers must register with the Labor and Treasury departments before beginning opera- ÛøööèïïÞÜÒñçèûèö tions. The rule, which was proposed in August, creates a new electronic form — EBSA Form PR — for inter- Îùèõüçìðèñöìòñ ested parties to submit. The rule requires pooled plan providers to register at least 30 days ìñóèõöóèæ÷ìùè before beginning operations, although for the period of Nov. 25 to Jan. 31, the 30-day requirement is ÛøööèïïÞÜÒñçèûèöäõè÷ëè÷õøèö÷ðèäöøõèòé÷ëè waived, provided registration oc- curs no later than the start of the ðäõîè÷Ùìñóòìñ÷÷ëèìðóäæ÷òéæëäñêèòñüòøõ plan, the Labor Department said. ìñùèö÷ðèñ÷ïäñçöæäóèúì÷ëòåíèæ÷ìùì÷üäñçóõèæìöìòñ The new electronic filing system goes live Nov. 25. Ýëìöìöäóèõöóèæ÷ìùèúì÷ëóòúèõéøïçìðèñöìòñ In its final rule, the Labor De- partment outlined 11 pieces of in- é÷öèõøööèïïæòð¦õøööèïï formation a prospective pooled plan provider would need to file on Form PR before beginning operations, including the approximate date when pooled plan operations are expected to begin; the address of any public website to be used to market its services or provide public information on a given PEP; a description of the administrative, investment and fiduciary services that will be offered; and statements disclosing any ongoing criminal, civil or administrative proceedings against the provider. “Pooled employer plans will give employers, especially small unrelated employers, a way of offering their employees a workplace retirement savings option with reduced burdens and costs,” said Jeanne Klinefelter Wilson, acting assistant secretary of labor for the Employee Benefits Security Administration, in a news release. “This final rule lays the groundwork for a sensible registration process so that providers can get pooled plans up and running.” The rule is effective upon its publication in the Federal Regis- ter. n INTERESTED IN SUSTAINABLE INVESTING?

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NAME THAT TUNE ONE BRICK AT A TIME Danish pension Legal & General partners with Oxford on building

Legal & General Group fund participants NBBJ PLC is building a $260 million Life and Mind Building at the pen a new song University of Oxford, Eng- land, to house its zoology, plant sciences and experi- Participants in Denmark’s AkademikerPension mental psychology depart- have helped the pension fund to come up with a ments. song to match its new identity. It will be the largest The 128 billion Danish kroner ($20.1 billion) building project ever under- Gentofte-based pension fund, known as MP taken on behalf of the Pension until Sept. 1, launched a competition university and will also be challenging participants to write Oxford’s largest teaching and verses for a new melody. The research facility. tune was composed by The development is part of musician Nicholas Findsen, a $5 billion partnership according to the pension between the university and fund’s website. L&G to provide innovation Forty-six participants entered facilities and thousands of the competition and were judged new homes for staff and by Annika Aakjaer, a singer and students. A partnership was songwriter, and Mathias Hammer, a launched in June 2019. pianist and radio and television host. The building is funded by The main winner was awarded an electric long-term annuity money bicycle, while second and third places won from L&G’s retirement Champagne and chocolate. business. Legal & General The song is set to be recorded this month, with Investment Management’s the finished version available later on the pension £35.9 billion ($46.3 billion) fund’s website. If you feel like having a go, check real assets unit will act as BREAKING GROUND: The building will be Oxford’s largest research facility and is part of a $5 billion partnership. out the melody and sheet music at https://aka- development manager and demikerpension.dk/skrivensang/noder-og-melodi. Legal & General Capital, the insurer’s location for art, exhibitions, lectures and driving essential inward investment and A sneak peek at the song and commentary on early stage investment business and conferences. providing opportunities for world-lead- the process (in Danish) can be found on Aka- alternative assets originator, is the “We are extremely proud of our ing innovation as well as much needed demikerPension’s website at https://akademiker developer. partnership with the University of housing for key workers,” said Nigel pension.dk/nyheder/vinderne-af-sangkonkurrencen- The Life and Mind Building is set to Oxford, which in the wake of COVID-19 Wilson, CEO of L&G, in a news release. er-fundet. open in 2024 and will also act as a will help retain talent in the city, whilst — SOPHIE BAKER — SOPHIE BAKER PENNY FOR YOUR THOUGHTS NAPA finds advisers’ opinions vary on whether to issue RFPs Ask advisers and consultants what Another 32% gave an in-between they think of RFPs, and the answers answer, saying they only insist on an can run the gamut from adhering to a RFP “when it seems necessary.” strict schedule to being uninterested The survey didn’t define “necessary,” and even hostile. Nevin E. Adams, chief content officer That’s the range of opinion in a of the American Retirement Associa- recent poll by the National Association tion, wrote in an email. NAPA is part of the American Retirement Association, and

FUTURE: NAIC’s symposiums Martin Allred both are based in focus on the next generation of Arlington, Va. ethnically diverse and female “My assump- private equity general partners. tion is that it would be tied in BACK IN CLASS with when you need to do so to assure that the NAIC planning more training for fees/services are reasonable,” Mr. founders of private equity firms Adams wrote. “But of course it The National Association of Investment Mr. Hughes said. might also be Companies is bringing back a series of six virtual The symposiums are scheduled to start Feb. just when the training sessions for the next generation of 19 and are designed to provide the more than (lack of) service ethnically diverse and female private equity 100 expected attendees “a 360-degree view of levels warrant it.” So what about general partners. what is required to start a new private equity firm OPTIONS: Nevin E. Adams said an RFP isn’t the only tool available. the 18% of The symposiums — the Next Generation of and effectively navigate the process of raising respondents Private Equity Firms Symposia — target private capital,” according to information about the of Plan Advisors, for which 34% whose views on RFPs aren’t favorable? equity professionals who have recently launched event on NAIC’s website. insisted on issuing an RFP every three “RFPs can take a lot of time and firms or who are thinking about doing so within “We are changing our formation structure as a years while 16% insisted on an RFP effort (and cost),” he wrote. “You can the next 12 months, said Alan Hughes, chief result of having gone through the course,” said every five years. often find out the essential elements content officer for the Washington-based NAIC, a one attendee from last year in an email providing By contrast, 15% said they “never through more modest undertakings.” network of 111 diverse individual-owned private feedback to NAIC. “We are taking a second look insist” on doing an RFP because “there A request for information or “bench- equity and hedge fund firms representing about at the service providers ... (and) rethinking what are other ways to assess providers/ marking tools that many advisors/ $178 billion in assets under management. the essentials are in terms of marketing capabilities,” said the unscientific poll consultants have developed” could of 157 respondents conducted in work well, too, Mr. Adams wrote, “We decided to bring it back since the materials in order to raise capital.” mid-October. Three percent said adding that it is crucial they document — ARLEEN JACOBIUS feedback was overwhelmingly positive,” conducting an RFP every three years their efforts. “does as much harm as good.” — ROBERT STEYER 5210514'& 5'%6+10

Target-date design: Holding fast to a strategic .14+'.#6*#/ 9;#66.'' 5GPKQT&GƂPGF%QPVTKDWVKQP 2QTVHQNKQ/CPCIGTKPVJG view in the face of uncertainty 5VTCVGIKUV64QYG2TKEG /WNVK#UUGV&KXKUKQP64QYG2TKEG

he world is awash in uncertainty, from the uptick in robustness of our work, looking at a lot of different factors outcomes — is preretirement derisking: reducing the equity COVID cases around the world to Brexit issues, vi- and stress-testing our designs before we implement them. and growth focus in the 10-year window before retirement. In T rus-aid gridlock in the U.S. and the recent U.S. pres- That gives us the confidence that we are well positioned for highly volatile markets, sensitivity to that issue can be raised idential election. The one certainty is that market volatility the long term, even if we take advantage of return or risk for all stakeholders, including plan participants, plan spon- appears here to stay. The question for long-term investors management opportunities in the short term.” sors and solutions providers. — both employees saving for retirement and the employers sponsoring retirement plans — is whether this uncertainty SETTING GOALS, PRIORITIZING RISKS and volatility warrants a change in strategic direction. The “There are lots of different glidepaths out there to solve for question is particularly important to the millions of 401(k) lots of different problems, but until and unless we know the participants invested in target-date funds — the most-used target outcome — and how you are defining and prioritizing We havehav the ability to modify our qualified default investment alternative — and to the employ- risk — it’s hard for a plan sponsor or solutions provider to get ers sponsoring the plans. The answer from experts is a re- strategic positions, in order to take a handle on the right design,” Latham said. sounding no, and that’s good news. advantage of emerging opportunities, According a recent plan sponsor survey by T. Rowe Price, “We’re seeing very little in the way of reactionary behavior 78% of 401(k) sponsors said that in designing their tar- on the part of plan sponsors, and that’s encouraging,” said or to be relatively more defensive at get-date option, they wanted to make the best decision for Lorie Latham, a senior defined contribution strategist for T. everyone. And in prioritizing risk, 64% said longevity risk was Rowe Price. “They have a clear orientation and anchor to certain points in time. either No. 1 or No. 2. Downside and behavioral risks fol- longevity coming first. Meaning, their primary concern is lowed, with volatility and inflation risks trailing far behind. setting up participants in a way that gets them to, and into, - WYATT LEE Latham said she is encouraged by this data, as it indicates retirement with sufficient funds so that they don’t experience plan sponsors are not anchoring their target-date design on a shortfall.” any single cohort of participants. In addition, as far as suc- “Prioritizing risk means not just looking generically at risk cess metrics are concerned, plan sponsors are much less Latham is also encouraged that participants appear to be over the long term, but also making sure you’re taking the attuned to market volatility and benchmark risk than they sticking to a strategic view and not overreacting to today’s right risks at the right point in time,” Lee said. “In that regard, used to be. economic and financial market ups and downs. She said that it’s important to keep in mind that the current environment is T. Rowe Price’s record-keeping data shows very few partic- extremely focused on a narrow window. However, realistical- “We have come a long way as an industry, and I think plan ipant withdrawals and very few reallocations — in the low ly, when you broaden it out, you have to look at the whole sponsors are much more astute in their risk orientation, their single digits — so far in 2020. cycle.” understanding of the role of the defined contribution plan and what they’re actually solving for,” Latham said. He cites substantial short-term market downturns during the SARS crisis, the European debt crisis and the U.S. debt “The aim is not a design that works really well in the perfect downgrade, among others. After each of these major events, situation,” Lee said. “The aim is a design that works well markets eventually rebounded. I think plan sponsors are much across a range of different scenarios and different individual circumstances, to make sure that people have the best more astute in their risk orientation, “The benefit of portfolio growth over the long term, to sup- chance of meeting their retirement needs. I have joked with port your ability to generate the desired outcome, is abso- clients that if everybody started saving 15% of their salary their understanding of the role of the lutely critical,” Lee said. at age 22 and got an 8% market return every year and only needed to take out 4% of their assets annually throughout defined contribution plan and what “You can’t manage to a single risk only. You have to think retirement, my job would be really, really easy. But plan spon- about the wide range of risks and variables, and then con- sors don’t want us as solutions providers to just solve for the they’re actually solving for. sider the trade-offs,” Latham said. She said she believes that average, they want their target-date solutions to be as broad it’s unhelpful to anchor too much to a worst-case scenario - LORIE LATHAM as possible and deliver successful outcomes across a wide — especially in the midst of one — and then let that drive range of individual circumstances.” decision-making, because markets do smooth out over time and cycles do come and go. A big part of the challenge is identifying the intended out- Now, keeping to one’s long-term strategic view doesn’t mean comes, analyzing the many risks to those outcomes and then target-date managers should sit back and relax in the face “Even in difficult markets, that period of time leading up to stress-testing those risks across a range of portfolio designs. of market upheaval. retirement is still a critical compounding opportunity, when Lee said he focuses on the market and behavioral variables you presumably have your highest asset balance, your most that can influence a successful retirement outcome, how “We have the ability to modify our strategic positions, in or- complex scenario and your highest savings rate,” she said. those variables can influence fund design and how they can der to take advantage of emerging opportunities, or to be That means that if you reduce “equity too soon, you may lose interact with each other. This approach enables him to model relatively more defensive at certain points in time,” said Wy- an attractive compounding opportunity that has a material and stress-test realistic portfolio behavior across a range of att Lee, a portfolio manager in the multi-asset division of T. impact on your landing point.” ■ scenarios, he said. Rowe Price. Lee said that over the course of the year he has seen opportunities to add to, and then take off, risk posi- SHORT-TERM STRESS & THE GROWTH CONUNDRUM URQPUQTGFD[ tions. However, he said, “What we haven’t seen is anything that might lead us to make meaningful changes to our stra- In glidepath design, one of the biggest questions — and po- tegic positioning. And a lot of that certainty is driven by the tentially one of the most important variables in retirement

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20pi0249.pdf RunDate: 11/16/20 Full Page Color: 4/C 10 | November 16, 2020 Pensions & Investments OPINION What they are expecting in the wake of the election

Editor’s note: With President-elect Joe Biden poised to begin a new administration in January, Pensions & Investments reached out to plan sponsors and money managers to ask them how or whether their investment thesis has changed in the wake of the U.S. election, as well as their chief concerns. Answers have been edited for space, style and clarity.

Christopher J. Ailman, CIO, $257.9 billion California State Teachers’ Retirement System, West Sacramento How has your investment thesis changed as a result of the U.S. elections? Not one bit, tell me how the economy is doing. Besides, (Federal Reserve Chair Jerome) Powell is still Fed Chair, right? What is your chief Christopher J. Ailman concern with how the election may affect the investment management and/or performance of the assets you oversee? No concern as a result of the election. My chief concerns are COVID-19, the economy, and that Powell said to expect lower rates for election behind us, the prospect We anticipate continued business confidence and longer. That’s what matters. for additional fiscal stimulus and Washington gridlock, perpetu- trade. This should have the announcement of a promising ating much of our pre-election positive implications for health vaccine likely buoy the economy investment theses. Our care and emerging markets. , CIO, Marcus Frampton and markets in the near term. But investment thesis has been We are also positioning for $65.4 billion Alaska Perma- questions remain about the predicated on continued muted executive order reversals, such nent Fund Corp., Juneau durability of any recovery, and inflation pressures, supportive as additional oil drilling Changes? APFC’s invest- given valuations, we might see monetary and fiscal policies, restrictions and environmental ment approach does not some weakness in the back half and early cycle business regulation, that will also have change materially based off of next year. conditions. This should sector implications. For any one election cycle. continue an economic recovery example, any restriction on Some of the geopolitical supportive of risk assets, corporate share buybacks and international trade Edward Perks, CIO, Franklin particularly equities. would benefit U.S. credit more risks, however, are likely Templeton Investment Solutions, San Mateo, Calif. Franklin Templeton than equities, on the margin. materially reduced in the Some of the changes we Marcus Frampton had about $1.4 trillion in AUM as of Edward Perks White House taking a more expect with a Biden presidency Concerns? Rising COVID-19 Oct. 31. collegial approach vs. the include a stronger focus on cases during the upcoming outgoing administration’s more aggressive Changes? With Biden’s victory declared, and domestic issues, particularly COVID-19. We winter season remains one of our chief and transactional approach to diplomacy and with a Republican-controlled Senate projected see a more steadfast, multilateral approach concerns, particularly if this could lead to trade. On the margin, this dynamic makes us to be the more likely outcome, a large part of to China and other trading partners that shutdowns similar to what we saw in March, slightly more risk-tolerant with internationally the current status quo should remain in place. should be more effective in driving improved although the fact that scientific and societal domiciled assets, but this does not represent knowledge of the virus has progressed a major shift in strategy. tremendously should help. Other concerns include elevated valuations for risk assets Concerns? Our biggest concern with respect due to Fed intervention, particularly growth to our ability to achieve our performance equities and high yield corporate bonds. We objective going forward (CPI + 5%) is the very remain concerned about the issues surround- elevated valuation environment today for ing global populism as seen in the severely stocks, private equity, venture capital, real divided U.S. election outcome. estate and other asset classes coupled with generationally low yields on fixed-income In this transitional period for U.S. politics, investments. This election has done nothing ahead of the Georgia Senate runoff, there is to change this challenging environment for still the possibility that supportive fiscal policy go-forward returns other than seeming to will disappoint market expectations, which exacerbate the dynamic with the recent surge could be particularly worrisome if the timing in stock appreciation. coincides with a surge in COVID-19 cases and associated lockdowns.

Lori Heinel, deputy global CIO, State Street Global Advisors, Boston. SSGA had $3.15 trillion Bob Maynard, CIO, $19.4 billion Idaho Public in assets under management as of Sept. 30. Employee Retirement System, Boise Changes? We’ve been gradually increasing Changes? I never saw, and still don’t see, any our allocation to risk assets — both equities change in direction nor any increased and credit — as economic conditions have concerns from the election — whichever way improved. We continue to look for good the legal disputes may land. Minimal impact relative value and areas where the policy on actual conditions — rhetoric will change, support provides tailwinds. We favor high- but basic China policy will be roughly similar, quality growth names in the technology, COVID-19 will fade over two years and may health-care and consumer sectors as well as change by a few months, etc. investment-grade credit. Concerns? Overall, still marginally more Concerns? The combination of getting the Lori Heinel optimistic than most of my peers. With (the Pensions & Investments November 16, 2020 | 11 OPINION

Christopher J. Battaglia VP/Group publisher

likelihood of additional be. I am not convinced we’re going to have much EDITORIAL fiscal stimulus near “Kumbaya” (if the House and Senate are Amy B. Resnick Editor (212) 210-0751 term. However, we’re controlled by different parties). Regardless of Julie Tatge Executive editor (312) 649-5442 optimistic for support in what happens politically, we’re in a low growth Kevin Olsen Managing editor (312) 649-5223 2021, which we expect environment (with) David Schepp News editor to be pro-cyclical. low inflation. I don’t Sophie Baker International news editor Peter J. Retzbach Copy desk chief The October U.S. see much changing. Colette Jordan Copy editor employment report Patrick Roth Web producer reinforced the continu- Richard “Shep” Trilbe Wynne Editorial assistant ing stabilization in Perkins, chief growth. Corporate investment officer of REPORTERS earnings for Q3 are equities, Putnam Douglas Appell International nearly complete with Investments, Boston. Hazel Bradford Washington results exceeding Putnam had $178 James Comtois General assignment expectations. More billion in AUM as of Margarida Correia Defined contribution stringent lockdowns in Oct. 31. Brian Croce Washington Arleen Jacobius Private equity/real estate certain regions could be Concerns? I expect Richard ‘Shep’ Perkins Rob Kozlowski General assignment a drag on the short-term some stimulus in Paulina Pielichata International pace of improvement. the next three to Robert Steyer Defined contribution But progress on four months (but) not as much as if Democrats Danielle Walker Money management vaccines significantly controlled the House and Senate. Christine Williamson Money management mitigates longer-term Lower stimulus would lead to lower growth. … threats associated with ART Lower interest rates would benefit the equities Bob Maynard the virus. Gregg A. Runburg Art director markets. … This would help growth companies. Roger Schillerstrom Editorial cartoonist Longer term, we still see The last year has been a great reminder on how Nov. 9) Pfizer rally, for example, we are at record a recovery that is led by global stimulus with low DATA/RESEARCH all-time highs, far over our needed return for this tricky stock-market timing can be. 2020 was a Aaron M. Cunningham Director of research and rates (a supportive backdrop for credit), though analytics fiscal year — we may be hitting double digits picture-perfect example. the shape of the recovery will differ by industry Anthony Scuderi Directory manager — and are in the mid-90s percent in funded and region. We believe monetary Valerie Ge Research analyst status — we may end the day hovering above or policy will carry relatively greater below 95%. If this is an investment crisis, it’s importance in the U.S. recovery given SALES & MARKETING the best one I’ve seen in the four to five the likelihood of continued divided Nikki Pirrello Associate group publisher, decades I’ve been around the business! government. conferences and marketing services Julie Parten Head of sales Lauren DeRiggi Digital specialist/account Shundrawn A. Thomas, executive president, Northern Trust Asset Management, Chicago. NTAM REGIONAL SALES MANAGERS had $1.31 trillion in AUM as of Rich Kiesel West Sept. 30. Paul Kissane Midwest Anna Koules New York Changes? Our five-year Steve Middleton EMEA +44-(0)77-1012-8464 outlook of slower economic Hideo Nakayama Asia (Tokyo) +81-3-3479-6131; growth, following an upfront [email protected] rebound remains intact. We Eduardo de Alcantara Machado Sao Paulo, rated a Democratic president, Brazil +55-11-3167-0821; [email protected] Republican Senate and Patricia Ghazvini Sales assistant Democratic House combina- CONFERENCES/MARKETING tion as the most favorable Kimberly Jackson Director of conference sales outcome for domestic growth Diane Pastore Director of conference programming given four scenarios we Joshua Scott Director of conference programming Darrell Spence modeled. Market participants Kathleen Stevens Investor relations director prefer stability in government Gerry O’Hara Investor relations manager Michelle DeMarco Director, relationship marketing Darrell Spence, economist, Capital Group, Los policy and the expected Assel Chanlatte Conference marketing manager Angeles. Capital Group had $2.1 trillion in AUM as outcome of a split government resulted in our tactical adjustment to Mirjam Guldemond Conference manager, of Sept. 30. WorldPensionSummit +31-6-2333-2464 moderately overweight risk favoring Concerns? While there is the risk of general Shundrawn A. Thomas Kristal Santos Client services project manager high yield, global listed infrastructure uncertainty itself, the bigger question is if that Ashley Perrucci Associate manager, client uncertainty ultimately delays fiscal stimulus and investment-grade bonds. Over partnerships until quite some time after the election or even the long term, there is no material difference in Rachel Lopez Conference administrative assistant risk-adjusted market returns under Democratic John D. Linehan, chief investment officer of into the new year, which would likely damage the CUSTOM CONTENT/CLIENT SOLUTIONS or Republican administrations. equity and vice president, T. Rowe Price Group, economy and make a recovery more challenging. Baltimore. T. Rowe Price Group had $1.3 trillion in Greg Crawford Director of content solutions Concerns? The near-term risk of insufficient AUM as of Oct. 31. Corina Lewis Client solutions senior program fiscal stimulus is our principal concern. manager James Keenan, Changes? I don’t David Joseph Research analyst chief investment think (T. Rowe’s Tetyana Saucedo Digital campaign manager officer and global Greg Peters, head of multisector and strategy, strategy) has been Deanna Speziale Senior marketing associate co-head of credit, PGIM Fixed Income, Newark, N.J. PGIM Fixed Income affected. We are BlackRock’s had $946 billion in AUM as of Sept. 30. SUBSCRIPTIONS/SITE LICENSES alternative invest- long-term investors. Elayne Glick Director, strategy & business, site Changes? Not really, politics matters a lot less license subscriptions ments unit. Black- My time horizon is Rock had $7.81 than we think. three to five years. David Bomberger Director, enterprise licensing trillion in AUM as of Concerns? We have a little too much comfort Ed Gorman Director, EMEA/international site You need to be licensing +44-(0)20-3823-9891 Sept. 30. around divided careful about government. RFP/RECRUITMENT Changes? Clarity having a knee-jerk Divided government Erin Smith Sales manager around the U.S. reaction to is the least good REPRINTS election outcome elections. John D. Linehan James Keenan results removes scenario because Laura Picariello Sales manager You will have to be one major source of you don’t get ADVERTISING PRODUCTION more conscious of the regulatory environment uncertainty from markets. We could still see enough fiscal Robert T. Hedrick Media services manager small bouts of volatility as markets digest policy (policy). The fiscal before you make an investment. ... You have to 312-649-7836; [email protected] thrust is incredibly have a more heightened sensitivity. Subscription information - single copy risks including the transition of power, further sales: 877-812-1586 fiscal stimulus, and President-elect Biden’s important. Concerns? Long term, a deeply divided personnel appointments. Recent catalysts such TO CONTACT A P&I STAFFER Now, I don’t know electorate will probably cause dysfunction. Unless otherwise noted above, email us at as positive vaccine news, a contested election what kind of Politics is becoming tribal. … It’s not productive [email protected] or find and likely divided government reduce the Greg Peters package there will for the country or the economy. phone numbers at pionline.com/staff. . 20pi0240A pdf RunDate: 11/02/20 Full Page Color: 4/C . 20pi0240B pdf RunDate: 11/02/20 Full Page Color: 4/C . 20pi0240A pdf RunDate: 11/02/20 Full Page Color: 4/C . 20pi0240B pdf RunDate: 11/02/20 Full Page Color: 4/C 14 | November 16, 2020 Pensions & Investments BY THE NUMBERS

PRIVATE FUND CLOSURES ($1 BILLION+) MONTHLY CORPORATE FUNDING RATIO Total private funds closed, by type Managers ranked by funds closed, 2018-’20 100% 100 Funds Total assets Rank Manager closed (millions) Total: Credit 1 Blackstone Group 10 $83,700 95% 90 87 Total: Total: 83 81 2 Carlyle Group 5 $35,150 Total: 80 Real 3 Thoma Bravo 4 $35,400 90% 75 estate 4 HarbourVest Partners 4 $15,410 70 5 Ares Mgmt. 4 $14,140 85% Real 6 BlackRock 4 $11,260 60 Total: Total: assets 54 54 7 Advent International 3 $21,500 Total: 80% 50 46 8 EQT Partners 3 $13,920 Private 9 Clearlake Capital 3 $12,000 equity 40 10 CVC Capital Partners 3 $11,300 75% 11 KKR 3 $10,300 Oct. 2020: 85.7% 30 Total: 12 Francisco Partners 3 $9,700 70% 21 Total: 19 20 13 Providence Equity 3 $9,300 14 Audax Group 3 $7,400 Total: 65% 10 7 15 Summit Partners 3 $7,100 16 Angelo Gordon 3 $6,050 0 60% 2011 20132012 2014 2015 2016 2017 20192018 2020 17 H.I.G. Capital 3 $5,500 2009 2010 2011 20132012 2014 2015 2016 2017 20192018 2020

TRAILING 12-MONTH RETURNS BY ASSET CLASS 2018 2019 2020 November December January February March April May June July August September October November December January February March April May June July August September October

Real Real Real Real Real BB U.S. Real Real BB U.S. BB U.S. BB U.S. BB U.S. S&P 500 Cash Estate Estate Estate S&P 500 Estate S&P 500 Estate Agg Estate Estate S&P 500 S&P 500 S&P 500 Agg Agg Agg S&P 500 Agg S&P 500 S&P 500 S&P 500 S&P 500 6.3% 1.9% 3.4% 10.5% 12.4% 13.5% 7.1% 10.4% 8.3% 10.2% 13.7% 21.7% 16.1% 31.5% 21.7% 11.7% 8.9% 10.8% 12.8% 8.7% 12.0% 21.9% 15.1% 9.7%

BB U.S. BB U.S. Russell Real BB U.S. Real BB U.S. Real BB U.S. Real Global ex- BB U.S. BB U.S. BB U.S. Cash Agg Agg 2000 S&P 500 Estate Agg Estate Agg Estate Agg S&P 500 Estate MSCI EM MSCI EM S&P 500 Cash U.S. fixed Agg S&P 500 Agg MSCI EM MSCI EM Agg 1.8% 9.5% 14.3% 26.6% 16.0% 8.2% 2.3% income 7.5% 16.5% 10.4% 0.0% 2.3% 5.6% 9.2% 6.4% 9.0% 8.1% 8.4% 10.3% 15.6% 2.6% 9.4% 10.1% 6.2%

Real BB U.S. Russell Real Global ex- MSCI ACWI BB U.S. Global ex- Estate High Yield Cash S&P 500 High Yield High Yield High Yield Agg S&P 500 High Yield High Yield MSCI EM MSCI EM 2000 Estate High Yield U.S. fixed Cash MSCI EM MSCI EM MSCI EM ex-U.S. Agg U.S. fixed -2.1% 2.0% 4.7% 5.9% 6.7% 5.5% 8.0% 6.6% 6.4% 12.6% 13.7% 6.1% income 2.1% 5.4% 2.1% 7.2% income 1.1% 7.9% 25.5% 11.1% 0.7% 8.3% 7.0% 5.0%

Russell Global ex- BB U.S. BB U.S. Global ex- Global ex- BB U.S. MSCI ACWI Real MSCI ACWI Global ex- Global ex- Global ex- BB U.S. Global ex- 2000 U.S. fixed High Yield High Yield Agg Agg S&P 500 High Yield High Yield U.S. fixed U.S. fixed Agg ex-U.S. Estate ex-U.S. U.S. fixed High Yield S&P 500 U.S. fixed Cash U.S. fixed Agg U.S. fixed MSCI EM income 1.7% 4.3% 3.8% 7.5% 6.9% income income % income -6.9% 1.8% income 1.7% income income 4.9% 0.6% -2.1% 4.5% 5.3% 5.7% 5.3% 11.5% 11.2% 23.6% 9.9 4.8% 2.7% 5.9% 6.5% 5.5%

Global ex- Global ex- High Yield S&P 500 S&P 500 BB U.S. MSCI EM MSCI EM Cash MSCI EM U.S. fixed S&P 500 S&P 500 MSCI ACWI BB U.S. MSCI ACWI BB U.S. MSCI EM S&P 500 MSCI EM Cash U.S. fixed High Yield Russell High Yield High Yield Agg income ex-U.S. Agg ex-U.S. Agg income 2000 0.4% -4.4% -2.3% 3.2% 2.6% 5.1% 2.3% 5.7% 2.9% 4.3% 11.3% 10.8% 21.5% 9.6% 3.9% -7.0% -4.3% 1.9% 4.1% 6.0% 3.3% 3.5% 3.7% 0.7%

Global ex- Global ex- Global ex- Real Russell U.S Real MSCI ACWI MSCI EM U.S. fixed Cash Cash . fixed U.S. fixed MSCI EM Cash Cash High Yield High Yield High Yield High Yield Estate MSCI EM High Yield High Yield High Yield Cash High Yield ex-U.S. Cash Estate income 2000 income income -1.0% 2.1% 2.1% 2.9% 2.4% 2.4% 8.4% 9.7% 14.3% 9.4% 3.1% -11.3% -4.5% 1.3% 0.0% 1.5% 4.7% 3.0% 0.9% -5.5% -3.3% 4.6% 0.4% 4.1%

BB U.S. Russell Russell Global ex- Russell BB U.S. Russell MSCI ACWI MSCI ACWI MSCI ACWI MSCI ACWI MSCI ACWI Global ex- Russell Agg MSCI EM 2000 MSCI EM 2000 Cash MSCI EM Cash Cash MSCI EM MSCI EM U.S. fixed 2000 Agg 2000 Cash ex-U.S. ex-U.S. ex-U.S. ex-U.S. ex-U.S. U.S. fixed Cash 2000 -9.4% -0.8% 2.2% -1.3% 2.3% 2.4% -0.3% 1.4% income 2.2% - income 1.1% -1.3% -3.5% 2.0% 7.8% 7.5% 8.7% 9.2% -15.6% -11.2% 3.4% -4.8% 0.7% 4.6% -0.1%

Global ex- Russell Global ex- Global ex- Global ex- MSCI ACWI MSCI ACWI MSCI ACWI MSCI ACWI MSCI ACWI Russell Global ex- Global ex- Global ex- MSCI ACWI Real Russell Russell Russell Russell Russell MSCI ACWI U.S. fixed 2000 MSCI EM U.S. fixed U.S. fixed U.S. fixed ex-U.S. ex-U.S. ex-U.S. ex-U.S. ex-U.S. 2000 U.S. fixed U.S. fixed U.S. fixed ex-U.S. Estate 2000 2000 2000 2000 Cash 2000 ex-U.S. income -7.5% income income income income income income 1.3% -4.0% -11.0% -3.4% -4.1% -2.5% -6.3% 1.3% -2.3% -3.3% -1.2% 4.9% 6.3% 5.1% 3.9% -0.7% -23.0% -13.2% -3.4% -6.6% -4.6% 0.4% -2.6%

MSCI ACWI MSCI ACWI MSCI ACWI MSCI ACWI MSCI ACWI MSCI ACWI Russell Russell Russell Russell Russell Russell Russell Real Real Real Real Real Real ex-U.S. ex-U.S. ex-U.S. ex-U.S. ex-U.S. ex-U.S. 2000 2000 2000 2000 2000 Cash Cash Cash Cash 2000 2000 Estate Estate Estate Estate Estate Estate Real Estate -8.1% -14.2% -12.6% -6.5% -4.2% -3.2% -9.0% -3.3% -4.4% -12.9% -8.9% 2.4% 2.4% 2.3% 2.2% -4.9% -24.0% -16.4% -16.1% -15.5% -13.2% -12.0% -16.6% -21.5%

INVESTOR SENTIMENT AS MEASURED USING SHILLER EVALUATION TOOLS S&P CoreLogic Case-Shiller 20-City Composite U.S. equities cyclically adjusted U.S. one-year stock market confidence index Home Price NSA index price-to-earnings ratio

240 36 100

220 33 90

200 30 80 180 27

70 160 24

140 21 60

120 18 50

100 15 40

80 12 30 60 9

20 40 6

20 3 10

0 0 0 2011 20132012 2014 2015 2016 2017 20192018 2020 2010 2011 20132012 2014 2015 2016 2017 20192018 2020 2010 2011 20132012 2014 2015 2016 2017 20192018 2020

Sources: P&I Research Center; NISA Investment Advisors; Bloomberg LP; Yale University ESG Investing Virtual Series December 1-4

Register today for P&I’s ESG Investing Virtual Series where attendees will learn all that is new in the regulatory environment post the recent Department of Labor ruling on ESG investing. Whether you are an ERISA plan or not, these rules on ﬁduciary responsibility can have a major impact on the market. What is allowable? How have things changed if at all? These questions and more will be answered by investment professionals across the spectrum of the institutional space. Hear directly from your peers how you can implement and improve your own ESG practice through panel discussions focused on: • This is the World We Live In… ESG and Global Trends in Investing • Reporting, Taxonomy and Constructing an ESG Policy Statement • Selecting a Manager using ESG Considerations • Climate Investing • Diversity Engagement – Is the Call is Coming from Inside the House? • What Asset Classes Provide Which Opportunities • ESG Performance in Uncertain Times and a Possible Bellwether?

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CO-CHAIR CO-CHAIR CO-CHAIR Dazzle Bhujwala David Eisenberg Hayden Gallaray Ming J. Yan Ceres Inc. Cambridge Associates Cambridge Associates Cambridge Associates

Mark Cagwin Andrew Collins Nickol Hackett Patricia Halper SSM Health San Francisco Employees’ Joyce Foundation Wespath Beneﬁts and Investments Retirement System

Daniel Ingram Sandy Matheson Brian Rice Elizabeth Sanborn Wilshire Associates Maine Public Employees’ CalSTRS Asset Consulting Group Retirement System

COMPLIMENTARY REGISTRATION AT PIONLINE.COM/ESGConf2020*

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Questions? For more details please contact Elayne Glick at (212) 210-0247 or [email protected]. *Only asset owners and a limited number of consultants are invited to attend. All registration requests are subject to veriﬁcation. P&I reserves the right to refuse any registrations not meeting our qualiﬁcations. The agenda for the ESG Investing is not created, written or produced by the editors of Pensions & Investments and does not represent the views or opinions of the publication or its parent company, Crain Communications Inc.

20pi0247.pdf RunDate: 11/16/20 Full Page Color: 4/C 16 | November 16, 2020 Pensions & Investments DC ROUNDUP

Social media termed a boon for improving DC engagement

Social media is on the cusp of leaders will be able to make that changing, for the better, how de- transition, he said. fined contribution participants en- Seeing into the brokerage window gage with their retirement plans, Supreme Court says no After a rocky start to the year, brokerage-window accounts have fully recovered. This has been helped by an Gordon L. Clark, professorial fellow to IBM stock-drop review overweight to technology stocks in the equity part of portfolios. Healthy weightings to Apple Inc., at Oxford University, said Nov. 9 in a Amazon.com Inc. and Telsa Inc. provided above-market returns. virtual keynote address to Pensions The U.S. Supreme Court on Nov. & Investments’ 14th annual Global 9 declined to review a request by Average balance in brokerage-window Average allocation by Pension Symposium, Tokyo. fiduciaries of an IBM 401(k) plan accounts (thousands) brokerage-window accounts $330 The record-keeping architecture seeking to overturn a pro-partici- Equities Mutual funds ETFs DC plans have been built on for de- pant ruling by a federal appeals $300 32.5% 32.0% 17.5% cades is losing ground now to a “so- court in a stock-drop case. $270 cial media” architecture that “en- Because the Supreme Court de- $240 hances participation, that enhances nied the request, the case affirms $210 engagement, where learning by do- the 2nd Circuit U.S. Court of Ap- $180 ing becomes a natural part of man- peals decision that participants had aging your own prospects,” Mr. provided sufficient information un- $150 Clark said. Mr. Clark is also co-di- der ERISA and under a previous $120 rector of the Zurich Research Pro- Supreme Court ruling, so that a $90 gram at Oxford University. complaint can go to trial. $60 The coming “revolution” will Participants contended that fidu- $30 Fixed Cash challenge the assumption — which ciaries should have taken correc- income $0 15.9% has supported the rapid growth of tive action because 401(k) plan in- Q3 2014 Q3 2015 Q3 2016 Q3 2017 Q3 2018 Q3 2019 Q3 2020 2.1% target-date funds and lifecycle vestors in company stock were funds — that plan participants have harmed when the stock fell follow- Breakdown of equity assets invested through brokerage windows little appetite for getting involved in ing IBM’s disclosure, asset write- managing their retirement ac- down and subsequent sale of a Amazon.com: 6.8% Microsoft: 3.0% Other: 50.5% counts, he said. money-losing microelectronics “All evidence that we have is that unit. people will get engaged, and will After reviewing the documents, Apple: 12.8% iShares Core S&P 500 ETF: 2.3% adapt accordingly, if they’re in a the judges sent the case to the Dis- Schwab U.S. Broad Market ETF: 2.9% medium that is supportive, flexible trict Court with instructions to pro- Vanguard S&P 500 ETF: 3.0% and has a low cognitive cost.” ceed given the terms of the appeals Invesco QQQ Trust: 4.2% Mr. Clark said the same techno- court’s opinion. Vanguard Total Stock Market ETF: 4.2% logical advances that allowed him “To the extent that the argu- SPDR S&P 500 ETF: 4.3% to address the Global Pension ments were previously considered, Symposium from the U.K. are lay- we will not revisit them,” the judges Source: Charles Schwab & Co. Tesla: 6.1% ing the groundwork now for offer- wrote. “To the extent that they were ing that type of medium to DC plan not properly raised, they have been participants. forfeited, and we decline to enter- ment adviser that focuses on serv- funds managed by Northern Trust. Americans. This bill will prevent The electronic games industry “is tain them.” ing retirement plans. The suit contends that plan admin- this Main Street tax which would changing how we design and build” Terms of the deals were not dis- istrators “kept these funds on the otherwise be passed on to middle the interface for defined contribu- Northern Trust sued over closed. plan’s investment menu ... despite income earners — two-thirds of tion plans, transforming engage- Leading Edge and its affiliates their continued underperfor- 401(k) participants make less than ment from being a chore and in- 401(k) target-date lineup are located in Fort Myers, Fla., and mance,” and despite there being $100,000 a year.” stead into a “positive, reinforcing A participant in Northern Trust specialize in employee benefits and similar funds in the marketplace With few legislative days re- experience … that encourages Co.’s 401(k) plan has filed a class- retirement planning and wealth that performed better. maining and with Democrats con- learning by doing,” he said. action lawsuit against the bank and management services. trolling the House, it’s unlikely the And much like electronic games, its benefit administrative commit- The acquisition will add 35 re- House GOP wants to block bill will see any movement this these new systems are being de- tee, alleging a breach of fiduciary tirement plans with $312 million in Congress. signed for a purpose, “in this case duties related to its target-date assets to Hub’s platform. financial transaction taxes Historically, Democrats have better long-term pension out- fund lineup. Baystate provides investment fi- Two key Republican House been open to financial transaction comes,” Mr. Clark said. The lawsuit alleges Northern duciary advisory services to 401(k) members have introduced a bill taxes. “These systems would be sys- Trust breached its fiduciary duties and 403(b) plan sponsors. It serves that would prohibit states from tems of graduated progress, where under ERISA by offering the North- 35 plans with $2.9 billion in assets imposing taxes on financial trans- Amway 401(k) participants you learn, you reinforce,” he said. ern Trust Focus Funds as the tar- under advisement, said Adam So- actions. There would be “limits to what you get-date fund lineup in the North- kolic, chief operating officer of re- Rep. Patrick McHenry, R-N.C., claim ERISA wrongs in suit can do until you get to the next lev- ern Trust Co. Thrift-Incentive Plan. tirement and private wealth at Hub. ranking member on the House Fi- Three former participants in the el,” but having advanced, the re- The suit alleges the company Gregg Andonian, Baystate’s nancial Services Committee, and Amway Retirement Savings Plan ward is more discretion, he said. breached its duties by continuing to managing partner, will join Hub’s Rep. Bill Huizenga, R-Mich., rank- filed a lawsuit alleging that plan fi- Mr. Clark said social media-driv- offer the lineup, which was retirement and private wealth ing member on the Investor Pro- duciaries violated their duties un- en systems, while no silver bullet launched in 2010, even though they group in New England. tection, Entrepreneurship and der ERISA by failing to reduce plan for underfunded retirement ac- have “significantly underperformed The insurance broker has been Capital Markets Subcommittee, fees and expenses. counts, should prove to be a “much their benchmark indices and com- acquiring adviser firms since 2017 unveiled the Protecting Retirement The fiduciaries also failed to “ex- better mousetrap.” parable target-date funds” since in a push to bulk up its retirement Savers and Everyday Investors Act ercise appropriate judgment to Workers in their 20s and 30s to- that time, according to the filing. plan and wealth management on Oct. 27. scrutinize each investment option day are aware that they’re not sav- The lawsuit says the plan has business. The bill’s introduction comes at a that was offered in the plan to en- ing appropriately for retirement lost up to $34 million in value since It bought 10 firms last year, in- time when lawmakers in New Jer- sure it was prudent,” the complaint but “it’s just that they haven’t had a 2014 because the Focus Funds have cluding Global Retirement Part- sey are considering a proposal that said. medium through which to do it, and remained in the investment options ners, a $40 billion registered invest- would levy a tax on all stock trades Seeking class-action status, the I think these social media-based lineup. ment adviser through which many that occur in New Jersey, where the plaintiffs argued that fiduciaries mechanisms can be very positive in As of Dec. 31, the Northern Trust of the firms Hub acquired cleared major exchanges house their pro- failed to control record-keeping that sense,” he said. Co. Thrift-Incentive Plan had $2.5 their transactions. cessing centers. costs and kept certain investments For the current defined contri- billion in assets, according to the Exchanges oppose the proposed in the 401(k) plan even though bution industry leaders, by con- company’s most recent 11-K filing. Allstate 401(k) suit argues tax. “identical or similar” options were trast, the coming shift to social As of that same date, the Focus Mr. McHenry said in a statement available that were cheaper and/or media-dominated interface sys- Funds had a total of $396 million in plan not in good hands that a financial transaction tax, or better-performing. tems will prove a considerable assets in the plan. A participant in Allstate Corp.’s FTT, will hurt retirement savers. “Amway has always been fair, challenge, he said. 401(k) savings plan filed a class- “This bill will protect the everyday generous, and competitive in its de- The needed investments in tech- Hub International’s RIA action ERISA suit against the com- investors who would ultimately pay livery of retirement benefits,” said nology and systems management pany and other related parties for this additional tax on their hard- an Amway email response. will be enormous, and especially buying spree continues “failing to prudently select and earned savings — including in their “We stand by the management of painful for incumbents with so Insurance broker Hub Interna- monitor” the $5 billion defined 401(k)s, pensions and college-sav- the Retirement Savings Plan we of- much money sunk into their cur- tional acquired the assets of Lead- contribution plan’s investment op- ings accounts,” he said. fer, and we will vigorously defend rent infrastructure that, at the end ing Edge Benefits Advisors and its tions and costing its participants Brian H. Graff, CEO of the Amer- against these baseless accusations,” of the day, may “have to be retirement plan and wealth man- $65 million. ican Retirement Association, voiced Amway said. scrapped,” he said. agement affiliates, as well as the as- The complaint accuses the de- support for the bill and said in a The Amway Retirement Savings “The jury is out” when it comes sets of Baystate Fiduciary Advisors, fendants of loading the plan “with statement the FTT “is a tax on the Plan, Ada, Mich., had $1.4 billion in to whether the current market a Boston-based registered invest- poorly performing” target-date retirement savings of hard working assets as of Dec. 31. Fixed Income & Credit Virtual Series November 17-19

Register today for P&I’s Fixed Income and Credit Virtual Series. Attendees will have the chance to learn from their peers how to navigate an increasingly uncertain and volatile market. In addition to the keynote and panel conversations, attendees will have the opportunity to hear two case studies from Oregon State Treasury and UTIMCO on how their organizations utilize ﬁxed income instruments to meet their investment goals. The event will also provide the opportunity to interact with peers in small group discussions each day, something you won’t want to miss! Fixed income markets are heavily inﬂuenced by macroeconomic decisions and there have been no shortage of geopolitical impacts on monetary policy in recent times. John Sitilides, a Washington, D.C.-based diplomacy consultant to the U.S. Department of State, will be on hand to discuss how investors can mitigate potential risks as he shares his insights on U.S. and global risk trends, developments and strategies. His discussion will cover the complex geopolitical decisions that impact markets in Europe and Asia, sure to be a timely discussion following the US presidential election.

KEYNOTE: A Post-Election State of A airs John Sitilides Washington, D.C. Government Aairs Specialist and Consultant to the Department of State

SPEAKERS INCLUDE:

CONFERENCE CHAIR: CONFERENCE CHAIR: Collin Geninatti Scott Grimberg Jason Josephiac William Emmett David Zee American Airlines CalPERS Raytheon Technologies Corporation Callan Callan

Russell Kampfe Shan Lo Todd Ludgate Michael Nguyen Geo Nolan UTIMCO State of Wisconsin Investment Board State of Wisconsin Investment Board Virginia529 Oregon State Treasury

Rodney Overcash Daniel Schmitz Kashif Siddiqui Terence Thompson Catherine B. Ulozas Margaret A. Cargill Philanthropies Hartford HealthCare CRICO DF Enterprises Drexel University

COMPLIMENTARY REGISTRATION AT PIONLINE.COM/FIC2020*

SPONSORS:

Questions? For more details please contact Elayne Glick at (212) 210-0247 or [email protected]. *Only asset owners, endowments, foundations and a limited number of investment consultants are invited to attend. All registration requests are subject to veriﬁcation. P&I reserves the right to refuse any registrations not meeting our qualiﬁcations. The agenda for Fixed Income & Credit is not created, written or produced by the editors of Pensions & Investments, and does not represent the views or opinions of the publication or its parent company, Crain Communications, Inc.

20pi0248.pdf RunDate: 11/16/20 Full Page Color: 4/C 18 | November 16, 2020 Pensions & Investments Special Report INDEX MANAGERS Growth in ETFs Daniel Burke causes jump in indexed assets

CONTINUED FROM PAGE 1 Worldwide assets managed in domestic xed income rose 9.4% to BlackRock Inc. remained the $2.17 trillion in 2020. Global and in- largest manager of worldwide international xed-income assets dexed assets overall, as well as the rose to $1.23 trillion, a 3.9% increase largest manager of ETFs and ETNs from one year earlier. in 2020. BlackRock’s ETF/ETN as- Domestic xed-income assets sets rose 13.4% to $2.28 trillion and managed for U.S. institutional tax- the rm’s worldwide indexed AUM exempt investors remained at, grew 5.1% to $4.73 trillion as of rising to $783.7 billion in 2020 from June 30. $783.5 billion one year earlier. “We’ve seen tremendous growth Global and international xed-in- overall, in ETFs, but what is differ- come assets rose to $16.9 billion, ent, a couple of the trends that are up from $14.8 billion in 2019, a truly remarkable in 2020 are the 14.2% gain. growth of xed-income ETFs, and According to the midyear S&P to a great degree, the growth of Indices vs. Active Funds U.S. Score- xed-income ETFs with institu- card, published by S&P Dow Jones BEST YEAR YET: Rich Powers said Vanguard has seen $150 billion ow into its ETFs so far this year, a feat he called ‘remarkable.’ tional investors, both asset manag- Indices LLC, 97.6% of active long- ers and asset owners,” said Arman- duration investment-grade funds tion around, ‘what would happen in investment-grade or high yield, Mr. Powers said the industry is do Senra, BlackRock’s managing underperformed their benchmark when there’s stress in the market?’ throughout the year we saw growth on pace to have the second-largest director and head of iShares in the one-year period ended June Our answer was always, we’ve seen in the rest of the product range.” year of cash ow into ETFs in 2020, Americas. 30 and 90.1% of active short-dura- stress in the market during the - Vanguard Group Inc. was the and more than half of those assets Mr. Senra said xed-income tion investment-grade funds un- nancial crisis. We’ve seen stress in second-largest manager of world- are owing into xed income. ETFs were “a perfect tool” for port- derperformed. The Bloomberg the market at the end of 2018. So wide indexed assets on P&I’s list, “The reason why that’s interest- folio rebalancing and risk manage- Barclays U.S. Government/Credit there were many different points in rising 6% to $4.57 trillion as of June ing and important is xed-income ment for investors that needed to Bond index returned 10% for the time where we would highlight how 30. Vanguard’s ETF and ETN assets ETFs are only about 20% of the in- navigate markets during the period year and the Bloomberg Barclays xed-income ETFs work,” Mr. Sen- grew 15.9% in 2020 to $1.18 trillion. dustry’s assets. But they’re account- of low liquidity and high volatility 1-3 Year Government/Credit index ra said. “Obviously, this year, March Vanguard has been the second- ing for 50% of the ows,” he said. caused by the onset of the C O V- had a one-year return of 4.2% as of was the ultimate test, and it was largest ETF/ETN manager in P&I’s “The organic growth rate there is ID-19 pandemic. June 30. clear to all types of investors that universe since 2015. pretty incredible and continues a “For instance, LQD, our invest- xed-income ETFs provide a very “This is our best year, from an trend we’ve seen the last couple ment-grade ETF, on March 12, Demonstrating their merit important utility. … We saw that in- ETF cash- ow standpoint, by a years, where more and more inves- which was a day of tremendous Institutional investors and advis- vestors replaced bonds for xed- wide margin,” said Rich Powers, tors are seeing the virtues of xed- volatility, changed hands almost ers were early adopters of ETFs, income ETFs, and they’ve become a Vanguard’s Malvern, Pa.-based income ETFs and utilizing them in 90,000 times on the exchange.” but Mr. Senra expects ETF assets to structural part of the portfolio. So head of ETF and index product a more signi cant way in portfolio The top ve bond holdings in increase at an even higher rate now what we’ve seen throughout the management. “We’ve received $150 construction. ... Maybe the best ex- LQD each traded about three dozen that any doubts about their utility in year is more adoption, more growth billion of ows this year. Our previ- ample of this would be why the times on that date, Mr. Senra said, times of stress have been disproved. in xed-income ETFs and more ous record was around $100 billion (Federal Reserve) chose to use illustrating the liquidity of the ETF “ETFs have been tested in the breadth. So while at the beginning and the year’s not even done. This is xed-income ETFs in its toolkit to as compared with the bonds. past, but there was always a ques- of the year you saw a lot of activity remarkable.” help when the bond market was not

Index manager statistics at a glance Growth of index assets Assets managed internally, including passive and Assets managed internally, including passive and enhanced strategies, in millions, as of June 30. enhanced strategies, in trillions, as of June 30.

One-year Five-year One-year Five-year Total assets $15.35 Assets change change Assets change change U.S. institutional $14.57 Worldwide index assets $15,353,460 5.4% 55.5% U.S. institutional, tax- $4,851,408 3.5% 47.9% tax-exempt exempt index assets assets $13.37 U.S. equity $7,216,738 3.6% 61.6% U.S. equity $3,060,410 0.6% 53.4% International equity $2,745,346 -0.4% 31.0% $11.83 International equity $509,639 2.4% 30.5% Global equity $1,584,944 8.4% 50.9% Global equity $355,651 10.3% 10.4% U.S. xed income $2,174,784 9.4% 82.6% $9.87 $9.86 U.S. xed income $783,655 0.0% 46.1% Global/international $1,234,734 3.9% 55.6% xed income Global/int’l xed income $16,879 14.3% -7.4% Other $396,914 90.0% 44.6% Other $125,174 401.1% 589.5%

Managed for: Managed for: Central banks $124,211 -1.4% -45.9% De ned bene t plans $1,184,926 4.3% 10.3% Sovereign wealth funds $250,227 1.0% -31.1% De ned contribution plans $2,535,138 3.9% 60.6% $4.69 $4.85 $4.30 Non-af liated insurance Endowments/foundations $202,912 14.1% 109.7% $3.84 $322,063 4.3% 28.6% companies $3.28 $3.33 529 plans $26,926 11.3% - Non-U.S. retirement plans $1,787,536 2.3% 35.5% Managed in enhanced $170,337 13.1% 9.2% Managed in ETFs/ETNs $4,810,685 11.6% 124.5% strategies

Historical data may include retroactive updates 2015 2016 2017 2018 2019 2020 Pensions & Investments November 16, 2020 | 19

functioning as well earlier this year. fund. “Seventy of our products are They did that because they could structured to have both an ETF and The largest index managers quickly get access to lots of corpo- conventional mutual fund share Ranked by total worldwide assets managed internally, in millions, as of June 30. Assets include passive and rate bonds in a really low-cost way class on the same fund. That has enhanced strategies. Totals may include assets not reflected in breakout categories. and very efficiently.” benefits for our ability to track a The Federal Reserve established benchmark well, our ability to cre- Global/ the Secondary Market Corporate ate scale in the products, and there- Total U.S. International Global U.S. fixed international Credit Facility on March 23 to pro- fore be able to lower costs. So we Rank Manager assets equity equity equity income fixed income vide stability and liquidity in the are agnostic as to which structure is 1 BlackRock $4,727,143 $1,760,910 $1,180,254 $384,542 $686,884 $664,542 corporate bond market. In addition better for a client. It really depends 2 Vanguard Group $4,570,523 $2,624,349 $946,995 $761,560 $237,619 to buying investment-grade corpo- upon the client’s situation,” he said. rate bonds, the Fed also bought Some clients, such as defined 3 State Street Global $2,494,077 $908,723 $118,667 $774,018 $245,410 $145,910 U.S.-listed ETFs, “to provide broad contribution plans, may be better 4 Northern Trust Asset Mgmt. $586,884 $334,008 $167,426 $80,552 $4,898 exposure to the market for U.S. cor- served by mutual funds that allow porate bonds,” according to the systematic deductions and partial 5 Geode Capital Mgmt. $562,423 $462,712 $59,788 $32,681 Federal Reserve’s website. share purchases. “With ETFs, the 6 Legal & General Investment $533,458 $54,272 $96,006 $229,783 $4,863 $114,954 ability to buy partial shares is a rel- 7 BNY Mellon $333,301 $227,328 $43,017 $21,306 $36,283 $2,283 Continuing trend atively new phenomenon, and not Mr. Powers said the advantages really available on many platforms. 8 Invesco $293,148 $215,576 $7,333 $24,844 $39,199 $6,195 of index investing — low costs and So we operate in this space where 9 Charles Schwab Investment $245,237 $165,379 $43,419 $159 $36,280 broad market exposure — have at- we offer investors options, depend- tracted assets into ETFs ing upon their situa- 10 Nuveen $170,023 $122,602 $20,933 $26,318 and he expects this tion, to access indexing 11 DWS $159,640 $8,098 $9,740 $94,743 $45,609 trend to continue. in the vehicle that best 12 Fidelity Investments $121,988 $113 $120,582 $1,293 “The acceptance and suits their needs,” Mr. preference for index- Powers said. 13 T. Rowe Price $114,942 $105,015 $1,750 $8,177 ing, that’s at the core of By asset class, U.S. 14 Baird Advisors $96,940 $96,940 why ETFs have be- equities retained the come so popular. We largest share of world- 15 J.P. Morgan Asset Mgmt. $90,777 $41,405 $32,230 $13,375 $1,931 $1,824 know it’s challenging wide indexed assets, 16 RhumbLine Advisers $68,010 $59,907 $3,336 $1,342 $3,425 for active managers to growing 3.6% to $7.22 outperform. More in- trillion as of June 30. 17 Prudential Financial $28,222 $18,653 $3,753 $527 $237 $5,037 vestors are saying ‘I NOT NOW: John Delaney Global equities in- 18 MetLife Investment $27,779 $14,038 $1,671 $12,070 don’t want to bear that feels index performance creased 8.4% to $1.58 19 Manulife/John Hancock $27,322 $15,386 $1,888 $4,731 $751 $4,566 risk’ or ‘I want to bear makes active manage- trillion during the one- less of that risk so I’m ment a tough sell. year period and inter- 20 Voya Investment Mgmt. $22,120 $15,831 $3,069 $3,220 going to invest in an national equities fell 21 ASB Capital Mgmt. $20,700 $20,700 index product,’ and an ETF is in- -0.4% to $2.75 trillion. creasingly the preferred way to do U.S. equity assets passively man- 22 Dimensional Fund Advisors $14,942 $12,942 $2,000 that,” Mr. Powers said. aged for U.S. institutional tax-ex- 23 Victory Capital $11,584 $11,584 Vanguard is the largest U.S. de- empt investors rose slightly to $3.06 24 Neuberger Berman $10,000 $10,000 fined contribution index manager trillion from $3.04 trillion in 2019. in P&I’s universe, with $1.07 trillion Indexed international equities rose 25 World Asset Mgmt. $9,425 $7,852 $1,544 $29 in indexed DC assets as of June 30, 2.4% to $509.6 billion and global eq- 26 Amalgamated Bank $5,501 $5,501 a 3.3% increase over the previous uities rose 10.3% to $355.6 billion. year. Mutual funds, which account John Delaney, portfolio manager, 27 Intech $2,864 $2,864 for more than 65% of Vanguard’s to- delegated investments, at Willis 28 Chandler Asset Mgmt. $1,709 $1,135 $527 $43 $4 tal indexed assets, rose 2.4% to Towers Watson PLC in Philadel- 29 Shelton Capital $1,083 $1,083 $2.99 trillion in the year ended phia, said the S&P 500’s continued June 30. Vanguard has been the strong performance through 2020 30 TWIN Capital $972 $972 largest manager of mutual fund in- has kept U.S. large-cap index in- 31 LSV Asset Mgmt. $362 $362 dexed assets since P&I’s survey be- vesting a good option for investors gan in 2006. and made it a difficult space for ac- 32 Johnson Asset Mgmt. $302 $302 Mr. Powers said many of Van- tive investors to add value. 33 Richmond Capital $59 $59 guard’s index mutual funds and “There’s not a lot of call for, ‘Oh, ETFs are share classes of the same SEE INDEX ON PAGE 21 TOTAL $15,353,460 $7,216,738 $2,745,346 $1,584,944 $2,174,784 $1,234,734

The largest managers of U.S. institutional, tax-exempt The largest managers of index assets ETF/ETN index assets Assets managed internally, in millions, as of June 30. Assets include passive and enhanced strategies. Totals may include assets Worldwide assets managed internally, in millions, as not reflected in breakout categories. of June 30. Assets include passive and enhanced strategies. International U.S. fixed Global/int’l Rank Manager Total assets U.S. equity equity Global equity income fixed income Rank Manager Assets $1,291,383 $991,290 $70,215 $226,241 $3,637 1 Vanguard Group 1 BlackRock $2,278,210 2 BlackRock $1,164,687 $692,456 $239,542 $43,025 $177,989 $6,784 2 Vanguard Group $1,176,314 3 State Street Global $842,066 $292,166 $15,835 $271,757 $142,919 $5,956 3 State Street Global $732,072 4 Geode Capital Mgmt. $545,957 $458,377 $52,494 $28,247 4 Invesco $262,789 5 Northern Trust Asset Mgmt. $337,449 $218,201 $61,490 $57,610 $148 6 BNY Mellon $177,228 $121,873 $22,635 $1,972 $30,748 5 Charles Schwab Investment $156,259 7 Nuveen $93,400 $67,928 $20,933 $4,538 6 DWS $110,047

8 RhumbLine Advisers $65,721 $57,915 $3,270 $1,111 $3,425 7 BNY Mellon $33,164 9 Baird Advisors $61,110 $61,110 8 J.P. Morgan Asset Mgmt. $23,816 10 Fidelity Investments $58,606 $19 $58,587 9 Northern Trust Asset Mgmt. $12,372 11 Legal & General Investment $34,628 $19,719 $6,857 $6,474 $1,578 10 Manulife/John Hancock $9,646 12 J.P. Morgan Asset Mgmt. $27,671 $17,434 $8,511 $1,646 $68 13 ASB Capital Mgmt. $20,700 $20,700 14 Voya Investment Mgmt. $20,406 $14,158 $3,032 $3,216

15 T. Rowe Price $19,017 $17,664 $90 $1,263 20 | November 16, 2020 INDEX MANAGERS Pensions & Investments ESG indexes grow in tandem with rising awareness Managers with the largest a recent Morningstar Inc. study focus or have an ESG overlay. indexes the providers administer, Managers using percentage of worldwide assets that showed 70% of sustainable A 2020 global benchmark and although the indexes them- managed against ESG-speci c equity funds ranked in the top survey by the Index Industry selves do not directly lead to more ESG-specific indexes further increased those halves of their categories, 44% Association, a New York-based passively managed assets, noting indexes allocations during the year ended ranked in the best-performing not-for-profit organization that the development of new indexes can Worldwide assets managed June 30. quartile and ESG metrics among serves independent index provid- help observers better understand internally, as of June 30. Assets According to Pensions & Invest- bond issuers showed a similar ers globally, recorded a more than the space. include passive and enhanced ments’ annual survey of managers impact. 40% increase from “So the number of ESG indexes strategies. of indexed assets, Northern Trust European 2019 in the has increased but that doesn’t % of total Asset Management once again had institutional number of indexes mean, in 2020, the ESG assets are Manager assets the highest concentration of assets investors have been measuring ESG going up the same amount. But BNY Mellon 11.10% managed against ESG-speci c early drivers of ESG criteria. coming in the future, a lot of the Fidelity Investments 0.10% indexes, rising to 15.14% in 2020, mandates, Mr. Rick Redding, index managers will create products a steady increase from 14.36% in O’Donnell said, but CEO of the IIA, said based on them and that’s when the Geode Capital Mgmt. 0.14% 2019 and 13.7% in 2018. interest and options areas of interest assets will ow into the investment Invesco 1.17% NTAM had $586.8 billion in are rising in the within ESG indexes products,” he said. Legal & General Invest. 6.00% worldwide indexed assets under U.S. vary geographically John Delaney, portfolio manager, Northern Trust Asset Mgmt. 15.14% management as of June 30. “At this point, the and by user base, delegated investments, at Willis In looking at 2020, Brian institutional space, but regulation in the Towers Watson PLC in Philadelphia, Nuveen 1.02% O’Donnell, a Chicago-based senior particularly in European Union has said he has seen interest in and RhumbLine Advisers 0.13% vice president in NTAM’s funds and certain regions, like had an impact on questions about passive ESG State Street Global 6.00% managed accounts group and head Northern Europe the creation of new investing but not, necessarily, NEW LOOK: Brian O’Donnell said of business strategy, enablement and especially indexes. signi cant commitments. Vanguard Group 0.06% sustainability has become a key and administration, said social Scandinavia, you factor of investment performance. “There’s a lot of “Clients are interested in issues such as the pandemic, social just don’t see any interest in climate- exploring what types of options are activism and the impact of global new mandates that based indexes and available in terms of having ESG in State Street Global Advisors, warming have heightened interest in don’t include some level or overlay some of that is being driven by place for ‘passive’ mandates — Boston, had the highest dollar socially conscious and sustainable of sustainable investing standards,” regulatory issues in the EU. The EU once you in uence any type of ESG amount of ESG-specific indexed investing in the U.S. Mr. O’Donnell said. has speci c sustainable nance screen, it becomes what we call assets, rising to 6% of the firm’s “We’ve started to explore “U.S. institutions are increas- benchmarks and right now they semi-actively managed because $2.494 trillion in worldwide sustainability as an investment ingly following suit.” He credited have two that they’re regulating. you’re excluding certain stocks to indexed assets incorporating factor, just like quality, size or boards and consultants for driving One is based on the Paris accord do whatever screens you put on environmental, social and gover- value. So not only is it ingrained in that change. indices and the second is one they from an ESG perspective — I’ve nance factors in 2020, up from 5% our DNA as a firm, in terms of our Asset managers are also on call a ‘transitional index.’ Both of seen interest in that. Mostly one year earlier. Measured in commitment to climate change and board, he said, offering a wider those, driven by the regulatory side, questions, mostly discussions. I dollars, SSGA has maintained the diversity, equity and inclusion, it is variety of products tied to sustain- are for climate benchmarks,” Mr. think there’s been some adoption largest allocation to passive ESG something that we consider a key, ability, whether they are ETFs, Redding said. of that more in portfolios that are strategies since P&I added the potential driver of investment mutual funds or other vehicles that Mr. Redding said the IIA survey not necessarily corporate spon- category in 2018. performance.” Mr. O’Donnell cited have sustainability as their primary speci cally looks at the number of sored.” — TRILBE WYNNE

The largest managers of index assets by plan type U.S. institutional, tax-exempt assets managed internally, in millions, as of June 30. Assets include passive and enhanced strategies.

Defined benefit plans Defined contribution plans Endowments/foundations 529 plans Rank Manager Assets Rank Manager Assets Rank Manager Assets Rank Manager Assets

1 BlackRock $481,924 1 Vanguard Group $1,069,844 1 State Street Global $92,155 1 Vanguard Group $25,133

2 State Street Global $331,733 2 BlackRock $649,255 2 Vanguard Group $47,406 2 State Street Global $1,450

3 Northern Trust Asset Mgmt. $119,932 3 State Street Global $312,337 3 BlackRock $25,187 3 Fidelity Investments $343

4 BNY Mellon $101,199 4 Northern Trust Asset Mgmt. $170,812 4 Northern Trust Asset Mgmt. $25,116

5 RhumbLine Advisers $55,670 5 Geode Capital Mgmt. $126,288 5 RhumbLine Advisers $6,414

6 Vanguard Group $21,909 6 Nuveen $59,097 6 BNY Mellon $2,765

7 ASB Capital Mgmt. $20,144 7 Fidelity Investments $54,155 7 Legal & General Invest. $1,469

8 Legal & General Invest. $19,175 8 BNY Mellon $49,200 8 Geode Capital Mgmt. $1,099

9 T. Rowe Price $9,148 9 T. Rowe Price $8,611 9 Baird Advisors $773

10 Baird Advisors $7,072 10 Prudential Financial $7,685 10 World Asset Mgmt. $124

The largest managers of index assets by client type U.S. institutional, tax-exempt assets managed internally, in millions, as of June 30. Assets include passive and enhanced strategies.

U.S-based clients Central banks Sovereign wealth funds Non-affiliated insurance companies Rank Manager Assets Rank Manager Assets Rank Manager Assets Rank Manager Assets

1 Vanguard Group $4,214,418 1 BlackRock $48,642 1 State Street Global $75,793 1 State Street Global $136,613

2 BlackRock $2,954,213 2 State Street Global $43,287 2 BNY Mellon $52,469 2 BlackRock $57,002

3 State Street Global $1,619,186 3 Northern Trust Asset Mgmt. $28,217 3 BlackRock $50,211 3 BNY Mellon $50,445

4 Geode Capital Mgmt. $548,298 4 BNY Mellon $3,513 4 Northern Trust Asset Mgmt. $36,271 4 Northern Trust Asset Mgmt. $33,468

5 Northern Trust Asset Mgmt. $465,148 5 DWS $551 5 Legal & General Invest. $31,953 5 DWS $21,342

6 BNY Mellon $274,562 6 Legal & General Invest. $1 6 T. Rowe Price $3,530 6 T. Rowe Price $12,317

7 Charles Schwab Invest. $245,237 7 Baird Advisors $7,236

8 Invesco $230,235 8 Legal & General Invest. $1,956

9 Nuveen $155,974 9 Invesco $1,030

10 Fidelity Investments $120,683 10 RhumbLine Advisers $482 Pensions & Investments November 16, 2020 | 21

ESG Index Social issues take center stage at conferences CONTINUED FROM PAGE 19 Robert Tjalondo let’s go actively manage against Money managers realize “One of the jobs of the new ad- this narrowly led index that is ministration or the second Trump tough to beat on an ongoing basis.’ there is growing need to administration is to finally get a Where we’ve seen more interest in handle on housing finance issues,” active management, in particular, address many concerns he said. Fannie Mae and Freddy is in the credit space, where, obvi- Mac should move to a more private ously, whether it’s investment By ARLEEN JACOBIUS investment rather than government grade or high yield, there is an op- model, and housing should be an portunity for managers to add val- Recent money management in- element of infrastructure and be ue. The indices are constructed in a dustry conferences agendas and included in any future government way that makes them susceptible speakers reflect a new, dramatic infrastructure spending package, to potential outperformance from recognition that ESG consider- Mr. Cisneros said. managers. So we’ve seen interest ations, diversity, and social issues there.” such as income inequality are be- Income inequality According to the midyear S&P ing amplified by the pandemic — At the Urban Land Institute’s Indices vs. Active Funds U.S. Score- and that the industry needs to ad- Fall Conference Oct. 13-15, the is- card, 63.2% of active large-cap dress them. sue of income inequality was raised funds underperformed the S&P That does not mean that institu- during a panel discussion on this 500, which returned 7.4% for the tional investors, money manage- year’s ULI Emerging Trends in Real year ended June 30. ment executives and corporate Estate report. State Street Global Advisors, leaders agree on how to take action. Onay Payne, managing director Boston, remained the third-largest But these topics came out from the of real estate manager Clarion manager of worldwide indexed as- wings to center stage at recent con- Partners LLC, said the pandemic sets, with an 11.6% increase to ferences, all held virtually due to has put income inequality into $2.49 trillion. A 21.2% rise to $842.1 the COVID-19 pandemic. stark relief. billion in U.S. institutional tax-ex- For instance, the Nov. 5-13 NC- Higher-income Americans can empt AUM and 9.9% growth to REIF Fall Conference was sched- work effectively from home but $732.1 billion in ETF/ETN AUM uled to devote a session on the role lower-income Americans, with low- kept SSGA in third place on those of real estate reporting standards in er levels of education, don’t have lists, as well. ESG as the “prominence of ESG REGULATE IT: Dambisa Moyo believes more government involvement is needed. the same luxury, Ms. Payne said. SSGA’s passively managed as- considerations for real estate in- She said that the 50 wealthiest sets saw double-digit increases in vestment continues to explode,” the Corporations should not be re- wave of evictions when current Americans have as much net worth several categories. Indexed AUM in agenda says. quired to solve issues such as cli- eviction moratoriums expire. as the 165 million Americans in the U.S. defined contribution plans The Milken Institute Global mate change that really should be Robert Morse, executive chair- bottom 50%. According to data from grew 41.6% to $312.3 billion in 2020; Conference, held Oct. 12-21, tackled within the purview of the govern- man of real estate money manage- the U.S. Federal Reserve, in the first SSGA was the largest manager of everything from stakeholder capi- ment, Ms. Moyo said. ment firm Bridge Investment six months of the year, the top 1% of indexed assets for U.S. endowments talism to affordable housing. Group, noted that over the past 20 Americans had total wealth of and foundations, rising 26.2% to During a panel on stakeholder Addressing societal issues years the vast majority of apart- $34.23 trillion, compared to the bot- $92.1 billion; and indexed assets capitalism — the idea that compa- Lucian Bebchuk, the James Barr ments that were built are so-called tom 50% with a combined net worth managed for U.S. defined benefit nies should serve all stakeholders Ames Professor of Law, Economics Class A, luxury apartments because of $2.08 trillion. plans grew 15.4% to $331.7 billion including their employees, custom- and Finance and director of the they were the most attractive from A disproportionate percentage of as of June 30. n ers and local communities as well Program on Corporate Governance a return perspective. The focus on the poorest 50% of Americans are as their shareholders — Christo- at Harvard Law School who spoke Class A multifamily was to the det- African American, Latinx and pher J. Ailman, CIO of the $257.9 on the same panel, said he agreed riment of the “missing middle” in- women, she said. Clarion execu- billion California State Teachers’ that the question is what is the best come people such as nurses and tives take income inequality into Retirement System, West Sacra- way to address societal issues. policemen, he said, adding that consideration as part of its real es- Managers using mento, spoke about the need for One way is to use measures ex- government needs to form public- tate investment strategy, she said. non-market-cap- corporations to focus on the long ternal to the corporations such as private-partnerships as it did with The ULI Fall Conference also term, considering all stakeholders legal rules and regulations to force opportunity zones that provide tax tackled the issue of segregation. weighted indexes including the companies’ impact on corporations to behave. The other is incentives to build underserved ar- Robert K. Nelson, director of the Worldwide assets managed the environment and the communi- stakeholder capitalism to force cor- eas. Mr. Morse said that Bridge In- Digital Scholarship Lab at the Uni- internally, as of June 30. Assets ties they touch. porate leaders to take care of those vestment Group has invested in versity of Richmond, discussed his include passive and enhanced Corporate boards and company issues, he said. multifamily properties in opportu- work on how past redlining policies strategies. top executives are incentivized for Climate change risk should be nity zones, setting rents at 30% of have had a lasting effect on those short-term results, and CEOs focus taken care of on a systemwide basis the area’s average income, the up- neighborhoods as part of a panel % of total Manager assets on increasing profits in the near with measures such as a carbon tax. per limit of affordability. discussion on the impact of segre- term instead of thinking what is “I worry that in 10 to 15 years the “There can be a real partnership gated housing. He is also editor of BlackRock N/A good for the company in the next 10 icebergs will have melted while between government policy and “American Panorama: An Atlas of BNY Mellon 16.42% years, he said. we’re relying on the illusory hope of private enterprise to create some United States History,” which in- “We own stock for 30 years … For stakeholder capitalism rather than momentum to at least address the cludes “Mapping Inequality: Geode Capital Mgmt. 1.37% me, the time period is very real,” Mr. a carbon tax,” Mr. Bebchuk said. dire crisis of affordability in hous- Redlining in New Deal America.” Invesco 23.04% Ailman said. “I don’t need a return Mr. Ailman said that he agreed ing today,” he said. The work shows that redlining, a Legal & General Invest. 8.00% in 91 days … I need a return that is with Ms. Moyo’s comment that gov- Dana Wade, assistant secretary practice that denied fair access to generational.” ernment is too short-term focused for the Federal Housing Adminis- mortgages based on the race of a Northern Trust Asset Mgmt. 5.00% A good company treats its em- as well and that companies need tration’s commissioner at the U.S. neighborhood’s residents, has re- T. Rowe Price 1.20% ployees fairly, properly takes care of consistent regulations. Department of Housing and Urban sulted in present day differences in its waste products and does not pol- But the world is going to change Development, speaking on the neighborhood resources. RhumbLine Advisers 4.00% lute because those actions have a dramatically and companies need same panel, said that in many areas During the ULI discussion, Mr. Charles Schwab Invest. 10.00% long-term impact, he said. to adapt to what CalSTRS officials land use restrictions increase the Nelson noted that homeownership, State Street Global 5.00% Dambisa Moyo, a global econo- think will be a dramatically differ- total cost of construction. She said which is one of the biggest engines mist, author and board member of ent future in 10 to 15 years, he said. there are “common sense” changes of wealth creation, was denied to Voya Investment Mgmt. 2.00% 3M Co. and Chevron Corp., who “It doesn’t matter if we give that could be made such as reduc- African Americans. World Asset Mgmt. 7.10% spoke on the same panel as Mr. Ail- teachers a retirement check in a ing parking spaces and more zon- He said that current studies man, said she didn’t think corpo- world that is scorched,” Mr. Ailman ing for multifamily. show a correlation between red- rate short-termism was still a con- said. Institutional investors like There are new ideas being float- lined neighborhoods and preterm cern since many companies have CalSTRS need a stable, growing ed on focusing on function rather births today. He also pointed to a already addressed the issue by not economy in the long term with the than size of lots, said Mr. Cisneros, 2020 paper by researchers from promoting company executives help of both corporations and gov- who is chairman of real estate man- Portland State University, the Sci- who do not take a long-term view. ernment, he said. ager CityView and executive com- ence Museum of Virginia and Vir- “Yes, I think we want corpora- Speaking on another Milken In- mittee chairman of investment ginia Commonwealth University tions to be good citizens,” she said stitute Global Conference panel, bank Siebert Brandford Shank & showing that people in urban in response to a question about Henry Cisneros, former secretary of Co. LLC. neighborhoods that had been red- whether crony capitalism is real. the U.S. Department of Housing and “New urbanism” considers size lined are disproportionately ex- But at the same time, people are Urban Development, said that it will and use of space without the tradi- posed to extreme heat. The reason, spending time and energy trying to take extraordinary commitment tional zoning template, he said. Mr. Mr. Nelson said, is that the green- fix corporations when the real ail- from local and federal governments Cisneros agreed with Ms. Wade that line neighborhoods have more ment is ineffective government, she to think through means to get com- governments need to ease the regu- lawns and tree cover, while the said. The government should pro- munities back to affordability in latory burden on multifamily devel- redlined neighborhoods have vide regulations to stamp out bad light of the lack of housing for low- opers by reducing fees imposed on more asphalt and concrete that ra- behavior, she said. income individuals and an expected housing and parking requirements. diate heat. n 22 | November 16, 2020 Pensions & Investments HIRINGS

Dallas Employees’ Retirement telecommunications sectors. City, committed $40 million to Fund hired Cohen & Steers to manage Fund officials also committed a Starwood Distressed Opportunity Fund about $58 million in a global listed total of up to $130 million to three FLORIDA OFFERS MANAGERS $3.8 BILLION XII, an opportunistic real estate fund, infrastructure portfolio. The $3.5 global venture capital funds managed Florida State Board of Administration, Tallahassee, disclosed $3.8 and up to $19 million to Apollo Accord billion fund conducted a shortlist by GGV Capital: GGV Capital VIII, GGV billion in manager hires, commitments and investments in the third Fund IV, a private credit fund. search. Duff & Phelps Investment Capital VIII Plus, and GGV Discovery III. quarter, said John Kuczwanski, communications manager, in an The commitments were approved at Management was the other finalist. LACERA also completed a $20 email. a board meeting Oct. 21, said Ginger million co-investment alongside one of Sigler, executive director of the $2.6 Within its global equity asset class, the board, which oversees a First Premier Bank hired its private equity managers, Leonard billion pension fund. total of $207.8 billion including the $167.4 billion Florida Retirement Empower Retirement as its new record Green & Partners. Further information keeper and selected a managed about the investment was unavailable. System, hired Thompson, Siegel and Walmsley to manage about $1 Oklahoma Tobacco Settle- account as the qualified default billion in active international developed markets large-cap equities, ment Endowment Trust Fund, investment alternative for its $173 Los Angeles Fire & Police and Eastspring Investments to manage $400 million in active Oklahoma City, committed $30 million million 401(k) plan, said Colleen Pensions committed up to $120 emerging markets equities. to Brookfield Senior Mezzanine Real Stratton, the bank’s assistant vice million to five managers, the $25.3 Mr. Kuczwanski said the TSW portfolio was funded mostly by the Estate Finance Fund, said Lisa Murray, president of total rewards. billion pension fund reported. termination of Franklin Templeton from its $990 million active chief investment officer. The Sioux Falls, S.D., bank shifted The board committed up to $40 international developed markets large-cap equity portfolio. The $1.3 billion endowment trust the plan from Alerus Retirement and million to STG VI, a private equity fund Within its strategic investments asset class, the board committed fund’s commitment to the real estate Benefits to take advantage of managed by Symphony Technology debt fund was the result of an RFP $250 million to Torchlight Debt Opportunity Fund VII, a real estate Empower’s technology and participant Group and up to $30 million each to issued in January. services, Ms. Stratton said. global opportunistic real estate fund debt fund; and also committed $200 million each to Apollo Accord Cerberus Institutional Real Estate Fund IV, a private debt fund; Audax Mezzanine Fund V-A, a mezzanine Oregon Investment Council, Georgia Peace Officers’ Partners V and Wind Point Partners IX, debt fund; Highbridge Convertible Dislocation Fund and Highbridge Tigard, which runs the $77.7 billion Annuity and Benefit Fund, Griffin, a middle-market buyout fund. Tactical Credit Fund, both managed by Highbridge Capital Manage- Oregon Public Employees Retirement hired Driehaus Capital In venture capital, ment; MSD Private Credit Opportunity Fund, a private credit fund Fund, hired Meketa Investment Group Management, Pinnacle HAVE SOME NEWS? LAFPP committed up to managed by MSD Capital; and OHA Tactical Investment Fund, a as its new general investment Associates and $10 million each to 645 distressed debt fund managed by Oak Hill Advisors. consultant and Aksia as its diversifying Silvercrest Asset Please submit news of Ventures III, which strategies consultant. changes to David The board also committed $150 million to Orion Energy Credit Management Group to makes seed and series Opportunities Fund III, a direct lending fund that focuses on North The council has a 5% allocation to run a total of about Schepp, news editor, at A investments, and diversifying strategies as part of its American middle-market energy companies; and $100 million to $138 million in active [email protected] Reach III, a fund that $8.1 billion alternative investments domestic smidcap invests in education- Grain Spectrum Holdings III, an infrastructure fund focused on the portfolio. The council also extended equities, said Robert W. Carter, related companies managed by Reach telecommunications sector managed by Grain Management. the contract of Aksia as its $1.7 billion secretary-treasurer. Capital. The board also made a follow-on commitment of $100 million to opportunity portfolio consultant. Driehaus, Pinnacle and Silvercrest DoubleLine Opportunistic Income Master Fund, an opportunistic Separately, the council committed will manage growth, core and value Los Angeles Water & Power credit fund. The board originally committed $200 million in 2017. up to $400 million with manager EQT portfolios, respectively, of about $46 Employees’ Retirement Plan Within private equity, the board committed $200 million to buyout consisting of up to $350 million to EQT million each for the $850 million committed up to $60 million to fund Thoma Bravo Fund XIV, $150 million to growth capital and Infrastructure V and $50 million to a pension fund, he said. Cerberus Institutional Real Estate special situations fund TPG Growth V, and $100 million to upper- co-investment sidecar. Partners V. The council also committed $350 middle-market buyout fund Thoma Bravo Discover Fund III. Hollywood (Fla.) Police The $16.5 billion plan disclosed the million Pathway Private Equity C-III, an Within real estate, the board committed €75 million ($87 million) Officers’ Retirement System commitment to the global opportunis- existing customized private equity committed $10 million to TerraCap tic real estate fund in an Oct. 21 to CapMan Nordic Real Estate III, a value-added real estate fund, and co-investment program. Partners V, a value-added real estate memo from CIO Jeremy Wolfson. also made direct investments of $21 million and $19 million in The council committed $250 million fund. As of June 30, the $323 million medical office properties managed by Heitman in a joint venture with each to Centerbridge Capital Partners pension fund’s actual allocation to real Maine Public Employees Montecito Medical Real Estate. IV, a private equity fund, and GTCR estate was 11.5%. Retirement System, Augusta, Fund XIII, a buyout fund. approved a commitment of up to $75 It also committed $200 million to Houston Firefighters’ Relief million to EQT Infrastructure V, said and £37.5 million to Wigmore Street Also, the pension fund committed Clearlake Flagship Plus Partners that and Retirement Fund committed James Bennett, chief investment BDC IV Co-Investment No. 2, a $250 million to Pearl Diver Empire would invest alongside private equity up to $25 million to Torchlight Debt officer of the $15.3 billion fund. pan-European lower-middle-market Fund, a credit fund of funds managed firmClearlake Capital Group’s private Opportunity Fund VII, a real estate buyout fund also managed by by Pearl Diver Capital that will invest in equity and credit opportunities debt fund. The $4.2 billion pension New Hampshire Retirement Bridgepoint. The pension fund also PDC Opportunities VIII, PDC Opportuni- strategies, as well as investments on fund’s board approved the commit- System, Concord, hired Aristotle Capi- committed $30 million to Primary ties IX, and PDC Opportunities X. its own in other tactical or special ment in October. tal Management and Lazard Asset Venture Partners III. These funds will invest primarily in situations investment opportunities. Management to run about $119 The pension fund’s real assets debt and equity tranches of collateral- The council also committed a total Kern County Employees’ million each in active international commitments were $200 million to ized loan obligations managed by of $150 million to three global venture Retirement Association, equities. Grain Spectrum Holdings III, an third-party investment firms. capital funds managed by GGV Capital: Bakersfield, Calif., invested $50 They replace LSV Asset Manage- infrastructure fund that focuses on the GGV Capital VII, GGV Capital VII Plus million in Davidson Kempner Multi- ment, said Marty Karlon, pension fund telecommunications sector; and $100 Oakland (Calif.) Police and and GGV Discovery III. Lastly, it Strategy Fund, a multistrategy hedge spokesman. million to Stonepeak Global Renew- Fire Retirement System hired committed $150 million to real estate fund, said CIO Daryn Miller. Separately, the $9.3 billion fund ables Fund Co-Invest (N.Y.), a Wellington Management to run about fund Waterton Residential Property The $4.6 billion pension fund also committed $50 million each to CVI renewable energy generation fund that $25 million in active domestic core Venture XIV. committed $30 million to distressed Credit Value Fund V, a distressed/ invests primarily in wind and solar fixed income. The $401 million debt fund Peak Rock Capital Fund III. opportunistic debt fund managed by power generation. pension fund’s board approved the hire Pensacola (Fla.) General CarVal Investors, and Industry Ventures New York State Common committed at it Sept. 30 meeting. Pension and Retirement Fund Los Angeles County Employ- Secondary IX, a venture capital fund to two emerging managers: $24 hired AllianceBernstein to run about ees Retirement Association, that invests in the secondary markets. million to Long Ridge Equity Partners Ohio State Teachers’ Retire- $5 million in active domestic smidcap Pasadena, Calif., committed up to III, a private equity fund that targets ment System, Columbus, committed equities. $300 million to three managers. New York State Common majority and significant minority $75 million to buyout fund GTCR Fund The $142 million pension fund’s It committed $150 million to Center- Retirement Fund, Albany, made up investments in high-growth financial XIII, said Nick Treneff, fund spokes- board approved dividing the total bridge Capital Partners IV, which is to $862 million in commitments. and business technology companies, man. It is the $81.3 billion pension amount of $14 million evenly between expected to include leveraged buyouts In private equity, the $216.3 billion and $15 million to Otter Storage Fund fund’s second commitment to a GTCR AllianceBernstein and incumbent and structured equity in U.S. and pension fund it committed £150 II, a real estate equity joint venture fund, Mr. Treneff said. managers Frontier Capital Manage- European companies in the consumer, million ($194 million) to Bridgepoint with Macritchie Group that acquires ment and Thompson, Siegel and financial services, health-care, Development Capital IV, a pan-Europe- and automates self-storage facilities Oklahoma Police Pension & Walmsley, which managed about $8 industrials, technology, media and an lower-middle-market buyout fund, throughout the U.S. Retirement System, Oklahoma million and $6 million.

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Philadelphia Board of Pen- that invests in companies that take Actis Energy 5, which targets electricity committed $255 million to GTCR XIII, a Investments, Aegon Asset Manage- sions and Retirement hired advantage of broad macro trends projects in emerging markets. buyout fund that invests in financial ment and Insight Investment were EARNEST Partners to run $50 million including user-generated content, In private equity, TRS committed services and technology, health care, named subadvisers for the £438 in a domestic small-cap equities video and artificial intelligence. $100 million to GTCR XIII/A&B, a large growth business services, and million absolute-return bond fund. strategy and committed $25 million to buyout strategy focused on U.S. technology, media and telecommunica- Western Asset Management Co., Estancia Capital Partners Fund II, a Texas Teacher Retirement companies, and $40 million to tions; and €45 million ($52 million) to MetLife Investment Management, middle-market buyout fund, confirmed System, Austin, committed a total of Bridgepoint Development Capital IV, a HIG European Capital Partners III, an Fidelity and T. Rowe Price were named Christopher R. DiFusco, CIO for the $765 million to six alternative pan-European lower-middle-market international buyout fund targeting subadvisers on the £790 million global $5.8 billion pension fund. investment strategies, a report from buyout fund. It also committed $25 distressed investments in Europe. credit fund. BlueBay Asset Manage- the $155.2 billion system showed. million to OMNIA Coinvest, a large ment and Colchester Global Investors San Antonio Fire & Police It committed $450 million to EQT buyout strategy focused on U.S. invest- Wales Pension Partnership, were named subadvisers on the £518 Pension Fund hired Zevenbergen Fund Management: $250 million to ment opportunities managed by Carmarthen, Wales, named the 14 million global government bond fund. Capital Investments and D.L. Carlson EQT Infrastructure V (No. 2), a fund Leonard Green & Partners. underlying money managers running Wales’ website said Intermediate Investment Group to each manage $15 focused on international developed its fixed-income platform. Capital Group, Man GLG, BlueBay, million in domestic large-cap growth/ markets, and $200 million to EQT IX Virginia Retirement System, The £17.5 billion ($22.7 billion) Barings and Voya Investment Manage- core equities as part of the $3.3 (No. 2) USD, a buyout fund that will Richmond, committed $307 million to pool of local authority funds invested ment were named subadvisers on the billion plan’s emerging manager seek opportunities in international private equity, spokeswoman Jeanne an initial £2.9 billion run across five £598 million multiasset credit fund; program. The board also committed developed markets. Chenault said. subfunds. and Fidelity was named sole manager $20 million each to private debt funds It also committed $150 million to The $83.8 billion pension fund Wellington Management, Putnam on a £547 million U.K. credit fund. VSS Structured Capital IV and CapitalSpring Investment Partners VI.

San Francisco City & County Employees’ Retirement System disclosed private equity commitments totaling $113 million in an investment report for its Nov. 10 board meeting. The $28.1 billion pension fund committed $48 million to GGV Capital VIII and $20 million each to GGV Capital VIII Plus and GGV Discovery III, all venture capital funds. Also, the fund disclosed a follow-on commitment of $25 million to Altaris Health Partners V, a middle-market buyout fund. It committed $50 million to it earlier this year.

San Mateo County Employ- ees’ Retirement Association, Redwood City, Calif., committed $25 million to EQT Infrastructure V, an announcement on the $4.3 billion pension fund’s website said.

Tennessee Consolidated Retirement System, Nashville, committed $120 million to Charles- bank Equity Fund X, a middle-market private equity fund, and $100 million to Principal Digital Real Estate Fund, a core real estate fund, said Shelli King, spokeswoman for state Treasurer David H. Lillard Jr., who oversees the &%++#&ƯƻƫƷƸƯƹƾ+ƴƩƲƺƸƯƵƴ#ƼƧƷƪƸ $53.6 billion pension fund. Texas Employees Retirement System, Austin, committed $281 ('--%MWTVSYHXSVIGSKRM^I6MWMRK7XEVWERH0IEHIVWJVSQSYV million, a transaction report from the $28.6 billion fund showed. In private equity, it committed $100 QIQFIVSVKERM^EXMSRWMRSYVMREYKYVEP(MZIVWMX] -RGPYWMSR million to HarbourVest Partners’ Dover Street X Feeder Fund, a private equity %[EVHWEZMVXYEPIZIRXLETTIRMRK(IGIQFIV secondaries fund, and $30 million to KSL Capital Partners Credit Opportu- nity Fund III for investment in travel and leisure businesses. The system ('--%QIQFIVWWLSYPHGLIGOXLIMVMRFS\JSVERMRZMXEXMSRXS also made commitments to two undisclosed private equity co-invest- VIKMWXIVERHMRJSVQEXMSREFSYXWTSRWSVWLMT ment funds, $70 million and $6 million. Also, the system committed 'SRXEGXMRJS$HGMMESVK[MXLUYIWXMSRW $75 million to DivcoWest Fund VI, a real estate fund that will target investments and locations serving the innovation and life-science sectors.

Texas Permanent School Fund, Austin, allocated $209 million in the quarter ended Sept. 30, 1ER]XLEROWXSSYV(MZIVWMX] -RGPYWMSR'SQQMXXIIERHSYVIZIRXWTSRWSVW according to the fund’s response to a Freedom of Information Act request. The largest commitment was $100 million to NW1 Strategic Investment Partnership I, a real estate fund managed by Blackstone Group. In private equity/venture capital, the $35.2 billion fund committed $47 million to Avedon Capital Partners’ GCF IV Feeder, a growth equity fund that focuses on lower-middle-market companies in Belgium, Luxembourg and the Netherlands, and $30 million to ACME Fund III, a venture capital fund 24 | November 16, 2020 Pensions & Investments

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“Technology allows for screening Investment Management and head ties with us as a result of COVID-19 Grant said. based on objective characteristics, of global distribution. and our pipeline remains very “During this time we have seen Recruiting such as particular skills or particu- MFS has more than 1,900 em- strong. In fact, applications to both many, many candidates, both in the lar types or years of experience ployees worldwide and managed our full and part-time early talent (job search) market and gainfully CONTINUED FROM PAGE 2 from a broader opportunity set, as $535.8 billion as of Oct. 31. programs at PGIM have increased employed, at a crossroads.” puses. “I don’t know how effective opposed to solely through a net- The firm has been able to inter- year-on-year,” Ms. Sinclair wrote. it’s going to be on Zoom recruiting,” work that is entirely curated view a broader array of candidates “Virtual recruitment has actually ‘The way things were’ Mr. Gabelli said. through more cultural and social due to the process being virtual, Ms. permitted us to cast a wider net and Some executives are questioning GAMCO, which had $29.7 billion connections; such as country club Geremia said. focus on schools that we may not whether they even want to go back in assets as of Sept. 30, typically re- membership or familial or friend- “Interest in (joining) the industry have otherwise. …We had more to “the way things were,” she said. cruits from undergraduate pro- ship connections or even gradua- is growing exponentially for diverse than 90 interns join us this past “For example, if they were in dis- grams at Babson College, Boston tion from elite schools. It is easy to talent. I’ve spent so much time in summer — more than ever before tribution and they were on the road College, Yale University, Fordham search more expansively remotely, the past six months, amid COVID at PGIM — and we’re expecting three weeks out of the month, do University, New York University, because it is less taxing on the re- and working from home, talking similar, if not higher, numbers for they miss it?” Some candidates are Princeton University, Duke Univer- cruiter’s time and travel expenses. with interns and talking with stu- 2021. We have found that virtual in- also exploring moving to new roles, sity, the University of Miami and Technology also can help prioritize dents,” Ms. Geremia said. “I’ve per- ternships has allowed for a wider whether at another company or on Roger Williams University. objective factors over subjective sonally not spent more range of candidates to the “fringes of asset management in The firm also recruits from MBA factors (race, gender, social back- time than I have now accept roles due to re- fintech,” according to Ms. Grant. programs at the University of Penn- ground) by simply highlighting talking to students,” as a duced relocation costs, There is still a subset of profes- sylvania’s Wharton business school, those factors first, before the fol- result of these engage- and the possibility of sionals, particularly at stable firms, Columbia University and, to a mi- low-up audio-visual or physical in- ments becoming virtu- remaining with their who are “putting their heads down” nor degree, Harvard University, Mr. terview,” Ms. Williams said. al, she said. families and part-time and staying put, she said. Gabelli said. As it pertains to Xponance’s ex- Since mid-March, jobs that fund their Another recruiter in the industry Among undergraduate students, isting workforce, technology has MFS has hired approx- schooling,” she added. has similarly seen that some long- in particular, the applicant pool for also provided an opportunity for imately 40 entry-level A spokeswoman at tenured professionals, who might entry-level analyst and sales roles staff who don’t work in the Phila- employees and “never PGIM said in an email have previously passed on new op- at GAMCO is about half that of last delphia headquarters to connect hit pause” on hiring that “the vast majority portunities, are now considering a year, said Richard Rose, director of more often with her and other se- during the pandemic DECISION: Amanda H. of the interviews for the job move. human resources. The firm typical- nior leadership, she added. with the move to virtual Grant said some 2020 summer intern- Jim Cooper, managing partner at ly has an average of 10 undergradu- Xponance has 43 employees onboarding, a spokes- question returning to ship program took executive search firm Concentriq ate applicants per school, according across its two offices in Philadel- man said. “We contin- ‘the way things were.’ place in fall of 2019 and LLC, Wenham, Mass., said that this to Mr. Rose. phia and Durham, N.C. ued to onboard on of- in-person prior to the year, some senior-level candidates GAMCO also had a couple of “In some ways, (technology) may fers we had out prior to the pandemic.” are “not only returning calls, but summer interns, who are enrolled democratize access. One thing it pandemic and continue to look to “There were, however, a handful proactively reaching out about op- in college, decide to take a gap year. has done for us, is staff in Durham staff on positions as they come up,” of positions that were recruited for portunities” at other firms. “One would assume there are po- have said they feel way more pres- the spokesman added. in spring 2020, where we facilitated This could be due to family or re- tentially more students taking a gap ent with me as the head of the firm The firm’s hiring of more than 40 interviews virtually after March,” mote work needs amid the pan- year because of COVID,” he said. relative to my colleagues in Phila- full-time, paid undergraduates the spokeswoman added. demic, or because they are con- delphia. They were acutely aware through its cooperative program, as As a result of the pandemic, and cerned about barriers to growth in ‘People adapt’ that folks that were in my office well as its onboarding of nearly 30 the acceleration of longer-term their individual role or at the over- Tina Byles Williams, the founder, could just stop by and have a chat summer interns was also on par trends like consolidation, recruiters all company, Mr. Cooper explained. CEO and CIO of Xponance Inc., a with me,” Ms. Williams said. with last year despite the pandemic, in the industry have noticed more “(Among these professionals) Philadelphia-based money manag- Since the pandemic started, according to the spokesman. senior-level talent reassessing their there are questions about the longer with $11 billion in AUM, said that Xponance has onboarded an intern career plans and in some cases term strategic direction or viability her firm typically recruits through and hired two additional employees Applications up considering a move. of some boutique active managers, either candidate searches or in- via virtual recruiting, she added. PGIM Inc., the $1.4 trillion New- Amanda H. Grant, a New York- particularly with all of the consoli- ternships. She believes recruitment Another source also noted that ark, N.J.-based money management based partner at executive search dation in the industry,” he said, not- of entry-level talent “will become virtual recruitment of entry-level unit of Prudential Financial, has firm Calibre One Inc., said among ing this is often a concern for firms harder,” as a result of the pandemic, talent has actually expanded re- seen applications to its early talent senior-level distribution profes- with less than $10 billion in assets. but says that “people adapt.” cruitment opportunities. programs increase over 2019, Pa- sionals, the firm is seeing “a sincere Executives may be taking indus- “In a recruitment sense, it is pos- “We’ve had our internship pro- mela Sinclair, global head of human reevaluation of career objectives.” try headwinds into consideration sible that technology will sort people gram for years. We think there’s resources, said in an email. “People have been forced to step with heightened scrutiny, or “they’ve out relative to more objective crite- such a huge opportunity (to recruit) “While we have seen some back by stepping into their homes had some time to assess their cur- ria vs. the subjective criteria that is especially people from more diverse changes in our candidates’ gradua- … in a way in which the pace and rent work-life balance and have said often infused with conscious or un- backgrounds,” said Carol W. Gere- tion plans, our early talent candi- in-person part of the industry did they are looking for something dif- conscious bias,” Ms. Williams said. mia, president of Boston-based MFS dates have not declined opportuni- not permit time for before,” Ms. ferent,” Mr. Cooper said. n

looking to address issues like pay “We took the temperature in minority employees. wealth gap is significant, Ms. Aidoo disparity, which Ms. Jones said is a 2015 and we started the conversa- An all-purpose “everything kind added. “It makes such a huge differ- Disparities contributing factor to the lack of re- tion about how we can address of class” that covers budgeting, ence to them because they very tirement savings among minorities. these disparities,” Ms. Cleary said. emergency savings and getting out well may not have anybody that is CONTINUED FROM PAGE 2 Beth Conradson Cleary, executive Not all plan sponsors have ac- of debt was playfully named “Tell giving them advice or good advice,” tionately Black and Hispanic. Part director of the City of Milwaukee cess to data based on race because Your Money Where to Go” — rather she said. of the problem is also tied to the Deferred Compensation Plan, looks not all record keepers track it, but than something like financial plan- Still, moves to bump up financial fact that smaller employers — to benchmarking to track racial dis- sponsors that do are increasingly ning — to make it more approach- education and other initiatives from where most minority workers are parities. Ms. Cleary, for example, interested in how plan design fea- able and “not stuffy,” Ms. Aidoo said. well-intentioned sponsors are un- employed — are less likely to offer started benchmarking the financial tures, such employer matches and likely to fix the problem, said the retirement plans, he said. wellness programs the plan offers waiting periods, might have “the ‘Office folks’ vs. hourly University of Illinois’ Mr. Brown. Whatever the causes of the dis- its 9,079 participants by unintended conse- Some plan sponsors are scruti- While he does not consider himself parities, plan sponsors are mindful race, gender and salary quence of disadvantag- nizing the disparities in attendance a “heavy-handed regulatory guy,” and sensitive to the issues, accord- quartiles, a practice ing one group or anoth- at group financial education ses- he sees the issue being corrected ing to industry observers. Some are that is also assiduously er,” said Mercer’s Mr. sions as well as participation in through public policy changes. strengthening their financial litera- applied when evaluat- Lloyd. A plan sponsor, one-on-one financial coaching be- “I think it is going to take a little cy and financial wellness programs, ing the $1 billion 457(b) for example, recently tween salaried employees and bit more of a regulatory approach,” while others are reviewing their retirement plan overall. scrapped a plan to im- hourly employees, which tend to be he said. investment lineups with a view to A review of its plan plement a new match- minority workers. Those who at- Measures to expand coverage to adding ESG funds or other types of by gender, race and sal- ing formula designed to tend the workshops and avail part-time workers, such as those socially responsible investments ary in 2015 “showed a encourage more retire- themselves of the one-on-one provided in the SECURE Act, are that, say, consider pay equity at big divide,” with Blacks ment savings after it meetings are predominantly “office “fine,” he said, “but they’re not going companies in which they invest. and Latinos trailing SPLIT: Beth Conradson was studied “through folks” and not hourly workers con- to have a major impact” given that other employees in Cleary sees pay disparity an ethnicity lens,” he cerned that they might not get paid between half and two-thirds of U.S. Conversations coming up plan participation and as a major impediment said. While the pro- if they take time off from work to workers are not in plans. “Conversations about everything savings rates, she said. for minorities. posed match seemed to attend, Ms. Aidoo said. Mr. Brown sees state-run retire- that has to do with racial disparities As a result, the city of work well in aggregate, In light of this, some sponsors are ment plans as possible ways to ad- and social justice and economic Milwaukee overhauled the plan it was unfavorable to two ethnic making group financial education dress the problem, though he fa- justice and mobility are coming up and implemented a series of auto- groups, Mr. Lloyd said. Other spon- sessions mandatory and in some vors a national plan for employees across our client base,” said Mere- matic features, including automatic sors are looking for ways to get mi- cases even taking the extra step of of firms that don’t offer retirement dith Jones, a partner and global reallocation to age-appropriate tar- nority populations more engaged scheduling one-on-one meetings plans of their own, something akin ESG lead at Aon PLC in Nashville, get-date funds. The move boosted with their plans. It’s important to with all employees in advance, Ms. to the $612 billion Thrift Savings Tenn. plan participation among Blacks make sure that participant commu- Aidoo said. Sponsors would not dock Plan for federal workers. In addition to looking at ESG and Latinos to 82% at the end of nications are inclusive and relat- hourly workers for taking classes “If we really want to take this se- funds, which have “a strong diver- September 2019, up from 62% for able, said Elizabeth Aidoo, a bilin- during their regular shifts. riously it’s inevitable there’s going sity component to it,” some are Blacks and 69% for Latinos at the gual Spanish-English financial While everyone can benefit from to be some form of either stricter looking into making allocations to end of September 2016. The partici- adviser with Francis Investment financial guidance, it’s particularly government requirements or just women- and minority-run funds, pation among other employees in- Counsel LLC in Brookfield, Wis., helpful for Black, Hispanic and oth- government-run plans with all Ms. Jones said. Other clients are creased to 84% from 74%. who specializes in working with er minority groups, where the their faults,” he said. n 26 | November 16, 2020 Pensions & Investments

man Richard Neal, D-Mass., and ber. Its retirement provisions offer UPCOMING WEBINARS | REGISTER TODAY ranking member Kevin Brady, R- funding relief for both multiem- Election Texas. The ambitious Securing a ployer and single-employer retire- Strong Retirement Act would re- ment plans through extended CONTINUED FROM PAGE 1 quire, among dozens of provisions, amortization periods for funding Paris Agreement on climate change automatic enrollment of many de- shortfalls. — unilaterally through executive fined contribution plan participants Multiemployer pension plans orders and administrative actions. with the opportunity to opt out, and could see even more dramatic He could also undo recent changes higher age for required minimum changes. Heroes Act sections aimed like the Department of Labor’s new distributions, while allowing 403(b) at shoring up the Pension Benefit policy on ESG investing. Loftier plans to participate in multiple em- Guaranty Corp.’s multiemployer The Institutionalization of Retail: A goals will require patience and ployer plans and invest in collective program would give it authority and compromise. investment trusts. resources to partition more trou- Webinar Series from P&I Content Solu- Everything will take a back seat During his campaign, Mr. Biden bled multiemployer pension plans. to the pressing crisis of getting CO- pledged that most workers will It would also allow for new compos- tions and Chestnut Advisory Group VID-19 under control and repairing have access to an automatic 401(k) ite plans that combine defined ben- Live, Tuesday, November 17 • 1:00 p.m. - 2:00 p.m. ET the economy. Congress also has a efit and defined contribution fea- Dec. 11 deadline to fund the federal tures, with more sharing of The Institutionalization of Retail, Part One: government for the rest of fiscal investment risk with plan partici- How to Position your Firm for Success 2021 and avert a government shut- pants. down. The expedited budget recon- As the “golden age” of retail sales fades into obscurity and retail and ciliation process requiring just 50 Melded proposals institutional platforms begin to converge, firms that want an edge must Senate votes can only be used for To gain Republican approval in rethink their go-to-market strategies. This webinar will identify the forc- fiscal decisions like taxes and fed- the Senate, those ideas could be es driving the institutionalization of retail and explain the impact of this eral spending, not controversial melded with proposals floated by trend on asset managers. Our speakers, Amanda Tepper of Chestnut new ideas like an ambitious clean Health, Education, Labor and Pen- Advisory Group and Paige Scott of Kingsley Gate Partners, will discuss energy program or raising taxes. sions Committee Chairman Lamar why firms need to change how they communicate their value and how Lack of a clear Democratic man- Alexander of Tennessee and Senate sales teams can eectively bring their message to market. date could be the best possible out- Finance Committee Chairman come for markets, said Stephen Chuck Grassley of Iowa, who Auth, Federated Hermes Inc. CIO of switches to the Judiciary Commit- Register Now: equities, in a client note. “We should TOGETHER: Julia Zuckerman thinks tee in the next Congress. They call pionline.com/InstitutionalizationofRetailWebinar still get a substantial fiscal package, retirement legislation could become a for higher PBGC guarantees but but avoid growth-killing tax hikes way to demonstrate bipartisanship. also sizable premium increases. planned by the Democrats in a Multiemployer plan sponsors Sponsored by: in parternship with sweep. This is supportive of our and said he would “equalize” the re- would face new rules for measuring bullish market call for 2021,” said tirement provisions of the tax code liabilities and funding levels, among Mr. Auth, whose firm manages that currently benefit affluent sav- other measures. $614.8 billion. ers more. A person involved in the discus- “When there is some bipartisan sions sees both parties eager to do An opening? consensus, lawmakers want to something on multiemployer pen- Target Date Construction and Its As political stalemates drag on, show they’re doing something,” Ms. sion reform before a new adminis- any possibility for bipartisanship Zuckerman said. tration takes over in 2021. “They’ll Impact on Outcomes could provide an opening for retire- Another boost to the COVID-19 want to get it off the plate,” he said. Live, Wednesday, November 18 • 2:00 p.m. - 3:00 p.m. ET ment legislation in the next session recovery should come from the Economic recovery measures of Congress, said Julia Zuckerman, next round of an economic relief could also be good for climate ac- Join us as we take a closer look at how a research-based engine Segal Group vice president for package, which politicians on both tion, particularly those dealing with influences portfolio construction in the pursuit of better retirement compliance in Washington. That sides of the aisle cannot ignore infrastructure and jobs. Overlaying outcomes. could make a path for legislation much longer. House leaders’ open- those with Mr. Biden’s plan calling introduced in October by House ing position is the Heroes Act legis- for 100% clean energy by 2035 and In this session, we will travel the winding road to retirement and the Ways and Means Committee Chair- lation they passed in May and Octo- zero emissions by 2050, “the U.S. critical underlying components of target date construction that can have a meaningful impact on outcomes. We will begin with a brief recap of our plan sponsor and consultant research findings and share key lion. Over the one-year period end- co-founder Josh Harris during an insights from our comprehensive participant research on demographics, ed Sept. 30, Franklin’s growth in- Oct. 29 earnings conference call behaviors, and preferences. We’ll then pivot to a conversation with our Earnings cluding Legg Mason was 104.9% with analysts. multi-asset team to discuss how we tackle the retirement problem and Among managers without help CONTINUED FROM PAGE 2 the opportunities and challenges that exist today and into the future. of an acquisition to boost assets, al- Big AUM drop asset managers and brokers in ternatives specialist Ares Manage- BrightSphere Investment Group Register Now: Morgan Stanley’s institutional se- ment Corp., Los Angeles, had the Inc., Boston, experienced the larg- curities unit, New York. largest growth, up 13.1% to $179.2 est AUM decline during the 12 pionline.com/TargetDateFundsWebinar “Overall, we’ve seen some decent billion. months ended Sept. 30, down 14.8% earnings,” Mr. Cyprys said, noting On an Oct. 29 conference call to $184.8 billion. The decline was Sponsored by: that many publicly traded manag- with analysts, Michael Arougheti, partly from the sale in July of Cop- ers reported lower expenses be- Ares’ president and CEO, attributed per Rock Capital Partners LLC, cause of COVID-19 restrictions on the growth to record fundraising which ran $2.2 billion in global eq- business travel and cessation of and nearly 50% growth in realized uities, as well as from net outflows other activities. income. The firm’s credit business, in the third quarter of $500 million, Consolidation within the invest- its largest, saw assets rise 11.8% to the earnings report showed. Investing Beyond the Pandemic: ment management industry also $131.2 billion in the quarter and An important ingredient in AUM remains on the minds of many 23.4% for the year. growth in the quarter ended Sept. A Reset for Portfolios managers seeking scale, distribu- Federated Hermes Inc., Pitts- 30 was net flows, with 14 managers tion capability, broader investment burgh, was one of the two managers The pandemic’s arc and its impact on political and policy developments reporting net inflows in the quarter strategy capabilities, new client that experienced an AUM decline and nine reporting net outflows, the are resetting expectations and will continue to define the investment segments and wider geographic in the quarter. Its assets fell 2.2% to same as the prior quarter. Northern landscape. What can we expect on these three critical fronts – the pan- coverage, Mr. Cyprys said. “We’re $614.8 billion, the largest drop Trust Corp. didn’t disclose net flows demic, politics, and policy – in 2021? And how should investors prepare seeing a pickup in merger and ac- among managers during the period. in either quarter. for a year that will likely have long-term implications for portfolio al- quisition activity,” he added. Federated Hermes “reached re- BlackRock Inc., the world’s larg- locations? Join us to hear how we’re positioning amid market conditions In fact, the biggest growth in cord fixed-income assets under est money manager, had the highest that are often unpredictable, and how we’re tapping into opportunities AUM within P&I’s manager uni- management of $79.5 billion at the net inflow — $128.7 billion — in the emanating from the disruptions. We’ll explore: verse in the third quarter was the end of the third quarter,” J. Christo- third quarter, which increased the • Which sectors and industries will benefit as we await the end of the result of the largest money manag- pher Donahue, president and CEO, New York-based firm’s AUM by pandemic’s grip on markets -- and daily life? er merger this year. said in a news release. But the de- 6.7% to $7.81 trillion. • What impact will politics have on portfolios driven by the US election, cline in total AUM was mainly the Of the inflows in the third quar- a post-Abe regime change in Japan, critical elections in Europe, and China’s full-steam-ahead capital market reform amid mounting ten- Topping $1 trillion result of $11 billion of net outflows ter, $37 billion was from Black- sions with the U.S.? Franklin Resources Inc.’s $4.5 from long-term assets and a $24.7 Rock’s institutional business, its • How will policy shift gears, from fiscal and monetary moves to re- billion acquisition of Legg Mason billion decline in money market as- Oct. 13 earnings report showed. sponses to the social justice movement and the focus on operational Inc. on July 31 significantly in- sets, the firm’s earnings report BlackRock had $100 billion in resiliency? creased assets, according to the showed. net inflows in the quarter ended Replay available: pionline.com/PineBridge-Webinar firm’s Oct. 27 earnings report. Over the longer term, alterna- June 30. San Mateo, Calif.-based Frank- tives manager Apollo Global Man- State Street Global Advisors, lin’s AUM topped the $1 trillion agement Inc., New York, had the Boston, which managed $3.15 tril- Sponsored by: mark for the first time, hitting $1.42 highest AUM growth for the year lion as of Sept. 30, experienced the trillion with the addition of Legg ended Sept. 30, up 34.2% to $433.1 highest net outflows at $65 billion. Mason’s $797.4 billion, an increase billion. About $58 billion of that came from For a full list of webinars, go to pionline.com/webinars of 127.8% from June 30, when Apollo’s growth primarily came the firm’s cash fund, according to Franklin’s assets totaled $622.8 bil- from its insurance business, said parent company State Street Corp.’s Pensions & Investments November 16, 2020 | 27

could emerge from the COVID-19 pandemic more resilient and competitive,” said Mindy Lubber, presi- Pennsylvania treasurer only incumbent loss in election dent and CEO of sustainability or- Pennsylvania Treasurer Joe Torsella was and Vermont each re-elected their state treasur- on Oregon’s secretary of state’s website. ganization Ceres in Boston. “Biden’s unseated in his re-election bid, while incumbent ers, with major implications for the retirements of Mr. Read, who was first elected in 2016 and 2009 experience in passing the treasurers in North Carolina, Oregon and Vermont millions of Americans. previously served in the Oregon House of largest clean energy stimulus pack- each secured another term. Representatives, spearheaded the implementa- age in history puts him in a good With election officials counting millions of North Carolina: In North Carolina, Republican tion of Oregon Retirement Savings Plan, the position to support the key sector mail-in ballots, the results from the Nov. 3 Dale R. Folwell topped Democrat Ronnie Chatterji, nation’s first state-sponsored private-sector that will usher in the clean energy Pennsylvania treasurer race took a week to 53% to 47%, according to the state board of retirement program known as OregonSaves, economy of the future,” she said. decide. As of Nov. 11, Republican Stacy Garrity elections. Mr. Folwell, who was first elected in which launched in 2017. Renewable energy got other earned 48.9% of the vote vs. Democrat Mr. 2016, will continue to serve as the sole trustee On Twitter, Mr. Read said it’s important for boosts this election season, including Nevada’s constitutional amend- Torsella’s 47.7%, according to results posted on of the $107.3 billion North Carolina Retirement people to support each other as many are ment to use 50% renewable energy the commonwealth’s website. Systems, Raleigh. currently struggling. by 2030 and another ballot measure Ms. Garrity, a retired U.S. Army Reserve In a statement Nov. 4, Mr. Folwell said the in Columbus, Ohio, creating a sys- colonel, said prior to the election in a statement results “reflect that voters of all persuasions Vermont: In Vermont, Treasurer Elizabeth tem for buying 100% renewable en- that tackling the unfunded liabilities weighing on wanted to keep the best treasurer money can’t Pearce, a Democrat, won her fourth term, ergy for residential users. Six states the $59 billion Pennsylvania Public School buy.” He added: “We have made and saved billions defeating Republican Carolyn Whitney Branagan — California, Hawaii, New Mexico, Employees’ Retirement System, Harrisburg, of dollars for the forgotten women and men who and two other candidates. New York, Virginia and Washington would be one of her top priorities. have too little to influence, too much to get help Ms. Pearce, who has been state treasurer — have already passed laws requir- The Pennsylvania treasurer or a designee from time to time, and spend their time working, since 2011, received 54% of the vote, compared ing a transition to carbon-free or serves on approximately 20 boards, including the paying taxes and praying for a better life.” to 31% for Ms. Branagan, according to results renewable energy. one overseeing PennPSERS. In 2017, Mr. Folwell, announced the first posted on Vermont’s secretary of state’s website. Climate change “is probably the Ms. Garrity said in the statement prior to the internally managed passive index fund for the During the campaign, Ms. Branagan said greatest issue humanity has faced election that she would like to make it easier for retirement system with the goal of reducing fees reforms were needed to tackle funding issues in since the industrial revolution,” said Bradford Cornell, who is teaching a all residents to invest “in low-fee, low-tax paid to outside investment managers while the $4.6 billion Vermont State Retirement course on energy, climate change retirement accounts that are fully portable and maintaining performance. Systems, including shifting new employees into and finance at UCLA’s Anderson controlled by individuals — not the government,” defined contribution plans rather than defined School of Management where he is while also educating citizens on the importance Oregon: Oregon Treasurer Tobias Read, a benefit plans. emeritus professor of finance. More of saving and investing. She said she would Democrat, defeated Republican challenger Jeff Ms. Pearce disagreed with her opponent, important than the Paris Agree- propose a financial curriculum for Pennsylvania Gudman as well as two third-party candidates. saying the system was in good shape despite the ment that Mr. Biden pledges to re- schools to help younger generations prepare for With 80% of the votes in as of at 8:30 a.m. year’s market turmoil, largely because of actions join on his first day in office, “you their futures. PST Nov. 3, Mr. Read secured 53% of the vote to taken to mitigate downside risks in recent years. need coordination and regulation Meanwhile, voters in North Carolina, Oregon Mr. Gudman’s 41%, according to results posted — BRIAN CROCE and you’ve got to get the incentives and the prices right,” Mr. Cornell said. “I think the Biden team is going to have a lot more interest in Biden will be in somewhat familiar recession,” Mr. Schulze said. change Commission. Other team tions, advocates for adding climate getting it right,” he said. waters as he begins his presidency. Other veterans of the 2008 finan- members represent progressive or- risk to financial stability calcula- As vice president, Biden took office cial crisis could be heading back to ganizations like the AFL-CIO and tions. Experience with crises in the midst of the global financial Washington, too. Gary Gensler, the market watchdog group Better Filling the top post at the Depart- Mr. Biden, who has already crisis and helped steer the economy former Goldman Sachs partner and Markets. ment of Labor is expected to take formed a transition COVID-19 ad- back into an expansion character- Commodity Futures Trading Com- Another Washington veteran more time, given the presence of visory board, knows something ized by steady but slow economic mission chairman during the considered a strong contender for union leaders and other strong about fiscal crises, said Jeffrey growth. Obama administration, is team Treasury secretary is Lael Brainard, voices on that transition team. For Schulze, an investment strategist This time, Biden will inherit an leader of the Biden transition team a member of the Federal Reserve’s that and other key posts, Mr. Biden with ClearBridge Investments LLC already-improving economy. In for the financial regulatory agen- board of governors. Ms. Brainard, is expected to tone down partisan in New York. “Investors should take fact, we believe the U.S. economy cies including the CFTC, Federal who served in several posts under politics and consider candidates some solace in the notion that has already exited the COVID-19 Reserve and the Securities and Ex- Obama and Clinton administra- from both parties. n

Oct. 16 earnings statement. not report its third-quarter reve- In the previous quarter, SSGA nue. saw total net inflows of $23 billion. KKR & Co. Inc., New York, saw its Manager earnings for Q3 2020 Morgan Stanley’s Mr. Cyprys said revenue rise 42.3% to $1.9 billion For a continually updated listing of publicly traded money manager earnings, go to pionline.com/section/ that by asset class, “fixed-income without an acquisition. KKR man- earnings-tracker. strategies are experiencing strong aged $233.8 billion as of Sept. 30. Change Change inflows” despite lower returns be- Ares Management had the larg- AUM Change from Q3 Revenue Change from Q3 Net flows cause “with the low-rate backdrop, est revenue decline in the third Manager (billions) from Q2 2019 (millions) from Q2 2019 (billions) investors have a need for income.” quarter among managers in P&I’s BlackRock $7,808.5 6.7 12.1 $4,369 19.8 18.3 $129 For example, Jennifer M. John- universe, down 18.7% to $490 mil- State Street Global Advisors $3,148.0 3.1 6.6 $455 7.1 2.2 -$65 son, Franklin Resources president lion. While Ares’ AUM grew from and CEO in a news release accom- strong fundraising, transactions J.P. Morgan $2,595.0 3.3 15.5 $1,924 8.1 5.9 $1 panying the firm’s earnings report, plummeted due to the COVID-19 BNY Mellon $2,041.0 4.1 8.5 $828 5.9 -0.2 -$5 said her firm is “already seeing the pandemic, cutting into deployment benefits of adding world-class and revenues, according to the Goldman Sachs $2,036.0 -1 15.6 $2,768 31.7 70.8 -$72 franchises (from Legg Mason) to an firm’s earnings report. Franklin Resources $1,418.9 127.8 104.9 $1,705 46.8 19.8 -$24 already strong set of investment “Aggregate revenue among pub- Northern Trust $1,311.7 4.3 9.1 capabilities. Case in point, U.S. licly traded money managers was fixed income attracted record net much more positive in the third T. Rowe Price $1,310.4 7.4 16.3 $1,596 12.7 11.9 -$5 flow of $5.7 billion in the quarter. quarter than in the previous quar- Invesco $1,218.0 6.4 2.9 $1,498 5.5 -13 $11 We were pleased to see strong ter and from the high-water mark long-term net flows for Western at the end of the fourth quarter Morgan Stanley $715.0 7.5 41 $1,056 19.2 38.2 $13 Asset (Management), which 2019,” said Amanda Walters, a New Affiliated Managers Group $653.5 2.4 -12.9 $495 5 -9.9 -$14 reached $410 billion in long-term York-based principal at Casey AllianceBernstein $630.8 5.1 6.5 $900 3.3 2.5 $3 assets and $487 billion in total as- Quirk, a practice of Deloitte Con- sets, both their highest levels in sulting LLP. Federated Hermes $614.8 -2.2 16.6 $364 1 7.1 $4 more than a decade.” She added that “margins are Blackstone $584.4 3.6 5.5 $3,033 20.5 74.8 $10 Western Asset Management was healthy but are on a downward a subsidiary of Baltimore-based path. Despite capital market re- Apollo Global $433.1 4.7 34.2 $434 5.8 9.9 $8 Legg Mason and is now a part of turns propping up assets under Janus Henderson $358.3 6.4 0.6 $569 9.7 6.1 -$3 Franklin. management, we continue to see Mr. Cyprys said equity strategies, more fee pressure including persis- Voya Investment Mgmt. $345.6 5.6 11.3 $2,071 24.5 10.5 $1 on the other hand, had net outflows tent fee discounting on the institu- KKR $233.8 5.4 12.2 $1,895 42.3 139.8 $1 in the third quarter likely due to in- tional side of the business. In a hard Carlyle Group $230.0 3.9 3.7 $364 -2.2 1.2 $1 vestors rebalancing out of equities, fundraising environment, some despite the rally in markets. managers may be using lower fees BrightSphere $184.8 2.1 -14.8 $182 4.4 -7.8 -$3 to attract new business.” Ares Management $179.2 13.1 24.2 $490 -18.7 5 $10 Revenue also up About managers cutting costs, As AUM rose in the third quarter Ms. Walters said: “This is the first Artisan Partners $134.3 11.4 19.4 $233 14.6 14.7 $2 for most money managers, reve- quarter in a long time that we’ve Victory Capital $132.7 2.8 -9 $189 3.7 -12.2 -$3 nues also improved. seen a fall in money managers’ op- Sculptor Capital Mgmt. $36.0 1.6 12.5 $112 10.8 13.4 $0 Twenty-one firms increased rev- erational costs,” noting costs were enue quarter-to-quarter, two saw down about 7% year-to-date Sept. Source: Manager reports decreases and Northern Trust did 30. n 28 | November 16, 2020 Pensions & Investments AT DEADLINE Denied officials committed $600 million to ARK resolute against option CONTINUED FROM PAGE 1 New Mountain Partners VI, a Resolute Investment Managers buyout and growth investment fund ‘brown’ (or fossil-fuels-related) will exercise its option to take managed by New Mountain Capital. cash tap. That’s necessary and suf- majority control of ARK Invest- ficient,” said Andreas Hoepner, pro- CalPERS committed $500 ment Management, a move not fessor of operational risk, banking million each to Forecastle, a supported by ARK’s leader. and finance at University College sustainable forest general Resolute, which takes stakes Dublin’s Michael Smurfit Graduate partnership; and AlpInvest in money managers, acquired a Business School. Secondaries Fund VII, an alterna- “Green investments are neces- minority stake in ARK in 2016 tive investment secondary market sary for Paris alignment at our cur- alongside an agreement that it fund run by Carlyle Group’s rent quality of life, but they are not would serve as the exclusive U.S. AlpInvest Partners. sufficient for Paris alignment as distributor of ARK’s investment they don't close the brown cash tap strategies, which focus on ... I think we’re often so focused on technologically enabled, disrup- Kaiser pulls plug on funds green investments that we’re ignor- tive companies. The trustees of Kaiser ing the fact that denying debt is the In an Oct. 29 SEC filing, ARK Permanente’s KP Funds family No. 1 requirement for Paris align- reported that as part of the 2016 have decided to liquidate its ment,” he said. Denying the debt as a concept is agreement, Resolute has “an target-date mutual fund series “the original bond vigilantes,” said INTERVENTION: Ulf G. Erlandsson, founder of Anthropocene Fixed Income Institute, option to purchase a controlling and four core mutual funds Ulf G. Erlandsson, Stockholm- believes the fixed-income markets can be used for climate-change mitigation. effective Dec. 15, according to a voting and equity interest in (ARK) based CIO at Diem Green Credit that is exercisable in 2021,” and filing with the Securities and and founder of non-profit organi- sitions on the subject. son is materiality, said My-Linh said Resolute notified the firm on Exchange Commission. The filing zation Anthropocene Fixed Income But other investors are consider- Ngo, London-based head of ESG at the same date that it “intends to didn’t give a reason. Representa- Institute, which advocates the use ing it or at least recognizing its im- BlueBay Asset Management LLP. exercise that option.” tives for Kaiser Permanente didn’t of fixed-income markets for cli- portance. “The fact that the absolute size of Casey Sheets, a spokeswoman respond to phone call and email mate-change mitigation. Research into divestment led by the debt market trumps the size of for Resolute, declined to com- requests for comments. “That’s a demand and supply academic Ellen Quigley, adviser to the equity market means that if you function of where that price is go- the chief financial officer at the Uni- want to make an impact, you need ment on the company’s decision A spokeswoman for Callan LLC, ing to be — hence, if a big investor versity of Cambridge — which to think beyond equities.” to increase ownership of ARK to a the funds’ investment adviser, goes out and says it's not investing, pledged last month to divest its £3.5 BlueBay has more than $67 bil- declined to comment. The majority stake. that removes part of the demand billion endowment fund by 2030 and lion in assets under management. collection of four core funds and According to ARK’s most recent for the debt and basic economics be net-zero carbon emissions by Another reason is that denying SEC ADV filing, Catherine D. Wood, the 11 vintage target-date series means they need to compensate by 2038 — found that most new financ- debt is a relatively simple thing for the firm’s CEO and CIO, holds an had aggregate assets of $20.9 increasing the yield of the bond to ing for fossil fuels comes from bond an investor to do, Mr. Hoepner said. ownership stake in the firm she billion as of Nov. 12, according to entice other investors to come in,” issuance or bank lending rather “If you do an equity divestment, you founded in 2014 of 50% to 75%. data compiled by Morningstar Mr. Erlandsson said. than equity. Ms. Quigley said the have to think about how to make up In a statement, Ms. Wood Direct. The firm doesn’t analyze university will have more to report for it in your portfolio diversifica- New mantra on the topic next year. tion. If you’re denying debt, there’s expressed the firm’s negative view KP Funds. The £8 billion ($10.4 billion) Lo- And Laura Chappell, CEO at the very little you need to do. You even of Resolute’s action: Acting on a recommendation by thian Pension Fund, Edinburgh, in £33 billion Brunel Pension Partner- save time skipping investment Callan, the fund family’s trustees “The remarkable success of June adopted a new statement of ship, Bristol, England, said in an banker pitches.” approved a plan for “liquidation of our team is rooted firmly in a investment principles and, with it, a email that executives at the pool culture of transparency, collabora- each fund’s assets and the new mantra: Engage your equities, have very much turned their atten- A bigger hammer tion, and employee ownership. We distribution of the net proceeds deny your debt. tion to fixed income. Some industry participants think do not believe that equity pro rata to the fund’s sharehold- “If you are not Paris-aligned … “The capacity to deny debt to denying debt to companies could ownership by a party tangential to ers,” said the SEC document. you’re not getting our money, basi- companies can be a useful tool in a seriously move the needle when it our business is in the best cally,” David Hickey, portfolio man- manager’s toolkit as they seek to comes to meeting the requirements ager and responsible investment align their fund to net-zero — and of the Paris Agreement. interest of ARK’s stakeholders.” Illinois Muni commits lead at the fund, said during a panel we would expect them to make use By the end of next year, €266 bil- ARK’s assets under manage- The $45.2 billion Illinois discussion at the Pensions & Invest- of it as needed,” she said. lion ($309.7 billion) in global corpo- ment with and without discretion Municipal Retirement Fund made ments virtual WorldPensionSum- Executives at the pool will be rate debt across 343 bonds issued totaled $29.8 billion as of Sept. new commitments totaling up to mit, held in October. conducting a full review of their by 147 companies is due to mature, 30, up 210.4% from the same $85 million, spokesman John Sources said Lothian — Mr. Hick- own approach as an asset owner in according to data from University date a year earlier, said Shaina Krupa said in an email. ey in particular — is leading the way a 2022 review, she added. College Dublin’s Michael Smurfit Tavares, a spokeswoman for the The pension fund’s board on when it comes to institutional inves- A closer focus on fixed-income Graduate Business School, pre- firm, in an email. Nov. 13 approved commitments of tors being vocal and stating their po- markets is not surprising. One rea- sented at a webinar Nov. 5. By 2025, Assets managed by the seven up to $60 million total to Versant firms Resolute has ownership Ventures Fund VIII, Versant two known consolidators also differ solidators could be constrained stakes and their subadvisers Voyageurs II and Versant Vantage from one another. Clara Pensions commercially by players they have totaled $86.7 billion as of Dec. 31. II, all venture capital funds Superfunds intends to ring fence every plan’s to work with such as insurance managed by Versant Ventures. assets that it will acquire and target companies. “The pricing (in the in- CONTINUED FROM PAGE 3 CalPERS allocates to alts Also at its meeting Nov. 13, the a separate buyout for each of them. surance market) has already moved CalPERS committed a total of pension fund’s board approved a will be regulated as pension funds Its only known competitor, The to squeeze consolidators out of the — as long as trustees can justify Pension SuperFund, is set to pool market,” he said. “When consolida- $8.45 billion to alternative commitment of up to $25 million to LSVP TIPL-D SPV, a venture that a buyout won’t be possible in assets and liabilities into a single tors started talking to schemes, they investments, according to a report the next five years without a con- fund but will not target a buyout. were talking about saving of about capital fund managed by Light- to the board of the $402.9 billion solidator’s help. 10%. They don’t tend to do that any- speed Venture Partners. pension fund. Consultants estimate that about Cost will depend more,” he said. Among the largest commitments As of Sept. 30, the actual 10% of U.K. plans might ultimately Also, the cost of moving assets to Mr. Evans also sees obstacles outlined in the report, the Califor- allocation to alternative invest- find a suitable home for their assets a consolidator for a plan sponsor with regards to the group of plans nia Public Employees’ Retirement ments was 6.2%; the target is 7%. and liabilities at a consolidator. The will depend on the superfund and in the Pension Protection Fund as- System’s staff under its discretion market could reach £170 billion the transferring plan, according to sessment that could be looking to committed $2 billion to West Incentives expected to dip ($220.1 billion) in the next 10 years, the regulator. As consolidators ef- secure more than the PPF benefit according to an estimate by Price- fectively replace plan sponsors and limits with a consolidator but less Street Strategic Solutions Fund I, a Money management employees waterhouseCoopers LLP on Oct. 16. The Pensions Regulator will scruti- than 100% of the benefits promised. distressed debt fund managed by can expect lower incentive Consultant Barnett Waddingham nize every individual transfer, su- “As the law stands, this could Goldman Sachs Group; and $1.5 payments in 2020 compared with LLP calculated that on the basis of perfunds will have to show they only be achieved by getting mem- billion to LongRange Capital Fund I, last year, said a report from current contributions, 46% of FTSE have secured access to a capital bers to agree to transfer to a scheme a midmarket private equity fund. compensation consultant Johnson 350 plans might be able to transfer buffer from external providers and with lower benefit promises. The CalPERS also committed $1.15 Associates released Nov. 12. to a superfund in the next five years if needed one-off contributions tragedy of this scenario is that it’s billion to TSSP Adjacent Opportuni- The firm’s analysis of third- compared with 24% that indepen- from plan sponsors, sources said. the most vulnerable who don’t re- ties Partners (B), an evergreen quarter compensation trends dently might be in a position to con- Because the plan’s employer cove- ply to correspondence and so end duct a buyout with an insurance nant is removed when a plan trans- up with an insurance company an- opportunistic multiasset class showed that overall year-end company in the same period. fers to a consolidator, the regulator nuity for the lower amount,” he alternative investment fund; and incentives (combined cash But sources said some questions expects a 99% probability that the said. $350 million to Sixth Street bonuses and equity awards) and hurdles remain as consolida- benefits will be paid in full. Insurers also criticized the mod- Fundamental Strategies Partners generally will decline for the tors are at the mercy of the regula- Huw Evans, director at indepen- el, stating that consolidators are (A), an opportunistic credit fund, second consecutive year. In 2019, tor before they can first win busi- dent trustee services firm BE- for-profit institutions but will not both managed by Sixth Street Johnson said bonuses overall ness. STrustees Ltd. in London, is less be regulated as financial institu- Partners. Additionally, pension generally were down 5% or flat. ‘No superfund has so far made it optimistic about consolidators tions. “We think consolidators are to the regulator’s approval list. The looking to buyout. He thinks con- frankly not a good idea,” said Jay Pensions & Investments November 16, 2020 | 29

€969 billion is due across 2,477 increased engagement is even more dated disclosure on four funda- nance director for the UAW Retiree bonds. Just 34 of these bonds are powerful. mental metrics: the number of em- Medical Benefits Trust, argued that green bonds, the data show. Figures “In isolation, where we have Human ployees including full-time, the data are often already collected relate only to companies targeted seen divestment campaigns in eq- part-time and contingent labor; to- by the firm, including workforce di- CONTINUED FROM PAGE 4 by investor initiative Climate Action uities, we have seen a modest im- tal workforce costs; turnover; and versity data reported annually to 100+, whose partner organizations pact on share prices and cost of interest to do that, Ms. Wilson said. workforce diversity, equity and in- the Equal Employment Opportuni- include Ceres and the Asia Investor debt,” said Rory Sullivan, London- The move to advance disclosure clusion data, especially among the ty Commission. Group on Climate Change. based chief technical adviser to the of human capital management is most senior levels. Having the four mandatory met- If an investor can target primary Transition Pathway Initiative, welcomed by the Human Capital However, when the SEC in Au- rics is “absolutely necessary for capital and affect supply and de- which assesses companies’ readi- Management Coalition, a group of gust amended financial reporting shareholders to make informed in- mand dynamics, “the logic goes that ness to transition to a low-carbon 32 institutional investors repre- rules, it opted for a principles- vestment, voting and engagement it will have more of an impact in economy. “In and of itself, divest- senting $6 trillion in assets that is based approach on the subject of decisions,” Ms. Allen-Ratzlaff said. terms of driving up the cost of capi- ment may not be that significant. working to elevate human capital human capital that coalition mem- The coalition would also appreciate tal. Companies that find they are But when married to corporate en- management as a critical compo- bers felt left too much to manager disclosure of workplace health and struggling to get access to capital or gagement, public policy engage- nent in company performance, It is discretion and limited investors’ safety, workforce skills and capa- having to pay more for that access, ment and investors publicly refus- co-chaired by the $60 billion UAW ability to compare companies on bilities, workforce culture and en- may then start to take action,” Ms. ing to invest when issuers come to Retiree Medical Benefits Trust, De- workforce practices. gagement, human and labor rights, Ngo said. market, the leverage and influence troit, and the $257.9 billion Califor- The financial reporting rules for and workforce pay and incentives, For Mr. Erlandsson, the impact of becomes much clearer. The call to nia State Teachers’ Retirement Sys- she said. investors denying debt “could be 'deny the debt' may not change tem, West Sacramento. Resources like the pending enormous — and I’m usually a very much, but if it becomes a philoso- “We definitely welcome a stan- SASB standard would help inves- conservative guy.” Although on one phy beyond how you invest in debt, dard that many companies can as- tors assess the quality of a firm’s hand, Mr. Erlandsson objects to the then it becomes more powerful.” cribe to because ultimately what we workforce management and de- terminology ‘debt denial.’ want is measurement,” said Rodrigo ployment practices, she said. “The real terminology should be Not a simple move Garcia, Illinois deputy treasurer ‘stop supplying loans.’ Investing in However, some market sources and chief investment officer. Diversity data wanted bonds is simply lending to compa- are more cautious about the impact “What is measured is managed,” Scott M. Stringer, the city comp- nies. No one is forcing you to do it.” denying the debt could have and said Max Dolaberger, director of troller and fiduciary of the five pen- Calvert Research and Manage- warned that it could get complicat- corporate governance and sustain- sion funds within the $211 billion ment takes a company-by-compa- ed. able investment for the Illinois New York City Retirement Systems, ny and sector approach to invest- One potential issue would be for treasurer, a coalition member. has been pushing for companies to ment, “but the cost of capital — the those asset owners that want to The Illinois treasurer is the disclose data for racial and gender spread that company and that sec- deny debt but also hold the equity state’s chief investment officer ac- diversity across job categories that tor should be paying for not (align- of a company. tively managing $35 billion, and RESOURCE: Cambria Allen-Ratzlaff is already required by the Equal ing to the Paris standards) or taking “Because you’re potentially also a trustee for the state pension thinks the pending SASB standard could Employment Opportunity Commis- that into account in their normal harming equity returns by enforc- funds. A sustainability law that be a big help for investors. sion. His office is also hopeful that business standards is how we con- ing a higher cost of capital — as- went into effect in 2020 requires all their ESG data providers will begin ceptually think about it,” said Vishal suming deny the debt can be orga- state funds to integrate diversity disclosing risk factors, known as collecting data that allows them to Khanduja, vice president, lead nized and implemented,” said Mitch and inclusion considerations into Regulation S-K, had not been up- screen and perform comparative fixed-income portfolio manager in Reznick, London-based head of re- their investment policies. dated in 30 years. The amended and trend analysis. Boston. Executives may choose to search and sustainable fixed in- rules shifted from a prescriptive Derek Butcher, senior ESG ana- buy only shorter-dated debt or not come at the international business More disclosure approach to a principles-based lyst for corporate governance and at all. “It’s become a way for us to of Federated Hermes Inc. “There is The coalition has been pushing framework based on an issue’s ma- responsible investment at RBC vote on the company, by not partici- a risk there you are potentially im- for more disclosure of companies’ teriality to respective companies. Global Asset Management in To- pating in a certain issue,” he said. pairing your equity returns by forc- human capital management poli- SEC Chairman Jay Clayton was ronto, also expects human capital Calvert had $23.4 billion in as- ing higher cost of capital on the cies, practices and performance for “particularly supportive of the in- issues to have a bigger presence sets under management as of June debt, which increases the weighted years, including a 2017 petition to creased focus on human capital next year, as the full impact of CO- 30. average cost of capital, the discount the Securities and Exchange Com- disclosures,” which depending on VID-19 sinks in. “For the 2021 proxy The concept of denying debt is rate and can diminish equity re- mission to adopt new disclosure the industry or company, “can be an season, I can certainly see that one that, while nascent right now, turns,” he said. rules or amend existing ones. important driver of long-term val- translating into shareholder pro- could snowball. However, there will be times that “There is broad consensus that hu- ue,” he said at the time. posals,” Mr. Butcher said. In the “It could have pretty significant the approach can be “deployed man capital management is impor- “We believe consistent and com- meantime, he said, “companies are (impact) — the market could start when all else fails when working tant to the bottom line, and a large parable disclosures are necessary showing a willingness to discuss it.” pricing it in very slowly, but the mo- with companies on engagement and body of empirical work has shown in order for investors to properly Among direct engagement, proxy ment it gets (to be a) more quantifi- the rest of the capital structure.” that skillful management of human benchmark companies over time,” voting and an eventual SASB stan- able impact on a company, then it A preferred approach would be capital management is associated said coalition co-Chairwoman Mary dard on human capital manage- can be very quick” in pushing the to engage with a company, encour- with better corporate performance, Hartman Morris, an investment of- ment, Mr. Garcia of Illinois said, “I cost of capital higher, added Brian aging them to align to the Paris including better risk management,” ficer within corporate governance would think that the more investors Ellis, portfolio manager at Calvert, Agreement in order to become pos- the coalition argued in its SEC peti- at CalSTRS. are vocal about what they are look- also in Boston. itively screened into portfolios, he tion. Her co-chairwoman, Cambria ing for, it will develop a standard And coupling debt denial with added. n Coalition members wanted man- Allen-Ratzlaff, corporate gover- that works for everyone.” n

Shah, chief origination officer at Pension Protection Fund’s assess- about longevity influencing the by Clara. Adam Saron, London- that we provide or any return on Pension Insurance Corp. in Lon- ment due to their sponsors’ insol- amount to be paid. In addition, in- based CEO and founder of Clara, the capital goes back to investors don. vency. surers need less risk capital, which said Clara is backed by private cap- until every member’s benefits in a “They are targeting a product Alistair Russell-Smith, head of is reflected in the price, sources ital provided by global investment section are insured. Only after the that is often the same as a buyout corporate DB at consultant Hymans said. firm Sixth Street Partners LLC and buyout can we get our capital back but proposing to do it cheaper by Robertson LLP in London, said Mr. Baines added that consolida- reinsurance company Wilton Re and profit if there is any,” he said. offering lower security, adopting a overseas groups selling a U.K. busi- tors can remove risks differently to Overseas that replaces the sponsor Clara’s competitor, The Pension more aggressive invest- ness could give sale other vehicles that consolidate as- covenant, and will manage assets SuperFund, has a different model ment strategy and op- proceeds to pension sets such as multiemployer plans, using a fiduciary manager for be- as it aims to consolidate assets and erating in a less regu- funds to go to a consoli- known in the U.K. as master trusts tween five to 10 years. liabilities into a single fund, and it is lated environment,” he dator. An overseas par- or fiduciary managers. Superfunds Clara will charge a management not a bridge to buyout. said. ent company might see are letting plan sponsors sever fee of 15 basis points paid from Peter Cazalet, managing director, value in separating the links with the plan. Master trusts or plan’s assets, much like an adviser deal origination at the fund, which Profits delayed pension fund from the fiduciary managers can help to im- to cover administration and actuar- is also backed by equity investors The regulator’s guid- U.K. subsidiary, poten- prove governance or provide access ial costs but will not take profit or such as other pension funds, sover- ance on Oct. 21 is also tially at lower costs to higher-risk investments at scale return profit to its shareholders un- eign wealth funds, insurance com- requiring consolidators than via an insurance but they leave the link with the em- til individual buyouts are complet- panies and banks, said that one of to wait at least three buyout, he said. ployer intact, requiring sponsors to ed. the big expenses of going to buyout years before they can BIG EXPENSE: Peter John Baines, partner keep plans on their balance sheets. In order for a frozen plan to mov for a pension fund is that it has to profit and require that Cazalet said the cost of and head of bulk annu- Mr. Baines thinks the first plans to a consolidator, Mr. Saron said the move its portfolio into an insur- buyouts are conducted moving to a buyout ities at Aon PLC in that are likely to choose a consoli- TPR will assess the capital needed ance-friendly format. For example, before they profit to of- could be ‘quite high.’ London, agreed that dator are those in the PPF assess- for the transaction to the consolida- private assets could be very expen- fer extra security to consolidators can help ment but are unlikely to be trans- tor, the plan’s own funding position sive for an insurer to hold under participants’ benefits. The regulator plans that can afford to secure ben- ferred to the lifeboat fund for and will ask the sponsoring em- Solvency II, he added. “The cost of said in the next three years it will efits with a consolidator but insolvent employers. “There are a ployer to fund any gap. “The regula- transition can be quite high,” he revisit the interim regulatory wouldn’t be able to afford a full few cases in the market that are ac- tor has made it clear that all con- said. framework and finalize a law for buyout with an insurance company. tively looking at a consolidator,” Mr. solidators need to be fully funded Instead, the superfund expects to consolidators. That’s because consolidators are Baines said. on a technical provisions basis,” he create surplus capital by a combina- Consultants say that there are a offering to hold liabilities until all said. If incoming schemes’ assets tion of good performance, econo- few types of plans that could be in- plan participants have retired. Different models are insufficient, the plan sponsor mies of scale, improved governance terested, including U.K. corporate Retired participants’ liabilities Plan sponsors could see their has to make up the difference, he and reduction in liabilities. The Pen- plans of sponsoring employers with are cheaper to insure than those of pension assets and liabilities sec- added. sion SuperFund’s buffer fund reim- overseas parent companies or well- participants that are yet to retire tioned off from other plans if they “There is no payment of profit burses the manager on a cost recov- funded plans that have entered the because there is less uncertainty choose to go with the model offered along the way. Neither the capital ery basis, Mr. Cazalet said. n 30 | November 16, 2020 Pensions & Investments

clude income-orientated alternative asset classes within private Pandemic causing insurers to sharpen Insurance credit, real estate, infrastructure and alternative credit solutions. CONTINUED FROM PAGE 3 After the immediate goal of mak- their focus on ESG investing issues invested in to achieve yield. ing sure their portfolios were strong “Insurance companies don’t do and liquid when the COVID-19 The COVID-19 pandemic is “That dialogue is gaining to something nice to have. Now, anything radical,” said John Simone, pandemic hit, insurance companies accelerating insurers’ moves intensity,” said Daniel Dunay, it’s moved to a ‘must-have’ managing director and head of in- focused on the challenge of where toward adopting stricter and more managing director and head of the category,” she added. “Most of surance solutions at Voya Invest- to find yield once markets began to defined environmental, social and financial institutions group in the that’s driven by asset owners.” ment Management in Chicago, stabilize. governance policies. Americas at BlackRock in New York. Insurance companies with which manages $25 billion in assets “In March and April, insurers fo- Although ESG and carbon Alexandra Mihailescu Cichon, whom P&I spoke said they are from 50 insurance company clients. cused on ensuring they had enough “It’s like moving the direction of an liquidity,” Mr. Halagan added. “Since intensity have been a major focus Zurich-based executive vice upping their commitment to ESG aircraft carrier. But they are making the spring, we’ve seen them incre- in Europe for several years, the president, sales and marketing, at and addressing climate change changes. It depends on the seg- mentally adding risk to their port- trend has been a bit slower to RepRisk AG, an ESG data science within their portfolios. ments of the industry.” folios.” catch on in the U.S. But COVID-19 and ratings firm, noted that “ESG is definitely starting to Nikki Hall Jones, Willis Towers One such insurer is MetLife Inc. is bringing the theme back into COVID-19 has led people to see impact allocations of capital,” said Watson PLC’s New York-based di- In an email, Steven J. Goulart, ex- sharper focus among North how interconnected everything is, John Bender, Chicago-based chief rector of investments, shared this ecutive vice president and chief in- American insurers. like how the environment impacts investment officer of fixed income sentiment. “Most insurers are very vestment officer of MetLife and conservative with their portfolios,” president of MetLife Investment BlackRock’s ninth annual global the economy. and co-head of global fixed income she said. “They’re con- Management in Whip- insurance survey, which gathered “You can’t move one (lever) at Legal & General Investment Man- sidering introducing pany, N.J., said that over the opinions of 360 insurance without affecting the other,” said agement America Inc. He added the private placement, the past six months the executives in June and July, Ms. Cichon, adding that she has company no longer invests in power CLOs, or high yield to firm has increased its revealed that 69% of North “seen a lot of growth coming from companies where more than 30% their portfolios. But this “focus on private assets American insurers said COVID-19 the U.S., including asset owners, of their revenue is generated from requires a lot of educa- like private placements is causing them to increase their banks and insurance managers. coal. “We’re also looking to reduce tion for them to under- and commercial mort- stand the regulatory gages to take advantage focus on ESG and emphasize their They’re looking to catch up quickly.” the carbon in our portfolio.” nature of these asset of the lagged effect of focus on the “S” and “G” in “In the last 18 to 24 months, “We’re being more selective of classes. So implement- early market disloca- particular. ESG has gone from a potential fad the bonds that we buy,” Mr. ing things takes time.” tions, focusing on high- And while some in- LOOKING: Steven J. Gou- quality private place- surers are in the early lart said MetLife sees ment names that offer stages of considering opportunity with public an attractive premium.” LGIMA is trying to stay consistent Of Aflac Inc.’s $126 billion in as- assets” for insurance companies adding more risk to corporate credit. Mr. Goulart added with its investment strategy, the sets, about $113 billion is managed “are in fixed income.” their portfolios, others that the firm is also see- firm is going “a little bit further out internally while $13 billion is man- While most insurance companies have either begun the move or are ing “some great opportunities ... on the curve and a little bit down on aged by external managers. already have in-house staffs that ramping up habits that had already within the public corporate credit quality but ... trying not to reach too Sara L. Hakim, a senior vice handle investments, many of them been in place prior to the pandemic. space ... to take on names that re- hard on yield and trying to protect president and consultant in Callan are increasingly turning to external main fundamentally strong, with principal in uncertain times.” LLC’s Summit, N.J., office, echoed managers as they go further outside Income important great prospects, but perhaps for now, this sentiment. their areas of expertise. “Income from investments is an represent strong value on price.” Companies different “It depends on the type of insur- “Insurers are realizing in order important contributor to profitabil- Meanwhile, Legal & General In- Although many insurers are er,” Ms. Hakim said. “Each have dif- to find yield and find value in this ity for insurance companies,” said vestment Management America turning toward similar opportuni- ferent liability durations. But in market they need to deploy a Gregory Halagan, a principal and Inc. has upped its investments in ties, not all insurance companies general, it’s really how much risk broader set of capabilities and rely co-head of U.S. insurance at Mercer, such illiquid assets as private credit are the same. they’re willing to take on and how on more sophisticated tools,” Black- Minneapolis. “So they’ve been in- and real estate debt because of the “Some, like annuity writers, de- much in alternatives they want to Rock’s Mr. Dunay said. “They need creasing their fixed-income alloca- near-zero rate environment. pend on yield. Our liabilities are not invest in the portfolio.” to just do more. They need to rely tions outside investment-grade “It provides good diversification, like that,” said Eric M. Kirsch, exec- Ms. Hakim added that what on more external help, bring in fixed income to below-investment- some good names not available in utive vice president, global CIO and makes insurance companies more external managers where grade non-core fixed income across the public markets, and provides president of Aflac Global Invest- unique as asset owners “is that their they don’t have the expertise.” both public and private markets.” better covenant protection,” said ments in New York. “Our under- investments get rated by the ratings Christopher Blunt, president and Within public markets, this can John Bender, chief investment offi- writing is where we make the ma- agencies, so they need to be mind- CEO of F&G Annuities & Life, said include below-investment-grade cer of fixed income and co-head of jority of our profit. We don’t need ful of the capital charges” they in- Blackstone Group Inc. manages corporates or securitized assets. global fixed income, Chicago. yield to make those products profit- cur with their investments. This is roughly 90% of the insurer’s assets, Within private markets, this can in- Mr. Bender added that although able. We don’t have that pressure.” in large part why “the lion’s share of which gives the firm access to the

fice of Management and Budget reinstated the five-part test used to Groom Law Group in Washington, and finalized, each agency is going determine whether an investment said the incoming administration Labor to have to make some hard deci- professional or financial institution could amend the rule at the Labor sions about which ones it wants to is a fiduciary and noted in the pro- Department through a traditional CONTINUED FROM PAGE 3 get reviewed by the White House posal’s preamble that the test’s notice and comment period if it so get rules published before the new and published because while “regular basis” prong would be sat- chooses, or take a more hands-off administration takes over. However, there’s a lot of bandwidth to get isfied when an entity with a pre- approach when it comes to enforce- a regulator can shorten the time be- things done in the last couple existing advice relationship with a ment. “If they don’t want to enforce tween publication and effective months of an administration, it’s retirement investor advises them to it, there’s definitely paths forward date if it has “good cause,” the APA not unlimited,” Mr. Hadley said. roll over assets from a plan to an in- but you have to see how far they notes. But relying on “good cause” If the investment advice and dividual retirement account. want to go and who’s in charge,” he could open the rule up to legal chal- proxy voting rules are not effective While the proposal has its differ- said. lenges from opponents who say the by Jan. 20, “they very well could be ences from the 2016 Obama-era fi- Added Ms. Stapel: “I can’t believe “good cause” is unwarranted, said subject to this broad freeze,” Mr. duciary rule that was struck down that enforcing these ESG rules Kevin Walsh, principal at Groom Hadley added. in court in 2018, Ms. Stapel said the would be a focus of a Biden DOL. Law Group in Washington. As of press time, neither rule had proposal “gets close enough to what DEADLINE APPROACHES: Michael L. And I do predict that there will For two Labor Department re- been sent to the Office of Manage- the more liberal thinkers at the Hadley said rules not in place by Jan. 20 eventually be action taken to ad- cent rule-making initiatives — one ment and Budget for review, the DOL were hoping for.” That is why could be subject to the broad freeze. dress them in some way.” requiring ERISA-governed fiducia- step before publication in the Fed- the incoming administration “would However, there’s an outside ries to cast proxy votes only when eral Register. be wise to consider how bruising constitute fiduciary investment ad- chance the financial factors rule there is an economic impact on the that process was. Is that really vice.” could be undone by Congress, de- retirement plan and another, a pro- Investment advice where you want to expend your re- pending on the results of two Sen- hibited transaction exemption that The debate around the invest- sources in this new administration? Priorities ate runoff elections in Georgia on would permit investment advice fi- ment advice regulation has been Those two things combined will In late October, the Labor Depart- Jan. 5. If Democrats were to win duciaries to receive compensation raging for years and is likely to con- probably mean that this (proposal) ment published a final rule con- both those races, the party would for their advice and to engage in tinue, several ERISA attorneys said. comes into fruition in some form cerning financial factors for ERISA control the Senate — in addition to certain principal transactions that Under the recent Labor Depart- pretty close to what it looks like plan investments, which means it the House and White House — and are now forbidden — final rules ment proposal, fiduciaries relying right now.” will be in effect before the Biden ad- could potentially use the Congres- have yet to be unveiled. on the exemption would have to But Mr. Hadley said the incoming ministration takes the helm. sional Review Act. The CRA lets Mr. Hadley said it’s unclear provide advice in the best interest administration will likely want to The rule stipulates that ERISA Congress disapprove — by a simple whether there will be enough time of retirement investors. The stan- make its mark. “I would be very sur- plan fiduciaries cannot invest in majority vote — a final rule issued to get both reviewed by the White dard would be interpreted and ap- prised if the Biden administration “non-pecuniary” vehicles that sac- by a federal agency if it has not House’s Office of Management and plied consistent with the Securities did not attempt to regulate invest- rifice investment returns or take on been in effect for more than 60 leg- Budget and published in the Fed- and Exchange Commission’s best- ment advice at some level,” he said. additional risk, though the final islative days. eral Register. interest standard, known as Reg BI, “I think it’s likely that they will take rule focused less on ESG than the But just how much attention “Given that there’s going to be a which went into effect June 30. a fresh look at whether they can ex- proposal on which it was based. Congress, no matter its makeup, or rush to get things through the Of- Moreover, the Labor Department pand the types of activities that David Levine, principal at the the Biden administration pays to Pensions & Investments November 16, 2020 | 31

Bender added. “We’re making a will complete our multiyear pen- bigger move toward a cleaner Risk transfer on the rise sion plan derisking journey,” Mr. environment and less fuel sources.” PRT Rancourt said. For details on all recent pension risk transfers, go to pionline.com/ This final contract is at least the Todd Hedtke, senior vice CONTINUED FROM PAGE 1 pension-risk-transfer. fourth one Boise Cascade has pur- president and CIO of Allianz Life “The effect of COVID-19 on the chased from Prudential. Boise Cas- Recent transactions (millions) Insurance Co. of North America, economy has clearly had a negative cade in April 2018 transferred $152 said that although COVID-19 has impact on pension risk transfer Sponsor Assets Date Type million in U.S. pension plan assets “dramatically” sped up the impor- sales, both in terms of volume and Marks and Spencer $971 Nov. 4 Buy-in to Prudential, transferred an addi- tance of ESG in the eyes of insurers, dollars,” said Mark Paracer, assis- tional $125 million to the insurance Kemper N/A Nov. 3 Lump-sum offer it’s been an important topic “for tant research director, LIMRA Se- company in August 2018, and trans- cure Retirement Institute, in a Sept. Kemper N/A Nov. 3 Buyout ferred another $20 million in No- Allianz for a long time.” 2 news release. “Fluctuating fund- vember 2019. Waddell & Reed Financial N/A Nov. 3 Lump-sum acceptance Allianz is a founding member of ing levels and the uncertain timing Mr. Rancourt said in an August the Net-Zero Asset Owner Alliance, a of the recovery have given employ- Waddell & Reed Financial N/A Nov. 3 Buyout 2018 interview that the first buyout coalition of roughly 30 institutional ers reason to pause. While we be- ITT $329 Nov. 2 Buyout transaction covered retirees and investors overseeing a total of $5 lieve social distancing and work- beneficiaries with smaller monthly Kellogg $470 Nov. 2 Buyout trillion in assets pledging to from-home transitions have also benefit amounts, while the second facilitate the decarbonization of the contributed to the sales decline, we Newell Brands $158 Nov. 2 Buyout transaction covered about 420 retir- expect increasing PBGC premiums ees and beneficiaries with larger world economy, starting with making Unisys N/A Oct. 27 Lump-sum offer and other administration costs will monthly benefits. The November their own portfolios carbon-neutral Old British Steel Pension drive employers to seek PRT deals $2,600 Oct. 22 Buy-in 2019 transaction affected about 100 by 2050. in the future.” Scheme retirees, spokeswoman Lisa Chap- In October, the alliance set its Corporate funding ratios have Ibstock Pension Scheme $441 Oct. 20 Buy-in man said at the time. first defined target for members: a fluctuated widely month by month The New York Times $235 Oct. 14 Buyout 16% to 29% reduction in green- since the economic impact of COV- Pent-up demand house gas emissions contained in ID-19 became clear in March. Ac- Levi Strauss N/A Oct. 7 Lump-sum acceptance Recent earnings reports have cording to Mercer LLC, the estimat- disclosed more buyouts, showing their member portfolios until 2025. Source: Pensions & Investments ed aggregate funding ratio of S&P the market is picking up. “Our focus is heavy on the 1500 companies was 81% at the end George Palms, Stamford, Conn.- climate side,” Mr. Hedtke said. of March, rose to 83.2% at the end of buyout index study. minate the plans,’ that billion dol- based president of Legal & General — JAMES COMTOIS April and then reached its nadir at The drop in volume in second lars is very much an estimate.” Group PLC’s U.S. retirement busi- 79% at the end of July before jump- quarter was “less due to an inability Because terminations can take ness, said that while the fourth ing a full 4 percentage points to 83% of the market to function and more up to a year or more from initial quarter has typically been the busi- at the end of August. due to plan sponsors just being dis- corporate board approval until est quarter of any given calendar private debt market. Ari Jacobs, Norwalk, Conn.- tracted,” Mr. McDaniel said. “(Com- completion, that estimate can go year, that will be exacerbated more “Our partnership with Black- based senior partner and global re- panies) had a hundred things on awry very easily in a volatile envi- so in 2020 because of the lull in the stone paid off in dividends,” Mr. tirement solutions leader at Aon (their) agenda around business ronment that sees large swings in second quarter. Blunt added. PLC, said in a phone interview that survival.” market returns as well as interest “I think as we look to next year, Over at Voya Investment Man- the “market sort of completely “In a lot of cases, pension man- rates. the parade of plan terminations is agement, Mr. Simone said the pace paused in mid-March, early March.” agement falls down a few rungs on “It doesn’t take much for that li- going to continue, based on what at which the manager’s insurance While plan terminations that had the priority ladder,” Mr. McDaniel ability to move 10%,” Mr. McDaniel we’re seeing from interest in the asset management business has been in the works for a year or said. said. market,” Mr. Palms said. “On top of grown has doubled over the course more went forward, “the liftout He said companies that, we’ll see the continued secular of 2020. market dropped off,” Mr. Jacobs Taking action are more likely to pur- trends of retiree deals.” Meanwhile, according to Mat- said. Following the second chase a buy-in contract Some companies, like Boise Cas- thew Armas, global head of insur- Despite this, the majority of quarter, more compa- to lock in rates and then cade, are making second and some- ance fixed-income portfolio man- transactions continue to be liftouts, nies resumed address- convert that contract to times third retiree liftout deals. agement at Goldman Sachs Asset experts agree. In those cases, rather ing pension manage- a buyout once the ter- Earlier in October, New York Times Management in New York, the than terminating a plan completely ment. Among the larger mination is complete. Co., New York, announced an agree- manager is “certainly seeing an in- and transferring the benefit re- transactions since then One recent example ment to purchase its second group crease in overall activity” from in- sponsibility of all participants to an were Moog Inc., East is Boise Cascade Co., annuity contract from Massachu- surance clients, particularly in insurer, the buyout simply “lifts out” Aurora, N.Y., entering Boise, Idaho, which an- setts Mutual Life Insurance Co. to niche assets such as private credit, a certain segment of the retiree into an agreement Sept. nounced plans in Au- transfer $235 million in U.S. pen- real estate and infrastructure. population. 16 to purchase a group LOOKING GOOD: Matt gust to terminate its sion plan liabilities and the respon- “Our insurance company clients fo- Matt McDaniel, Philadelphia- annuity contract from McDaniel said the U.S. pension plan be- sibility for paying benefits to about cus on where they have core exper- based U.S. leader of Mercer’s finan- Metropolitan Tower market is still strong and fore the end of the year. 1,850 retirees and beneficiaries. tise,” Mr. Armas said. n cial strategy group, said the market Life Insurance Co., pricing is attractive. The lumber manu- In 2018, New York Times trans- is still strong. transferring $481 mil- facturer and distributor ferred $225 million in liabilities from “We’re not seeing any insurers lion in U.S. pension plan liabilities, signed a pension buy-in contract two of its U.S. pension plans and the these issues remains to be seen. As back out of deals, and we continue and Kellogg Co., Battle Creek, Mich., with Prudential Insurance Co. of benefit-paying responsibilities to evidenced by the president-elect’s to see very attractive pricing,” Mr. purchasing a group annuity con- America on Aug. 5, with an agree- MassMutual beginning for about recent statements, the COVID-19 McDaniel said. tract in October from an undis- ment to convert it to a pension buy- 3,800 retirees and beneficiaries. pandemic will be his administra- Mr. Jacobs agreed, and also noted closed insurance company to trans- out following a lump-sum offer to As of Dec. 31, New York Times’ tion’s top priority when taking of- that while pricing continues to be fer about $470 million in U.S. participants. That offer closed Oct. overall pension plan assets totaled fice, Mr. Levine said. “It would not attractive, a wider range of prices pension plan assets and liabilities. 31 and those who selected the lump $1.65 billion, while projected bene- surprise me if COVID was high on has emerged because some insur- Both were basic retiree liftout sum will receive payments around fit obligations totaled $1.66 billion, their list across the government be- ers are “more comfortable in this deals, and while those types of Dec. 2. for a funding ratio of 99.4%, accord- fore we get to anything else,” he volatile market.” transactions still make up the ma- “We were fortunate that our pen- ing to the company’s most recent added. According to Milliman’s most re- jority of deals, there is also a signifi- sion asset performance and move- 10-K filing. Ms. Stapel expressed a similar cent study on PRT premiums, the cant number of full terminations. ments in the interest-rate environ- The size of the New York Times thought: “It’s an understatement to estimated cost of group annuity “One of the things that plan ment early in 2020 provided us the deal is typical of current buyouts. say there’s a lot going on and I just purchases as a percentage of total sponsors are moving to is an envi- opportunity to transfer our remain- Mercer’s Mr. McDaniel said deals don’t know that (issues like ESG in- pension liabilities fell to 102.3% in ronment that’s more driven by plan ing pension obligations to Pruden- are topping out at $1.5 billion or $2 vesting and proxy voting are) going September from 102.9% in August. terminations,” Mr. McDaniel said. tial without making additional cash billion at the most right now. to register urgently even in the mi- The change was the result of aver- “They’re looking for more certainty contributions to the plan,” said Mega transactions like Memphis, crocosm of the Department of La- age accounting discount rates going in costs of the ultimate termina- Wayne Rancourt, Boise Cascade’s Tenn.-based FedEx Corp.’s transfer bor. up 2 basis points during September, tion.” If it’s a typical plan sponsor, executive vice president, chief fi- of $6 billion in U.S. plan liabilities to “He’s walking into a burning while average annuity purchase “you’ve got $1 billion of liabilities nancial officer and treasurer. Metropolitan Life Insurance Co. in building here. You need to prioritize rates increased 9 basis points, ac- and $900 million in assets, you go to The process should be complet- 2018, are “not imminent right now,” what you save,” she said. n cording to Milliman’s latest pension the board and say, ‘We want to ter- ed by the end of December, “which Mr. McDaniel said. n

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20pi0251.pdf RunDate: 11/16/20 Full Page Color: 4/C