Investors Hungry for Industrial Properties

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Real Estate Investors hungry for industrial properties Growth of online shopping tics properties in their portfolios to take multifamily, according to a 2021 invest- advantage of consumers’ growing ac- ment intentions survey issued jointly by during pandemic driving ceptance of online shopping. But the real estate investor trade groups PREA, COVID-19 crisis and stay-at-home or- INREV and ANREV. rise in warehouse interest ders supersized the trend and investor According to Real Capital Analytics demand. Inc., the office sector’s share of total deal By ARLEEN JACOBIUS Traditionally, office and retail have flow in 2020 shrunk to 23% in the Ameri- been the largest property types in insti- cas, below industrial for the first time. In Before the pandemic, industrial prop- tutional portfolios. At 34%, office remains Europe, the Middle East and Africa, office erties were a more of a snack than a main the largest investment category in insti- sales fell below apartment and industrial, course among real estate’s primary food tutional real estate portfolios, even as Real Capital Analytics data show. groups, but investors’ voracious appetite questions remain about the future of Jim Costello, New York-based senior for the sector may result in it occupying a work post-pandemic, according to the vice president of Real Capital Analytics, larger place in their portfolios. Pension Real Estate Association. But in called it a “sea change” for the industrial Many investors were already over- 2021, asset owners plan to invest the sector. In the past, industrial had not been SHIFT: Jim Costello sees the groundswell as a ‘sea change’ for the weighting warehouses and other logis- most capital in industrial, followed by SEE INDUSTRIAL ON PAGE 24 industrial sector, which had previously been thought of as boring.

SPECIAL REPORT Economy PENSION CONTRIBUTIONS APAC execs Strengthening Arnd Wiegmann/Reuters warn against markets affect complacency contributions on inflation Past infusions, new legislation By DOUGLAS APPELL also provide reprieve for firms Asset owners and analysts in the Asia-Pacific region are expecting By ROB KOZLOWSKI an ephemeral spike in inflation this year but gatekeepers warn that the U.S. corporate pension plans continue to potential for longer-term challeng- lower their pension contributions as a strong es should be shaping asset alloca- market and accelerated pension contributions tion decisions. in the past have kept funding levels healthy While it’s far from a certainty, despite the effects of the COVID-19 pandemic. “we’re definitely acknowledging U.S. corporations plan to contribute a total of the heightened risk of inflation slightly less than $15 bil- Money Management over the medium term and we’re MORE ON lion to their global pen- advising clients to think about po- PENSION sion plans in 2021, ac- sitioning for that,” said Andrew CONTRIBUTIONS cording to Pensions & Zurawski, associate director in Wil- n For a list of Investments’ analysis of Credit Suisse faces reputational lis Towers Watson’s research team expected 2021 S&P 500 companies that in Hong Kong. contributions, see announced contributions In the wake of last year’s unprec- Page 15 of at least $100 million. damage after Greensill collapse edented monetary and fiscal policy n Boeing The total is signifi- response to the pandemic, the pros- contributes stock, cantly lower than in By SOPHIE BAKER that collapsed in early March. pect of central bankers falling be- not cash. Page 16 past years, thanks to Credit Suisse also warned of financial and hind the curve in controlling infla- n Public plans don’t strong investment re- Pension funds are closely watching how the reputational hits in the March 18 statement, tionary pressures is “a risk that we need full funding, turns that have im- fallout associated with Credit Suisse Asset Man- and that it may lose clients and assets under can’t be complacent about,” agreed study finds. Page 16 proved funding ratios agement’s relationship with collapsed Greensill management over the scandal. The bank is also Cameron Systermans, senior port- significantly as well as Capital may impact their allocations, the money dealing with the failure of Archegos Capital — a folio manager and head of main- accelerated discretionary contributions made manager and the wider hedge fund industry. hedge fund that defaulted on margin calls stream investments, Japan with since 2017 that have fulfilled minimum re- Parent bank Credit Suisse Group AG said made in late March by Credit Suisse and other Mercer Investments (Japan) Ltd. quired contributions for multiple years. on March 18 it would split out its money man- banks — which it warned on March 29 “could And if inflation looks set to gath- The data reflect S&P 500 companies’ expect- agement unit from the international wealth be highly significant and material to our first er momentum across the globe this ed contributions disclosed in their 10-K filings management division and run it under a new quarter results.” J.P. Morgan Chase & Co. ana- year, it’s U.S. numbers that will be with the Securities and Exchange Commission CEO after liquidating about $10 billion in sup- lysts said in a note that press speculation that top of mind. “Definitely, we see the between Jan. 28 and March 4, before single- ply chain finance strategies. The strategies Credit Suisse losses could amount to $3 billion main risk in the U.S.,” with the pas- employer pension funding relief was adopted were run by CSAM with assets originated and to $4 billion was “not an unlikely outcome,” ac- sage of its huge fiscal stimulus in the American Rescue Plan Act of 2021 that structured by Greensill Capital, a U.K. and cording to Bloomberg. package at the start of the year and may lower minimum required contributions. Australia-based financial services company SEE CREDIT SUISSE ON PAGE 21 the Federal Reserve making it clear CONTINUED ON PAGE 14 SEE INFLATION ON PAGE 26 SOUND BITE BlackRock CEO Fink gets 18% raise CONSUMER FEDERATION OF AMERICA’S BARBARA ROPER: BlackRock CEO Larry Fink’s ‘There’s nothing magical about the 5th Circuit ruling. total pay rose 18% in It was just a game of musical chairs and they turned 2020, thanks to increases off the music at that point.’ Page 2 in long-term incentives and cash awards. Page 23 2 | April 5, 2021 Pensions & Investments

IN THIS ISSUE Regulation

VOLUME 49, NUMBER 7 Alternatives Advice exemption stands – for now, anyway Ares Management has agreed to buy Landmark Partners from BrightSphere Labor Department indicates it Investment Group for nearly $1.1 billion.

will continue to explore issue Mallory Tyler Page 6 and make changes as needed Russell Investments and Hamilton Lane formed a partnership to give Russell’s OCIO clients access to Hamilton Lane’s By BRIAN CROCE private markets strategies. Page 6 To the surprise of many stakeholders, Defined contribution the Department of Labor under the Biden administration let a Trump-era invest- Two pooled plan providers are wooing ment-advice exemption take effect in Feb- employers without 401(k) plans in a bid to ruary, but the debate on the issue is far establish themselves in the marketplace. from over as focus turns to the depart- Page 4 ment’s next move. The new administration allowed a pro- Investing hibited transaction exemption that per- Chinese government bonds will be phased mits investment-advice fiduciaries to re- into the FTSE World Government Bond ceive compensation for more types of guidance, including advice to roll over as- index over a longer period than previously sets from a retirement plan to an individu- announced. Page 16 al retirement account, to go into effect on Feb. 16 as scheduled. Money management The exemption was finalized in Decem- SOME RELIEF: Jennifer Eller cited the exemption as providing flexibility in how businesses can be structured. Credit Suisse Asset Management clients ber under the Trump administration but said they will watch the Greensill-related needed 60 days to take effect. Upon taking emption in September, a variety of stake- “I thought because of that DOL would de- situation closely but have no plans to office Jan. 20, the Biden administration had holders criticized the proposal, including lay the exemption so that they would get change allocations. Page 21 the ability to halt and review any rule-mak- participant groups like the AARP and the input and comments as to whether to let it ing effort that was not in effect. Consumer Federation of America, which go into effect,” said Kent Mason, a partner Special report: During a 30-day comment period and at a broadly said that the exemption does not with law firm Davis & Harman LLP in Wash- Pension contributions subsequent hearing on the proposed ex- sufficiently protect investors. SEE ADVICE ON PAGE 22 Companies have the option of making pension contributions with their own ESG common stock, but there are risks. Page 16 U.S. public pension funds are generally Bonds becoming favorite of green investors sustainable in the long term even without Asset class also appealing and $1 billion, along with endowments, becoming fully funded, a Brookings foundations and others. Institution study shows. Page 16 for diversification, managing “It was revealing that what was really driving a lot of the ESG is the belief that it Departments risk and capital preservation helps as a risk mitigator,” said Peter Coffin, At deadline ��24 ESG roundup ��12 founder and president of Breckinridge Cap- Changes ahead �� 27 Frontlines ��8 By HAZEL BRADFORD ital Advisors. The Boston firm manages $44 Classified ��20 Hirings ��18 billion in assets and specializes in invest- Corrections ��4 Other views ��10 When it comes to green investing, fixed ment-grade fixed-income portfolios. Editorial ��10 RFPs ��20 income seems to be getting more attention That asset class is “a logical and relatively than equities from institutional investors, seamless starting point” for integrating ESG, Money manager survey which also like the asset class for capital said Andrew McCollum, managing director overdue preservation, diversification and downside and head of investment management for Pensions & Investments is still accepting risk management. Greenwich Associates in Boston. late responses to the annual money A survey of 80 midsize U.S. institutional ESG, Mr. Coffin said, “is in large part try- investors conducted by Breckinridge Capi- PERFECT PAIR: Peter Coffin said ESG aligns well ing to identify external risks. The purpose of manager survey. Firms managing U.S. tal Advisors and Greenwich Associates with fixed income in mitigating risk in investments. a fixed-income allocation is to preserve institutional, tax-exempt assets are found investment-grade fixed income to be capital. We see ESG aligning with that ob- eligible. Results will run May 31. the top asset class for ESG use, ahead of do- were either actively considering it or might jective of looking ahead and trying to gauge To request a survey or obtain further mestic and non-domestic equities. consider it. and assess price and risks that are long information, please contact Anthony At the time of the 2020 survey, 34% of Corporate and public pension funds term,” he said. “A pension fund would want Scuderi at [email protected] or the institutional investors were using ESG made up more than half of the sample of in- their investment manager examining those 212-210-0140, or visit www.pionline. in their portfolios and 70% of the others vestors with assets between $200 million SEE GREEN BONDS ON PAGE 27 com/section/surveys. Washington Entire contents ©2021 Crain Communications Inc. All rights reserved. Pensions & Investments (ISSN 1050-4974) is published biweekly by Crain Communications Inc., 150 N. Michigan Ave., Chi- cago, Ill. 60601-7593. Periodicals postage paid at Chicago, Ill. and New labor secretary facing multitude of challenges at additional mailing offices. Postmaster: Send address changes to Pensions & Investments, Circulation Dept., 1155 Gratiot Avenue, By BRIAN CROCE OPPORTUNITY Detroit, Mich. 48207-2912. $16 per issue; $350 per year in the U.S.; $375 per year in Canada; all other countries $475. ‘‘Canadian FOR ALL: Marty Post International Publications Mail Product (Canadian Distribution) Marty Walsh was sworn in as labor secretary March 23, Walsh wants the Sales Agreement No. 0293539’’ GST #136760444. Printed in U.S.A.

taking the helm of the department at a critical time as the economy to work Mandel Ngan/CNP COVID-19 pandemic persists and millions of Americans are for everyone, CRAIN COMMUNICATIONS INC out of work. ‘especially those Keith E. Crain, Chairman The now-former mayor of Boston, a position he held since in our most Mary Kay Crain, Vice Chairman 2014, was confirmed by the Senate March 22 in a 68-29 vote. marginalized KC Crain, CEO Mr. Walsh has an extensive labor background, including communities.’ Chris Crain, Senior Executive Vice President leading the Boston Metropolitan District Building Trades Lexie Crain Armstrong, Secretary Council from 2011-2013. Bob Recchia, Chief Financial Officer “As the son of immigrants and a former union laborer, I G.D. Crain Jr., Founder (1885-1973) share their deep commitment to building an economy that Mrs. G.D. Crain Jr., Chairman (1911-1996) works for all,” Mr. Walsh said in a statement following his

Published every other Monday by Crain Communications Inc. confirmation. Boston: 101 Federal St., Suite 1615A, 02110; Chicago: 150 N. Michigan Ave., 19th Floor, “I have been a fighter for the rights of working people 60601; London: 11 Ironmonger Lane, EC2V 8EY; El Segundo, Calif.: 400 Continental Blvd., 6th throughout my career, and I remain committed to ensuring Floor, 90245-5074; New York: 685 Third Ave., 10017; San Francisco: 71 Stevenson St., Suite 400, 94105; Washington D.C.: 601 13th St. NW, Suite 800 South, 20005. that everyone — especially those in our most marginalized Address all subscription correspondence to Pensions & Investments, 1155 Gratiot Ave., Detroit, communities — receives and benefits from full access to eco- Mich. 48207-2912 or email [email protected]. nomic opportunity and fair treatment in the workplace. I be- Member of Business Publications Audit of Circulation lieve we must meet this historic moment and, as the nation’s www.pionline.com secretary of labor, I pledge to help our economy build back SEE WALSH ON PAGE 23 Pensions & Investments April 5, 2021 | 3

Defined Contribution CITs become preferred target-date series choice Collective investment trusts fund-based target-date series. according to Morningstar Direct. Mutual “The performance tends to be similar” fund target-date assets more than dou- more than double their share between comparable target-date series, bled to $1.57 trillion from $703 billion

but the CIT fees are less than the fees for during this period. Gilson Matthew of the market in 6 years mutual fund series, he said. Because CIT data is less precise than Mr. Kephart said the CIT structure mutual fund data — the former is pro- By ROBERT STEYER and its regulatory requirements enable vided by firms voluntarily to Morning- more flexibility for sponsors to negoti- star — the CIT market share and asset As target-date funds continue to gain ate fees. size are likely larger than what Morn- popularity and assets, those based on Mutual funds must charge a stated ex- ingstar Direct is measuring, Mr. Keph- collective investment trusts are growing pense ratio listed in the prospectus for art said. much faster than their mutual fund- each share class; but CITs have more He added that CIT-based target-date based brethren, more than doubling leeway. “This makes CITs more attractive series could get a boost if Congress pass- their market share in six years. to larger sponsors,” he said. es — and President Joe Biden signs — “It’s money,” said Jason Kephart, a As a result, Morningstar’s latest tar- legislation, proposed in both the House strategist on the multiasset and alter- get-date industry annual report shows and Senate, that would enable 403(b) native strategies team at Chicago-based CIT-based target-date series with 43% of plans to offer CITs. Morningstar Inc., describing a key at- target-date fund assets last year vs. 18% The CIT advance also was under- traction for choosing a CIT-based tar- in 2014. The CIT assets jumped to $1.18 scored in an annual sponsor survey GOOD DEAL: Jason Kephart cites lower fees but similar performance get-date fund vs. a comparable mutual trillion last year vs. $154 billion in 2014, SEE TARGET ON PAGE 23 as a reason for the growing popularity of CITs for target-date series.

Hedge Funds Pension Risk Transfer Managers see good U.K. expects a strong year times ahead in 2021 for offloading of liabilities Firms optimistic about inflows and By PAULINA PIELICHATA finding alpha in market dislocations The risk transfer market in the U.K. will continue to flourish in By CHRISTINE WILLIAMSON 2021 as an increase in U.K. long- term interest rates in the first quar- Prospects for the hedge fund industry a year ter resulted in improved funding after the COVID-19 outbreak are strong given levels for many defined benefit good performance, the first positive flows since funds, consultants said. 2018 and plenty of market dislocation providing Over the course of 2021, consul- opportunities for alpha production. tants expect that at least £30 billion “2021 is shaping up to be a very good environ- ($41.6 billion) in risk transfer deals ment for hedge funds as managers focus more on will materialize across the U.K. The fundamentals,” said John F. Frede, managing di- ultimate opportunity set could be ‘BUSY YEAR’: James Mullins thinks there rector and head of research at 50 South closer to the £60 billion mark, con- will be more than £30 billion in deals. BACK TO BASICS: John Capital Advisors LLC, a Chicago-based al- ditional upon some plan sponsors F. Frede said managers ternatives funds-of-funds manager. moving ahead with exceptionally linked to plan participants that are can focus on fundamen- “Portfolio managers of long/short equity large longevity swaps and buy-in yet to retire, known as deferred tals and take advantage hedge fund strategies, for example, are transactions or alternative strate- participants. of market disruptions. taking advantage of market disruption and gies such as capital-backed journey “My expectation is that 2021 will dislocation. It’s really a very good environ- plans, consultants said. be another busy year … It is hard to ment for stock pickers,” Mr. Frede said. But the year will belong to buy- predict (exact) volumes, (which) 50 South Capital had a total of $10.5 billion in outs, consultants believe, as insur- can be swayed one way or the other. assets as of Dec. 31, with $6.9 billion of assets un- ance companies have been im- My best guess today is that we will SEE HEDGE FUNDS ON PAGE 25 proving their capabilities and see similar volumes to last year … capacity to insure the liabilities SEE RISK TRANSFER ON PAGE 24

The passive fixed-income glut Within fixed-income mutual funds in U.S. defined contribution plans, passive offerings have gained significant share and now make up more than a quarter of assets. Passive funds clearly have the lowest expense ratios, but would active investment options better help participants achieve their retirement objectives?

Two behemoths: Both Vanguard A better option: Active funds, net of fees, have provided both Reliance on Treasuries: The largest index strategies and Fidelity have seen large increases in superior returns and lower risk. The largest active funds in DC plans track the Bloomberg Barclays U.S. Aggregate Float Adjusted assets allocated to passive fixed-income sailed through the COVID-19 market turmoil; all but two had a index, which has become a concentrated bet on the U.S. strategies over the past 20 years. Total smaller drawdown than a typical passive strategy. Every fund had government. More than 60% of the holdings of the largest assets in the firms’ most popular higher returns over the past 10 years, with an average passive funds are either U.S. Treasuries or agency mortgage- passive fixed-income mutual funds have outperformance of 73 basis points, net of fees. backed securities. soared to $71.2 billion from $1.4 billion 10-year return and most recent drawdown Holdings of the largest mutual funds in 1997. relative to asset size Municipal, Asset growth (billions) 5.50% Cash & other funds/ Western Asset Core-plus Bond Loomis Sayles Core Plus Fidelity Total Bond Fund Treasuries Corporate Mortgages* other not covered $300 5.25% Western Asset Core Bond Dodge & Cox Vanguard Total Bond Market 44.2% 31.4% 23.9% -0.2% 0.7% $275 Vanguard & 5.00% Income Index-Institutional $250 Fidelity U.S. 26.0% 4.75% PIMCO Total Return 19.5% 30.4% 41.4% 7.1% 1.5% passive total of total American Funds $225 4.50% Bond Fund Amer. Dodge & Cox Income 9.0% 40.3% 41.4% 6.6% 2.7% $200 All others 4.25% Western Asset Core-plus Bond 31.2% 40.1% 29.1% -0.5% 0.1% $175 4.00% Fidelity Total Bond 28.8% 28.4% 7.4% 34.8% 0.6% $150 3.75% Federated Federated Hermes Tot. Ret. Bond 14.5% 35.5% 1.3% 36.1% 12.5% $125 3.50% Hermes Total Return Bond

$100 10-YEAR RETURN 3.25% American Funds Bond Fund Amer. 35.2% 25.9% 28.1% 8.9% 1.8% Wells Fargo Core Bond J.P. Morgan Core Bond $75 6.4% 3.00% Western Asset Core Bond 25.9% 36.1% 37.9% 0.0% 0.1% of total Vanguard Total Bond PIMCO Total Return $50 2.75% Market Index-Inst’l J.P. Morgan Core Bond 20.1% 31.1% 38.5% 9.9% 0.5% $25 2.50% Loomis Sayles Core Plus 26.1% 40.9% 27.6% 5.2% 0.2% -5.00% -4.75% -4.50% -4.25% -4.00% -3.75% -3.50% -3.25% -3.00% -2.75% -2.50% $0 Wells Fargo Core Bond 32.9% 28.1% 29.7% 8.8% 0.5% 202020152010200520001997 MOST RECENT DRAWDOWN *Includes agency and private mortgages. Source: P&I’s Mutual Funds Most Used by Defined Contribution Plans survey and Bloomberg LP Compiled and designed by Aaron M. Cunningham and Gregg A. Runburg 4 | April 5, 2021 Pensions & Investments

Defined Contribution New PEPs targeting firms without retirement plans Strategy offers them Payroll provider Paychex Inc. has a business update. FOOT IN THE DOOR: Andy est in the startup market as heart- already signed up 1,000 such em- While employers Schreiner sees PEPs as a ening given the goal of the SECURE an easier way to enter ployers into its PEP — a milestone without retirement way for small businesses Act, the legislation enacted in Janu- it hit in February, a month after its plans — and therefore to offer a retirement plan. ary 2020 to expand retirement cov- growing marketplace launch on Jan. 1, said Michael Ma- no assets — are not erage to more Americans. The SE- jors, senior director of national re- the most attractive with an existing plan, CURE Act facilitated the creation of By MARGARIDA CORREIA tirement sales at Paychex in Seattle. from a business per- they said. pooled employer plans, which law- “We didn’t expect for it to take off spective for providers “The PEP is a natu- makers hoped would serve as a As providers of pooled employer that fast,” Mr. Majors said. of pooled employer ral way to help com- strong incentive to get more em- plans scramble to attract sponsors Fidelity Investments, too, plans, they offer a rel- panies get their first ployers to offer retirement savings of small- and midsize 401(k)s into launched a PEP in January that’s atively easy way to plan started, and it plans to their workers. As a result of their new pooled plans, at least two restricted to employers with be- enter the marketplace made the most sense the legislation, employers now no are taking a different tack. Rather tween five and 50 employees that and establish a base from which to to focus on initially as our results longer need to be in related busi- than pursuing employers already don’t have retirement plans. The grow, industry experts said. It’s also have shown,” Mr. Majors said, ex- nesses to join a pooled 401(k) plan, offering workers a retirement plan, company declined to disclose how faster and easier to move an em- plaining that “things move a lot where they can benefit from great- they’re chasing those not offering many employers have joined its ployer without a retirement plan faster in the startup space.” er economies of scale and poten- one at all. PEP, saying it was too early to share into a PEP than it is to move one Industry experts view the inter- tially lower costs. Fidelity alluded to the intent of the SECURE Act as well as the size of the startup market as the reasons behind its focus on new retirement plans. MARKETING OPPORTUNITIES “There are millions of small businesses that do not offer a retirement plan today,” said Andy Schreiner, Fidelity’s Boston-based senior vice president of defined contribution innovation. 2021 Sponsored “Fidelity sees PEPs as an opportunity to help close the retirement coverage gap, providing a simpli- fied, back-to-basics DC plan that can make it easier and more afford- able for a small business to offer a Roundtable Calendar retirement benefit to their employees for the first time.” While the focus on startup plans An excellent way to highlight your firm’s investment expertise. supports the ambitions of the SE- CURE Act, it’s driven more by what Sponsor one of the upcoming Roundtables in Pensions & Investments. some say is sensible business thinking. For pooled plan providers, it’s much easier to convince an employer to offer a retirement plan Private Markets | Publishing: July 12 than it is to get them to dump the one they have, according to indus- The search for uncorrelated return never really ends but in today’s world of low interest rates, high volatility try experts. and a healthy dose of uncertainty, it’s become more critical for institutional investors seeking to meet return “The companies that already targets, improve funded status or have an income stream. This roundtable discussion will break down the have plans in place are not going to private market asset class into its components and provide insight into which areas are most appealing. be in a position to implement the (pooled plan provider) structure right away, whereas the startups are,” said Joan M. Neri, an attorney The DC Participant’s Investment Journey | Publishing: July 27 with Faegre Drinker Biddle & Reath LLP in Florham Park, N.J. How are defined contribution plan sponsors viewing the evolving investment journey of the participant Plan sponsors that are happy in moving from new employee to mid-career worker and near retiree to retiree? With a large percentage with their plans are unlikely to be a of participant assets still in the core menu, what are the asset allocation considerations for each good prospect for a PEP, and those stage of the participants’ lifecycle to and through retirement? Hear about QDIA developments, that are less than thrilled with what custom approaches, strategies that address the complexity of retiree financial situations, and more. they have are under a fiduciary obligation to evaluate whether transi- tioning to a new structure is prudent and in the best interest of their Target-Date Funds | Publishing: September 20 employees, Ms. Neri said. “Selling them a new plan struc- Target-date funds are always a hot topic of discussion among defined contribution plan sponsors and their partners. ture is going to be time-consuming,” Are they delivering as promised? Are plan participants using them correctly? Can they be used e ectively in retirement she said, explaining that plan spon- income solutions? Meantime, target-date funds remain the most popular QDIA. This roundtable will provide an sors must consider current plan update on all things target date: from new innovations to the latest in glidepath development. SEE PEPs ON PAGE 26

Managed Accounts | Publishing: November 1 CORRECTIONS & Managed account assets have continued to grow as deﬁned contribution plan sponsors seek personalized CLARIFICATIONS solutions to help participants maximize retirement outcomes. With advances in product features and improved fees ■ Chris J. Battaglia is for services considerations, are we nearer to a tipping point towards more widespread use of managed accounts president and publisher of in DC plans? Will they follow a similar trajectory to the uptake of TDFs over the past decade? Pensions & Investments. Incorrect information about his title was included in the story “P&I business, editorial units For more information on this multi-platform sponsorship opportunity, announce changes” in the March 22 issue on page 3. contact Julie Parten at 952.495.0422 or [email protected]. ■ The first name and title of Marcie Frost, CEO of the California Public Employees’ Retirement System, was inadvertently omitted in the page 6 story “CalPERS halts CIO search after picking finalists” in the March 22 issue. $98.9B AUM* in Exceptional access Private Placement Debt. to deal ow.

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21pi0041.pdf RunDate: 04/05/21 Full Page Color: 4/C 6 | April 5, 2021 Pensions & Investments

Alternatives Ares’ deal to acquire Landmark expands secondaries business Fallon/Bloomberg T. Patrick

By JAMES COMTOIS mark funds, which were valued at join Ares. roughly $34 million as of Dec. 31. A news release issued by Ares Ares Management Corp. has Founded in 1989 and acquired said that the acquisition will expand agreed to buy Landmark Partners by BrightSphere in August of 2016, the firm’s investment offerings in from BrightSphere Investment Landmark is an alternatives in- the secondaries market, a sentiment Group for nearly $1.1 billion, an Ares vestment manager with $18.7 bil- that Ares President and CEO Mi- spokesman confirmed in an email. lion in assets under management chael Arougheti echoed in a confer- As part of the deal, Ares will buy through its private equity, real es- ence call Ares hosted March 31. the 60% stake BrightSphere owns as tate, and infrastructure secondar- “Landmark is a unique and valu- well as the 40% interest held by the ies funds. It has 150 employees in able platform that will instantly Landmark management team. Ares six offices globally. bring us scale and capabilities in an has also agreed to acquire Bright- Landmark will retain its brand attractive and growing global mar- NEW PLAYER: Ares President and CEO Michael Arougheti said the deal ‘will instantly Sphere’s co-investments in Land- and all of the firm’s 16 partners will SEE ARES ON PAGE 22 bring us scale’ in a growing global institutional secondaries market.

Alternatives Russell’s deal ESG Investing Virtual Series with Hamilton May 17-20 P&I’s 2021 ESG Investing Virtual Series is in its sixth year! We’ll be looking back at Lane more than topics from previous agendas to see how the space has evolved and where it still needs to go during our interactive roundtable discussions. Register Today! Among things missing from the past year, the inability to network with peers has subadvisory been one that many have found dicult. These dynamic, focused conversations will be led by an asset owner and investment consultant with the ability for By ARLEEN JACOBIUS attendees to be on camera to join the fun! The last topic Russell Invest- Topics to be covered include: ments and Hamilton Lane executives discussed when they decided • ESG Returns & Performance to form a strategic partnership was • Sourcing & Integrating ESG Data what ended up being the alternative investment firm’s $90 million investment for a minority stake, said Michelle Seitz, Russell chair- • ESG as a Risk Management Strategy woman and CEO, in an interview. • Engagement The companies said March 30 that they formed a strategic partnership to provide Seattle-based Russell’s outsourced CIO clients ROUNDTABLE LEADERS INCLUDE: with access to Hamilton Lane’s open-architecture private markets investment strategies. Russell executives were most interested in ensuring that its clients understood that its deal with Ham- ilton Lane was more than a subadvisory relationship, Ms. Seitz said. “It put an exclamation point to Russell’s clients that this is not a Devon Francis Monika Freyman Laura Glick Craig Grenier normal relationship but a strategic Fiducient Advisors Mercer Spencer Foundation Northeastern University partnership,” she added. “Hamilton Lane is a firm believer of putting our money where our mouths are,” said Erik Hirsch, vice chairman and head of strategic initiatives, in an interview. “We’re invested in the success of Russell and Russell’s clients. Russell already had alternative Sarah Hinman Michael McCauley Jerey Mindlin Christopher Rowe investment capabilities, Ms. Seitz said, “(but) with the sheer explosion Fiducient Advisors State Board of Administration Arizona State University The Church Pension Fund of alternatives and the access of Florida points, it became clear to me that we needed to strategically lean in COMPLIMENTARY REGISTRATION AT PIONLINE.COM/ESG2021* — to build ... acquire or to partner.” Russell needed the full depth and breadth of alternative invest- SPONSORS: ment capabilities “at warp speed” with a partner with the same fiduciary duty “touchstones,” she said. In addition to Hamilton Lane’s technology focus and extensive data on the private markets, she Questions? For more details please contact Elayne Glick at (212) 210-0247 or [email protected]. said that getting Russell’s clients *Only asset owners and a limited number of consultants are invited to attend. All registration requests are subject to veriﬁcation. access to secondaries and co-in- 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 vestments is very attractive because Pensions & Investments and does not represent the views or opinions of the publication or its parent company, Crain Communications Inc. they have been growth areas in terms of client interest. SEE RUSSELL ON PAGE 21 Innovations in DC Helping Supercharge Retirement Outcomes

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DON’T FORGET THE FENNEL BOLD SYMBOL: Fearless PUTTING IT ON PAPER Girl stands defiant amid the shards of a shattered Norges chief dons glass ceiling after State New book culls Street Global Advisors modified the art institutional chef’s hat to boost installation to reflect improved gender diversity employees’ spirits on corporate boards. wisdom from

Nicolai Tangen is well-known in the investment podcast series industry for leading the in-house money manager of the world’s largest sovereign wealth fund. But turns Theodore “Ted” D. Seides distilled out, he’s also trained as a professional chef. the content of 150 podcast inter- Mr. Tangen, CEO at Norges Bank Investment views he conducted with institutional Management, made the revelation on LinkedIn, in a chief investment officers, money video he posted last month showing him cooking his managers and other investment version of pasta alla Eoliana — Aeolian-style pasta. industry players into a new book, The video was made as an introduction to a virtual “Capital Allocators: How the world’s social event before Christmas, a spokeswoman said, as elite money managers lead and part of the manager’s focus on internal communication invest.” and to keep spirits up. A number of other employees Mr. Seides is founder and shared their favorite recipes, she said. managing partner of Capital Allocators LLC, Greenwich, Conn., which he launched in 2017 to produce the “Capital Allocators” podcast series. He wrote in the book that he A NOD TO PROGRESS chose to focus on interviewing CIOs because “their seat is the broadest SSGA’s Fearless Girl statue and most fascinating in all of now shattering glass ceiling

Not content to rest on her laurels as a one female director, according to SSGA. PINCH OF SALT: Nicolai Tangen cooked up some pasta alla striking Wall Street statue, Fearless Girl The asset manager took its own advice, Eoliana in a video for his employees during a virtual event. has moved on to shattering glass ceilings. naming its first female global CIO, Lori Four years ago, State Street Global Heinel, who joins other women at the firm However, Mr. Tangen posted the video to appeal to Advisors installed Fearless Girl to send serving in asset class CIO roles. Ms. Heinel his “many thousand students” that he is connected with “an immediate and unmistakable message will oversee 500 investment professionals via the social media platform, given he knows from his to the world’s business leaders: that worldwide and nearly $3.5 trillion in own experience “how empty the bank account is this having strong women in leadership assets under management. SSGA is also late in the semester.” matters,” President and CEO Cyrus doing more to recruit, retain and promote LET’S TALK: Theodore ‘Ted’ D. Seides In the video, Mr. Tangen said he had three months of Taraporevala said in a recent client letter. more diverse employees, and to eliminate interviewed 150 institutional CIOs professional chef training at the world-famous Le To celebrate International Women’s racial inequity in the organization, Mr. and money managers for his podcast. Cordon Bleu culinary school. There he learned basic Day on March 8 this year, SSGA sur- Taraporeva said in the letter. skills and was graded on the taste, hygiene and rounded her with a broken glass ceiling “Of all the things Fearless Girl proved investing and their decisions presentation associated with his cooking. “as a symbol of the new ground women — from the fact that long-term value significantly influence how capital “It’s very hard. … I have a lot of respect for chefs,” are breaking every day,” the letter said. really does begin at the board, to the flows throughout the world.” Mr. Tangen said in the video. Since 2017, the call for greater gender reminder that we all have so much The book is divided into two In case you fancy making Mr. Tangen’s pasta dish, diversity on corporate boards has untapped potential in our own employee sections. you will need olive oil, tuna, pasta, black olives, capers, resonated across the globe, the asset ranks — perhaps the most important is red onion, tomatoes, fennel — “not mandatory, but if manager said. What started in the U.S., that change is both desperately needed The first part offers a toolkit you want to be fancy you can have fennel” — and chili. U.K. and Australia has since spread to the and very much possible,” Mr. Taraporeva explaining five essential functional “No food without chili,” Mr. Tangen said. rest of Europe, Canada, Japan, Hong Kong, said. “Four years later, that’s only one of tools used by allocators — interview- NBIM manages Norway’s sovereign wealth fund, and Singapore. Today, 58% of 1,486 the many reasons she’s still going strong. ing, decision-making, negotiating, Government Pension Fund Global, Oslo, which had companies with previously all-male Here’s to many more.” leadership and management. 10.91 trillion Norwegian kroner ($1.27 trillion) in assets boards have responded by adding at least — HAZEL BRADFORD The second part focuses on “the as of Dec. 31. — SOPHIE BAKER craft of investing” encompassing investment frameworks that E. Jason Wambsgans/Chicago Tribune GETTING CONNECTED summarize “how modern allocators think about and conduct the investment process” including Ken Griffin donates $5 million governance, investment strategy, investment processes and technology innovations, Mr. Seides wrote. to give Miami students internet Mr. Seides uses examples throughout the book gleaned from Hedge fund manager Kenneth equality in the county, are the podcast interviews with high-profile C. Griffin donated $5 million to partners running the program. CIOs including Christopher J. Ailman, fund Miami Connected, which The program was launched in CIO of the $286.9 billion California will provide free internet access March, initially providing 22,000 State Teachers’ Retirement System, and improve digital literacy for Miami-Dade County public school more than 100,000 students and students with free internet access, West Sacramento. their families in Miami-Dade the news release said. He included a quote from Mr. County, Fla. The Miami Connected program Ailman’s podcast in the book: “If you Mr. Griffin, founder, CEO and also will seek to create jobs by can soften your negative periods, co-CIO of Chicago-based Citadel investing “in career pathways that you compound faster and the end LLC, is the lead funder for Miami increase diversity and inclusivity result over time is dramatic. Think Connected, a public-private in the technology sector,” the about it in life. If the bad times are partnership that “represents a release said. CRUCIAL TOOL: Ken Griffin said internet access is important because it’s ‘a lifeline just a little less bad, life would be unified effort to make Miami- In addition to Mr. Griffin’s to opportunity’ that gives students ‘critical resources they need to succeed.’ wonderful.” Dade the most technologically largesse, donations from other The “Capital Allocator” podcasts inclusive county in the nation,” sources now total $11 million. the release. “It is inspiring to see — Chicago Connected — that said The Miami Foundation, in a “Connectivity is a lifeline to the Miami community come provides free internet access to are available on Mr. Seides’ website news release. opportunity. It improves outcomes together to address this important Chicago public school students. and on Apple Podcasts and Spotify. The $350 million foundation and and gives students and their issue.” Citadel manages $34 billion in The book is available in hard copy Achieve Miami, a non-profit that families critical resources they In 2020, Mr. Griffin contributed multistrategy hedge funds. and digital versions. strives to increase educational need to succeed,” Mr. Griffin said in $7.5 million to a similar program — CHRISTINE WILLIAMSON — CHRISTINE WILLIAMSON DOW NLOAD THE P&I 1,000 SUMMARY REPORT Understanding market trends is key to new product development as well as prospecting for new business. Now, you can use key ﬁndings from the P&I 1,000 Annual Survey of U.S. Pension Funds to help you ﬁnd new opportunities to grow your business.

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Managers split_PI_20210405.pdf RunDate: 04/05/21 Color: 4/C 10 | April 5, 2021 Pensions & Investments OPINION

Christopher J. Battaglia President and publisher, Pensions & Investments

EDITORIAL Amy B. Resnick Editor (212) 210-0751 Julie Tatge Executive editor (312) 649-5442 Kevin Olsen Managing editor (312) 649-5223 David Schepp News editor Sophie Baker International news editor Meaghan Offerman Associate editor Colette Jordan Copy editor Patrick Roth Web producer Trilbe Wynne Editorial assistant

REPORTERS Douglas Appell International Hazel Bradford Washington James Comtois General assignment Margarida Correia Defined contribution Brian Croce Washington Arleen Jacobius Private equity/real estate Rob Kozlowski General assignment Paulina Pielichata International Robert Steyer Defined contribution Christine Williamson Money management

ART Gregg A. Runburg Art director Roger Schillerstrom Editorial cartoonist

DATA/RESEARCH Aaron M. Cunningham Director of research and analytics Anthony Scuderi Directory manager Valerie Ge Research analyst

EDITORIAL SALES & MARKETING Nikki Pirrello Chief operating officer Julie Parten Head of sales Lauren DeRiggi Digital specialist/account Urgency underscores CalPERS’ search for a CIO executive REGIONAL SALES MANAGERS he largest public pension fund in the country has been many years — one who presumably wants to steer his or her own ship Rich Kiesel West without a chief investment officer for eight months. And — while already planning to embark on a new strategic asset allocation Paul Kissane Midwest after suspending the search until June despite identifying this year, CalPERS needs to get it right and bring on someone for the Anna Koules New York three finalists, it could very well be at least a year before long haul. Interim CIO Dan Bienvenue said at a Jan. 21 stakeholder Steve Middleton EMEA +44-(0)77-1012-8464 Hideo Nakayama Asia (Tokyo) +81-3-3479-6131; CalPERS installs a new permanent CIO following Yu “Ben” forum that the investment committee is expected to review capital [email protected] TMeng’s surprise resignation in early August over some questionable market assumptions in June and sample portfolios in September, with a Eduardo de Alcantara Machado Sao Paulo, personal investment holdings. decision on a new strategic asset allocation slated for November. Brazil +55-11-3167-0821; [email protected] That search length in and of itself isn’t necessarily unusual. The Unless the new CIO is Mr. Bienvenue (and if that is the case, what CONFERENCES/MARKETING $247.7 billion New York State Common Fund, for example, waited is CalPERS waiting for?), the new person is going to be starting in the Usha James Group director of conferences more than a year before taking the interim tag off Anastasia Titarchuk middle of one of the most important decision-making processes at Kimberly Jackson Director of conference sales Diane Pastore Director of conference programming to replace Vicki Fuller as CIO. the fund. And until a new CIO is named, Mr. Beinvenue is merely a Joshua Scott Director of conference programming But CIO of the $445 billion California Public Employees’ Retire- placeholder and the pension fund is in a holding pattern during a Kathleen Stevens Investor relations director ment System should be the most coveted position in the public fund challenging investment environment as the economy rebounds from Gerry O’Hara Investor relations manager universe. CalPERS is often looked to as a trendsetter or anchor, with the COVID-19 pandemic. Michelle DeMarco Director of relationship any big portfolio or holistic changes sure to have an effect on the Yes, CalPERS has outpaced its assumed rate of return over the marketing investing tides. one-, three-, five- and 10-year periods, but it also underperformed the Assel Chanlatte Conference marketing manager Mirjam Guldemond Conference manager, CalPERS called off the current search citing difficulties presented policy benchmark in each of those periods, the pension fund reported WorldPensionSummit +31-6-2333-2464 by the pandemic as well as a lack of clarity on whether the new CIO this year. Kristal Santos Client services project manager would participate in a long-term incentive program. CEO Marcie Frost Ms. Frost is looking for someone who will guide CalPERS on a Ashley Perrucci Associate manager, client partnerships also has acknowledged the challenges posed by the political and long-term basis, and she should. There is still time to find and pursue Rachel Lopez Conference administrative assistant public attention that come with the job. the right candidate, whether the long-term compensation incentives The biggest problem is the threat a delay poses to CalPERS’ long- are the issue or not. But rebooting a search for what should be an CUSTOM CONTENT/CLIENT SOLUTIONS Gauri Goyal Director of content solutions term strategy, and during a pandemic no less. Facing a third CIO in as attractive position does ring some alarm bells. n Corina Lewis Client solutions senior program manager David Joseph Research analyst OTHER VIEWS JIM PARK Tetyana Saucedo Digital campaign manager Deanna Speziale Senior marketing associate

SUBSCRIPTIONS/SITE LICENSES Elayne Glick Director of audience marketing and Asian Americans, Pacific Islanders face ‘bamboo ceiling’ acquisition David Bomberger Director, enterprise licensing community has shed light on the history of Ed Gorman Director, EMEA/international site ast year’s horrific events of social Jim Park is CEO of the Asso- injustice put a spotlight on the ugly discrimination and attacks endured by the licensing +44-(0)20-3823-9891 ciation of Asian American truth of racial disparity and structural community, the social and institutional RFP/RECRUITMENT Investment Managers, a issues in the U.S. It was a collective barriers AAPIs had to overcome to succeed Erin Smith Sales manager moment that prompted American non-profit organization continues to be downplayed. In fact, there is a Lcompanies to reflect on the realities of the focused on increasing widespread misperception that the AAPI REPRINTS nation’s long history of discrimination and the diversity in the investment community experiences no or limited Laura Picariello Sales manager silent role that they play as institutions in management industry, obstacles in navigating the investment ADVERTISING PRODUCTION namely the inclusion of perpetuating inequality. While we have a long industry. The reality is that AAPI-owned Robert T. Hedrick Media services manager way to go, there have been positive changes Asian Americans and Pacific managers face a steep climb toward equal 312-649-7836; [email protected] and calls for dramatic shifts in the investment Islanders. Mr. Park is based opportunity and full inclusion. Subscription information - single copy management industry as a direct result of this in San Diego. According to a study published by the sales: 877-812-1586

self-reflection. Association of Asian American Investment TO CONTACT A P&I STAFFER In this broader conversation around left behind because myths of the “model Managers and Bella Private Markets in Unless otherwise noted above, email us at diversity and inclusion, Asian Americans and minority” persist. While the recent escalation December, U.S. asset management firms with [email protected] or find phone numbers at pionline.com/staff. Pacific Islanders, or AAPIs, are at risk of being of heinous hate crimes against the AAPI SEE PARK ON NEXT PAGE Pensions & Investments April 5, 2021 | 11 OPINION

that the more established and historically OTHER VIEWS TIFFANY R. REEVES advantaged firms are not gaining access to Park an increasingly disproportionate share of CONTINUED FROM PREVIOUS PAGE the overall capital allocation, while emerging managers are fighting over 6 guiding principles for developing a majority AAPI ownership represent only scraps. 3.5% of the industry total. These firms are We will only see substantial progress if also typically smaller and manage just 0.7% there is broader accountability for diversity of asset under management, despite their and inclusion, particularly when it comes to pension plan governance policies performance meeting or exceeding initiatives like the emerging manager industry benchmarks. This is nowhere near programs. As asset managers consider a course of action to create more opportuni- equitable with the Asian Americans and ension plans currently face a Tiffany R. Reeves is a Pacific Islanders who make up more than ties for diverse communities, there needs to variety of challenges from the shareholder with 6% of the U.S. population. be a parallel effort to make emerging effects of a global pandemic, a Reinhart Boerner Van The findings from this study put a sharp- manager programs a greater tool for changing political climate and a er focus on the challenges faced by the economic inclusion and equity. Institutional struggling economy. Trustees, Deuren SC in the AAPI investment community in gaining investors need to expand these programs to Pthose entrusted with the life savings of employee benefits and access to capital. To address that, institu- increase opportunities for all diverse millions, are expected to understand the institutional investor tional investors need to expand emerging managers and make them specifically intricate workings of finance, demography, services practices, based manager programs to increase opportuni- targeted to woman and minority firms, technology and more. Are they now required in Minneapolis. She is ties for all diverse managers and make including AAPIs. to know how to navigate these uncharted the former deputy them specifically targeted to woman and We also need to recognize that what waters as well? executive director and minority firms, including AAPIs. qualifies as an emerging manager pro- The truth is that pension plan trustees chief legal counsel at the grams is not consistent across the board. come from a variety of backgrounds, $12.1 billion Chicago Teachers’ Pension Fund. Emerging manager programs Pension plans have different definitions as experiences, and perspectives. Whatever a Ms. Reeves is a member of the Board Smart can be a vehicle for change to what counts as an emerging or diverse trustee’s credentials and qualifications, the Faculty. Board Smart is an online governance The misperception that AAPIs are doing manager. Most programs require a fund to fiduciary responsibility remains the same. If learning resource. fine is partially driven by the relative have less than $2 billion in assets, but good governance practices create the formal success of AAPIs in getting their foot in the some pension plans have raised that limit infrastructure that guides fiduciary deci- be. For some topics, the policies may be room of the investment field. Some 15% to to $10 billion. There are only a few plans sion-making, here are six guiding principles high-level, setting forth an objective while 20% of graduates from the top 25 business that have specified the firms must be about governance that will help trustees leaving tactical discretion to staff. Others schools are AAPIs, a good number of whom minority- or women-owned. Decisions steady the ship. may require more technical or specific end up taking on analyst roles at invest- about who qualifies for mandates at times guidance. The goal is to develop policies ment firms. Lack of opportunity for can shift based on who is in power and 1. The importance of prudence. The duty that are specific enough to provide guid- advancement, however, is forcing talented their priorities. of prudence is a core fiduciary principle. ance, but not so specific that the policies investment professionals to start their own Changing the eligibility requirements to Though the standard of care may vary by lack critical flexibility or raise unnecessary funds. This perpetuates focus on the greatest state, most states apply a prudent expert compliance risks. the problem of non-di- areas of disparities standard that requires the fiduciary to In addition to organizational basics, like verse leadership at major As asset managers should be the priority exercise the care, skill, judgment and bylaws, committee charters and stand-alone firms and the lack of consider a course for allocators, which diligence that any prudent expert would use policies, a prevailing practice among representation among means giving priorities in a similar enterprise. The prudent expert pension funds is to establish a governance decision-makers. of action to to underrepresented standard is process-oriented with a focus on policy framework and compile governance Emerging manager create more communities. This does diligence, meaning that the development policies in a manual, which becomes a programs are intended to not mean giving up on and consistent application of reasonable central repository for all the board’s provide opportunities to opportunities returns and perfor- governance practices is key to demonstrat- governance documents and an important such emerging and mance, as reflected in ing the absence of negligence. resource. The governance manual, frame- diverse managers that for diverse many studies. Addition- work and policies within should be specific can otherwise struggle to communities, ally, the definition of 2. Informed decisions require education. to the unique characteristics and operation- compete for mandates diverse managers must Demonstrating prudence in decision-making al realities of the fund, but the governance against more established there needs to be include all underrepre- requires complete and accurate information. manual will likely include such topics as and widely represented a parallel effort sented communities in An important source of guidance for trustees general board governance, delegation, risk managers. Today, there terms of ownership and when evaluating and revising governance and compliance, ethics, stakeholder rela- are 46 public pension to make emerging AUM. Finally, limiting policies can be a review of peer practices, tions, operational issues and investments. plans participating in the number of applica- which can serve as a reference point in emerging manager manager programs tion rounds a firm can determining whether an action or inaction is 5. Adhering to policies is necessary for programs, although the a greater tool for pursue through emerg- negligent. In an ongoing effort to stay up to compliance. From a fiduciary perspective, $23 billion managed ing manager programs speed, trustees should periodically bench- trustees are not judged in hindsight on through these programs economic can also help to keep a mark their governance practices against outcomes. Rather, from a fiduciary perspec- still represents a small inclusion and steady flow of opportu- their peers. Peer benchmarking requires tive, trustees are scrutinized on the pru- portion of institutional nities open to newer ongoing education regarding evolving dence of the process they followed. Well- investors’ total assets. equity. entrants. practices and can be accomplished through documented policies, procedures and a Of the 146 unique Greater representa- structured board training and education robust system of compliance are all vital to managers participating in the above tion of diverse managers, including AAPIs, programs. Peer benchmarking also requires demonstrating prudent processes. In fact, a emerging manager programs analyzed by in investment mandates can also be trustees to actively seek the advice of lack of formal policies and compliance the Association of Asian American Invest- achieved if more institutional investors are consultants, counsel and other experts in practices or the use of outdated practices ment Managers, only seven are Asian held to account by their stakeholders. We developing and reviewing policies. could support a claim that a board action (or American or Pacific Islander-owned. This already see that public pressure on inaction) was negligent. shows that emerging manager program corporations and public funds to increase 3. Governance is not ‘one size fits all.’ The consistent application of policies and implementation has a significant opportu- diversity and inclusion is bringing about Peer practices are a data point to be procedures can help trustees avoid potential nity gap for the AAPI community and meaningful change. Elsewhere, doors have considered, but trustees must remember liability and other adverse outcomes. Good indicates that AAPI-owned funds are not started to open up to diverse managers that each fund or system is unique. Appro- governance typically requires the even- experiencing equal opportunity in the — particularly among university endow- priate fund governance considers a variety handed application of policy, which can industry. ments, which have their own separate set of factors, including the size of the fund, demonstrate that fiduciary decisions are not The low levels of support for these of rules and requirements for diverse staff capability, strategic focus, funded arbitrary or capricious. If the board (or staff AAPI-owned funds from emerging managers. It’s a positive step in the right status, operational budget and resources, where appropriate) determines to take an manager programs makes it even more direction, but we are still a long way from delineation of board and staff roles, com- action inconsistent with policy, there should difficult to scale, despite the relative equity. plexity of the investment program, addi- be an informed, reasoned and documented outperformance of AAPI-owned funds in The large gulf between fact and percep- tional internal and external resources, and basis for doing so. most asset classes. And since emerging tion of AAPI participation in the investment applicable law. These specific characteristics manager programs only make up a small field perpetuates the ongoing belief that provide the critical context that should 6. Policy development and review percentage of institutional investors’ total AAPIs are doing just fine in terms of influence policy development. requires regular maintenance. The develop- commitments, AAPI-owned firms are participation in the finance industry. It has ment of governance policies should be a getting a minuscule bite of an already small curtailed opportunities for many worthy 4. Establish formal practices to create dynamic and ongoing process, continuing slice of pie. AAPI-owned funds, and deepened the accountability. Prudent fund governance after the initial development of the gover- racial inequity in America that was high- requires both formality and accountability. nance manual. Employing the expertise of Breaking the ‘bamboo ceiling’ lighted by the tragedies of 2020. Through an Trustees should require clear policies that staff and professional resources, such as There is no doubt that emerging increase in the dollar commitment to provide uniformity and explicit guidelines legal counsel or consultants, trustees should manager programs have helped to address emerging manager programs and tightening to the board and staff. Well-documented begin by reviewing foundational policies to inequality and structural bias in the up the eligibility requirements, we can policies also ensure continuity and consis- fill any gaps or lagging areas. Then the industry by providing access to capital for begin providing meaningful opportunity to tency in organizational knowledge despite board should consider any leading practices managers that would otherwise struggle to underrepresented investment managers. any turnover. suggested by peer comparisons. Finally, grow their funds. Nonetheless, these That would be a win-win for the asset Of course, there is no standard approach trustees should plan ahead and draft new programs need to be expanded to ensure management industry overall. n to how specific or detailed a policy should policies that address foreseeable issues. n 12 | April 5, 2021 Pensions & Investments ESG ROUNDUP

New York City pension funds surpass climate-change goal

New York City pension funds will tions increased more than 10%, and achieve an environmental and social invest more than $6 billion in proj- another 19% reported increases be- benefit; that green gilts are medium- ects that fight climate change, sur- tween 5% and 10%. FED TO CREATE CLIMATE-RISK COMMITTEE to long-dated, matching the time- passing their $4 billion goal, trust- NEPC found that the pandemic The Federal Reserve is launching a committee to identify, assess lines of projects they are invested in ees said March 23. significantly changed philanthropy and address climate-related financial stability risks, Lael Brainard, a and meeting long-term investment New York City Comptroller Scott and donor behavior, with small com- member of the Federal Reserve’s board of governors, said March 23. needs of pension funds; and that Stringer, Mayor Bill De Blasio and munity foundations the hardest hit. The Financial Stability Climate Committee will consider the they are forward-looking, providing other trustees said they plan to Foundations will continue to fo- a long-term financing path for fu- potential for complex interactions across the financial system at a double investments in public com- cus on racial inequity, with 87% ex- ture projects. Other requirements panies offering alternative energy pecting to see increased donations “macroprudential” level. It will complement the work of the Fed’s include that there is a social impact sources, efficient technology, pollu- to combat it in 2021, and 91% re- Supervision Climate Committee, which was announced in January element to the green gilts and that tion prevention and more, from a porting increased grant-making to and has similar goals on a “microprudential” level to ensure the an audit committee scrutinizes pro- previous 2018 goal of increasing in- address racial and social justice is- resilience of the Fed’s supervised firms to climate risks, Ms. Brainard cesses associated with green bonds vestments to about $4 billion, or 2% sues, and 83% reporting that for said during a speech at a Ceres conference, according to a transcript and their objectives. of assets, by the end of 2021. health care-related causes. posted on the Fed’s website. The remaining five requirements Combined with current commit- Diversity will be a chief priority “It is increasingly clear that climate change could have impor- are for mandatory verification that ments, it adds up to more than $6 for 7 in 10 foundations, the poll tant implications for the Federal Reserve in carrying out its bonds are in line with market stan- billion across the portfolio of all five found, with 71% planning to hire dards; annual reporting on the gilts responsibilities assigned by the Congress,” Ms. Brainard said. pension funds in the $239.8 billion more women- and minority-led as- by the government; continuous en- “Given the implications of climate change for both individual New York City Retirement Systems. set managers and 70% increasing the gagement between the government Mr. Stringer said in a statement diversity of their investment staff. financial institutions and the financial sector as a whole, we need and money managers regarding that the investments in climate Asked about fossil-fuel divest- a framework that incorporates both microprudential and macropru- project progress; that existing change solutions are “in the fidu- ment, 75% reported no plan to do it, dential considerations.” frameworks such as those around ciary interest of our beneficiaries while 25% said it is being considered. The announcement March 23 continues the Fed’s recent efforts to the sustainable development goals and together we’re leading the address climate risks to the financial system. In its semiannual are incorporated into the green charge to build a cleaner and PRI pushes ministers to Financial Stability Report released in November, the Fed recognized gilts; and that green gilts have oth- greener future for all.” climate change as a key risk to U.S. financial stability. erwise equivalent features to con- In January, the $77.4 billion New commit to sustainability ventional bonds, such as being is- And in December, the Fed announced it had joined the Network of York City Employees’ Retirement Principles for Responsible In- sued in inflation-linked and Central Banks and Supervisors for Greening the Financial System, System and the $91.4 billion New vestment has sustainable finance fixed-income formats. York City Teachers’ Retirement said advice for policymakers preparing which brings central banks and supervisory authorities from around they would divest an estimated $4 for several high-profile economic the world together to support the exchange of ideas, research and Latinos underrepresented billion in securities related to fossil- summits this year. best practices on the development of environmental and climate risk fuel companies. A report issued March 25, which management for the financial sector. on company boards – report A third pension fund, the $7.8 is to be shared with finance minis- Latinos represent 18.5% of the billion New York City Board of Ed- ters of countries attending the G7 U.S. population but only 3% of For- ucation Retirement System, also meeting in June and G20 meeting in transition-aligned benchmarks, se- making it harder for investors to tune 1000 board seats, according to voted for divestment one day later, October, calls on them to embed lective divestments and tweaking submit shareholder proposals was a report released March 30 by the on Jan. 26. sustainability within international exposures within some sectors, ac- introduced March 26. Latino Corporate Directors Associ- finance policy. cording to the LGIM news release. In September, the Securities and ation and KPMG. New Zealand super fund The United Nations-backed Separately, Mercer said it will Exchange Commission voted to raise The Latino Representation on Principles for Responsible Invest- limit the carbon emissions in $43.7 the requirements for investors that Fortune 1000 Boards, 2020 edition retains WTW for review ment has more than 3,500 signato- billion of investments in portfolios wish to submit a shareholder pro- measures 2020 Latino representa- New Zealand’s Government Su- ries, including pension funds, in- by 45% by 2030. posal and approved higher thresh- tion on Fortune 1000 boards by in- perannuation Fund Authority, Wel- surers, investment managers and The investments are made on be- olds for resubmitting shareholder dustry, and by the states where the lington, has retained Willis Towers service providers globally with a half of U.K., European and Asian cli- proposals in subsequent years. companies are headquartered. It Watson to conduct a statutory five- collective $100 trillion in assets. ents, whose assets are managed by At the time, then-Chairman Jay also shows the Latino directors’ year review of the organization, a “At previous G-7 and G-20 Sum- Mercer through discretionary, multi- Clayton said the changes would gender, age, board and committee spokeswoman confirmed. mits, sustainable finance topics client and multiasset portfolios. modernize the commission’s share- service. The review will include what have only been discussed in a sepa- holder proposal regulations to the LCDA Board Chairman Roel New Zealand’s Minister of Finance rate working group without creat- SEC puts climate, benefit of all shareholders and Campos said Latino purchasing Grant Robertson termed a “deeper ing a lasting impact on mainstream public companies, but Commis- power is growing 70% faster than dive” with regard to how GSFA’s in- financial policy,” PRI CEO Fiona ESG on front page sioner Allison Herren Lee, now the non-Latino and companies not capi- vestment framework is approaching Reynolds said in a statement. The The SEC is putting ESG issues acting chairwoman, said that the talizing on that are losing market ESG-related issues, such as climate report recommends that financial on the front page — literally. rule changes coupled with new share. “Many boardrooms are miss- change, confirmed Tim Mitchell, and economic policies be aligned The Securities and Exchange rules for proxy advisory firms, “col- ing out on Latino talent and inadver- WTW’s Wellington-based global with sustainability goals and out- Commission on March 22 launched lectively put a thumb on the scale tently diluting earnings by not seek- head of governance consulting. come statements. a new webpage making it easy to for management in the balance of ing Latinx directors for their boards,” GSFA’s latest annual report find all agency actions on ESG is- power between companies and Mr. Campos said in a news release. showed the fund listing investment Mercer, LGIM to reduce sues and information about ESG their owners.” KPMG partner and LCDA board assets of NZ$4.3 billion ($2.8 billion) investing. “Our all-of-SEC ap- Senate Banking Committee member Jose R. Rodriguez said in as of its June 30 fiscal year close. their carbon footprints proach looks at how climate and Chairman Sherrod Brown, D-Ohio, the news release that despite Lati- The statutory review must be de- Legal & General Investment ESG intersect with our broader introduced Senate Joint Resolution nos accounting for $2.6 trillion or livered to New Zealand’s Treasury Management and Mercer will each regulatory framework to get inves- 16 that would use the Congressional one-quarter of U.S. gross domestic by mid-May. cut the carbon footprint of some of tors the information they need to Review Act to reverse the SEC rules product, their “representation on A Willis Towers Watson news re- their retirement portfolios by 2030, plan for their financial future,” Act- known as Rule 14a-8. Invoking the corporate boards is staggeringly lease said the review will also eval- the firms said in separate an- ing Chairwoman Allison Herren CRA will require a majority vote in low and there has been no progress uate GSFA’s “statements of invest- nouncements March 31. Lee said in a statement. both the House and the Senate. in the last decade by any measure.” ment policies, standards and In an effort to limit global warm- The SEC Response to Climate and Larger companies have more procedures for their appropriate- ing to 1.5 degrees Celsius, the two ESG Risks and Opportunities page Managers unveil U.K. Latino board members, with 42% of ness and compliance, as well as the firms set targets to reduce the car- on sec.gov will be updated as the Fortune 100 companies having at fund’s investment performance.” bon intensity associated with tens SEC responds to investor demands, green gilts wish list least one Latino director, the re- of billions of dollars in assets by the statement said. Recent SEC ac- Money managers and their trade port found. Foundations to focus on 40% to 65% by 2030. tions listed on the page include a re- association have set out 10 key fea- By industry, Latinos are best LGIM said it will reduce carbon quest for public input on climate risk tures they want to see from the represented on company boards in diversity in 2021 – poll emissions associated with £53 bil- disclosure, a division of corporation U.K.’s first sovereign green gilts. the food, beverage and tobacco in- Diversity is a top priority in 2021 lion ($73.4 billion) in defined contri- finance review of climate-related The U.K. government has com- dustries, at 5% of board seats in for foundations, which also report bution portfolios. The firm intends disclosure in public filings, more fo- mitted to launching green gilts this those three sectors combined. In being “significantly” changed by to reduce carbon-linked invest- cus on climate-related risk by the year to help the country meet its the technology industry, 85% of the COVID-19 pandemic, accord- ments by 40% to 55% for some of its division of examinations, creation of net-zero pledge by 2050. companies do not have a Latino ing to a flash poll conducted by multiasset funds and 45% to 65% for a Climate and ESG Task Force in the The Investment Association board member. NEPC in March. its target-date funds by 2030. division of enforcement, and an in- March 26 set out the industry’s wish The state comparison is even Of the organizations polled, 31% LGIM also set an intermediate vestor bulletin on ESG funds. list for green gilts to ensure issuance more striking. While California and had more than $1 billion in assets, target of 2025, by which point it aims meets the government’s funding Texas residents are 39% Latino, 27% had between $250 million and to have reduced the carbon intensity Senate moves to undo SEC needs and the needs of investors. only 3% of Fortune 1000 board seats $1 billion, and 34% had between of the multiasset funds by 20% to 30% Requirements include legal doc- of companies based there are held $100 million and $250 million. and target-date funds by 30% to 50%. shareholder rule change umentation explicitly noting how by Latinos. Florida, with a 25% La- Compared with 2019, 46% of Reductions are expected to be A joint Senate resolution to undo proceeds will be used to ensure that tino population, had 5% of Fortune foundations reported that dona- achieved by using a combination of a controversial SEC rule change financing goes to projects aiming to 1000 board seats held by Latinos. INTERESTED IN SUSTAINABLE INVESTING?

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GFS_P&I_AD70 - SustainableInvesting_17_EQUITY.pdf RunDate: 04/05/21 Full Page Color: 4/C 14 | April 5, 2021 Pensions & Investments Special Report PENSION CONTRIBUTIONS Firms tamp down contribution plans

CONTINUED FROM PAGE 1 within a 10% range, or corridor, of the two-year average of corporate The 42 companies tracked said bond index rates to calculate their

they planned to make a total of Carlos Alejandro pension liabilities. $14.9 billion in contributions to The beginning of the phaseout of their global pension plans in 2021, those provisions was originally set according to their 10-K lings. for 2021. The American Rescue Those same companies said they Plan now narrows that range of the contributed a total of $14 billion to two-year average to 5% from 10% the plans in 2020. The 52 companies through 2025, at which point the P&I tracked one year ago said they corridor begins to gradually widen expected to contribute a total of $21 until it hits 30% in 2030. billion to their plans in 2020. The act also provides for 15-year Five companies that expect to amortization of funding shortfalls, make no or little contributions this up from seven years, for plan years year made contributions totaling beginning after Dec. 31, 2021. Cor- $8.7 billion last year, reported in porate plan sponsors can use that 2021, well above the combined amortization for plan years begin- $1.63 billion those companies had ning in 2019, 2020 or 2021. said they planned to contribute for Now, the question is whether to the year. take advantage of the new relief Only three companies an- and face lower funding ratios and nounced plans to contribute at least higher PBGC variable premiums in $1 billion to their plans in 2021. the short term. Chevron Corp., San Ramon, Ca- Michael Moran, senior pension lif., plans to contribute $1.1 billion strategist at Goldman Sachs Asset to its U.S. plans and $200 million to Management in New York, said in its non-U.S. plans in 2021; Lock- an interview that the contribution heed Martin Corp., Bethesda, Md., strategy of companies will likely not plans to contribute $1 billion to its shift too much following the pas- global plans; and Dow Inc., Mid- sage of the funding relief. land, Mich., also plans to contrib- WIDE GULF: Royce Kosoff said a disparity exists among plans, with some being fully funded and some needing major contributions. “I think some companies saw ute at least $1 billion, speci cally when the Senate turned at the be- to its U.S. plans. In the latter case, centage points), whereas the bot- interest accrued, until Jan. 1, 2021. ic-af icted industries but long de- ginning of January, I would say the Dow announced all these contri- tom decile declined by 21 (percent- While not a large number of sired by most in the industry, was outlook for extending funding relief butions are going to the chemical age points).” companies took advantage of the included with the new American became brighter,” Mr. Moran said. company’s U.S. plans in an 8-K l- On the one hand, there are com- deferral, those who did so were Rescue Plan Act of 2021, signed into He added it was likely that the ex- ing on March 4 that also said it will panies that are in solid funding generally in pandemic-devastated law by President Joe Biden on pected contributions that compa- freeze the bene t accruals of those shape thanks in part to actions tak- industries. March 11. nies announced in 10-K lings had plans at the end of 2023 and in- en in 2017 and 2018. One was American Airlines Inc., The act provides interest-rate already taken an extension of fund- crease the matching contributions U.S. corporations made large con- Fort Worth, Texas. The airline plans stabilization and longer amortiza- ing relief into account. in its 401(k) plan. tributions in those two years for the to contribute a total of about $827 tion periods for plans. However, he said, “even in an en- Dow originally announced it most part to take advantage of tax million to its de ned bene t plans Interest-rate-stabilization mea- vironment where contribution re- planned to contribute the minimum breaks that were set to expire due to in 2021. Of that total, $130 million sures enacted by the Moving quirements may be low because of required $300 million to its global the passage of the Tax Cuts and Jobs consists of minimum contributions Ahead for Progress in the 21st funding relief, or because of previ- pension plans during the year in its Act, signed into law by then-Presi- for 2020 that were deferred under Century Act, or MAP-21, signed ous voluntary contributions — 10-K ling with the SEC on Feb. 5. dent Donald Trump in December the provisions of the CARES Act. into law by then-President Barack whether tax-driven or not — they’re 2017. The law reduced the corporate Obama in July 2012, allowed cor- still paying PBGC premiums on Growing dispersion tax rate to 21% from 35%. More funding relief porate plan sponsors to take a 25- those de cits.” Royce Kosoff, Philadelphia- Because tax law allows plan Further funding relief, primarily year historic average of corporate Mr. Moran said increasingly over based managing director, retire- sponsors to deduct a portion of targeted for companies in pandem- bond rates to determine a rate the past couple of years, many of ment, for Willis Towers Watson their pension contributions based PLC, said in a telephone interview on its tax rate, corporations poured there is a growing dispersion be- billions into their pension plans to The lost decade tween corporate pension plan con- meet the Sept. 15, 2018, tax dead- tribution scenarios. line to deduct contributions at the Despite $498 billion in pension contributions by S&P 500 companies from 2008 to 2019, the group’s “The ‘typical’ plan sponsor,” Mr. higher 2017 rate. aggregate funded status recovered only one-third of its 30% drop from a 2007 high. Kosoff said. “That notion doesn’t re- These actions ful lled the mini- $90 120% ally exist. (There is everything) mum required contribution re- Yearly contributions from fully funded plans with no quirements for multiple years for $80 110% real need for funding and contribu- many companies. The number of (billions; left axis) tions, down to plans that have to S&P 500 companies planning to Funded status $70 (right axis) 100% make signi cant contributions contribute $100 million or more to even with the current relief.” their plans has been falling for sev- Scott Jarboe, a Washington-based eral years from a peak of 66 compa- $60 90% partner in Mercer’s U.S. wealth nies in 2018. business, said in an interview that According to Mr. Jarboe, S&P $50 80% “the dispersion of results during 1500 companies contributed a total 2020 was astounding.” of $75 billion to their DB plans in $40 70% Mercer tracks the funding ratios scal year 2018. That number had of S&P 1500 companies with de- dropped to $45 billion each in scal $30 60% ned bene t plans. years 2019 and 2020, he said. “The average plan went from On the other hand, there are $20 50% 87% funding at the end of 2019 to companies in industries who have about 84% at the end of 2020, and been hard hit by the COVID-19 somewhere in the middle around pandemic. The Coronavirus Aid, $10 40% there, in March (2020) it fell to 74%,” Relief and Economic Security Act, he said. signed by Mr. Trump in March 2020, $0 30% However, he said in 2020, “on av- provided companies the option of a 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 erage, the top decile of those plans one-year holiday from making Source: Voya Investment Management and S&P. Data are as of March 31, 2020. improved funded status by 13 (per- 2020 pension contributions, with Pensions & Investments April 5, 2021 | 15

his clients are linking a large part of maining $200 million in the third their contribution strategies to low- quarter. The total minimum re- Expected 2021 pension contributions ering those PBGC premiums. quired contributions for the U.S. For P&I’s continuously updated pension contribution tracker, go to pionline.com/section/pension-contribution. The PBGC’s variable rates for and non-U.S. plans combined is single-employer plans are deter- $160 million. Expected Expected U.S. Global mined by the funded status of those Regardless of the condition of 2021 U.S. 2021 total 2020 total U.S. U.S. pension pension plans. the individual company, U.S. corpo- contribution contribution contribution funded discount assets assets rations have to contend with the Company (millions) (millions) (millions) status rate (billions) (billions) Silver lining fallout of the Great Recession 13 3M Co. $100-$200 $153 88.4% 2.55% $17.1 $25.3 Oleg Gershkovich, New York- years ago that has kept interest based LDI solutions strategist and rates at record lows, which make Abbott Laboratories $410 $400 91.5% 2.30% $12.0 senior actuary with Voya Invest- pension liabilities higher. ment Management, noted in an in- A paper by Voya’s Mr. Gershkov- American Airlines $827 $1,200 68.4% 2.70% $13.6 terview there was one positive re- ich and Atlanta-based senior vice 1.74%- Aon $95 $122 $120 67.3% $2.3 $10.4 garding those PBGC rates: This president and fixed-income client 2.45% was the first funding relief passed portfolio manager Brett Cornwell in the post-Pension Protection Act features an analysis of S&P 500 Arconic $183 $192 2.45% $2.8 of 2006 era that is not being sup- companies with DB plans, which plemented with a rise between the 2008 re- Ball $185 $79 75.8% 2.49% $2.1 $5.8 in PBGC rates. cession and the end of Berkshire Hathaway $202 $196 $17.9 The MAP-21 provi- 2019 contributed a total sions, for example, in- of $498 billion to those Chevron $1,050 $1,250 $1,213 cluded rate hikes. Be- plans but only recov- fore MAP-21 was ered one-third of the Cleveland-Cliffs $202 $50 81.2% 2.34% $5.3 enacted, the variable original 28-percentage- ConocoPhillips $265 $340 $159 2.30% $1.8 $6.6 rate for single-employ- point drop in funded er plans was just $9 per status to 78% at the end Consolidated Edison $480 $332 89.7% 2.60% $17.0 $1,000 of underfunding of 2008 from 106% at in 2013. This year, the the end of 2007. Deere & Co. $105 $108 97.0% 2.50% $14.6 rate is $46 per $1,000 of Mr. Cornwell said in Delta Air Lines $500 $47 73.1% 2.60% $16.5 underfunding. BAKED IN: Michael an interview that many Mr. Jarboe said that a Moran thinks firms took of his corporate clients Dow $1,300 $299 2.71% $26.4 Mercer survey last year funding relief into account may have finally shows that 72% of cor- with their contributions. stopped waiting for in- 2.60%- Entergy $356 $316 75.0% $6.9 porate plan sponsors terest rates to rise. 2.83% want to contribute more than the “Every time they think rates can’t Evergy $132 63.8% 2.95% $1.7 minimum required amounts, but in go lower, they keep being wrong an informal survey during a recent about that,” Mr. Cornwell said. The Eversource Energy $130 $110 76.7% 2.40% $5.4 roundtable, about 50% of surveyed U.S. discount rates for the compa- sponsors said they planned to take nies P&I tracked ranged from 1.7% Exelon $556 $556 $542 81.7% 2.58% $20.3 $20.3 advantage of funding relief. to 3.45%, down from 2.9% to 4.36% Despite the opportunity of that last year. Ford Motor Co. $600-$800 $930 98.8% 2.60% $48.4 $82.2 relief, he said, the underlying eco- Rather than wait for interest General Dynamics $360 $480 $14.8 nomics of individual corporate rates to rise and liabilities to drop, plans haven’t changed. The vari- they’re embracing strategies to General Motors $70 $570 $464 91.9% 2.40% $61.1 $74.9 able rates haven’t changed and hedge interest-rate risk to avoid profit and loss measures haven’t having to make greater contribu- Howmet Aerospace $130 $140 $227 58.5% 2.40% $1.4 $1.7 changed. tions. IBM $300 $182 104.1% 2.20% $54.4 $98.2 “Is that business case stronger “It’s more responsible behavior (for smaller contributions) than the in terms of hedging interest-rate Johnson & Johnson $110 $870 100.3% $25.6 $38.2 flip side impact of higher PBGC risk even without the additional premiums for longer?” Mr. Jarboe contributions,” he said. “They seem Lockheed Martin $1,000 $1,000 74.9% 2.50% $38.5 asked. to be much more rate agnostic, It would also mean maintaining looking to hedge the volatility of Masco $140 $140 $57 78.5% 1.70% $863.0 the plan for longer “because a lot of rates rather than looking at a spe- Mondelez International $8 $228 $207 94.1% $11.0 the (existing) funding strategies are cific level.” n in place for some sort of derisking Northrop Grumman $98 $851 85.7% 2.70% $34.5 or pension risk transfer or termination altogether,” he said. All caught up Occidental Petroleum $170 $146 $1.2

Five companies that made PACCAR $150 $185 100.8% 2.20% $3.8 Largest contributors large contributions in 2020 are Two of the largest expected con- expecting to contribute very PepsiCo $500 $660 $507 92.3% 2.50% $15.5 tributions for 2021 come from ma- little — or nothing — in 2021. jor U.S. automakers that plan to They are: PG&E $327 $327 $343 89.6% 2.77% $20.8 $20.8 make large injections to their non- Philip Morris International $262 $102 $8.7 U.S. plans. Ford Motor Co., Dear- n Boeing born, Mich., plans to contribute be- 2020 contribution: $3 billion Pinnacle West Capital $100 $100 99.6% 2.53% $3.9 tween $600 million and $800 million Expected 2021 contribution: $0 to its non-U.S. plans in 2021, and Principal Financial Group $100 $61 80.1% 2.50% $3.4 General Motors Co., Detroit plans n Raytheon Technologies to contribute about $500 million to 2020 contribution: $1.01 billion Prudential Financial $185 $205 $14.9 its non-U.S. plans during the year. Expected 2021 contribution: $50 Raytheon Technologies $50 $1,010 $51.4 According to their 10-K filings, nei- million ther company plans to make contri- Sempra Energy $246 $290 73.6% 2.78% $3.0 butions to their U.S. qualified pen- n United Parcel Service sion plans. 2020 contribution: $2.9 billion Truist Financial $387 $387 $373 142.0% 3.45% $14.6 $14.6 Some companies also expect to Expected 2021 contribution: $66 United Parcel Service $66 $2,900 85.4% $46.2 $1.6 make some significant discretion- million ary contributions. Walt Disney Co. $500-$600 $664 75.1% 2.80% $15.6 Purchase, N.Y.-based PepsiCo n U.S. Bancorp Inc.’s board of directors in Novem- 2020 contribution: $1.1 billion Willis Towers Watson $60 $132 $172 82.3% 2.50% $4.4 $10.8 ber approved a total of $500 million Expected 2021 contribution: $0 in discretionary contributions to its Xcel Energy $125 $150 90.8% 2.71% $3.6 U.S. pension plans in 2021, $300 n Wells Fargo & Co. Xerox $25 $130 $139 74.8% 2.20% $2.8 $10.0 million of which was contributed in 2020 contribution: $700 million January. The food and beverage Expected 2021 contribution: $0 Source: Company reports maker plans to contribute the re- 16 | April 5, 2021 PENSION CONTRIBUTIONS Pensions & Investments

Boeing’s contribution of stock Public pension plans instead of cash puts it in rare air don’t need to be fully By ROB KOZLOWSKI funded – Brookings While most U.S. corporations contrib- Boeing’s stock gambit ute cash to their pension plans, others The aerospace and defense company decided to contribute company stock By ROB KOZLOWSKI make the choice to contribute common instead of cash to its pension plan in November 2020. stock or new debt to their plans. U.S. public pension funds are generally sustainable in $450 Boeing Co., Chicago, contributed $3 the long term even without becoming fully funded, a billion in its own common stock to its study from Washington-based think tank Brookings In- primary U.S. pension plan in November. $400 stitution shows. Spokesman Bryan Watt, who in Feb- The study, presented at the Brookings Papers on Eco- ruary con rmed the contribution, did $350 nomic Activity Conference on March 25, says that state not reply to requests for further infor- and local government pension plans do not need to be mation. $300 fully funded in order for the plans to be able to pay ben- While corporations traditionally con- e ts in the future. tribute cash for their pension plans, it is $250 Louise Sheiner, senior fellow in economic studies and not unheard of to contribute a compa- policy director for the Hutchins Center on Fiscal and ny’s own common stock. $200 Monetary Policy at the Brookings Institution and co- Doing so can help a company that author of the study, said in a phone interview that the might not want to devote cash to contri- study’s origins came from an academic debate on the $150 butions, said Ned McGuire, Los Ange- sustainability of public pension plans. les-based managing director and mem- “The academic debate,” she said, “was really, really fo- ber of Wilshire Associates’ investment $100 cused on the appropriate discount rate for the liabili- management and research group, in an ties.” interview. $50 Public pension plans use their expected rate of re- “One of the complications is your turn as the discount rate for stock is typically tied to how your com- $0 their liabilities, she said, and MFJDNOSAJJMAMFJDNOSAJJMAMFJDNO pany is doing,” Mr. McGuire said, “and 2018 2019 2020 2021 some academics believe that that’s also potentially tied to how the because of the higher risk re- Source: Bloomberg LP rest of the economy is doing.” sulting from the guarantee of “The other risk is how do you get out bene ts that public plans pro- of that common stock?” he said. “Com- vember it made the contribution in com- More common when a company does vide, a much lower risk-less panies have more information about mon stock, but its common stock price not want to contribute cash to their pen- rate should be used, meaning their common stock than a typical in- ranged from $145.75 at the opening of sion plan is the purchase of bonds to the plans are “really, really un- stitutional investor. Liquidating that Nov. 2 and at $210.71 at the close of Nov. complete such a transaction. derfunded.” investment may require additional 30. In the 10-K ling, Boeing said the The most recent notable move in this As a result, those academics oversight.” value of the common stock in the pen- direction was United Parcel Service Inc., believe there is a public pen- NEW APPROACH: Louise The aerospace and defense company sion plan as of Dec. 31 had increased to Atlanta, issuing $1.5 billion in bonds to sion crisis, because lower dis- Sheiner said academics said in its 10-K ling on Feb. 1 that it had $3.3 billion. The closing stock price as of make early contributions to its U.S. pen- count rates would raise liabili- have always focused on retained an independent duciary to Dec. 31 was $214.06. sion plans in 2019. ties and force governments to discount rates. manage and liquidate the stock “over As of March 24, the price was $244.57, Oleg Gershkovich, New York-based make unsustainably enormous time at its discretion.” well below the all-time high of $440.62 LDI strategist and senior actuary with contributions. Boeing stock over the past two years on March 1, 2019. Voya Investment Management, said in In response, the study takes a public nance perspec- has been hit particularly hard not only Mr. McGuire said it could potentially an interview, “It’s going to happen to the tive, that governments issue debt and unfunded pension by the COVID-19 pandemic but by the be advantageous to contribute common extent that it makes economic sense. liabilities are simply a form of implicit debt. cancellation by multiple airlines of the stock into a plan when it has dropped sig- You can borrow at a lower rate, transfer- Even if assets are exhausted, plans can be sustain- Boeing 737 MAX orders due to safety ni cantly over time, “but to my point ear- ring one debt for another.” Doing so able as long as the government makes the service pay- concerns resulting from multiple lier, you have to be careful for overly gam- would be advantageous if bonds can be ments at an interest rate equal to the asset return as- crashes. ing the system and having outside counsel issued at a lower rate than how liabili- sumptions on the debt they issue to pay bene ts, the Boeing did not disclose when in No- discussion about when to contribute.” ties are calculated.  study says. As an exercise, the study calculates how long it would take plans to exhaust assets at discount rates of 5%, 2.5% Investing and zero. Of the 40 plans studied, eight plans would exhaust assets in 99 or fewer years at a 5% discount rate , 21 plans would exhaust assets in 88 or fewer years at a 2.5% discount rate, and 31 plans would exhaust their as- FTSE Russell extends phase-in of China bonds to index sets in 69 or fewer years at zero. The study shows that over the past 30 years using By DOUGLAS APPELL The initial inclusion date of the bonds est bond market in the world to our ag- discount rates based on the expected rate of return, the in the index was also slightly adjusted to ship global government bond index re- 40 public pension plans studied had an average funding Chinese government bonds will be re ect a one-week Chinese market holi- ects our robust index governance ratio of 83%. First, she said, if plans used a AAA corpo- phased into the FTSE World Govern- day in early October and “that some cli- process and regular engagement with rate-bond interest rate to calculate their discount rates, ment Bond index over a longer period ents may need longer onboarding time to global investors, regulators and other key it means “they always would have been underfunded,” than previously announced. access the market.” For the October 2021 market participants,” Waqas Samad, CEO she said. If they used that discount rate, the average The index provider published March inclusion to happen, a spokesman said, it at FTSE Russell, said in a news release. funding ratio would have been 55%. 29 the results of its latest semiannual would have needed to begin on the last At the end of February, foreign inves- “If you really believe the real rate of return is zero,” country classi cation review for xed trading day of September. He added that tors’ holdings of Chinese bonds was 3.7 Ms. Sheiner said, “then you’re in this world where hav- income and equities, con rming that the rebalancing of xed-income indexes trillion yuan ($566.9 billion), Pan Gong- ing assets is not particularly valuable.” Chinese government bonds would be is done each month at month-end, unlike sheng, deputy governor of the People’s The study also says another way to assess sustain- introduced starting Oct. 29. equities, which are typically rebalanced Bank of China and director of the State ability is to “ensure that the implicit debt to (gross do- However, the period over which the quarterly, semiannually or annually. Administration of Foreign Exchange, mestic product) ratio is no higher in 30 years than it is bonds will be included will occur over 36 Since the September announcement, said in the same release. today.” The study provides a table of one-time perma- months rather than over a 12-month pe- when FTSE Russell rst said Chinese FTSE Russell said Malaysia’s sover- nent percentage point increases in contribution rates to riod as announced in FTSE Russell’s government bonds would be included in eign debt will be removed from its watch- public plans to keep that ratio stable, based on real rates September review. major indexes, the index provider has list following recent market enhance- of returns of zero, 2.5% and 5%. The extension of the implementation engaged with Chinese authorities and ments, meaning the market remains part For example, plans would need to increase contribu- period re ects feedback received during market stakeholders to monitor market of the World Government Bond index. tions by 7.2 percentage points today at a 2.5% rate of a February market consultation and enhancements and recent reforms that Indian and Saudi Arabian government return on assets. comments made at FTSE advisory com- facilitate easier participation by interna- bonds were added to the watchlist for po- Ms. Sheiner added that many state and local plans mittee meetings, a technical note outlin- tional investors. Changes include simpli- tential inclusion in the FTSE Emerging have enacted pension reforms over the past 10 years, ing the decision said. “In the light of this cation of the account opening process, Government Bond index. primarily in creating new tiers of bene ts for new hires feedback, it has been determined that a the option to transact foreign-exchange The index provider also said, effective and altering cost-of-living adjustments. As current em- more conservative implementation with third parties and the option to March 31, the objective and transparent ployees “age out” of this peak of bene ts, the sustain- schedule is appropriate which recog- lengthen the settlement cycle — the pe- FTSE xed-income classi cation pro- ability of these plans will improve even more. nizes the passive nature of WGBI man- riod between trade execution and com- cess will be expanded to assign market The study is available on the Brookings Institution’s dates and the material monetary in ow pletion — beyond three days. accessibility levels to in ation-linked website.  emanating from index inclusion.” “The decision to add the second-larg- government bond markets.  DC Investment Lineup Virtual Series April 19-22 | 2021

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DCIL House Ad 7 70’.pdf RunDate: 04/05/21 Full Page Color: 4/C 18 | April 5, 2021 Pensions & Investments HIRINGS

Alaska Retirement Manage- associated with these three tasks, a million to a co-investment sidecar ment Board, Juneau, approved a news release said. vehicle. The division also committed commitment of up to $100 million to NEW YORK COMMON SLATES $1.1 BILLION $180 million to Eagle Point Defensive Crestline Specialty Lending Fund III, Illinois Municipal Retirement New York State Common Retirement Fund, Albany, made eight new Income Fund, a collateralized loan pending successful contract negotia- Fund, Oak Brook, made new private commitments totaling $1.1 billion in February, according to a monthly obligation strategy that will be broken tions. The board oversees the equity and real estate commitments transaction report. into two parts: $60 million to the fund management of $38.6 billion in totaling up to $413 million. In real estate, the $247.7 billion pension fund committed $300 and $120 million to a related separate defined benefit and defined contribu- In private equity, the $51 billion account. million to Blackstone BioMed Life Science Real Estate Partners. tion plan assets. pension fund committed up to £175 million ($243 million) to Inflexion Within real assets, the pension fund committed €250 million New Mexico State Investment Arizona Public Safety Person- Buyout Fund VI, a middle-market U.K. ($298 million) to Copenhagen Infrastructure IV, a fund seeking to Council, Santa Fe, committed up to nel Retirement System, Phoenix, buyout fund; up to $50 million to NMS invest in a diversified portfolio of renewable infrastructure assets. $215 million to three alternative committed $100 million to ORG AZ Fund IV, a buyout fund managed by In its credit asset class, the pension fund committed €200 million investment funds, said Charles Opportunity Fund II, a customized real New Mainstream Capital; and up to to Blantyre Special Situations Fund II, a European middle-market Wollmann, spokesman for the $32 estate fund managed by ORG Portfolio $20 million to LSVP SCF1, a venture private credit fund. billion endowment. The council Management for the $12.7 billion capital fund managed by Lightspeed committed up to $100 million to Within private equity, the pension fund committed $200 million to pension fund. Venture Partners, spokesman John middle-market growth equity fund TA FIMI Opportunity VII, a buyout and growth equity fund focusing on Krupa confirmed in an email. XIV-A and up to $40 million to TA Select Arlington County (Va.) In real estate, the pension fund middle-market companies based in Israel, and $10 million to JVP Opportunities Fund II-A, both managed Employees’ Retirement System committed up to $100 million to CBRE Growth Opportunity X, a growth equity fund targeting investments in by TA Associates. TA Select Opportuni- committed $15 million to Sustainable Strategic Partners U.S. Value 9, a U.S. growth-oriented Israel and Israel-related technology companies ties Fund II-A will recapitalize portfolio Asset Fund III. The $2.9 billion enhanced return real estate fund. managed by Jerusalem Venture Partners. companies in other TA Associates pension fund’s board approved the Finally, the pension fund disclosed three February transactions in funds. The council also committed up commitment to the infrastructure fund, Illinois State Universities its emerging manager program. to $75 million to Hellman & Friedman which is managed by Vision Ridge Retirement System, Champaign, Capital Partners X, a North America The pension fund made a commitment of $24 million to New Partners and invests in sustainable committed $100 million to two real and Europe large-cap buyout fund. projects, at its Feb. 4 meeting. estate debt strategies during a March Harbor Capital Fund III, a growth equity fund focused on education 12 board meeting, confirmed and health-care industries; and up to $15 million each to Brasa North Dakota Public Employ- Baton Rouge & spokeswoman Beth A. Credit II, an opportunistic real estate fund, and Mandrake Capital ees Retirement System, Parish of East HAVE SOME NEWS? Spencer in an email. Real Estate Fund, a special situations real estate fund. Bismarck, hired Callan as the first Baton Rouge (La.) The $29.1 billion investment consultant for its $139 Employees’ Please submit news of pension fund million 457 plan and $15 million Retirement changes to David Schepp, committed $50 million Mediolanum International Michigan Department of 401(a) plan, said Bryan T. Reinhardt, news editor, at dschepp@ System committed each to Torchlight Funds formed equity subadviser Treasury, Bureau of Investments, procurement officer. pionline.com $55 million to Debt Opportunity Fund partnerships with Intermede Investment disclosed $805 million in fourth-quar- Principal Enhanced VII, which will seek Partners, RWC Partners and Cadence ter commitments on behalf of the Ohio Police & Fire Pension Property Fund. The $1.3 billion pension value-added real estate debt deals in Investment Partner, which will in turn $84.2 billion Michigan Retirement Fund, Columbus, hired Barings to run fund’s board approved the commitment the U.S., and BIG Real Estate Fund II, see the firm distribute strategies in Systems, East Lansing. about $180 million in active interna- to the open-end, core-plus real estate managed by Basis Investment Group. Europe. A spokesman for Mediolanum In absolute return, the bureau tional small-cap equities. fund at its Feb. 25 meeting, said confirmed that more than €1.1 billion committed $200 million to AG Separately, the $17.2 billion Jeffrey Yates, retirement administrator. Iowa Public Employees’ ($1.3 billion) in equity assets will be Essential Housing, a credit fund pension fund pension fund committed Retirement System, Des Moines, managed through the new relationships. managed by Angelo, Gordon & Co. up to $125 million to KKR Diversified Colorado Public Employees’ selected four mangers to run $700 Intermede will manage €700 million focused on financing the production- Core Infrastructure Fund, an open-end Retirement Association, Denver, million in opportunistic private credit in its global equity strategy; RWC will ready land inventory of large home- core infrastructure fund focusing on hired Empower Retirement as record strategies for the $39 billion pension run about €240 million in a seed builders; and $100 million to Kayne North American, Western European keeper of its 401(k) and 457 defined plan, spokeswoman Shawna Lode investment in a new global equity CLO Partners Fund II, a credit fund and developed Asian opportunities. contribution plans totaling $5 billion. confirmed. income strategy and €60 million in an managed by Kayne Anderson Capital Finally, the pension fund placed Empower will replace Voya Institutional The board hired Crestline Investors emerging markets strategy; and Advisors that invests in majority stakes Bridgewater Associates on watch for Plan Services. and Marathon Asset Management to Cadence will manage €130 million in in Kayne-managed collateralized loan its $888 million global macro account. each manage $250 million in opportu- its flagship Asia strategy. obligation equity/warehouse facilities. Contra Costa County Employ- nistic private credit strategies; and Ares In real return and opportunistic, Ohio State Highway Patrol ees’ Retirement Association, Management and Audax Management Merced County (Calif.) $125 million was committed to Sixth Retirement System, Columbus, Concord, Calif., invested up to $150 Co. to manage $100 million each in Employees’ Retirement Asso- Street Specialty Lending Europe II made two new commitments totaling million in Sit Investment Associates mezzanine lending strategies. ciation committed $8 million to (USD Feeder), a commingled fund $40 million. The $1 billion pension Liquid Low Correlation Absolute Return IPERS increased its allocation to Taconic Commercial Real Estate focused on originating European fund committed $20 million each to Strategy. The $10.2 billion pension private credit to 8% from 3% last yera. Dislocation Fund III. middle-market credit opportunities. middle-market buyout fund Genstar fund’s board approved the investment The $1.1 billion pension fund’s Within real estate and infrastruc- Capital Partners X and Oaktree Real in the multistrategy hedge fund at its James City County, Williams- board approved the commitment to the ture, the bureau committed $100 Estate Opportunities Fund VIII, a Feb. 24 meeting. burg, Va., hired Empower Retirement opportunistic real estate debt fund million to Kayne Renewable Opportuni- distressed credit real estate fund, said as record keeper for its $34 million managed by Taconic Capital Advisors ties Partners, a closed-end commin- Mike Press, chief investment officer District of Columbia Retire- 457 plan and $3 million 401(a) plan. at its meeting March 30, said Kristen gled fund specializing in renewable and general counsel. ment Board approved two new Empower replaces ICMA-RC. Santos, retirement plan administrator. infrastructure; $100 million to Rialto commitments totaling up to $175 Real Estate Fund IV-Debt, a closed-end Ohio State Teachers Retire- million. The $10.1 billion pension fund Kansas Public Employees University of Michigan, Ann commingled fund that specializes in ment System, Columbus, committed committed up to $100 million to Retirement System, Topeka, Arbor, disclosed up to $114 million in credit strategies; and €32.5 million up to $30 million to middle-market Blackstone Property Partners, an approved new commitments totaling alternative commitments from its $14.2 ($40 million) in BGO Europe III buyout fund Genstar Capital Partners X. open-end real estate fund, and up to up to $150 million. billion long-term endowment pool. Co-Investment, a closed-end co-invest- It is the $87.7 billion pension fund’s $75 million to Centerbridge Capital The $21.1 billion pension fund The university committed a total of ment vehicle managed by BentallGree- first commitment to a fund managed Partners IV, a distressed debt fund. committed up to $75 million each to $29 million to two funds managed by nOak that invests in an Italian logistics by Genstar Capital, spokesman Nick Hellman & Friedman Capital Partners Matrix Partners, a venture capital firm portfolio alongside Michigan’s previous Treneff said in an email. Fairfax County Educational X, a North America and Europe with a primary focus on early stage commitment to GreenOak Europe III. Employees’ Supplementary large-cap buyout fund, and TA XIV, a investing in the U.S., China and India; In private equity, the bureau Oklahoma Firefighters Retirement System, Springfield, middle-market buyout fund managed up to $25 million total to two funds committed $50 million to Axiom Asia Pensions & Retirement System, Va., made two new commitments by TA Associates, spokeswoman managed by Hydrazine Capital, a Co-Investment Fund II, a co-investment Oklahoma City, committed $50 million totaling $23.5 million. The $3 billion Kristen Basso said. venture capital firm that invests in early overage fund to Axiom Asia VI; $50 to PIMCO BRAVO IV, an opportunistic pension fund committed $13 million to Also, KPERS’ board approved a stage technology companies; and up to million to GTCR Fund XIII, an upper- private credit multistrategy fund, said Centerbridge Partners Real Estate follow-on commitment of up to $100 $20 million total to two funds managed middle market buyout fund; and $40 Troy Brown, executive director at AndCo Fund II, an opportunistic real estate million to Prime Property Fund, an by Sequoia Capital, which invests in million to Accel Leaders Fund 3, a Consulting, the $3.5 billion pension fund, and $10.5 million to Silver Point open-end core real estate fund “new and developing companies late-stage venture capital/growth fund. fund’s investment consultant. Specialty Credit Fund II, a middle-mar- managed by Morgan Stanley Investment engaged in businesses where new ket direct lending fund. Management. KPERS had previously technologies play a significant role in New Jersey Division of Orange County Employees committed $50 million in 2013 and either processes or products,” Investment, which manages Retirement System, Santa Ana, Fonds de Reserve pour les $65 million in 2019 to the fund. according to board documents. investment for the $83.3 billion New Calif., committed $50 million to Oak Retraites, Paris, rehired Russell Also, UM committed up to $15 Jersey Pension Fund, Trenton, made HC/FT Partners IV venture capital and Investments France and hired AXA Louisiana State Employees’ million to SDC Allo Co-Invest, a real three commitments totaling $580 growth equity fund, Reginald Tucker, Investment Managers Paris as overlay Retirement System, Baton Rouge, estate fund managed by SDC Capital million, confirmed Treasury Depart- managing director, told the $19.8 billion managers. The two firms will passively committed $100 million to Glendower Partners. Lastly, UM committed $15 ment spokeswoman Jennifer Sciortino. pension fund’s investment committee. manage exposure to currency risks, Capital Secondary Opportunities Fund V. million to Accel Leaders Fund 3, a The division committed $200 The fund will invest in health care implement asset class exposures The $12.8 billion pension fund’s late-stage venture/growth fund, and million each to buyout fund Hellman & and fintech, primarily in the U.S. decided by FRR’s executive board, board approved the commitment to the $10 million to a fund managed by 8VC, Friedman Capital Partners X and hedge part of the €26.3 billion ($32.3 secondary private equity fund at its a venture capital firm that invests in Stonepeak Infrastructure Fund IV. The Rhode Island State Invest- billion) FRR portfolio with options and March 25 meeting, said Laney early stage U.S.-based technology Stonepeak commitment will be $125 ment Commission, Providence, invest the necessary liquidity Sanders, assistant CIO. startups. million directly to the fund and $75 approved a commitment of up to $30 Pensions & Investments April 5, 2021 | 19 HIRINGS

million to Shamrock Capital Growth pension fund. private debt portfolio managed by Hayfin CVI Credit Value Fund V. transition to a global, low-carbon Fund V for the $9.5 billion Rhode Within private equity, the $60.6 Capital Management; it invested $300 The $6.9 billion pension fund’s economy,” Mr. Cook said in an email. Island Employees’ Retirement System. billion pension fund committed $200 million to the separate account in 2018. board approved the commitment to the The hire was made on behalf of the The commission approved the million to Redwood Drawdown Domestic private credit fund managed by CarVal $5.3 billion Vermont State Retirement commitment to the buyout fund Fund III, a distressed debt fund, and Texas County & District Investors at its meeting March 29, CIO Systems. managed by Shamrock Capital also committed a combined $200 Retirement System, Austin, Dan Gallagher said in an email. Advisors at its Feb. 24 meeting. million to TA XIV and TA Select committed $200 million to two Wayne County Employees’ Opportunities Fund II, both growth alternative funds, a transaction report Vermont Pension Investment Retirement System, Detroit, made San Diego City Employees’ equity funds managed by TA Associates. showed. In the $35.7 billion plan’s Committee, Montpelier, hired two new private equity commitments Retirement System committed In real estate, the pension fund distressed credit portfolio, it commit- BlackRock to manage $200 million in totaling $20 million. $30 million to KKR Real Estate committed $100 million to J.P. Morgan ted $100 million to Taconic European global equities with a low-carbon The $1.1 billion pension fund’s Partners Americas III, said Elizabeth Asset Management Sunbelt Residen- Credit Dislocation Fund III. In real focus, according to Andy Cook, an board approved commitments of $10 Crisafi, CIO of the $9.8 billion pension tial Development Fund, a real estate estate, $100 million was committed to investment analyst with the state million each to private equity fund of plan, in an email. fund that invests in the development of SRE Opportunity Fund IV, managed by treasurer’s office. funds Taurus Private Markets Fund KKR Real Estate Partners Americas single-family and multifamily homes in Singerman Real Estate. The separately managed account and Abbott Capital Secondary is a non-core, opportunistic closed-end the southern U.S. will be a “global index fund that seeks Opportunities II, a secondary private fund investing primarily in the U.S. Within its strategic lending portfolio, Ventura County (Calif.) to invest in companies that are equity fund, at its Feb. 22 meeting, TCRS added $50 million to its Employees’ Retirement Asso- well-positioned to maximize returns confirmed Robert Grden, executive San Luis Obispo County investment in a core illiquid European ciation committed $30 million to and minimize risks associated with the director, in an email. (Calif.) Pension Trust hired State Street Global Advisors and BlackRock to manage roughly $225 million in two fixed-income index funds, confirmed Carl Nelson, executive director of the $1.5 billion plan, in an email The board selected SSGA to manage 8% of the portfolio, or about $120 million, in a U.S. government bond index fund; and BlackRock to run 7% of the portfolio, or roughly $105 million, in a U.S. Treasury inflation protection securities index fund. The board also hired NEPC to assist in the selection of a private markets investment consultant, which the pension trust plans to hire later this year.

SEI hired LMCG Investments as a subadviser of the $317 million SEI Catholic Values Equity Fund. LMCG replaces Snow Capital Management as one of the fund’s subadvisers, an SEI spokeswoman confirmed. The change was made to reduce overall volatility in the fund “as Snow’s strategy contributed significantly to volatility,” she Are you (or someone you know) doing said. “The addition of LMCG’s small-cap value strategy should something innovative to improve retirement provide us with the ability to better manage the fund’s value exposure.” income security for plan participants?

Smart Pension, London, made a roughly £100 million ($139 million) seed investment in a new credit Pensions & Investments and the Deﬁned Contribution strategy it developed alongside Natixis Institutional Investment Association are once again Investment Managers. The retirement plan provider, which co-sponsoring an awards program for excellence and runs the multiemployer defined innovation by deﬁned contribution plan executives. contribution plan of the same name, made the investment from its default fund into the MV Dual Credit Fund. The We want to recognize out-of-the-box thinking by those DC plan executives strategy brings together European and their employers who are making new and unusual changes to help leveraged loans, run by Natixis affiliate improve participants’ retirement income security. MV Credit, with a global multiasset credit strategy from affiliate Loomis Sayles & Co., said a news release. The possibilities are endless; there are no categories. A prominent theme The £100 million investment among last year, four of the seven winners centered their campaigns on represents 10% of the default fund, people nearing retirement, addressing topics such as drawndown strategies, the spokeswoman said. The master managed accounts and guaranteed retirement income that won’t run out. trust has a total £1.5 billion in assets.

Stanislaus County Employ- WWhatever the innovation is in design and/or excellence in execution, it ees’ Retirement Association, uundoubtedly is something others are just now considering. Help your Modesto, Calif., made two new peers by sharing your innovation and receive recognition for your ingenuity. infrastructure commitments totaling $80 million. The $2.5 billion pension fund committed $50 million to IFM Global NOMINATION Infrastructure Fund, an open-end fund, and $30 million to J.P. Morgan DEADLINE Full details and nomination form are available at Infrastructure Investments Fund, an May 28 open-end fund, said Stan Conwell, pionline.com/innovationawards2021 retirement investment officer. The commitments follow the board’s approval in November to raise its infrastructure target to 7.5% from 2%.

Tennessee Consolidated Retirement System, Nashville, made new commitments totaling up to Any questions, please contact Ashley Perrucci $500 million, said Shelli King, at [email protected] spokeswoman for state Treasurer David H. Lillard Jr., who oversees the 20 | April 5, 2021 Pensions & Investments

CAREERS RFPs

Request for Qualifications for Passive Investment Management Services OFFICE OF THE CONNECTICUT Underwriting Services for the Sale STATE TREASURER of Pension Obligation Bonds The Illinois Firefighters’ Pension Investment Fund (FPIF) is soliciting proposals from firms qualified to provide passive investment management services. PENSION FUND MANAGEMENT DIVISION The City of Quincy acting through The Munic- ipal Finance Department is seeking proposals Starting on March 29, 2021, the RFP can be found on FPIF’s website: from potential Contractors in accordance with www.ifpif.org/employment-procurement/. CHIEF INVESTMENT OFFICER Massachusetts General Law chapter 30B. This Request for Qualifications (RFQ) sets forth the Proposals must be submitted by 3:00 p.m. CDT on April 15, 2021 to: procedures and requirements to be employed Illinois Firefighters’ Pension Investment Fund 7KH6WDWHRI&RQQHFWLFXW7UHDVXUHU¶V2I¿FH3HQVLRQ)XQG0DQDJHPHQW'LYLVLRQLV by the City of Quincy in the selection of an Mitchell Green, Portfolio Officer – [email protected] underwriter(s) for the sale of pension obliga- KLULQJDVWUDWHJLFVHQLRULQYHVWPHQWSURIHVVLRQDOWROHDGWKH'LYLVLRQDV&,2UHVSRQVLEOH AND [email protected] tion bonds on a negotiated basis. IRU WKH GD\WRGD\ DGPLQLVWUDWLRQ DQG DGYLVLQJ WKH 7UHDVXUHU RQ WKH LQYHVWPHQW RI DSSUR[LPDWHO\ELOOLRQLQDVVHWV All questions regarding this Request for Quali- fications should be directed in writing to Kath- Total Fund Portfolio and Risk Management System 7KH3)0'LYLVLRQLVUHVSRQVLEOHIRUWKHDGPLQLVWUDWLRQRIWKH&RQQHFWLFXW5HWLUHPHQW ryn Logan Chief Procurement Officer via email 3ODQDQG7UXVW)XQGVDQGDVVLVWVWKH7UHDVXUHUDQG,QYHVWPHQW$GYLVRU\&RXQFLOWR to [email protected] All inquiries The Ohio Public Employees Retirement System has issued an RFP for a total fund, multi-asset GHYHORSLQYHVWPHQWSROLF\DQGDVVHWDOORFDWLRQVWUDWHJLHVVXSHUYLVHDQGPRQLWRUWKH must be received by April 23rd, 2021 @ class portfolio and risk management system. SHUIRUPDQFHRILQYHVWPHQWPDQDJHUVDQGFRQVXOWDQWVDQGVRXUFHDQGGLOLJHQFHQHZ noon. LQYHVWPHQWRSSRUWXQLWLHVDQGVWUDWHJLHV7KH'LYLVLRQDOVRVXSSRUWVWKH7UHDVXUHULQWKH Minority-owned, Women-owned, and Emerg- Refer to www.opers.org/about/vendor/index.shtml for details. DQDO\VLVRISODQOLDELOLWLHV7KH&,2DSSRLQWHGE\WKH7UHDVXUHUZLWKWKHFRQVHQWRIWKH ing Small Business Enterprises will be afforded ,$&OHDGVDWHDPRI full opportunity to submit their proposal in response to this solicitation and will not be 7KH&,2LVDWKRXJKWSDUWQHUDQGWUXVWHGFROOHDJXHRIWKH7UHDVXUHU7KHLQGLYLGXDO discriminated against on the grounds of race, PXVWDOLJQDQGVXSSRUWWKH7UHDVXUHU¶VLQYHVWPHQWSKLORVRSK\DQGSROLF\REMHFWLYHV color, sex or national origin in consideration LQFOXGLQJKLVLQLWLDWLYHVRQGLYHUVLW\LQFOXVLRQDQG(6*7KH&,2PXVWKDYHEURDG for an award of any contract entered into. DVVHW FODVV NQRZOHGJH DQG LQVWLWXWLRQDO H[SHULHQFH LQFOXGLQJ VLJQL¿FDQW H[SHULHQFH Bids/Proposals will be received at the Purchas- LQ SRUWIROLR FRQVWUXFWLRQ DQG DVVHW DOORFDWLRQ$Q LQGHSWK XQGHUVWDQGLQJ RI JOREDO ing Office until the time and date stated above, HFRQRPLFV DQG FDSLWDO PDUNHWV LQYHVWPHQW VWUDWHJLHV DQG YHKLFOHV WKH SULQFLSOHV at which time and date they will be opened DQGSUDFWLFHVRILQVWLWXWLRQDOLQYHVWLQJLQYHVWPHQWRSHUDWLRQVDQGLQYHVWPHQWSROLF\ and registered. Late Bids/Proposals, delivered GHYHORSPHQWDUHDOVRUHTXLUHG by mail or in person, will be rejected. )RU DGGLWLRQDO LQIRUPDWLRQ LQFOXGLQJ DOO UHTXLUHPHQWV DQG SUHIHUHQFHV FRQWDFW Detailed specifications are available on-line, March 29, 2021 noontime, at the City of Quin- +XGHSRKO $VVRFLDWHV[email protected]RU cy’s website https://www.quincyma.gov/govt/ depts/purchasing/current_bids.htm and also available at the office of the Purchasing Agent, 6WDWHRI&RQQHFWLFXWLVDQ$I¿UPDWLYH$FWLRQ(TXDO(PSOR\PHQW2SSRUWXQLW\(PSOR\HU Quincy City Hall, 1305 Hancock Street, Quin- cy, Massachusetts, 02169, between the hours of 8:30 AM and 4:30 PM The City of Quincy reserves the right to with- draw the Request for Proposal; to reject any Your company’s best and all proposals; and to accept any proposal investment strategy! deemed to be in the best interest of the City of Quincy. Place your ad today! www.pionline.com/careers 212-210-0719

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31% over the last three years, according to the Thinking Ahead In- Credit Suisse stitute’s Global Pension Assets CSAM’s passive clients aren’t worried, Study covering calendar years 2018, CONTINUED FROM PAGE 1 2019 and 2020. Hedge fund alloca- but will still monitor Greensill situation Credit Suisse first suspended tions as a share of total alternative trading for the four CSAM-run investments were not available. A number of Credit Suisse Asset Management supply chain finance funds that Some Swiss pension funds’ lat- clients — none with holdings in the $10 billion of contained Greensill-backed paper est annual reports show reduced supply chain finance funds the firm said it is on March 1 due to valuation un- allocations to hedge funds as of Philipp Zinniker terminating — have no plans to make changes to certainties. The funds had more the end of 2019, with Pensions- than 1,000 investors, all of whom kasse SBB, Bern, which had 18.3 their relationships with the money manager. But were institutional or professional billion Swiss francs ($20.7 billion) they’ll still be watching the situation as it continues investors. as of Dec. 31, 2019, noting that it to unfold. On March 5, Credit Suisse said reduced its hedge funds allocation Executives at the pension funds said the termina- “valuation uncertainty with respect to only 4 million Swiss francs, tions, which followed difficulties by the manager in to certain investments, the reduced around zero, down from a 1.8% al- reaching valuations and issues over insurance availability of insurance coverage location a year earlier. And Pen- coverage related to now-collapsed financial services for new investments and the sub- sionskasse Stadt Zurich, Zurich, stantial challenges to source suit- which had 18.5 billion francs as of firm Greensill Capital, have no impact on their able investments make it currently Dec. 31, 2019, had a 7.2% allocation passive investments through CSAM. unachievable for the Credit Suisse to hedge funds as of that date, Swiss federal pension fund PUBLICA, Bern, which supply chain funds to remain in- down from 9.3% a year earlier. had 41 billion Swiss francs ($42.2 billion) as of Dec. FOCUSED: Stefan Beiner said PUBLICA didn’t put CSAM on vested in accordance with their in- However, Mr. Delessert doesn’t 31, 2019, has a relationship with CSAM in the watch but will keep an eye on any changes at the firm. vestment policies,” resulting in think any change in attitude toward passive equity space at about 5 billion Swiss francs, CSAM fund boards hedge funds will be deciding that the across all pension and with no investment in Greensill or any other Zuber, chief operations officer at the fund. There are strategies “can no lon- funds, but rather that alternative strategies offered by CSAM. no exposures to Greensill products. ger be appropriately “less experienced in- “Is CSAM now officially on watch? No,” because “Regarding our mandates, we currently do not see managed.” The funds vestors or boards of the allocation run by CSAM is passive and separate immediate need for action. The development will be were terminated trustees in Switzer- to the supply chain finance funds. “And we’re monitored and considered when discussing all our March 4 and Greensill land will just link this satisfied with what they’re doing,” said Stefan managers in the regularly held investment commit- filed for administra- to hedge funds. I think Beiner, head of asset management and deputy CEO. tee,” Mr. Zuber added. tion in the U.K. on it will reinforce a bit March 8. at least for small in- But, “are we talking to them and monitoring what Patrick Fleming, CIO of the Wyoming State The firm then said vestors, do I really they’re going to do with regards to their strategy, the Treasurer’s Office, said the situation has been on March 31 it had want to (invest in) reorganization of the unit? Yes, of course we do that. discussed with senior management and executives created side pockets hedge funds in my Being a large asset manager in (the) Swiss market, “will be monitoring the situation as it progresses. At for four Credit Suisse FALLOUT: Fabien Delessert portfolio? The impact we would talk to them anyway” about any major this point, we do not have plans to change our Virtuoso SICAV — said smaller pension funds will not only be on changes and about the situation, whether or not they allocations,” he said. The Wyoming State Loan and SIF strategies, run by could change their attitude Credit Suisse, but the were a partner — a standard process, he added. The Investment Board, Cheyenne, hired CSAM to run a Credit Suisse Asset toward hedge funds. entire hedge funds in- Management where dustry — at least for parent bank announced March 18 it was separating $500 million bank loans investment in 2019. Mr. certain assets were invested in the small investors,” he said. the asset management unit from the international Fleming oversees the state’s $19.5 billion in now-terminated supply chain fi- Stefan Beiner, head of asset wealth division and installing its own CEO. non-pension assets. nance funds. Trading in these strat- management and deputy CEO at PKSBB, for which CSAM runs overlay, passive Other pension fund executives for which CSAM egies was temporarily suspended Swiss federal pension fund PUBLI- equity, passive bonds and real estate allocations, runs passive allocations said they have no intention on March 1. The side pockets, which CA, Bern, agreed. according to its 2019 annual report, is following the of putting the firm on watch. contain the illiquid assets associat- Larger pension funds aren’t ex- ed with the funds, will be liquidated pected to change hedge fund allo- recent developments “with interest,” said Patrick — SOPHIE BAKER and paid out in cash while trading cations because of the CSAM sup- of the liquid parts of the four strate- ply chain finance funds situation, gies is set to resume April 7. he said. “Maybe for smaller inves- effects on CSAM and the parent billion Swiss francs as of Dec. 31 — clients either pick from pre-select- tors or those with less resources, bank itself to be greater than any “will allow high management to ed strategies or create their own al- Focus on supply chain funds reputational risk is even more im- financial hits. have a better oversight and it raises locations, Mr. Delessert said. Pension fund and money man- portant and it might have an effect. The money management busi- a bit their profile in the context of “We were lucky enough not to agement sources said they are It shows once again that it’s very ness has “a relatively small direct looking into what could have gone have any exposure to these supply closely watching the supply chain important to know what you have share of about 5% of adjusted wrong, if there were any gover- chain funds — (client assets are) finance funds situation, although in the portfolio. However, this is of- (group) revenue,” said Ioana Sima, nance issues or failures in the pro- mostly on the passive side in Swit- most of their relationships are for ten the case because over the last director-banks EMEA at Fitch Rat- cess. It makes sense it gets sepa- zerland. On the other side where passive allocations — a part of years the professional standard of ings Inc. in London. The ratings rated out and gets proper attention clients select their own, we imple- CSAM that was unaffected by the investors has increased in Europe,” agency’s base-case is that the group so that this matter is investigated ment risk management procedures Greensill-impacted funds. Howev- he said. rating will stand, but it may be hard properly and then put to rest,” Ms. to check that choices are not too er, some also warned that the de- The fund had 41 billion Swiss to improve. Sima added. far away from investment best bacle may have wider-reaching ef- francs in assets as of Dec. 31, 2019. There probably is some litigation The move to separate the asset practices.” fects — particularly since, in The supply chain finance funds coming from investors, which may management business “was a quick There, one client was invested in Switzerland at least, these funds news may also trigger a change in result in costs for Credit Suisse, change,” Mr. Delessert said. “Wheth- one of the supply chain finance are viewed as alternative invest- the types of managers that Swiss “and while there’s the uncertainty er it’s really going to work, I’m not funds affected, but through a multi- ments and, in some cases, pension funds delegate portfolio allocation and negative publicity, there may be so sure because at the end, (it may manager hedge fund run by Credit funds may have had indirect expo- to, Mr. Delessert said, adding that repercussions that make it harder be) two entities but it’s still the Suisse. “But the exposure is really sure through hedge fund-of-funds specialized firms may become more to achieve the profit growth ambi- same firm.” small — maybe 6% of the multi- allocations, sources said. popular at the expense of “big asset tions they have in asset manage- manager fund.” “In terms of reputational risk, it management firms that simply in- ment and maybe into the interna- Keeping watch Credit Suisse has said proceeds is making a lot of noise — that is vest in their own funds” under mul- tional wealth management division. A number of pension funds with from redemptions will be paid out definitely not good press for Credit timanager agreements. There is a risk of reputational spill- allocations to CSAM said they are to investors in several installments, Suisse,” said Fabien Delessert, over into other businesses.” watching the situation but not put- with the first amounting to about member of the investment commit- Greater scrutiny The separation of the money ting the firm officially on watch. 80% of available cash and cash tee of collective occupational plans Sources expect the reputational management unit — which had 440 As a collective foundation, FCT equivalents on March 8. n management firm FCT Founda- tions and head of pension and ad- Callie Lipkin ministration services at employee the client’s needs.” “The private markets are not benefits firm Trianon SA in Renens, Russell has $327 billion in assets uniformly accessible and that is a Switzerland. Russell under management and $2.5 tril- challenge,” Mr. Hirsch said. “And now also if you look back lion in assets under advisement. Mr. Hirsch said the deal was not CONTINUED FROM PAGE 6 at the trend in Switzerland, alter- Hamilton Lane reported roughly about expanding Hamilton Lane’s natives exposure is reducing: The idea is to offer the sophisti- $76 billion in discretionary assets client base or adding distribution Hedge funds exposure has been cated tools and asset classes — now under management and $581 bil- capabilities. significantly reducing over the last available for the largest institution- lion in assets under advisement as Hamilton Lane will be offering 10 years. Now we have this, Credit al investors — to the wider market of Dec. 31. services for Russell’s clients, Mr. Suisse’s own fund-of-fund ex- of clients including middle-market Hamilton Lane’s clients base is Hirsch said. posed to the issue — and on the institutional and wealth market cli- primarily composed of institution- Russell is in charge of building hedge fund side it is going to be ents, Ms. Seitz said. “It is an oppor- al investors. Firm clients also in- customized portfolios for its clients another hit. It is bad press for this tunity in the wealth market and clude insurance companies, finan- and for managing them, he said. type of investment,” Mr. Delessert middle market to make sure we are cial institutions, family offices and “We are here to play a small part of said. EXPANDED REACH: Michelle Seitz wants user-friendly,” she said. But, she “selected high-net-worth individ- that,” Mr. Hirsch said. Swiss pension funds’ alternatives to be able to offer institutional-level tools added, “Not every tool should be uals,” according to its latest SEC The deal is expected to close in allocations have remained steady at and asset classes to a wider market. democratized because it may not fit filing. April. n 22 | April 5, 2021 Pensions & Investments

the Labor Department in June also exemplary fiduciaries, said the ex- UPCOMING WEBINARS | REGISTER TODAY stated that its previous analysis — a emption is imperfect, but an up- Advice 2005 advisory opinion known as the grade for fiduciary standards. Deseret Letter, which found that Phoenix-based CBCF Chairman CONTINUED FROM PAGE 2 rollover advice did not constitute Don Jones said the exemption is ington who testified at a Labor De- investment advice — was incorrect. likely a placeholder. “I think there’s partment hearing in September on The Labor Department in its final more to come,” he said. “It’s still too the proposed exemption on behalf exemption’s preamble stated that easy — whether it’s fair or not — of brokerage firm, mutual fund, in- “the facts and circumstances analy- not to become a fiduciary and that surance company and asset man- sis required by the five-part test ap- by and large has not been good for ager clients. plies to rollover recommendations.” the industry.” Innovations in DC: Helping supercharge But while the Biden administra- Mr. Mason said the exemption’s tion allowed the exemption to take preamble includes new interpreta- More challenges? retirement outcomes effect, it signaled that it would soon tions of the five-part test that would Exactly what the administration have more to say on the issue. very significantly expand the scope will do next remains to be seen, but Live, Wednesday, April 7 • 2:00 p.m. - 3:00 p.m. ET “We recognize that investment- of who is considered a fiduciary, in Ms. Roper would like to see guid- RDefined contribution plan sponsors are taking the lessons learned advice providers have been prepar- direct contradiction to the federal ance issued that clearly defines from the Covid-19 pandemic’s impact on their employees to revisit plan ing for the exemption, and this step court’s ruling in 2018. what “best interest” means and design, review product selection, tailor their plan communications and will allow them to implement im- Firms are now struggling with what financial professionals who focus on the full participant journey to and through retirement. An over- portant system changes,” said Ali how to handle the preamble, Mr. utilize the exemption can do with arching focus on financial wellness of employees is driving priorities for Khawar, deputy assistant secretary Mason said. respect to conflicts of interest. 2021 and beyond. Our panel of industry experts reveals what’s next on of labor for the Employee Benefits “Technically, a preamble is not “There’s room for (the Labor De- DC plans and shares practical considerations on evolving features. Security Administration, in a state- the law so on a technical legal anal- partment) to send a strong mes- ment shortly before the exemption ysis the preamble is invalid,” he sage that they expect to see real, Join us for this webcast, that will cover top of mind issues from custom took effect. “That said, we will con- said. “On the other hand, compa- meaningful steps to rein in con- default solutions to lifetime income and short-term financial needs man- tinue our stakeholder outreach to nies tend to be conservative so flicts in order to comply with the agement to demand for ESG investments. determine how we might improve they’re struggling with this notion rule,” Ms. Roper said. this exemption, the rule defining of whether to follow what I think is Sarah Buescher, associate gen- who is an investment-advice fidu- the law or the preamble.” eral counsel at the Investment Ad- Register Now: ciary, and related exemptions to He added: “The ex- viser Association in pionline.com/InnovationsinDCWebinar build on this approach.” emption requires you Washington, said she’d The Employee Retirement In- to say you’re a fiduciary, like the Labor Depart- come Security Act of 1974 prohibits and when you say that ment to tackle any is- Sponsored by: investment-advice fiduciaries from you’re accepting a tre- sues that spring up self-dealing, or taking actions that mendous amount of from the new exemp- would provide additional compen- potential liability. There’s tion before undertak- sation from transactions for them- a lot of uncertainty with ing a new rule-making selves, their affiliates or related en- how to proceed.” process. tities involving plans and individual One change the IAA retirement accounts. ‘Better than nothing’ would like to see is Investment-advice fiduciaries — Barbara Roper, Pueb- FIRST STEP: Barbara making the exemption Understanding the PEP Evolution like registered investment advisers, lo, Colo.-based director Roper said the exemption available to all digital broker-dealers, banks and insur- of investor protection at is a good placeholder until advice. The exemption Live, Wednesday, April 14 • 2:00 p.m. - 3:00 p.m. ET ance companies — relying on the the Consumer Federa- the DOL’s work is done. excludes investment I With the SECURE Act establishing pooled employer plans (PEPs) for exemption would have to provide tion of America, did not advice “generated sole- companies to join together on oering retirement savings plans, the advice in the best interest of retire- support the Labor Department’s ly by an interactive website in prospect of closing the retirement coverage gap for workers who have ment investors and give those in- exemption as drafted, but now that which computer software-based not had access to this benefit is now closer to reality. Not only new vestors basic information about it’s in effect, she said it’s “better models or applications provide in- entrants, existing DC plan sponsors also have compelling reasons to conflicts of interests. than nothing while they’re getting vestment advice based on personal embrace the PEP structure. “There’s a lot in flux right now, that additional work done.” information each investor supplies but ultimately what the exemption The five-part test makes it “too through the website, without any We believe that plan consultants and advisors will be crucial intermedi- provides is broad relief and a lot of easy for firms to avoid responsibil- personal interaction or advice with aries in helping all plan sponsors understand and explore the benefits flexibility in terms of how you ity when they’re clearly functioning an investment professional.” and challenges of multi-employer and pooled-employer arrangements. structure your business,” said Jen- as fiduciary advisers,” Ms. Roper But any further rule-making on Our experts will share where they see PEPs take hold and where they nifer Eller, a Washington-based said, and has urged the Labor De- this issue could be subject to legal will evolve, discuss major considerations for plan sponsors in fiduciary partner at Groom Law Group. “The partment to “close loopholes” in its challenge, Mr. Mason said. “What I oversight, scale, cost, and operations, and explain how technology can conditions are definitely something investment advice definition. expect is they will revive a good part to contend with, they’re meaty, She likes that the new exemption of the 2016 set of rules; that will enhance access and delivery for plan participants to and through retire- there’s real work to comply with the requires an adviser to document the then face legal challenges,” he said. ment. conditions so it’s not going to be basis on which they determine that For Ms. Roper, who is in favor of great for everyone.” a rollover recommendation was in stronger fiduciary standards, an- Register Now: pionline.com/PEPsWebinar the best interest of a customer but other round of court challenges are Sponsored by: Preamble questions said the language in the preamble not reason to fret. When proposing the exemption makes it simple for an adviser to “There’s nothing magical about in June, the Labor Department also make the best-interest case without the 5th Circuit ruling,” she said, ref- announced a final rule reinstating having to do the due diligence. erencing the federal court that the five-part test used to determine “You could arguably get away made the 2018 decision to strike whether an investment profession- with saying, ‘Well there’s a broader down the Labor Department rule. al or financial institution is a fidu- investment menu and more servic- “It was just a game of musical chairs New Outlook on Income: ciary. It was in 2016 that the Labor es available through the IRA,’ and and they turned off the music at Department under the Obama ad- not have to do a meaningful analy- that point.” A Framework for Evaluating DC ministration finalized a rule, com- sis of the relative costs of those rec- The rule survived previous chal- Retirement Income Solutions monly known as the fiduciary rule, ommendations or whether the cus- lenges in lower courts, but not a rul- that aimed to replace the five-part tomer needs or would benefit from ing from the 5th Circuit Court of Live, Wednesday, April 28 • 2:00 p.m. - 3:00 p.m. ET test by broadening the definition of those added services or selections,” Appeals. The Trump administration when a person or entity is taking on Ms. Roper said. did not appeal the decision. “There’s There has been much discussion about bringing retirement income fiduciary responsibilities. The rule Members of the Center for a strong reason to believe a rule to solutions into DC plans as more plan sponsors report a preference to was struck down in federal court in Board Certified Fiduciaries, a close (conflict of interest) loopholes help their participants into retirement. However, progress has been slow. 2018 due to regulatory overreach. newly formed public benefit cor- would survive legal challenge,” Ms. Without the processes to appropriately match objectives to income With respect to rollover advice, poration aimed to help develop Roper said. n solutions, evaluating investments and strategies that address the wide range of participant needs can be complicated and intimidating. lieves that “we are still in the early many years to come.” Informed by original research with plan sponsors and consultants, as days of the development of (the The transaction, pending cus- well as longitudinal data on trends in retirement spending, we will work Ares secondaries) market,” and that tomary regulatory approvals and through a retirement evaluation framework that will help organize your “there’s a long and visible runway closing conditions, is anticipated to CONTINUED FROM PAGE 6 progress towards helping retiring participants who choose to remain in for significant growth.” close in the second quarter. your plan. ket,” Mr. Arougheti said on the call. Francisco Borges, chairman and RBC Capital Markets and Credit “Over the last several years the sec- managing partner of Landmark Suisse Securities (USA) served as fi- ondaries market has evolved to be- Partners, said in the release: “Ares’ nancial advisers to Ares, while Kirk- Register Now: pionline.com/TRPWebinar come more institutionalized, in- global platform and significant re- land & Ellis served as legal counsel. creasing from a limited number of sources will enhance our com- Morgan Stanley & Co. acted as finan- Sponsored by: bespoke transactions over a decade bined investment capabilities and cial adviser to BrightSphere. Gold- ago to more than $88 billion in GP my partners and I look forward to man Sachs & Co. acted as financial and LP secondary market transac- driving continued strong perfor- adviser to Landmark Partners. Ropes For a full list of webinars, go to pionline.com/webinars tions per year.” mance, transaction structuring in- & Gray provided legal counsel to Mr. Arougheti added that he be- novation and business growth for Landmark and BrightSphere. n Pensions & Investments April 5, 2021 | 23

Money Management Target CITs gaining favor Target-date funds based on collective investment trusts have grown CONTINUED FROM PAGE 3 from 18% of the market in 2014 to 43% in 2020. BlackRock CEO Larry recently published by Callan LLC, Growth of target-date assets by fund type (billions) San Francisco. Mutual fund-based target-date funds were used by 68% $1,175 of respondents in 2010 while 22% CIT assets Fink sees 18% pay rise Three-line deck goes used CIT-based series (the other Mutual fund assets $908 respondents cited custom target- By CHRISTINE WILLIAMSON sights and risk management tools right here in this fine date funds or they didn’t know). By to our clients, and prioritizing the spot under that head 2020, the mutual fund target-date BlackRock Chairman and CEO well-being of BlackRock employees series offerings were down to 42% $600 $646 Laurence D. Fink’s total compensa- and the firm’s culture,” the commit- of sponsors while the CIT group $1,570 tion rose to $29.85 million in 2020, tee noted in the proxy statement. $1,375 was up to 41%. $408 an 18.2% increase from $25.25 mil- “Mr. Fink drove the firm and sur- The latest survey covered 93 lion in the prior year, according to rounding ecosystem around sus- $311 $1,106 $1,085 sponsors, including clients and the company’s proxy statement tainability and climate risk as in- $154 $880 non-clients. About 61% had total as- $763 filed Thursday with the SEC. vestment risk and helped sets of $1 billion or more. $703 The largest portion of Mr. Fink’s communities through philanthrop- 2020 compensation — $14.9 million ic efforts. The culmination of these Mutual funds stagnant — was from a long-term incentive efforts delivered value for share- As the number of CIT-based tar- award, followed by cash at $9.5 mil- holders.” get-date funds has soared, the 2014 2015 2016 2017 2018 2019 2020 lion; deferred equity, $3.95 million; According to the proxy state- number of mutual fund-based tar- Source: Morningstar Inc. and base salary, $1.5 million. ment, BlackRock’s return of $3.8 get-date funds has remained stag- In 2019, Mr. Fink’s compensation billion of capital to shareholders in nant in recent years. of $25.25 million comprised a long- 2020 was the same amount as in the There were 134 CIT strategies scale of fees vs. assets. For example, “A lot of drivers for CITs are cost, term incentive award of $11.75 mil- prior year. last year vs. 58 in 2015, according to the CIT series with the 60/40 mix of but there are other factors — trans- lion; cash, $7.75 mil- Morningstar Direct. The number of passive and actively managed in- parency, flexibility and regulatory lion; deferred equity, mutual fund strategies rose to 57 vestments charges 46 basis points oversight,” Mr. McCarthy said. $4.25 million; and from 54 during this period. for a plan with $20 million to $100 Although he said Nuveen’s mu- base salary, $1.5 mil- Mr. Kephart noted the overall million in target-date assets. If a tual fund-based index series is low- lion. yearly numbers reflect some ebb and plan devotes $4 billion to $5.5 bil- cost at 10 basis points, the CIT in- As in previous flow in each category as some series lion in target-date fund assets, the dex series is even lower at 8. The years, 2020 total com- are liquidated and others merge. fee is 19 basis points. latter requires a sponsor to have pensation for Mr. Fink However, the recent rise in new “In most plans, target-date funds $100 million in target-date fund as- and other named ex- CIT target-date series has been are the largest assets,” said Mr. Mar- sets; the former has no minimum. ecutive officers was dramatic — 22 last year, 23 in 2019 tel, referring to their prominent The actively managed mutual based on these cate- and 12 in 2018, according to Morn- role as a qualified default invest- fund series charges 42 basis points. gories and weights: ingstar Direct. Among mutual fund ment alternative. The CIT blend series charges be- BlackRock’s financial target-date series, there were four For institutional clients, the mu- tween 26 and 28 basis point de- performance, 50%; over this period. tual fund target-date series require pending on the share class. There is business strength, Mr. Kephart pointed out that a $1 million minimum in target date no asset minimum for either series. 30%; and organiza- many of the new series are relative- assets, although this requirement Underlying investments in the tional strength, 20%. ly small products often issued by may be waived under certain cir- two index-based target-date series BlackRock’s com- IN THE MONEY: Laurence D. Fink’s pay climbed to $30 trust companies in groups of three cumstances. Through January, the T. are the same, and so is the glide- pensation committee million, thanks to long-term incentives and cash awards. investment styles — ag- Rowe Price mutual path — a “through” approach that decides the appropri- gressive, moderate and fund series’ aggregate goes 30 years past retirement. The ate mix between cash, deferred eq- Regarding BlackRock’s 2020 fi- conservative. Still, some assets were about $176 actively managed mutual fund se- uity and long-term equity for each nancial results, total net inflows fell of the biggest names in billion vs. the CIT ag- ries and the CIT blend series have executive. At least half of the total 8.9% to $391 million in the year asset management of- gregate assets of about the same glidepaths as the index- incentive award for each of Black- ended Dec. 31 compared to $429 fered new target-date $146 billion, he said. based series. Rock’s five NEOs is delivered million the prior year, which was a funds last year, includ- CIT assets have been through equity in the company, the record. ing T. Rowe Price Group gaining over the years PIMCO adds CIT series proxy statement showed. Net inflows in 2020 were buoyed Inc., Nuveen and Pacif- through new money PIMCO added a CIT-based tar- In Mr. Fink’s case, $18.85 million by 5% of organic asset growth, com- ic Investment Manage- and through transfers get-date series in May 2020 because came from deferred and perfor- pared to 7% of organic growth ment Co. LLC. from the mutual fund “ultimately, the market demands mance-based equity in 2020. across strategies in the prior year. T. Rowe Price was RECKONING: Joseph series, he added. and expects target-date funds to be The firm’s compensation com- BlackRock’s revenues totaled the third-largest pro- Martel says plan The glidepaths for in a CIT format,” said Bransby mittee rated Mr. Fink’s 2020 perfor- $16.2 billion in 2020, an increase of vider of all target-date sponsors are eager to all of the target-date Whitton, executive vice president mance as “far exceeding” expecta- 11.7% over the prior year. funds based on assets, keep expenses distinct. series are the same — a and target-date fund strategist, tions. BlackRock’s assets under man- as well as the third- “through” approach in based in Newport Beach, Calif. “Mr. Fink successfully led Black- agement totaled $8.68 billion as of largest provider of CIT target-date which the ratio of equity to fixed in- The underlying investments in Rock through a challenging envi- Dec. 31, up 16.8% from the same funds last year, according to Morn- come changes past the standard the CIT series and in a mutual ronment in 2020, focusing the firm date a year earlier. The year-end ingstar. The company added its landing point retirement age of 65. fund-based series, launched in De- on strategic priorities, providing 2020 AUM was a record for the fourth CIT target-date series in Target-date funds using the “to” ap- cember 2014, are “nearly identical,” thought leadership, investment in- firm. n January 2020; it also has two mutual proach freeze the equity-fixed in- combining active and passive man- fund-based target-date series. come ratio at the landing point. agement, he said. The glidepaths, The newest CIT target-date se- which use a “to” approach, are the cisions based on ESG factors, even ries emphasizes active manage- Entering the fray same. when those factors are related to ment with about 93% of underlying Nuveen, the investment man- The average cost for the mutual Walsh the economic well-being of plans investments being actively management arm of TIAA-CREF, en- fund series is 22.5 basis points vs. and their participants,” Mr. Walsh CONTINUED FROM PAGE 2 aged. That’s the same percentage as tered the CIT target-date field in 20 basis points for the CIT series. said in his written response. “Given another CIT target-date series. The October 2019, with a series featur- Mr. Whitton said PIMCO needed better,” Mr. Walsh added. ERISA’s overarching goal of pro- difference is that the newer series ing a mixture of active and passive a commitment from a sponsor to in- During his Feb. 4 hearing before tecting plans and their participants, has a slightly lower equity expo- management, and again in Decem- vest a minimum of $1 billion in tar- the Senate Health, Education, La- that is reason enough to review the sure. ber 2020, with an index-based target-date fund assets before launch- bor and Pensions Committee, Mr. rule-makings.” Another target-date series has get-date series. Both use the Nu- ing its CIT-based series. The $1 Walsh was asked about getting peo- On March 10, the Labor Depart- an approximately 60% passive/40% veen TIAA Lifecycle brand and billion minimum applies to any ple back to work, protecting work- ment said it would not enforce both active ratio and still another has a both use SEI Trust Co. as the trust- sponsor seeking the firm’s CIT- ers during the pandemic, boosting rules, though they remain on the 20%/80% ratio of passive manage- ee. CIT-based asset data wasn’t based series. unemployment insurance and im- books. ment to a combination of active available. For CITs, his company is “pri- proving job training programs. On a In February, the Labor Depart- management and enhanced index. “There was strong demand,” said marily focused on market segmen- bipartisan basis, the committee ap- ment under the Biden administra- “The No. 1 driver is sponsors un- Brendan McCarthy, the Boston- tation, rewarding the larger plans proved his nomination in an 18-4 tion let a Trump-era investment- bundling their expense structure” based managing director and head for their (asset) scale,” he said. vote on Feb. 11. advice exemption take effect as by moving away from revenue- of DCIO. For the mutual fund series, “the Before the committee vote, in a scheduled. The exemption permits sharing, said Joseph Martel, a Balti- TIAA-CREF offers two mutual minimum initial investment for in- written response to a question investment-advice fiduciaries to re- more-based target-date portfolio fund-based target date funds — an stitutional and administrative class posed by Sen. Patty Murray, D- ceive compensation for more types specialist at T. Rowe. “They want to actively managed one with $38.7 shares is $1 million,” a spokeswoman Wash., the committee’s chairwom- of guidance, including advice to roll separate investment expenses from billion in assets and an index-based wrote in an email. “However, it may an, Mr. Walsh took issue with over assets from a retirement plan administrative expenses.” one with $34.2 billion in assets, both be modified for certain financial in- Trump-era rules for ERISA fiducia- to an individual retirement account. CITs also provide fee flexibility. as of Dec. 31. These target-date termediaries who submit trades on ries on selecting investments and But the department indicated that The more target-date fund assets in funds, with the TIAA-CREF brand behalf of eligible investors.” exercising voting rights. its work on the issue was not done a plan, the more a sponsor can ne- name, have been available long be- As of year-end, the CIT series “I am especially concerned that and stakeholders expect the Biden gotiate fees. fore TIAA-CREF acquired Nuveen had $1.1 billion in assets; the mu- the recent rules could make it hard- administration to initiate a rule- Each CIT series has a sliding Investments in 2014. tual fund series had $1.5 billion. n er for plans to make investment de- making process of its own. n 24 | April 5, 2021 Pensions & Investments AT DEADLINE Industrial which ran a passive portfolio, was PIMCO placed on watch CONTINUED FROM PAGE 1 the result of a decision to The $3.5 billion San Joaquin emphasize active management in a big part of institutional portfolios County Employees’ Retirement the fund given the current because it seemed boring, he said. Association has placed Pacific “It was slow, stable and steady. environment in fixed income, Ms. Investment Management Co. on Nobody wanted to focus on it,” Mr. Magnotta said. watch for an emerging markets Costello said. “Slow, stable and Active managers Merganser equity portfolio. steady are fantastic right now.” Capital and Wellington Manage- The board placed the manager Whether industrial supplants of- ment were hired as subadvisers on watch at its March 12 meeting fice and/or retail as a leading prop- at the end of 2020, she said. erty sector among institutional in- “as a result of the ongoing claims vestors depends on where their regarding PIMCO,” said Johanna DoubleLine Capital, originally investment dollars end up, Mr. Shick, CEO of the pension fund. hired as an active manager alongside BlackRock’s passive Costello said. A lawsuit was filed against “It’s a capital race,” he said. PIMCO by five current and former portfolio in 2017 when the fund was launched, remains as a third female employees in November Office deals down FOLLOWING THE TREND: CalSTRS is buying a five-building industrial property from alleging gender and pay discrimi- subadviser. Office deals continue to be down Crow Holdings for $320 million, a deal that will close in the second quarter. nation, sexual harassment, and from prior periods — $2.8 billion in other employment issues. PIMCO Hedge fund group revived February, down 71% from a year ear- dines,” he added. land and constructing the buildings, has categorically denied the lier, RCA data shows — because “The recovery or growth of office he said. The Financial Stability Over- buyers and sellers cannot agree on into the future is a bit of a question “Then came COVID and the claims alleged in the suit. sight Council has relaunched its price, Mr. Costello said. Banks are mark while the demand for indus- market froze for a $700 million PIMCO manages about $73 hedge funds task force. At the forcing properties into default based trial space is strong,” Mr. Brill said. portfolio,” Mr. Levy said. million in the strategy on behalf of request of Treasury Secretary on technical breaches of lending Industrial was also the highest- In May, PGIM Real Estate of- the pension fund. A PIMCO Janet Yellen, who leads the FSOC, agreements, buyers want bargains performing private real estate cat- fered to buy the stabilized, or spokeswoman declined to the council will reconvene its and sellers aren’t willing to take a egory in the NCREIF Property in- leased, properties in the portfolio, comment on SJCERA’s decision. hedge fund working group for the price cut, he said. There were $4.9 dex in 2020 at 11.78%, surpassing leaving the rest of the portfolio that first time since 2016. billion in industrial transactions in the next-highest-performing sec- had yet to be leased, he said. February, the most of any sector tors of multifamily at 1.83% and of- “We have strong relationships Penney terminates plan “We are re-establishing the tracked by RCA, even though the fice at 1.57%. with CalSTRS and, like many in- J.C. Penney Corp. Inc. has working group so that we can deal volume was also down, by 69% Asset owners are not only ac- stitutional investors, it was seek- purchased a group annuity better share data, identify risks from February 2020 due to a large cessing the sector by investing in ing more industrial,” Mr. Levy said. contract from Athene Holding Ltd. and work to strengthen our portfolio deal that occurred last year. diversified and specialist funds but “As each month went by, the zero- to transfer about $2.8 billion in financial system,” Ms. Yellen said Asset owners are continuing to also in open-end funds, separately percent leased portfolio got leased pension liabilities to complete the at a March 31 FSOC meeting, invest in the asset category, in part, managed accounts and in some up — and CalSTRS got more com- termination of its pension plan. according to a transcript posted drawn by outperformance. In 2020, cases, direct portfolio investments. fortable.” An April 1 news release from on Treasury’s website. industrial along with self-storage By the time CalSTRS and Crow Athene said two of its subsidiar- During the meeting’s executive were the only real estate invest- CalSTRS makes a move Holdings close the transaction in ment trust sectors with positive to- The $286.9 billion California the second quarter, all of the prop- ies, Athene Annuity and Life Co. session, the council heard an tal returns, according to PitchBook State Teachers’ Retirement Sys- erties in CalSTRS’ portfolio will be and Athene Annuity & Life update from the Office of Data Inc.’s latest global real estate tem, West Sacramento, is acquiring fully leased, “demonstrating that Assurance Co. of New York, will Financial Research about hedge report released in March. Industrial a five-property industrial portfolio the industrial market is even stron- take on the responsibility of fund activities during the market REITs earned 12.2% total return in Southern California for $320 ger after COVID,” Mr. Levy said. paying benefits to about 30,000 stresses in March 2020, “includ- and self-storage had a total return million from real estate developer Since January, demand from in- participants in J.C. Penney’s ing the relationship between of 12.9% for the year ended Dec. 31, and investment manager Crow stitutional investors for industrial pension plan. hedge funds’ deleveraging and PitchBook data show. Holdings. properties has accelerated, he said. The transaction, signed in price declines in certain financial “Industrial is a nice cash-flowing CalSTRS officials declined to At the same time, banks and other March, completes the termination markets,” Treasury said in a business and probably one of the comment beyond confirming the lenders “are out in force, more than lowest risk category of real estate,” transaction. in even 2020,” Mr. Levy said. of the plan. statement. said Glenn Brill, New York-based The story of how the CalSTRS “I think that we have several According to the company’s managing director in the real estate deal came to be reflects the broader years of outperformance ahead for most recent 10-K filing in January Fidelity victorious solutions practice of FTI Consult- trend around industrial, which industrial,” he said. 2020, the plan had $3.5 billion in A federal court judge in ing Inc. “It can be perceived as a grew stronger during the pandemic, Eventually, supply will increase assets and $3.2 billion in Galveston, Texas, ruled for Fidelity core asset under the right circum- said Michael Levy, Dallas-based and meet the demand “and the tor- liabilities, and was 120% funded. stances because it is relatively low CEO of Crow Holdings. rid growth will settle down a bit,” Investments, rejecting a claim by risk and cash flowing,” he added. CalSTRS is buying half of a port- Mr. Levy said. plan participants that Fidelity’s R.I. tweaks asset classes By comparison, in the office folio that Crow Holdings originally “I don’t know about five years or role as a record keeper for a Shell market, every major employer is re- was to sell to another buyer in Jan- 10 years, but I feel awfully comfort- The $9.6 billion Rhode Island Oil Co. 401(k) plan made it a thinking its office needs, making of- uary 2020, a few months after it had able saying it will continue to out- Employees’ Retirement System fiduciary because of its use of fice investment an iffier proposi- been put on the market. Crow perform for the next several years,” plans to consolidate private participant data. tion, Mr. Brill said. “You can’t Holdings had assembled the port- he said. Crow has about $20 billion equity and opportunistic private “The plaintiffs allege that continue to pack people in like sar- folio two years earlier, buying the of assets under management. credit investments, according to a participant data are ‘plan’ assets memo from a March 24 meeting under ERISA,” thus making Glasgow, Scotland, with Pension In- allowing them to move quickly of the Rhode Island State Fidelity a fiduciary and causing surance Corp. in October. when market conditions are advan- Investment Commission. “profiting from the data a violation ■ A £1.1 billion buy-in conduct- tageous for such transactions. The memo on staff recommen- Risk transfer of its fiduciary duties,” U.S. ed by Maersk Retirement Benefit “Schemes that have already done dations for strategic asset CONTINUED FROM PAGE 3 District Court Judge Jeffrey Scheme, Ware, England, with Legal buy-ins are ahead of the game on allocation said that making the Vincent Brown wrote in a March in excess of £30 billion,” said James & General Assurance Society Ltd. risk management and they on aver- change would allow for deploying 30 opinion. Mullins, partner and head of risk in December. age tend to have better funding lev- capital “periodically as market “Because the court has transfer at U.K. consultant Hymans els,” Mr. Mullins said. conditions or manager availability determined that participant data Robertson LLP in Birmingham, Positive conditions Gavin Markham, partner and permit, rather than through a does not meet the statutory England, referring to the buy-in/ Hymans Robertson’s Mr. Mullins, head of bulk annuities at U.K. con- buyout opportunity set. who noted that an increase in the sultant Barnett Waddingham LLP consistent annual pacing plan.” definition of ‘plan assets,’ the The value of buy-ins and buy- number of plans moving to a buy- in London, agreed with Mr. Mullins The current targets for private plaintiffs have failed to state equity and opportunistic private outs in 2020 was £31.8 billion, while out could be in the cards this year, that 2021 volumes could reach be- claim” that Fidelity engaged in a a record £24.2 billion in longevity said the last few months have been tween £30 billion and £35 billion as credit are 11.25% and 1.5%, prohibited transaction under swaps drove the total deal value to very positive for pension funds due the financial positions of U.K. plans falling under the category of ERISA, the judge wrote. £56 billion. to improving funding levels com- have improved in the first quarter private growth. The new combined Fidelity, its parent company, Some of the largest 2020 deals bined with an improved ability to of the year. “Schemes may not have target is 12.5%. FMR LLC, and several affiliates were: afford risk transfer. been as well-hedged against the were among the defendants in the ■ A £5 billion longevity swap “We will see more and more movement of interest rates. That Brinker axes BlackRock case of Charles Harmon et al. vs. conducted by Barclays Bank U.K. schemes being able to afford insur- position would have moved favor- Retirement Fund, Redhill, England, ing all of their liabilities,” he said, ably for them,” he said. Brinker Capital Investments Shell Oil Co. et al., which was filed with Reinsurance Group of Ameri- adding that plans could move with Over the first quarter of the year, in January 2020. terminated BlackRock as one of ca Inc. in December. buyouts outright or could continue long-term interest rates have risen the subadvisers of its $2 billion The Shell Provident Fund, ■ A £3 billion longevity swap their derisking journey to a full significantly with gilt/swap yields Destinations Core Fixed Income Houston, Texas, had assets of conducted by BBC Pension Scheme, buyout under existing buy-in con- increasing by around 60 or 70 basis Fund, said Amy Magnotta, co-head $11.74 billion as of Dec. 31, London, with Zurich and Canada tracts. Under these so-called um- points and were back toward the of discretionary portfolios. 2019, according to the latest Life Reinsurance in December. brella contracts in the U.K., plan levels at the start of 2020, Mr. The removal of BlackRock, Form 5500. ■ A £2 billion buy-in agreed by sponsors pre-agree terms with in- Markham noted. Old British Steel Pension Scheme, surers for future risk transfer deals, Fifteen-year gilt spot rates were Pensions & Investments April 5, 2021 | 25

Uncertainty about office modestly to existing hedge fund going on about inflation this year tors in traditional bonds,” he said. There’s a cyclical aspect to inves- strategies. I haven’t seen any reduc- and asset owners also are worried Capstone also is seeing “a big tors’ current demand for industrial, Hedge funds tions, but on the other hand, I’m not about the funding challenges for steady stream of net inflows into said Greg MacKinnon, Hartford, seeing broad moves generally into defined benefit plans in the current the firm’s tail-risk portfolio so far CONTINUED FROM PAGE 3 Conn.-based director of research for hedge funds.” low-interest-rate environment,” this year because, ultimately, there the Pension Real Estate Association. der management and the balance Performance remains strong in said Luke Ellis, CEO of Man Group. is a need for investors to protect “There is a lot of uncertainty sur- in assets under advisement. 2021 after the HFRI Fund Weighted Those inflation-oriented conver- large institutional portfolios,” Mr. rounding office at the moment as Sources said the outlook for the Composite index returned 11.8% in sations with Man Group clients in Britton said. investors try to figure out what the hedge fund industry this year re- the year ended Dec. 31, the best return have led to “more bond-re- Mr. Britton said he could not pro- future of work will look like in a mains positive despite plenty of turn in a decade, data from Hedge placement conversations in the last vide specifics about net inflows so post-COVID world, while at the headline risk and general skepti- Fund Research Inc., Chicago, four months than we’ve had in a far this year. Capstone managed $9 same time industrial has been the cism resulting from the market tur- showed. very long time,” Mr. Ellis said. billion as of March 31. big winner among the property moil caused by retail trading in By comparison, in the year end- The situation “creates a good op- types,” Mr. MacKinnon said. “That stocks like GameStop Corp. in Janu- ed Dec. 31, the S&P 500 Total Re- portunity to substitute market-neu- Closed to new investors naturally leads to more interest in ary and high losses incurred in turn index was up 18.4% and the tral hedge funds (for fixed income Balyasny Asset Management LP, industrial and less in office.” March by family office Archegos Bloomberg Barclays U.S. Aggregate because they) ... offer a bond-like Chicago, closed its multistrategy However, while COVID-19 has Capital Management LP. Archegos’ Total Return index was up 7.5%. return of between 5% and 10%, low hedge funds to new investors last accelerated the trend, it has been in losses have broadly been labeled as Year-to-date through Feb. 28, the volatility and generally low draw- year after experiencing high in- place for a few years, he said. Allo- hedge fund problems. HFRI index was up 5.3%, support- downs,” Mr. Ellis said, noting that flows from the second quarter on- cations for open-end real estate A hedge fund consultant who ing expectations that “the outlook Man Group is seeing “really strong ward and remains closed despite funds, as represented by the MSCI/ asked not to be named referred to for the hedge fund industry in 2021 demand for market-neutral hedge “accelerated demand” this year, said PREA U.S. Property Fund index, both incidents as “a flash in the is very positive,” said Ken- Micha Theiner Scott Schroeder, co-founding have shown a rising allocation to in- pan,” noting that they were painful neth J. Heinz, HFR’s presi- partner and head of the cli- dustrial and a decline to office since but short-lived and markets quickly dent. ent relationship group/busi- the end of 2017. Office fell to 31% at recovered. Net inflows into hedge ness development. the end of 2020, from 34.9% in the “These were good reminders that funds are “following better Balyasny’s flagship fund fourth quarter of 2017, the MSCI/ everybody needs to be cognizant of performance and there is returned 33% in 2020 and PREA U.S. Property Fund Index leverage, risk concentration and il- more return dispersion likely is one of the reasons shows. Industrial rose to 24.1% at liquidity,” the consultant said. among hedge fund managers asset owners were keen to the end of 2020 from 16.5% at the Like other hedge fund and hedge than I’ve seen for a couple of invest in the fund, a source end of 2017, according to the MSCI/ funds-of-funds managers, 50 South years,” said Peter Laurelli, said. PREA U.S. Property Fund index. Capital is seeing net inflows from eVestment LLC’s global head Balyasny managed $10 However, office is still the largest both new and existing clients, as are of research. billion as of March 31. allocation, followed by multifamily, AQR Capital Management LLC, Year-to-date through Feb. After a tough 2020 in in the MSCI/PREA index of open- Greenwich, Conn.; Capstone In- 28, net inflows totaled $23.7 which AQR Capital Manage- end funds, so there is a ways to go vestment Advisors LLC, New York; billion, up from net outflows ment’s total assets declined before industrial could overtake of- and Man Group PLC, London, the of $59.3 billion in all of 2020 24.7% to $140 billion, the firm fice, he said. firms said. and $102.3 billion in 2019, is seeing renewed interest That said, asset owners such as Regarding asset owners’ current eVestment data showed. from institutional investors the Oregon Public Employees Re- and future hedge fund allocations, EVestment doesn’t break in its hedge fund strategies, tirement Fund and the $9.8 billion “the question institutional investors out net flows from institu- BULL MARKET: Man Group CEO Luke Ellis said his firm thanks to much improved San Diego City Employees’ Retire- are asking is ‘did hedge funds do tional investors, but analysis is seeing strong demand for market-neutral hedge funds. performance in the first ment System have long-term goals what they are supposed to do and of P&I’s reported hedge fund quarter. of overweighting industrial and mitigate risk when the equity mar- activity by asset owners through funds.” He declined to provide spe- For example, AQR’s absolute-re- underweighting office in their ket was down 20% in the first quar- March 26 found that $1.8 billion cific asset flows. turn strategy, a broad multistrategy portfolios. ter last year?’ The answer is yes,” was invested in hedge funds and Man Group managed $123.6 bil- hedge fund, was up an estimated Oregon Investment Council, Ti- said Daniel Stern, a senior manag- hedge funds of funds and $31 million as of Dec. 31. 22% in the quarter ended March 31, gard, which manages the $82 billion ing director at alternatives consul- lion was redeemed. By comparison, Mr. Frede said 50 South Capital’s compared with 1.2% in the year OPERF’s long-term investment tant Cliffwater LLC. $1.4 billion was invested and $230 institutional investors also are ended Dec. 31. strategy for its $8.4 billion real es- In contrast, Cliffwater clients’ million was terminated from hedge looking for a substitute for tradi- The AQR Diversified Arbitrage tate portfolio, is to underweight of- hedge fund portfolios were down funds/hedge funds of funds in first tional long-only investment-grade Fund was up an estimated 6% in the fice and overweight industrial and 4% to 5% in the tumultuous first quarter 2020. bond strategies and are evaluating first quarter after a one-year return multifamily, and to a lesser extent quarter of 2020, Mr. Stern said. the firm’s credit hedge fund strate- of 25% in 2020. niche assets, according to a report He added that “hedge fund alpha Potential as substitute gy, which features very short dura- David G. Kabiller, an AQR co- by its real estate consultant (production) has been very strong Hedge fund and hedge funds-of- tion and low interest-rate sensitivi- founder, principal and head of busi- Townsend Group. since April last year and continues funds managers expressed opti- t y. ness development, said there had SDCERS began actively building in 2021. We think alpha will be per- mism about 2021, not only because Paul Britton, CEO of volatility been outflows from the firm’s hedge up its exposure to industrial in 2019 sistent for several years.” of favorable market conditions, but and tail-risk manager Capstone In- funds in 2020 but noted that so far with commitments to the RREEF also due to nascent interest from vestment Advisors, said the firm this year “flows tend to follow per- Core Plus Industrial Fund LP of $50 ‘Business as usual’ institutional investors in using also is seeing “very strong demand” formance and we are seeing in- million and Lion Industrial Trust of That said, Mr. Stern said indus- hedge funds as a possible portfolio for its hedge fund strategies as increased institutional investor inter- $30 million, said CIO Liza Crisafi in trywide he’s not seeing “big asset replacement for low-returning vestors shift away from bonds. est and modest inflows … and we an email. By design, the pension allocation changes into or out of fixed-income strategies that are be- “The utility of fixed income cur- expect this to continue as perfor- plan’s $1 billion real estate portfolio hedge funds. Most plan sponsors coming too correlated to public eq- rently is compromised. There’s not mance continues to accelerate.” is underweight office, multifamily are conducting business as usual, uity returns. an awful lot of yield protection or Mr. Kabiller declined to provide and retail, she said. n rebalancing as needed and adding “There has been lots of debate diversification available for inves- the size of net inflows in 2021. n

0.5% as of Dec. 31, and adding that the firm is important factor that will further £60 billion, driven by pension funds returns over a longer period of time have since more than working on a number support the U.K. risk transfer mar- entering the market for the first are expected to enable the plan to doubled to 1.2%. of £500 million to £1 ket in 2021. time, selecting capital-backed jour- move to a buyout. Another alterna- In addition to im- billion transactions. Mike Edwards, partner at Aon ney plans, or those conducting lon- tive is to part with the plan and proving funding levels, Mr. Finch added that PLC in London, said the U.K. insur- gevity swaps that cover deferred move it to a consolidator. deal pricing continues while last year’s pricing ance market has matured enough participants. Ruth Ward, principal at Mercer to be favorable for U.K. provided good value for in recent years to support a greater For example, on March 18, AXA Ltd. in Bristol, England, said that plan sponsors, consul- money, some pension number full buyouts. Mr. Edwards Pension Scheme, London, conduct- her firm is working with a number tants agreed, even if dis- funds — due to lower noted that more recent entrants to ed a £3 billion longevity swap with of plans that could move closer to counts found in the sec- funding levels — could the providers market, such as Hannover Re Holdings (U.K.) Ltd., risk transfer this year through out- ond quarter of last year not take advantage of Phoenix Group Holdings PLC, have which covers plan participants that sourcing. are no longer available. favorable market condi- been building their capabilities have not yet retired. “The front-runners (in terms of POISED: Charlie Finch tions at that time. Fast over the last few years to offer in- plans) are already in conversations Attractive pricing believes DB plans are forward 12 months and surance contracts that cover the li- New pipeline with the regulator ... That should Charlie Finch, part- better funded and have DB plans are better abilities of deferred participants as Though longevity swaps are speed up the process,” she said. ner at U.K. consultant more capacity to derisk. funded and have more well as retirees. more likely to be secured by finan- Ms. Ward added that plans that Lane Clark & Peacock capacity to derisk even if Similarly, he added, more rein- cial services firms for their own are already being assessed by the LLP in London, said that in 2020 pricing is not as exceptional, he said. surance companies are now also plans, any arrival of new solutions £36 billion Pension Protection deal pricing was exceptionally at- Mr. Finch also thinks buyout op- developing capabilities to take on such as capital-backed journey Fund, London, the lifeboat fund for tractive for pension funds, with portunities have improved steadily risks relating to the liabilities of de- plans or DB consolidators in the the DB plans of insolvent compa- sponsors securing transactions at a over the last few years despite the ferred participants. “This partly re- U.K. market in 2021 could unlock a nies, could be strong candidates to 10% discount. economic backdrop of the U.K.’s flects an acknowledgement that the whole new pipeline of companies enter consolidators, which can en- The reduction in price occurred withdrawal from the European market for full scheme transactions, looking to offload pension risk. able them to secure the benefits of due to the widening of credit Union and the coronavirus pan- including deferreds, is expected to Plan sponsors can choose capi- employees when the sponsoring spreads at the height of the corona- demic, as the pace of increases in grow as more pension schemes tal-backed journey plans to help employer has failed. virus pandemic. longevity has slowed down. reach their objectives,” he said. provide additional support to DB Consolidators could offer higher However, despite the fall in cred- Other sources added that insur- Some consultants expect that funds to keep assets invested for benefits to the employees of strug- it spreads, Mr. Finch said: “Pricing is ers’ willingness to cover the liabili- 2021’s total deal value could end up longer rather than plugging the gling employers compared to the still favorable by historic levels,” ties of deferred participants is an higher than in 2020, reaching up to funding gap with cash. Investment benefits the PPF would offer. n 26 | April 5, 2021 Pensions & Investments

Brisbane-based super fund. Mr. front of deflationary trends globally Rieck says his team anticipates in recent decades due to the coun- Inflation higher — potentially materially try’s fast-aging demographic profile higher — inflation over a 12- to — has seen the least activity when CONTINUED FROM PAGE 1 18-month period but nothing that is it comes to preparing for a potential “they’re happy to let inflation be likely to get out of hand over the surge in inflation. above target for a period of time,” longer term. In January, Japan’s consumer Mr. Zurawski said. The plunge in sovereign bond price index — which rose 0.6% year “That’s why we’ve changed our yields to rock-bottom levels, mean- on year in February 2020 just as the position from ‘no, we’re in a defla- while, has found asset owners pandemic was beginning to shut tionary environment,’ prior to CO- around the world continuing to trim down economies globally — VID, to ‘you need to think about the their exposures to that asset class, dropped 0.6% from the year before. risks of inflation and here are some which would suffer the greatest Mercer has been encouraging its asset classes that can provide some losses should inflationary expecta- clients in the region to review their hedge against that risk,’” he said. tions worsen. portfolios with a view to making A number of asset owners in the The NZ$54.1 billion ($38.7 bil- them more resilient to inflationary region predict only a short-term lion) New Zealand Super Fund, pressures, but with Japan’s demo- jump in inflation numbers as lock- guided by its reference portfolio graphic trends probably 10 to 20 downs come to an end this year, un- targets of 80% global equities, 20% years ahead of other developed leashing a wave of consumption global fixed income, is already well- countries, there’s considerable that should temporarily lift goods positioned to benefit in an economy skepticism there that prices will be- prices well above last year’s pan- growing strongly enough to throw gin a sustained rise, Mr. Systermans demic-depressed levels. off rising inflation numbers, noted said. In the second quarter, U.S. con- Michael Frith, the fund’s Auckland- Konosuke Kita, Tokyo-based di- sumer prices or producer prices based chief economist. rector of consulting at Russell In- could be up 4% year on year, but STAYING PUT: LGIAsuper CIO Troy Rieck said there has been no change in strategy at And New Zealand vestments, said Japa- that should prove very temporary, the superannuation fund on account of the prevailing inflation outlook. Super’s strategic tilting nese people aren’t falling back to more normal levels program — which uses worried — or perhaps of around 2% by early next year, driven by a vibrant global economy, In other areas, analysts say cur- overlays to buy broad “cannot imagine” — said Dong Hun Jang, chief invest- analysts said equities, infrastruc- rency hedging could take on great- asset segments trading inflation returning ment officer of the 15.5 trillion won ture, real estate and commodities er importance if the U.S. market’s below its team’s fair anytime soon. ($13.7 billion) Public Officials Ben- would all offer some protection for expected role as the epicenter of value estimates or to But with Russell’s efit Association, Seoul. institutional portfolios. Sovereign global inflationary pressures causes sell assets it sees as clients in Japan sport- But with monetary and fiscal bond allocations, meanwhile, would the dollar to depreciate, reflecting overvalued — has ing an average alloca- policy in unchartered territory over remain the source of choice for relatively stable prices in other been underweight tion now of 25.8% to the past year, some observers see funds to shift into those asset seg- markets, including China. sovereign bonds for currency-hedged room for missteps. ments. Meanwhile, rising prices some time, he said. The global fixed income, Willis Towers Watson is “pivot- wouldn’t affect all countries or fund’s annual report BE AWARE: Andrew more than double their Fed waiting ing” some of its portfolios to real- markets to the same degree. for its fiscal year end- Zurawski thinks investors domestic fixed income In the past, the Fed would have asset type investments — including ed June 30 showed should consider medium- holdings of 11.5%, they boosted rates if it anticipated infla- infrastructure and real estate — Focus locally only a 7% allocation to term inflation risk. will find that they have tion, but now it’s willing to allow pe- “where there are interesting and Inflation is more of a local story fixed income. to deal with the fallout riods of above-target inflation to sustainable cash flows — income than a global one and the implica- Mr. Rieck said “given that cash on their portfolios should U.S. infla- make up for periods of below target effectively — that have a sensitivity tions for asset allocation or a do- rates and bonds yields are so low, tion push higher, he said. results while adding new criteria to inflation,” said Paul Colwell, the mestic book of business could be and are likely to stay that way for New Zealand Super’s Mr. Frith such as ensuring a broad range of firm’s Hong Kong-based senior di- considerably different for asset some time, (LGIAsuper) has been said while the possibility that infla- social groups are benefiting from rector of investments and head of owners in Hong Kong, Australia, pivoting into alternative sources of tionary pressures get out of hand is stronger growth, Mr. Systermans advisory portfolio group, Asia. the U.S. or Europe, Mr. Colwell not- sustainable income, which includes “absolutely the risk that everyone is noted. POBA’s Mr. Jang said the pros- ed. many forms of debt and credit, as going to be watching for,” conceptu- “By the time you hit all of those pect of even a short-term pick-up Superannuation funds in Austra- well as infrastructure and property ally the more interesting conversa- preconditions, there’s a risk…that in inflation has left his team looking lia, for example, with allocations to assets.” tion would be “what happens if you inflation is well above their 2% tar- for opportunities to add floating- growth or risk assets of 65% or more “Direct hedges of inflation risk, don’t get inflation” in the face of all get and as a result they could lose rate exposures, including private would be in a better starting place such as inflation swaps, are now this stimulus? control,” he said. debt, while continuing to boost al- to cope with rising inflationary trading at high levels compared to That possibility would prompt Even on a short-term basis, spik- locations to real estate and infra- pressures than institutional inves- their prices over the last five years, economists to re-examine models ing inflation numbers could prove structure. tors with higher allocations to sov- so we’d prefer to look for assets that had simply stopped explaining disruptive for investors that haven’t Mr. Jang said 61.1% of his portfo- ereign bonds in the U.S. or Europe, with either low duration risk (e.g. what was going on, he said. seen U.S. inflation figures with any- lio was allocated to alternatives as said Philip Naylor, a principal con- floating-rate credit) or assets with “For most investors, it’s those thing but a 1 or a 2 in front of them of the end of 2020, up from 54.6% sultant with Melbourne-based growing cash flows (e.g. infrastruc- structural changes that kill you, for 40 years now, potentially alter- the year before. He declined to Frontier Advisors Pty Ltd. ture) as better ways to deal with that wipe you out” — things that ing relationships between asset break out numbers for real estate There’s been no change in strat- that longer-term challenge,” he sometimes only become clear in classes that have prevailed for de- and infrastructure. Only 6.2% of the egy at LGIAsuper on account of the added. hindsight, like the fact that Micro- cades, Mercer’s Mr. Systermans portfolio was parked in fixed in- prevailing outlook for inflation, said soft Inc. and Facebook Inc. are now said. come, down from 10.6% the year be- Troy Rieck, chief investment officer Holding back central to our economy, Mr. Frith In an inflationary environment fore. of the A$13 billion ($10.1 billion), Japan, meanwhile — at the fore- said. n

Michael A. Marcotte viders to pursue employers looking and minimal information,” he said. to offer their first retirement plan, Employers, which in the past PEPs noting that there’s no conversion found their 401(k) options too com- cost. “If you go after organizations plicated, can now more easily say CONTINUED FROM PAGE 4 that don’t have an existing plan, “yes” to a PEP, Mr. Majors said. In features, including protected bene- there’s nothing to change. You just addition, Mr. Majors believes em- fits, which under ERISA law must sign them up, and they start sav- ployers probably feel a little more be preserved. ing,” Mr. Cary said. Unlike startup pressure to offer a retirement plan Employers with affiliates that plans, converting an existing plan since COVID-19 happened. were merged, for example, might takes “more than zero effort,” he “There’s more awareness that have their own separate preserved added. they need to also care about their benefit structures, which PEPs may Still, the initial focus on startup employees’ financial wellness,” he not be able to accommodate, Ms. plans will likely broaden over time said. Neri said. as existing plan sponsors begin to The initial 1,000 adopters of the “Given the likelihood that com- consider pooled employer plans Paychex PEP have anywhere from panies with current plans in place with more of a track record, more one to more than 1,000 employees are going to take their time in tran- experience and possibly more de- and cover a “good cross-section of sitioning to the PPP structure, it re- veloped offerings, industry observ- American businesses” ranging from ally does make sense for providers ers say. startups to companies that have to focus first on the startup,” Ms. “From a business perspective, been in business for 20 years, Mr. Neri said. “If I were in the market- this is the first step, not the destina- Majors said. He declined to say how ing department of a pooled plan tion in terms of who they’re target- FIRST STEP: Clint Cary thinks it makes sense for pooled plan providers to first focus many participants or how much in provider, I would be encouraging ing,” Mr. Cary said, referring to on employers without workplace plans, but he expects the focus to broaden over time. assets are in the PEP. them to go this route.” pooled plan providers pursuing Even though the high rate of employers without workplace re- startup plans, has already opened ployers without workplace plans to adoption “right out of the gate” was No conversion cost tirement plans. its PEP to employers with existing the ease with which they can join, unexpected, Mr. Majors demurred Clint Cary, head of U.S. delegated Indeed, Fidelity plans to expand plans, an effort Mr. Majors said is unlike stand-alone 401(k) plans, when asked about how soon it solutions at Willis Towers Watson its target market beyond startup showing “promising early results.” which typically involve more ven- might hit the 2,000 mark. PLC in Chicago, agreed that it plans in the future, Mr. Schreiner Mr. Majors attributes the strong dors and more documents. “We’re “I wish I could answer that,” he makes sense for pooled plan pro- said. And Paychex, having hit 1,000 adoption of the PEP among em- really only asking for one signature said. n Pensions & Investments April 5, 2021 | 27 CHANGES AHEAD Green bonds Texas Employees Retirement System, Austin, is searching for CONTINUED FROM PAGE 2 domestic large-cap equity managers. The $30.9 billion pension fund issued an RFP for external managers of large-cap core, growth and value equities factors when they are looking at within its $12.8 billion global public equity portfolio. According to the RFP issuers.” posted on the state’s procurement website, ERS is seeking multiple Part of the increased interest managers to create a select pool from which the retirement system will comes from better disclosure by select managers to provide services on an as-needed basis. In a report companies of environmental im- from the pension fund’s joint board and investment advisory committee pacts, he said. “As disclosure has meeting held remotely Dec. 9, the investment staff said they believed it was improved, as investors have be- time to refresh the select pool because a search had not been conducted come more knowledgeable about since 2010. Barrow, Hanley, Mewhinney & Strauss and Brandywine Global ESG making an impact, I think the Investment Management were listed as external value managers in that investment case has really taken report. The portfolio sizes were not provided. About 27% of the retirement hold,” he said. system’s global public equity portfolio is externally managed. Spokeswom- Green bonds generally refer to an Mary Jane Wardlow said existing managers in the pool do not need to how the proceeds will be used, from respond to the RFP. Proposals are due at 5 p.m. CDT on April 17. specific environmental goals to helping companies transition to a HAVE SOME NEWS? Norfolk County Retirement System, greener outcome. Curbing climate Canton, Mass., is searching for midcap value change was the top reason that na- Please submit news and small-cap growth equity managers. The tional governments issue green, so- of changes to David $1.2 billion pension fund is looking to allocate cial and sustainability (GSS) bonds, GREEN PROJECT: CalSTRS issued $340.6 million in certified climate bonds to finance Schepp, news editor, at $35 million to $40 million to a midcap value according to the Climate Bonds Ini- the expansion of its headquarters in West Sacramento, seen in a rendering above. dschepp@pionline. equity strategy and $32 million to $40 million tiative, an international organiza- com to small-cap growth. Wainwright Investment tion working to develop a green and green bonds is generally very have dedicated sustainability teams Counsel, investment consultant to the plan, is climate bond market. Those sover- strong,” but the need is even great- to help consultants and clients un- assisting with the searches. The RFPs are scheduled to be available on eign issuers also are serving as cat- er, with an estimated $1 trillion derstand what they are getting. Wainwright’s website. Registration is required. Proposals for both searches alysts for corporate and institution- needed “just to get Europe on track “The focus now is trying to report are due by 2 p.m. EDT on April 19. al issuers, green bond advocates say. to meet the EU’s Green Deal sus- on the impact metrics. We want to tainability goals,” she said. go back to clients on how this per- Westfield (Mass.) Contributory Retirement System is looking to Investors driving ESG “Clients asking for fixed-income formed. That’s what clients want at allocate $5 million to $10 million to an active global unconstrained/ Increasingly, it is investors who allocations focus a lot more on the E the end of the day, and it is a great opportunistic and flexible-duration fixed-income strategy. Fiducient are driving interest. “Investors (environment),” said Vishal Khan- gut check for us as well to make Advisors, investment consultant to the $290 million defined benefit system, globally are setting out their own duja, Boston-based director of insure what we intended to happen is assisting in the search. The investment would be a new allocation for the ESG criteria as to what matches vestment-grade fixed-income port- actually happened in a portfolio,” plan, said Liam Browne, retirement administrator for the plan. The board is their own goals,” said Janine Dow, folio management and trading and he said. looking for a fixed-income strategy that is not highly correlated to the senior director of sustainable fi- portfolio manager of the $841 mil- Bloomberg Barclays U.S. Aggregate index. Core-plus, multisector, hedge nance for Fitch Ratings Ltd. in lion Calvert Green Bond Fund. “It is CalSTRS: investor and issuer funds and illiquid strategies will not be considered. The RFP is available on London. definitely a lot of our conversations Investment officials at the $286.9 Fiducient Advisors’ website. Proposals are due 4 p.m. EDT April 23. “Some of that is being dictated by with consultants and clients.” He billion California State Teachers’ regulation, especially in sees the growing inter- Retirement System, West Sacra- Columbus (Ga.) Consolidated Government is searching for a record Europe, but increasing- est coming from asset mento, believe in green bonds as keeper for its $33 million 457 plan. The government issued an RFP for a firm ly it is voluntary as well. owners thinking about both an investor and issuer. to provide administration, record keeping, education and investment services Consumers and inves- how to incorporate ESG CalSTRS has $268 million infor the plan, said Della Lewis, buyer specialist. The RFP is available on the tors are setting their into their investment vested in its green fixed-income government’s purchasing website. Proposals are due at 5 p.m. EDT April 23. own criteria,” Ms. Dow processes, “and then portfolio and recently financed a said. Regulators also climate became one of high-profile headquarters expan- Texas Tech University System, Lubbock, is searching for outsourced play a part, she said. the key issues asset sion project by issuing $340.6 mil- CIO services for its $1.3 billion endowment. The initial term of the contract “Increasingly, financial owners started to focus lion in green bonds through the will be for four years. The endowment’s target asset allocation as of its regulators have accept- on. Green bonds are California Infrastructure and Eco- fiscal year ending Aug. 31 was 30% each to equity and private investments ed that climate risk can just a byproduct of that nomic Development Bank. and 20% each to debt and diversifying assets, according to its latest annual pose financial risks.” work done by asset The bonds were certified as cli- report. The RFP is available on the university system’s procurement In March, the Fed- KEY ISSUE: Vishal owners,” said Mr. Khan- mate bonds by the Climate Bonds website. Registration is required. Proposals are due 1 p.m. CDT April 28. eral Reserve launched Khanduja said Calvert’s duja of Calvert, which Standard Board, and require a veri- a second climate-relat- fixed-income clients focus has $31.8 billion under fication report within 24 months of Los Angeles County Deferred Compensation and Thrift Plans is ed committee to ad- mostly on the ‘E’ in ESG. management. issuance. searching for a provider of class-action filing services, said Elizabeth Lee, dress financial stability Helping to increase The move also earned CalSTRS finance analyst for the county treasurer and tax collector. The 457 plan had risks at a “macroprudential” level the assets invested in green bonds recognition as the 2020 Green Proj- $14.4 billion in assets and the 401(k) plan had $3.8 billion as of Jan. 31. The and to develop a regulatory frame- is their nearing in size to high- ect Bond of the Year by Environ- provider would check whether the plans qualify to participate in any U.S. work. The Fed is also now part of yield offerings, bringing liquidity mental Finance. Due for completion class-action suits based on their past securities holdings, purchases or sales. the Network of Central Banks and and diversification, “which is also a in mid-2022, the project incorpo- Officials at the plans are launching the search because its custodian State Supervisors for Greening the Fi- big thing for institutional inves- rates several green building stan- Street, which was hired in 2017, does not provide the service. ISS Securities nancial System. tors,” he said. dards and is estimated to reduce Class Action Services has provided the service on a short-term basis and has Other U.S. regulators, including Asset managers are also helping CO2 emissions by 56% over a base- been invited to rebid for a long-term contract, Ms. Lee said. RFP responses the Securities and Exchange Com- clients understand the differences line building, and reduce electricity are due May 4 with a selection expected in about three months. The RFP can mission and Commodity Futures between the respective bench- use by 81%. Its green attributes in- be found on the Los Angeles County treasurer and tax collector website. Trading Commission, now have cli- marks for these newer bonds. “Pub- clude producing renewable energy, mate risk initiatives as well. lic pension plans have a clear man- water recycling, a cafe with its own University of West Florida Foundation Inc., Pensacola, will begin a In 2020, more than $300 billion date that they’re coming with, and garden and even an “irresistible search for an investment consultant in April or May. The $110 million in green bonds were issued global- one thing they truly want to under- stairwell” with windows enticing foundation’s executive committee made the decision to go forward with an ly, out of a global total of $730 bil- stand is you are not compromising people away from the elevator. RFP, according to March 10 board of directors meeting minutes. A draft of lion for sustainable bonds, accord- what an investment should be do- A Climate Bonds Initiative report the RFP is currently being written. The current consultant is Atlanta ing to public sources tracked by ing,” he said. on green bond pricing in public and Consulting Group; whether the firm is invited to rebid was not available. The Fitch. In the first few months of “The other thing they are looking private sector bond markets in the university posts RFPs on its procurement website. 2021, there have been roughly $14 for is the true deep proprietary second half of 2020 found “increas- billion in green bonds, with 70% is- work” behind the green bond offering signs of greenium,” with both For a comprehensive database of search and hiring activity, visit P&IQ at PIonline. sued in Europe. ing. “That is one that consultants European and U.S. green bonds on com/piq. Exponential growth is expected, have honed in,” said Mr. Khanduja, average performing well on all met- Ms. Dow said. “Oversubscription of who also credits banks that now rics, including yield curve. n

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