UTC-Raytheon Merger Challenges Overcome
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February 22, 2021 PIonline.com $16 an issue / $350 a year THE INTERNATIONAL NEWSPAPER OF MONEY MANAGEMENT Loreen Kelley OUCH: Brendan J. Retirement Plans Powers sees managers as being hurt by both waning DB assets and retiring baby UTC-Raytheon merger boomers moving their DC assets. challenges overcome Melding different funding ratios and asset allocations becomes a Glass Peter tall order for investment staff By ROB KOZLOWSKI The recent merger of United Technologies Corp. and Raytheon Co. presented some unique Money Management challenges for UTC CIO Robin Diamonte and her investment staff in bringing together more than $100 billion in retirement plan assets under the More firms feeling the draw umbrella of a single organization. Ms. Diamonte did have the advantage of prior experience in integrating other companies’ de- of retail market opportunities fined benefit and defined contribution plans into UTC’s portfolio. By CHRISTINE WILLIAMSON MORE ON GOING RETAIL Its 2012 acquisition of aircraft-components maker Goodrich Corp. and 2018 acquisition of Institutionally oriented money man- n Alternatives managers also looking at aerospace company Rockwell Collins added agers are dipping their toes in the retail retail channels. Page 3 about $5 billion and $8 billion in retirement as- investment market in response to de- sets in those deals, respectively. clining defined benefit plan assets as retail investors, sources said, but tradi- However, there were key differences with this corporations wind down their plans tional managers, even those that have new effort, she said. This was a merger of equals RESTRICTED: Robin Diamonte said the ‘merger of and baby boomers take their defined catered to retail investors for years, are rather than a straight acquisition, the amount of equals’ meant that more accommodation was needed. contribution plan assets with them trying new ways to attract investors to assets involved was far greater, and the compa- when they retire. diversify their client base. nies’ funding ratios and asset allocation were sig- underlying managers that fund has, their asset Alternative investment managers “Institutional managers moving into nificantly different. allocation and their investment philosophy,” Ms. are leading the way when it comes to retail investment is a strategic planning The end result, she said, left her and her staff Diamonte said. However, she said, “it was differ- new investment funds specifically for SEE RETAIL ON PAGE 22 feeling very much like their own OCIO firm. ent this time because it was a merger of equals. It “The very first thing you do is you look at the SEE UTC RAYTHEON ON PAGE 26 Graeme Jennings/Pool via CNP Regulation Economy New labor secretary Is canceling the debt being counted on to an option for future? Investors consider what could be done handle host of issues for countries piling up sovereign debt By BRIAN CROCE By SOPHIE BAKER Marty Walsh will likely soon lead the Department of La- bor during one its most complicated chapters. The pan- Fixed-income executives across the globe are weigh- demic is still raging, and the official unemployment rate ing in on a debate over whether governments and cen- stands at 6.3%, though Federal Reserve Chairman Jerome tral banks should simply cancel the piles of sovereign Powell said on Feb. 10 that it’s probably closer to 10% due to debt they’ve accumulated over recent years to prop up misclassification errors. developed economies. But while those issues will almost surely be top of mind The topic is front of mind for some executives be- for Mr. Walsh, who has served as Boston’s mayor since cause of the huge amount of money being printed by 2014, work on day-to-day retirement issues at the Labor central banks and the trillions of dollars of fiscal spend- Department’s Employee Benefits Security Administration ing — major tools used by advanced economies in ef- is expected to continue, sources in the retirement com- forts to curb the economic impacts of the coronavirus munity said. pandemic. “EBSA doesn’t have to worry about what’s happening at The options are clear: Write it off or pay it back. But (the Occupational Safety and Health Administration),” the path to arriving at one of these conclusions is less SEE WALSH ON PAGE 23 BUSY GUY: Retirement issues will be one of many concerns for Marty Walsh. SEE CANCEL ON PAGE 24 SOUND BITE Growth equity and long duration rule SWIB’S ROCHELLE KLASKIN on the death of David Villa, Growth equity and long-dura- pictured: ‘Over the last 15 years, his initiatives and tion bond strategies rack up vision created the road map for SWIB to become a impressive gains in year for premier investment organization.’ Page 6 both Morningstar separate accounts and CITs. Page 14 2 | February 22, 2021 Pensions & Investments IN THIS ISSUE Retirement Plans VOLUME 49, NUMBER 4 Exchange-traded funds States push ahead on private-sector initiatives ETFs aren’t immune from coordinated an ally,” Mr. Read said. savings,” he said. action by retail traders, but can they Virginia, Wisconsin latest to Virginia and Wisconsin are the Earlier this month, a Wiscon- handle a mob without a cascade of look into offering workers a latest examples of the trend. sin retirement security task unintended consequences? Page 17 In Virginia, legislation estab- force convened by the governor way to save for retirement lishing an auto IRA appears recommended a private sector In memoriam headed for passage, propelled in auto-IRA program, Wisconsin- Peers and colleagues said David By HAZEL BRADFORD part by an estimate that inaction Saves, and incentives to en- Villa, CIO of the $145 billion State of would cost Virginia taxpayers courage auto enrollment in Wisconsin Investment Board, was a Despite the economic stress caused by the $11.8 billion over the next 15 workplace plans. Wisconsin leader in portfolio management. Page 6 pandemic — or possibly because of it — in- years due to a lack of retirement was “in trouble when it comes terest in state private-sector retirement pro- preparedness and increased reli- LET’S TALK: Tobias Read to retirement security” even be- Investing grams continues to grow. ance on social services. said he’s in contact with fore the coronavirus pandemic, Whether governments and central “It seems like momentum is picking up,” The bill’s sponsor, House Ap- several states mulling a the report noted. banks can agree to simply cancel their said Tobias Read, treasurer of Oregon, the propriations Committee Chair- retirement program. The pandemic and some of sovereign debt will depend on the rules first state to launch a retirement savings pro- man Luke Torian, D-Prince Wil- the political measures being and specifics of the region. Page 24 gram for private-sector workers. Mr. Read liam, said the new program, to be housed taken to help people impacted by it may be regularly talks with officials in Nevada, within the state’s 529 office but administered responsible for some of that momentum, said Real estate Pennsylvania, Hawaii and other states inter- by a separate board, is an opportunity for all Angela M. Antonelli, executive director of ested in starting their own programs. “People Virginia workers to build portable savings. Georgetown University’s Center for Retire- European money managers are adding really get the power of what we have done “I am hopeful that Virginia529 can do for ment Initiatives. She noted that one COVID- new expertise to keep fees at the same here. We are turning apathy and inertia into retirement planning what it did for college SEE RETIREMENT ON PAGE 27 level. Page 4 Special report: Top- Defined Contribution performing managers Top-performing domestic equity managers posted triple-digit returns as Biden’s retirement idea growth strategies dominated. Page 14 Long-duration bonds led Morningstar’s lists of top-performing strategies getting the cold shoulder throughout 2020. Page 15 Equalized tax advantage high-income earners. Departments Under the current system, for At deadline .................24 ETFs ...........................17 proposal being met with example, a low-income earner in By the numbers ...........12 Frontlines .....................8 the 12% tax bracket who contrib- Changes ahead ...........27 Hirings........................18 skepticism by industry utes $1,000 to his or her retirement Classified ...................20 Other views .................10 account would defer paying $120 in Corrections ...................4 People ..........................6 By MARGARIDA CORREIA DC roundup ................13 RFPs ..........................20 taxes, whereas a higher-income Editorial .....................10 earner in the 37% bracket would Trade groups representing plan defer $370, or more than three sponsors have snubbed a proposal times as much. Record keeper, manager floated by President Joe Biden to “It doesn’t make any sense to surveys in progress give individuals across all pay make the incentive for saving Responses to Pensions & grades equal tax advantages for $1,000 bigger for higher-income Investments’ annual survey of defined their retirement savings. people than for smaller-income contribution service providers are The proposal calls for replacing people,” said Alicia Munnell, direc- due Feb. 26. Firms record-keeping the current upfront tax break that tor of the Center for Retirement assets for U.S. institutional DC plans savers now receive for money they Research at Boston College. are eligible. Results will run April 5. put into their retirement accounts Under Mr. Biden’s proposal, all with a flat, refundable tax credit of savers — regardless of their income For P&I’s annual money manager 26%. The administration’s ratio- level — would receive the same 26% survey, responses are due March 19. nale for the proposed shift is that credit for whatever dollar amount Firms managing U.S. institutional, tax- it would be more equitable to low- they contributed to their retirement exempt assets are eligible. Results er- and middle-income earners accounts that year.