Institutions See Risks Returning, Seek Protection

October 19, 2020 PIonline.com $16 an issue / $350 a year

THE INTERNATIONAL NEWSPAPER OF MONEY MANAGEMENT

STANDING UP FOR THE Investing LITTLE GUY: Scott

Daniel Burke Conking said Vanguard will be returning to the company’s heritage of working with individual Institutions see investors. risks returning, seek protection U.S. election, Brexit, coronavirus combine to make investors uneasy

By SOPHIE BAKER and PAULINA PIELICHATA

Institutional investors and out- Money Management sourced CIOs are adopting conservative, cautious stances in portfolios for the final quarter of what has been a difficult year, partly due to Vanguard moves from Asia-Pacific institutions fears that supportive policies may be pulled back too quickly. Industry ‘gobsmacked’ as manager pins its future its Asia-Pacific assets under Before the end of the year, inves- management. tors will also have to deal with po- CAREFUL: Mirko Cardinale said his fund on the retail markets in both China and Australia Vanguard will shut down its litical events — the U.S. presidential is seeing ‘many clouds on the horizon.’ business in Hong Kong and close election and the end of the Brexit By DOUGLAS APPELL first and foremost in China. its sales and client service office transition period — and the poten- “We have adopted a conservative The move will effectively nar- in Tokyo as well over the coming tial resurgence of the coronavirus stance as we move into the final Vanguard Group is adopting a row Vanguard’s footprint in the year or two. and associated lockdowns in West- quarter of the year,” said Mirko Car- binary approach for its Asia-Pa- region to China — with its head- When the firm announced new ern economies. dinale, head of investment strategy cific business, walking away from quarters shifting to Shanghai leadership for the region in a These fears are leading some in- and advice for USS Investment tens of billions of dollars of segre- from Hong Kong — and Austra- March 19 news release — ap- vestors to pare back on risk assets, Management Ltd. in London. USS gated mandates from retirement lia, where the firm’s A$160 bil- pointing 36-year veteran Scott while others are adding protection IM is the in-house manager for the plans and official institutions to lion ($114.5 billion) business ac- Conking as head of Vanguard Asia into portfolios in order to try to eke Universities Superannuation focus on serving retail investors, counts for roughly two-thirds of SEE VANGUARD ON PAGE 36 out gains from equity exposures Scheme, London, which had £67.6 while also hedging downsides. SEE RISK ON PAGE 34

Zach Veilleux/The Rockefeller University Private Equity Endowments Data, technology become Private investments, liquidity new prized possessions valued as different priorities

By ARLEEN JACOBIUS By ROB KOZLOWSKI ENDOWMENT DATA Private equity firms are writing a new chapter in their play- University endowments that re- n Data on endowment returns can book to favor business models incorporating data utilization and ported annual returns saw mixed be found on Page 38. technology. results during an extraordinarily The pandemic and COVID-19-induced recession have accel- volatile 2020 fiscal year that ended lion endowment returned a net erated trends already in motion. In the new normal, every com- June 30. 7.3% for the fiscal year, while Yale pany — no matter the sector — will collect and use data to its While the largest endowments University’s $31.2 billion endow- advantage. All companies will replace existing business models performed well due to their large al- ment returned a net 6.8% for the with technology-enabled models that own few assets, making locations to private investments, same period, both well above the these companies higher priced and more nimble, industry exec- smaller and midsize endowments median return of 5.1% among the 26 utives said. are prioritizing liquidity as the insti- university endowments with $1 bil- The digital transformation is a huge benefit in the COVID-19 tutions they support face financial lion or more in assets that had re- world in which private equity and venture capital firms are try- challenges, industry observers said. ported results by Oct. 14. ing to sell or take public as many portfolio companies as possible The two largest university en- Nirmal P. “Narv” Narvekar, presi- before the potential double whammy of a second wave of the dowments reported similar results dent and CEO of Harvard Manage- virus and increased market volatility around the U.S. presiden- FOR THE WIN: Amy C. Falls said private equity was for the fiscal year ended June 30. ment Co., which oversees the Cam- tial election. | SEE DATA ON PAGE 36 the difference-maker for Rockefeller University. Harvard University’s $41.9 bil- SEE ENDOWMENTS ON PAGE 38 SOUND BITE Pitfalls not a problem with DC managers ACCENTURE’S MICHAEL SPELLACY: ‘Bigger isn’t better in Managers serving the defined asset management today. The old style — where two asset contribution industry shrug managers combine and put everything together in one big off coronavirus-related shop — doesn’t work well in today’s market.’ Page 3 volatility and post gains for the year. Page 22 2 | October 19, 2020 Pensions & Investments

IN THIS ISSUE Retirement Plans

VOLUME 48, NUMBER 21

Defined contribution Few powering up with electronic disclosure While the use of OCIOs by defined contribution Simsbury, Conn.-based SPARK In- plan sponsors is not widespread, those that use Implementing programs stitute, which represents retire- them are satisfied and rely on them. Page 11 will take some time, and ment industry players such as re-

Pensions & Investments is extending the Ciara Cusseaux cord keepers, investment advisers, deadline for entering the 2021 Eddy Awards to other things come first mutual fund companies and benefit Oct. 23. Page 26 consultants. “So much has been By BRIAN CROCE happening with regard to the SE- ESG CURE Act and CARES Act and ex- While U.S. regulators cautiously consider how When the Department of Labor ecutive orders. This has been some- to deal with climate risk, other countries and finalized a rule in May that permit- thing that our members have been institutional investors are not waiting. Page 6 ted default electronic delivery of wanting for a long time but there’s retirement plan disclosures, record so much other activity going on that Exchange-traded funds keepers and plan sponsors wel- we’re all just starting to implement comed the move by saying it will the new rule now.” Today’s exchange-traded product launches are increase participant engagement Will Hansen, executive director increasingly tomorrow’s closures. Page 12 and cut mailing costs. of the Arlington, Va.-based Plan And while those points still hold, Sponsor Council of America and Governance since the rule went into effect July chief government affairs officer at CalPERS for the first time voted against 27 there hasn’t been much move- the American Retirement Associa- compensation committee members for say-on- ment to implement default election, has noticed something similar pay plans. Page 26 tronic disclosure programs. Both from plan sponsors. It’s “not a nega- plan sponsors, which need to OK tive toward the rule, it’s just priori- Money management the electronic shift, and record ties,” he said. “Right now from an Active value manager AJO Partners will close keepers, which need to figure out HR perspective, priorities are still Dec. 31 in reaction to asset losses from the logistics, have been busy lately. focused on the pandemic and the performance and terminations. Page 4 “Most members are just starting general end-of-year employee ben- NO RUSH: Tim Rouse said industry participants have so much on to spec out the program,” said Tim efit activities, and once that goes Analysts fail to see how a potential merger of their plates that only now is electronic delivery being addressed. Rouse, executive director at the SEE DISCLOSURE ON PAGE 33 Invesco and Janus Henderson would alleviate secular challenges facing both firms.Page 6 Singapore’s Temasek has set up a holding ESG company for four money management subsidiaries with combined assets under management of $54.9 billion. Page 19 CPPIB urged to plan now for net-zero reality Departments With significant investment At deadline ��36 ETFs ��12 Changes ahead ��39 Frontlines ��8 in fossil fuels, fund needs to Classified ��32 Hirings ��30 DC roundup ��28 Other views ��10 look to future, experts say Editorial ��10 RFPs ��32 By DANIELLE WALKER Index manager, consultant Despite Canada’s economic reliance on surveys in progress its oil and gas industry, finance experts and Pensions & Investments is accepting late sustainability advocates are urging large responses to the annual survey of index public investors like the C$434.4 billion managers. Firms managing index strategies ($326.3 billion) Canada Pension Plan In- — including passive, enhanced, ETFs/ETNs vestment Board to implement long-term and factor-based — for U.S. institutional, investment strategies that better align with tax-exempt assets are eligible. Results will the federal government’s pledge to achieve run Nov. 16. net-zero carbon emissions by 2050. Multiple sources agree that Toronto- Also, responses to P&I’s annual survey based CPPIB, Canada’s largest pension of investment management consultants fund, should support the country’s transi- are due Oct. 23. Firms providing tion to a low-carbon economy, enhance its investment advice and related services disclosure of fossil-fuel investments and to institutional investors are eligible. set a long-term plan for winding down TALK IT OUT: Richard Manley believes engagement will produce better results than mere divestment. Results will run Nov. 30. such assets. To request a survey or obtain further Adam Scott, director of Shift Action for gether to engage on climate change issues, pension fund’s C$11.6 billion fossil-fuel information, please contact Anthony Scuderi Pension Wealth and Planet Health, a To- said the organization gives CPPIB “credit portfolio is still more than twice as large as at [email protected] or 212-210-0140, ronto-based non-profit that aims to bring for ramping up the scale of their invest- its renewable energy portfolio. or visit www.pionline.com/section/surveys. beneficiaries and their pension funds to- ments into clean energy” even though the SEE NET ZERO ON PAGE 33

Entire contents ©2020 Crain Communications Inc. All rights reserved. Pension Funds Pensions & Investments (ISSN 1050-4974) is published biweekly by Crain Communications Inc., 150 N. Michigan Ave., Chicago, Ill. 60601- 7593. Periodicals postage paid at Chicago, Ill. and at additional mailing offices. Postmaster: Send address changes to Pensions & Investments, P&I survey of top 1,000 retirement plans underway Circulation Dept., 1155 Gratiot Avenue, Detroit, Mich. 48207-2912. $16 per issue; $350 per year in the U.S.; $375 per year in Canada; all Pensions & Investments launched its or more are eligible. To request a survey or invested under ESG principles and how other countries $475. ‘‘Canadian Post International Publications Mail annual survey of the 1,000 largest obtain further information, please contact much is invested in ESG mandates. Product (Canadian Distribution) Sales Agreement No. 0293539’’ GST retirement plans in the U.S. earlier this Anthony Scuderi at [email protected] Similarly, while past surveys asked #136760444. Printed in U.S.A. month. or 212-210-0140, or visit pionline.com/ whether DB plans have a policy of P&I has published a special report section/surveys. Plan sponsors that encouraging the hiring of money managers CRAIN COMMUNICATIONS INC based on this survey annually since 1974. complete the survey can have access to owned by women, minorities, the disabled Keith E. Crain, Chairman Mary Kay Crain, Vice Chairman The data gathered on what has been a the data in P&I’s Research Center and veterans, this year P&I is asking how KC Crain, President tumultuous year for retirement plans will database. much is invested with those managers and Chris Crain, Senior Executive Vice President inform stories by the staff on the latest The survey generally covers the 12 how many managers are on the roster. Lexie Crain Armstrong, Secretary trends in defined benefit and defined months ended Sept. 30, 2020. In cases Finally, in light of Department of Labor Bob Recchia, Chief Financial Officer contribution investing in the Feb. 8, 2021, where no information is provided from the guidance allowing DC plans to include G.D. Crain Jr., Founder (1885-1973) issue. plan sponsor, or the data are older than certain private equity strategies into Mrs. G.D. Crain Jr., Chairman (1911-1996) Questionnaires were sent to more than June 30, 2020, P&I will calculate esti- diversified investment options, a question Published every other Monday by Crain Communications Inc. 1,300 plan sponsors in P&I’s database. mates to Sept. 30. has been added on how much is invested Boston: 101 Federal St., Suite 1615A, 02110; Chicago: 150 N. Michigan Ave., 19th Floor, 60601; The largest 1,000 will be identified in the There are a few new questions this year in private equity in DC plans. London: 11 Ironmonger Lane, EC2V 8EY; El Segundo, Calif.: 400 Continental Blvd., 6th Floor, 90245- 5074; New York: 685 Third Ave., 10017; San Francisco: 71 Stevenson St., Suite 400, 94105; coming months from completed question- to reflect emerging trends and areas of Also, a comments box has been added Washington D.C.: 601 13th St. NW, Suite 800 South, 20005. naires, follow-up phone calls and emails, interest. The question on whether a DB to the end of the survey where plan Address all subscription correspondence to Pensions & Investments, 1155 Gratiot Ave., Detroit, Mich. and database searches. plan incorporates ESG factors into the sponsors can voluntarily note any 48207-2912 or email [email protected]. Member of Business Publications Audit of Circulation Plan sponsors with combined U.S. portfolio management process now has substantial changes in their data from the www.pionline.com pension and DC plan assets of $1.3 billion two subsequent questions on how much is year before. n Pensions & Investments October 19, 2020 | 3

Marc Schlossman/Fovea Regulation Money Management Eaton Vance Industry claims acquisition said PPP proposal to be good for asks too much Morgan Stanley Registration requirements sought by By SOPHIE BAKER DOL too onerous, of cials contend Morgan Stanley’s $7 billion deal to acquire Eaton Vance Corp. is By MARGARIDA CORREIA seen as a plug-and-play transac- OUR TAKE tion, with industry sources in gen- Retirement plan service provid-  Pooled plans eral positive on the coming togeth- ers, plan sponsors and other indus- to open soon, er of two businesses with different, try stakeholders are pushing back and everyone but complementary, strengths. against the Department of Labor’s will be welcome The transaction, which will cre- proposed registration require- to dive in. Page ate an investment management ments for pooled plan providers, 10 business with about $1.22 trillion in the companies that will run the assets under management, is ex- new pooled employer plans expected to start rolling pected to close mid-next year and out Jan. 1 under the SECURE Act. will be funded via stock and cash. In comment letters to the Department of Labor, in- The intent is to ll gaps in offer- dustry participants argued that the proposed regis- ings, share and expand distribution tration requirements go of strategies, and well beyond what was help to balance RELATED anticipated under the VALUE FOR MONEY: Marisa Hall sees trends in money management as a re ection of the focus on fees. Morgan Stanley’s NEWS legislation and urged capital-inten-  Experts the agency to stream- SPECIAL REPORT WORLD’S LARGEST MONEY MANAGERS sive businesses, skeptical on line the information re- such as invest- any merger of quired. ment banking, Invesco, Janus- “We were thinking with the relative- Henderson. that the registration Passive assets at all-time high ly balance sheet- Page 6 would just be a short light operations registration with basi- of money management, James Gor- cally contact informa- for world’s largest managers man, Morgan Stanley’s chairman tion,” said Jan Jacobson, and CEO, said in a conference call senior counsel, retire- with analysts on Oct. 8. HOLDING BACK? Jan Jacobson ment policy, at the By PAULINA PIELICHATA MORE ON THE WORLD’S LARGEST The rationale for the deal is also believes employers could be American Bene ts MONEY MANAGERS different to other manager M&A, turned off by the costs Council in Washington. Passive assets run by the 500 largest global said Stephen Tu, New York-based associated with compliance. The anticipated new money managers increased to an all-time  North American money manager assets vice president and senior credit of- plans — or PEPs — were high at the end of 2019, recovering from a increase 20.3%. Page 14 cer in Moody’s Investors Service established under the SECURE Act to make it easier for 9.7% decline in 2018, while overall assets un-  Charts and data can be found starting on Inc.’s nancial institutions group. employers in unrelated businesses to join a collective der management grew 14.8% to $104.4 trillion. Page 15. “You compare it to the logic of a lot or pooled retirement plan for their workforces, a move The annual ranking by Pensions & Invest- of other deals being done,” which that would allow companies to reduce administrative ments and Willis Towers Watson PLC’s Think- Marisa Hall, co-head of the Thinking are about scale, cost savings and duties and lower retirement plan costs through econo- ing Ahead Institute showed that passively Ahead Institute in London, said the trends in ‘how do you survive.’ But here, that’s mies of scale as well as attract employers that currently managed assets increased 25.3% at the end of the money management industry are a re- what sets this deal apart from some do not offer plans. The breadth of the proposed regis- 2019 to $7.87 trillion. ection of an increasing focus on fees and of the others we’ve seen in the tration requirements would erode some of the intended Active assets under management in- value for money by asset owners. The growth space.” Those factors do not appear ef ciencies and cost savings, some industry partici- creased 12.5% to $25.17 trillion, following a of passive over the last 10 years re ects rap- to be “the primary motivation for pants argued. 3.8% decline in 2018, according to the re- idly advancing technology changing the the deal,” he said. “You’re running the risk that the costs would become search. Active and passive assets under man- shape of mandates and producing products Boston-based Eaton Vance ran too great and you wouldn’t meet your original goal of agement are based on a subset of money that require less governance and are more $507.4 billion as of July 31 through encouraging more employers to have retirement plans,” managers that have provided data for all streamlined, she said. four of its investment af liates: SEE PPPs ON PAGE 39 years since 2015. SEE MANAGERS ON PAGE 14 SEE MORGAN ON PAGE 34

Manager growth 40% led by gains in 36% 32% Vanguard Group BlackRock** DC, passive 28% T. Rowe Price assets 24% Nuveen 20% J.P. Morgan Asset Mgmt. Managers with less than $1 billion in 16% DC assets and no U.S. institutional MassMutual tax-exempt passive assets 12% Northern Trust Asset Mgmt. Managers with more than $1 billion 8% in DC assets and no U.S. institutional tax-exempt passive 4% assets; bubble size = DC AUM as of Dec. 31, 2019 0% BNY Mellon Managers with DC assets that -4% manage U.S. institutional tax-exempt passive assets; bubble -8% size = DC AUM as of Dec. 31, 2019; Invesco shading = growth in passive assets, -12% 2004 - 2019: Prudential Financial -16% 15% to 20% State Street Global 10% to 15% -20% 5% to 10% Fidelity Investments* 0% to 5% -24% -10% to 0% Lower than -10% -28%

CHANGE IN U.S. INSTITUTIONAL TAX-EXEMPT AUM, 2004 - 2019 (ANNUALIZED) AUM, CHANGE IN U.S. INSTITUTIONAL TAX-EXEMPT -32% -16% -12% -8% -4% 0% 4% 8% 12% 16% 20% 24% 28% CHANGE IN WORLDWIDE ASSETS UNDER MANAGEMENT, 2004 - 2019 (ANNUALIZED) *Growth in passive assets is from 2007 to 2019. **Acquisitions included in computing growth in passive assets. Source: P&I Research Center Compiled and designed by Aaron M. Cunningham and Gregg A. Runburg 4 | October 19, 2020 Pensions & Investments

Money Management AJO closing after 37 years because of ‘market forces’ Value manager says it es and client redemptions. Theodore R. Aronson, founder, couldn’t outlast client managing principal and co-CEO, broke the news to investors in an losses, bad performance Oct. 14 memo that was obtained by Pensions & Investments. By CHRISTINE WILIAMSON “Our decision to close is in response to market forces,” Mr. Aron- After 37 years, active value spe- son said in the memo. “We still be- cialist manager AJO LP will cease lieve there is a future for value trading Nov. 30 and close Dec. 31 investment; sadly, the future is un- after a steep decline in assets under likely to arrive fast enough for us.” management from investment loss- “A year ago, I didn’t see this coming,” Mr. Aronson said in an interview. “The confluence of events led us to a conclusion that was in- exorable. There was just no way out. Over the last three to four years, we lost so many clients and HOW DO YOU performance was a problem. It be- gan an avalanche, and we saw that we had to do what was right for cli- MANAGE RISK ents and employees.” AJO added a lot of value to many THROUGH institutional portfolios over 37 BOTH CHAOS AND CALM?

ADAMANT: Theodore R. Aronson believes there still is a future for value investing, but it won’t come in time for the firm.

years, but current conditions created a lot of business insecurity, said Gina Marie N. Moore, co-CEO, principal and portfolio manager of the Philadelphia-based manager. “Even if clients wanted to hang in there with us until value came back into favor, we had to ask our- selves how long could we make it until that happened. When the trip- wires in this kind of situation are triggered, it creates a lot of employee insecurity, too,” Ms. Moore added. In the client memo, Mr. Aronson said the firm’s revenues are largely driven by U.S. mandates with a value tilt and added “our relative per- You can’t control the changing tide formance has suffered because our investment edge ... is at odds with of the markets, but we can help you many forces driving the market.” navigate it. CME Group helps you He added that “the drought in manage risk and capture opportunities value — the longest on record — is at the heart of the challenge. The across all major asset classes. We length and severity of the head- deliver nearly one billion data points winds have led to lingering viability daily, informing the insight you need to concerns among clients, consultants and employees.” refine your trading strategy. For taking Mr. Aronson said during the in- advantage of opportunities in all terview that the firm manages a market environments… CME Group. total of $10 billion for 44 institutional clients. According to survey data provided by AJO for P&I’s annual VISIT CMEGROUP.COM/ACTION money manager report, AJO’s current AUM is down 46.8% from $18.8 Derivatives are not suitable for all investors and involve the risk of losing more than the billion as of Dec. 31, 2019, and down amount originally deposited and any profit you might have made. This communication 64.7% from $28.3 billion as of Dec. is not a recommendation or offer to buy, sell or retain any specific investment or service. Copyright © 2020 CME Group Inc. All rights reserved. 31, 2016, the most recent high reported to P&I. Mr. Aronson said AJO hit its peak SEE AJO ON PAGE 38 20pi0148.pdf RunDate: 07/27/20 Full Page Color: 4/C 6 | October 19, 2020 Pensions & Investments

ESG Federal regulators urged to address climate risk Bill Clark/CQ Roll Call U.S. under increasing cial risk. SECOND And in November, the Federal BANANA: pressure to recognize Reserve Bank of Richmond is host- Robert Jackson ing a similar Climate Change Eco- Jr. said a potential market harm nomics summit, and bank regula- failure by U.S. tors are paying closer attention, regulators to By HAZEL BRADFORD advocates say. A new report from act on the risks Ceres warns that more than half of climate change The pressure on U.S. financial major U.S. banks’ syndicated lend- could pose to regulators to address climate risk is ing is exposed to climate risk, yet markets could growing as investors and regulators that exposure is not fully disclosed. allow other overseas — and others at the state Summits are helpful, but institu- countries to level — continue to forge ahead. tional investors want U.S. financial take the lead “We are seeing great momentum regulators to see mandatory climate in a way that every day from companies, inves- risk disclosure as part of their man- wouldn’t reflect tors and regulators, but it’s just not date to protect U.S. market stability the needs of fast enough. We have to accelerate and competitiveness. A group of in- U.S. investors. the rate of change,” said Steven vestors with nearly $1 trillion in as- Rothstein, Boston-based managing sets stressed that point in a July let- director of the Ceres Accelerator for ter to all U.S. regulators, including Sustainable Capital Markets, a Ce- the heads of the Federal Reserve res initiative advocating for capital and the Securities and Exchange market policies to address global Commission. climate change. Climate risk “poses a systemic “I have had hundreds of conver- threat to financial markets and the sations with regulators at the fed- real economy, with significant dis- eral and state level. We have seen a ruptive consequences on asset val- trol “before other jurisdictions im- ment research fees as a warning. “It subcommittee advising the Com- lot more interest and momentum at uations and our nation’s economic pose disclosure regimes on U.S. is- allowed Europe to take leadership modity Futures Trading Commis- the state level,” Mr. Rothstein said. stability,” warned the 72 signatories, suers and investors alike.” in a way that didn’t reflect our in- sion on climate change’s impact on Recent examples include the including the $262.5 billion Califor- vestors’ needs,” he said. financial markets. The report called New York Department of Financial nia State Teachers’ Retirement Sys- A real risk Mr. Jackson does see some room out the U.S. for lagging behind oth- Services dictating that New York- tem; $211.2 billion New York City That is a real risk, said former for progress, though. With major er countries in protecting their fi- based insurers integrate consider- Retirement Systems; $210.5 billion SEC Commissioner Robert Jackson asset managers like BlackRock Inc. nancial system from climate ations of climate risk into their gov- New York State Common Retire- Jr., a professor at New York Univer- pressing corporate boards for change. “It is a striking assessment ernance frameworks, risk ment Fund; $56.1 billion Maryland sity School of Law and co-director more transparency on climate and and indictment of the state of cli- management processes and busi- State Retirement & Pension Sys- of its Institute for Corporate Gover- other ESG risks, “the conversation mate risk. I am hopeful that the ness strategies. The agency also tem; and the $3 billion Seattle City nance and Finance. “A failure to act at the SEC is completely different SEC and CFTC can provide leader- signed the United Nation’s Princi- Employees’ Retirement System. on climate disclosure is going to than it was 10 years ago. It’s no lon- ship in this area,” he said. ples for Sustainable Insurance. Another advantage of having a lead to allowing Europe and others ger viewed as the object of gad- Like Mr. Jackson, current SEC In Washington state, the insur- uniform disclosure framework for to take the pen,” said Mr. Jackson, flies,” he said. Commissioner Allison Herren Lee ance commissioner convened an U.S. companies, said the SEC’s in- who sees the confusion caused by One “real achievement,” Mr. Jack- agrees with many institutional in- October summit on regulating cli- vestor advisory committee in May, European MiFID II rules unbun- son said, was the September report vestors that the SEC already has mate change as a systemic finan- is that it will let the SEC take con- dling trade execution and invest- from a non-partisan market risk SEE REGULATORS ON PAGE 26

Money Management great on either side this year.” “At Invesco, the very high price and costs of the Oppenheimer acquisition continue to drag on the balance sheet and earnings of the Rumors of Invesco-Janus deal met with skepticism company. Paying a public company premium JHVEPhoto Kristoffer Tripplaar/Alamy and launching another bruising integration is Experts say merger wouldn’t not easy to contemplate,” he wrote. Invesco had $1.15 trillion and Janus Hen- do much to address challenges derson had $336.7 billion in AUM as of June facing both management firms 30. “Consolidation is hard to implement when DANIELLE WALKER both firms are trading under the market, and the integration is likely to be long and Amid speculation that Invesco Ltd. and Ja- fraught,” Mr. Putnam added. nus Henderson Group PLC could pursue a tie-up as a result of activist investor pres- Less complementary sure, there is a healthy dose of skepticism Moody’s Mr. Epstein added that he doesn’t among analysts and M&A experts about see the firms’ client or product mixes being as whether such a deal would significantly ben- complementary as Franklin Templeton’s ac- efit the firms. quisition of Legg Mason or Invesco’s pur- The rumors of a merger come as there has chase of OppenheimerFunds. been continued scrutiny of the industry’s “(A combination) would push Invesco to be largest money manager tie-ups, including more of a U.S. retail firm and that’s the area of whether such combinations have ultimately the industry that is under the greatest stress. strengthened companies. Traditional (active) funds have been sup- On Oct. 2, activist hedge fund Trian Fund planted by passive products and both firms Management LP said in SEC filings it had have had outflows in assets under manage- taken 9.9% stakes in Janus Henderson and ment,” Mr. Epstein said. Invesco and may encourage the firms to indi- Of Invesco’s $1.15 trillion in total AUM, vidually explore “strategic combinations” $863.5 billion was actively managed assets as with “one or more companies in the asset NOT REALLY: Many believe an Invesco-Janus Henderson merger wouldn’t solve their individual problems. of June 30. Some $788.4 billion of its total management industry” — wording that AUM was in retail strategies and $829.8 bil- sparked speculation that the firms could in pushing the companies together,” Mr. Ep- combination is not a “natural association” he lion was with clients in the Americas, the firm merge together and create a firm with almost stein added. would make. reported in its second-quarter earnings. Ja- $1.5 trillion in assets under management. A spokeswoman at Trian declined to com- Invesco has already “done some large nus Henderson is an active manager with Neal Epstein, vice president, senior credit ment beyond the SEC filings. deals and their balance sheet is already a lit- more than half of its total AUM, $187.6 billion, officer at Moody’s Investors Service, New Of note, Trian took a 4.5% stake in Legg tle stretched,” Mr. Epstein said, noting the with North America clients, the firm reported York, said in an interview that the SEC filings Mason Inc. less than a year before it was an- firm’s 2019 acquisition of Oppenheimer- in its second-quarter earnings. hinted that Trian may see Invesco and Janus nounced in February the firm would be ac- Funds for $5.7 billion. As of June 30, around a third of both In- Henderson as “potential partners” and that quired by Franklin Resources Inc. in a $4.5 Donald H. Putnam, a managing partner at vesco and Janus Henderson’s businesses the firm was “talking to each company sepa- billion deal. Grail Partners, San Francisco, said in an were institutional AUM, Mr. Epstein also rately about merging with companies in If a deal between Invesco and Janus Hen- email that there is “certainly potential for noted. which (Trian) already has taken positions in,” derson were on the table, Mr. Epstein said consolidation in the industry, and over time Catherine Seifert, a vice president and eq- or may in the future. that he believes Invesco “could conceivably (Invesco and Janus Henderson) might make uity analyst at CFRA Research, New York, “That sort of suggests they are interested absorb Janus Henderson,” although that the a half-decent match, but the timing is not SEE INVESCO-JANUS ON PAGE 26 6FKZDE5HWLUHPHQW 3ODQ6HUYLFHV,QF

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20pi0217.pdf RunDate: 10/19/20 Full Page Color: 4/C 8 | October 19, 2020 Pensions & Investments FRONTLINES

MEANINGFUL MONIKER Princeton to name new residential college after Ariel’s Mellody Hobson Calvin Sit/Bloomberg

Princeton University will establish a new that our past does not have to be our future.” residential college, thanks to a lead gift from On June 26, the university’s board of Mellody Hobson, co-CEO and president of trustees voted to remove the name of Ariel Investments, and the Hobson/Lucas Woodrow Wilson from Wilson College and Family Foundation. the School of Public and International Affairs. The residential college is expected to Wilson College was renamed First College, open in the fall of 2026. It will be named and it will be closed pending completion of Hobson College, and it will be built on the two new residential colleges now under site of what was formerly known as Wilson construction on campus. Hobson College will College, which was named for Woodrow be the third new residential college. Wilson, the former president of the univer- “We have taken this extraordinary step sity, former governor of New Jersey and because we believe that Wilson’s racist former president of the U.S. thinking and policies make him an inappro- “My hope is that my name will remind priate namesake for a school whose scholars, future generations of students — especially students and alumni must be firmly commit- those who are Black and brown and the ted to combating the scourge of racism in all ‘THEY TOO BELONG’: Mellody Hobson wants minority students to know ‘our past does not have to be our future.’ ‘firsts’ in their families — that they too its forms,” the trustees wrote. belong,” Ms. Hobson said in a recent univer- Michael Hotchkiss, a university spokes- Family Foundation other than to call it will include the building of “an entire sity news release. “Renaming Wilson College man, declined to comment on the size of the “significant.” He declined to comment on the complex of dormitories and social and study is my very personal way of letting them know gift from Ms. Hobson and the Hobson/Lucas cost of building the residential college, which spaces,” he wrote. — ROBERT STEYER

‘GOING ABOVE AND BEYOND’ MORE WANTED CIO of Chicago Teachers to Verus, eVestment receive award from Women push for enhanced Investment Professionals diversity reporting Angela Miller-May, chief WIP’s annual award. investment officer of the $11 billion “I have attended the WIP Annual Verus Advisory Inc. has teamed with eVestment Chicago Public School Teachers’ Trailblazer Dinner every year over LLC to push money managers to disclose more Pension & Retirement Fund, will the last seven years, and I have sat workforce data on gender and ethnic diversity. receive the Distinguished Woman in the audience and listened to the The joint initiative will entail eVestment Investment Professional of the Year award recipients and speakers talk enhancing its questionnaires to request data on Award from Women Investment about their career journeys, the diversity at firmwide and investment team levels Professionals at its Annual challenges that they faced and the as well as information on money managers’ efforts Trailblazers event, which will be impossibilities that they con- to increase gender and ethnic diversity within held virtually Oct. 22. quered,” Ms. Miller-May said. investment and senior leadership roles, according The non-profit organization, “I took to heart each piece of to a news release from Verus, a Seattle-based established in 1996, gives the award advice that I was privileged to hear investment consultant and OCIO firm. annually to a leading figure for her and the sage wisdom served to guide EVestment, an achievements and contributions to and support me along my own institutional investment the institutional investing industry. career journey,” she said. “I want to data and analytics firm Ms. Miller-May joined the be that conduit for other women. It in Atlanta, previously HONORED AND PROUD: pension fund in 2010 and served as is my goal to be an advocate for a collected diversity data Angela Miller-May said director of investments until positive change in the investment on firm ownership and her goal is ‘to be an becoming CIO in 2017. industry and to make it a more expects to update its advocate for a positive “Angela is an active WIP member inclusive and diverse industry for manager questionnaires change in the and a trailblazer who is going above the betterment of us all.” in time for its year-end investment industry and beyond to change the invest- In addition to the presentation of data collection process, and to make it a more ment management industry,” said Ms. Miller-May’s award, the Annual the news release said. inclusive and diverse Susan Small, Chicago-based WIP’s Trailblazer virtual event’s featured EVestment should industry.’ president, in a news release. “She is keynote speaker will be Mellody have a representative a leading voice when it comes to Hobson, co-CEO and president of dataset by the middle of MORE INFORMATION: promoting diversity and inclusion Ariel Investments. Further infor- the first quarter, Shelly Shelly Heier thinks in our investment community.” mation and registration information Heier, Verus president, the new data will Ms. Miller-May said in an email is available on WIP’s website at said in an interview. begin to be available she was proud and honored to www.wipchicago.org/events. Verus is particularly in the first quarter. become the latest recipient of — ROB KOZLOWSKI interested in the diversity makeup of investment teams, even more so than at the leadership level, Ms. Heier said. “I’m laser- MORE THAN PATRIOTIC operating officer of Wilshire. focused on (investment) teams,” Ms. Heier said. George Altman, managing director of “We (care) very much at the product level (about) VETS Indexes, said companies that hire the people who make investment decisions.” New index tracks performance of veterans often see that decision rewarded “I know plenty of large asset management financially. “Hiring veterans (is) not just firms that may get dinged for ownership-level about charity or doing something patriotic,” diversity. They may have an ‘N/A’ just because of firms that recognize veterans’ value Mr. Altman said. “Veterans are a uniquely ownership, but they may have a great emerging valuable human resource, and companies markets equity team that is very diverse … and A firm that creates custom indexes that The VETS Indexes eligible universe that take advantage of this talent pool will we want to be able to see that,” she added. show the value U.S. military veterans bring leverages selection criteria such as company see that show up in their bottom lines.” Verus is also asking other investment consul- to the workplace has launched an index culture, policies and reservist accommoda- Mr. Altman noted that veterans have tants to urge money managers to provide the with the help of Wilshire Associates that tions to identify companies that are the best unique advantages that “civilian employees enhanced diversity data, Ms. Heier said. tracks the performance of public large-cap employers of military veterans. The Veterans never have the chance to gain.” For one While she doesn’t expect the datasets to firms that are most supportive of veterans. Select index is constructed from that thing, veterans are put in charge of millions impact mandate win rates or managers’ inclusion The Veterans Select index, created and universe and includes public companies of dollars of military equipment and make in searches “for the foreseeable future,” Ms. owned by VETS Indexes LLC and calcu- that carry a market cap of $1 billion or more life-or-death decisions at a very young age. Heier does believe consultants and institutional lated and maintained by Wilshire, mea- with liquidity greater than $40 million in Plus, they’re often well-trained in highly investors want to see what firms are doing to sures the performance of publicly traded average daily traded dollar volume. specialized sectors, such as logistics, improve their diversity and inclusion. “I think companies that have strong records hiring “We provide the infrastructure, the technology, information technology and asset owners and consultants may bookmark military veterans and members of the guidance and tools to turn this idea into a telecommunications, to name a few. that (data) and track it over time,” she added. National Guard and Reserves. tangible index,” said Jason Schwarz, chief — JAMES COMTOIS — DANIELLE WALKER TRENDS IN DC FREE WEBINAR Oct 21, 2020 | 2:00 PM ET Trends in DC: DC Plans Pass Pandemic Test

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20pi0224.pdf RunDate: 10/19/20 Full Page Color: 4/C 10 | October 19, 2020 Pensions & Investments OPINION

Christopher J. Battaglia VP/Group publisher

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 Peter J. Retzbach Copy desk chief 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 Danielle Walker Money management 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 Associate group publisher, conferences and marketing services Julie Parten Head of sales The pools open soon, and everyone will be welcome Lauren DeRiggi Digital specialist/account executive

lmost a year after passage of the SECURE Act, the U.S. that defined contribution assets in U.K. master trusts (as these REGIONAL SALES MANAGERS retirement plan market is preparing for what could be pooled plans are known there) are projected to increase to £425 Rich Kiesel West Paul Kissane Midwest the biggest change to employer-provided retirement billion ($549 billion) by 2028 from £38.5 billion in combined assets Anna Koules New York benefits since the launch of the 401(k) plan. at the end of 2019 and £29 billion a year earlier. Steve Middleton EMEA +44-(0)77-1012-8464 The SECURE Act permits creation of pooled employer This month, Smart, a large London-based online record keeper and Hideo Nakayama Asia (Tokyo) +81-3-3479-6131; Aplans, so-called PEPs, offered by pooled plan providers, known as master trust provider, set up operations in the U.S. to take advantage [email protected] Eduardo de Alcantara Machado Sao Paulo, PPPs, which enable U.S. employers to outsource their retirement of opportunities from the SECURE Act, in record-keeping services for Brazil +55-11-3167-0821; [email protected] plans to third-party providers starting in 2021. pooled employer plans and with technology it said will facilitate Patricia Ghazvini Sales assistant If the PEPs are widely adopted, and that remains to be seen, the providing retirement income. CONFERENCES/MARKETING benefits available to participants in larger plans — lower fees, a Record keepers, third-party administrators, consultants and trade Kimberly Jackson Director of conference sales wider, more sophisticated array of investment and retirement income groups for plan sponsors, money managers and broker-dealers have Diane Pastore Director of conference programming offerings — could be available to many more workers. commented on the U.S. Department of Labor’s plans for PEPs and Joshua Scott Director of conference programming And employers could focus on the work of their businesses, while PPPs, and there will clearly be growing pains getting a new system off Kathleen Stevens Investor relations director other companies focus on providing retirement plans. The potential the ground while ensuring the protections of ERISA are available to Gerry O’Hara Investor relations manager to benefit participants and employers is tremendous. pooled plan participants. Michelle DeMarco Director, relationship marketing Pooled plans are taking off in the U.K. and Europe. And as with But overall, if this new system gives more American workers Assel Chanlatte Conference marketing manager Mirjam Guldemond Conference manager, many other trends in retirement, like LDI-focused investing and access to retirement plans offering the kind of investments, low fees WorldPensionSummit +31-6-2333-2464 pension risk transfers, the idea of pooled retirement plans is moving and plan design features only currently available to those in the Kristal Santos Client services project manager west across the Atlantic. largest plans, it will benefit many and have a significant impact in Ashley Perrucci Associate manager, client partnerships A study by data provider Broadridge Financial Solutions Inc., helping ensure that more American workers are prepared for Rachel Lopez Conference administrative assistant commissioned by Willis Towers Watson and published in July, found retirement. n CUSTOM CONTENT/CLIENT SOLUTIONS Greg Crawford Director of content solutions Corina Lewis Client solutions senior program manager OTHER VIEWS VALTER VIOLA David Joseph Research analyst Tetyana Saucedo Digital campaign manager Deanna Speziale Senior marketing associate Proper ways to evaluate performance of a potential OCIO SUBSCRIPTIONS/SITE LICENSES Elayne Glick Director, strategy & business, site license subscriptions David Bomberger Director, enterprise licensing hen funds search for an Valter Viola is managing While the passive, or beta, return compo- outsourced chief investment nent is larger and riskier than alpha, OCIOs Ed Gorman Director, EMEA/international site director and principal at licensing +44-(0)20-3823-9891 officer, they inevitably Cortex Applied Research are not accountable for it because their asset consider past performance. in Toronto. mix responsibility is limited to providing RFP/RECRUITMENT Unfortunately, there are no prudent, non-discretionary advice. OCIOs Erin Smith Sales manager Wwidely accepted standards for measuring aren’t off the hook for asset allocation or risk OCIO performance, and many common Evaluate (only) management, of course. Instead, evaluations REPRINTS approaches can lead funds to draw the alpha in these important areas should be based on Laura Picariello Sales manager wrong conclusions. Typically, funds the quality of OCIOs’ advice, rather than the ADVERTISING PRODUCTION For example, they may rank a truly skilled delegate the discre- outcomes over which they have no discretion. Robert T. Hedrick Media services manager OCIO lower than others that simply experi- tion to hire and fire 312-649-7836; [email protected] enced better luck over a (short) time horizon; underlying managers Account for fees separately Subscription information - single copy or they may penalize an OCIO for perfor- to the OCIO, but retain authority over their Performance analysis should start by sales: 877-812-1586 mance over which the OCIO, in fact, had no policy portfolios. As a result, funds — not the assessing an OCIO’s skill before fees are TO CONTACT A P&I STAFFER control. If funds consider past OCIO perfor- OCIO — are accountable for policy portfolio considered. Any fees included in past Unless otherwise noted above, email us at mance, it is critical that they minimize the risk outcomes (i.e., benchmark returns), leaving performance should be backed out, and [email protected] or find phone numbers at pionline.com/staff. of drawing wrong conclusions. Here’s how. the OCIO accountable only for alpha. SEE VIOLA ON NEXT PAGE Pensions & Investments October 19, 2020 | 11 OPINION DC sponsors give

easily when one or more of these strategies and Ronald Kahn in their book, “Active big thumbs-up to are permitted: tactical asset allocation; Portfolio Management: A Quantitative Viola active currency hedging; certain hedge fund Approach for Producing Superior Returns outsourced CIOs CONTINUED FROM PREVIOUS PAGE strategies; or private equity. In these four and Controlling Risk.”) strategies,there’s typically an inverse If median managers outperform half the replaced by the fees that will apply to relationship between the capital used to universe, by definition, we should expect By BRIAN CROCE accounts in the future. implement the strategy (low) and tracking them to add zero alpha before fees (normal Here’s why. First, fees change over time, error taken (high). This low/high relation- distribution) in a given year. Their expected While the use of outsourced CIOs by so those that apply in the future may differ ship between capital/risk creates an information ration is zero before fees. Top defined contribution plan sponsors is not from past fees. Second, fees are negotiable, advantage because tracking error is quartile managers, however, are expected to widespread, the sponsors that use them while investment skill is not. There’s no allocated more efficiently in this case, all add 67 basis points of value for every 100 are satisfied and rely on them for discre- point considering fees until there’s evidence else equal. basis points of tracking error taken (infor- tion on the selection of investment strate- that an OCIO has any skill worth paying for. To remove these effects, performance mation ratio of 0.67). gies and hiring and firing of asset manag- should first be analyzed at the asset class ers, according to research out Oct. 14 Adjust for constraints level and only later at the total fund level. Include all types of funds from PGIM. An OCIO’s ability to add value from Also, greater care is needed in private While performance could be aggregated PGIM worked with Greenwich Associ- active management is constrained by the markets, where valuations (and therefore by client type (e.g., endowments only), ates to survey 138 DC plan sponsors and asset classes the fund permits and the returns) are less reliable than public ones, funds should resist doing so because it with Curcio Webb to survey 20 OCIO ranges within which the portfolio must be benchmark quality is low and because it provides less evidence of skill (or lack managers representing $16.8 trillion in rebalanced. To make performance compa- takes years to deploy private capital (i.e., thereof) due to a smaller sample size. Asset total assets including $1.2 trillion in OCIO rable across OCIOs, then, we need to “vintage year” plays a big role). class strategies pursued by an OCIO are assets of all plan types. remove any effects that made it harder — or typically similar across different client The survey found that 15% of sponsors easier — for some OCIOs to outperform Adjust for risks types, so there’s little benefit from a focused currently use an OCIO manager for their benchmarks. It takes time to gain confidence that analysis on any single investor type. entire 401(k) plan. Use of OCIOs are more For example, it is harder to outperform “seemingly good” returns were truly due to common for midsize plans (24%) — with the policy portfolio when: skill, rather than luck, and it involves Pull it all together $250 million to $500 million in assets — ■■Fewer asset classes are permitted. considering the risks taken as well. An The final step is to apply appropriate than larger plans (8%), the survey said. ■■Rebalancing ranges are tight. OCIO that takes less tracking error but adds weights to OCIOs’ asset class performance, Sponsors not using an OCIO manager in- ■■Policy weights are high in markets that the same value as another OCIO has along with the fees that would apply dicated their top two reasons for refrain- are more efficient. generated better performance on a risk- (including underlying managers’ fees). ing are to retain control of the investment ■■Opportunities to add value are limited. adjusted basis (other things equal). Measur- Our OCIO search clients find “historical decisions and existing internal expertise. Inflation-linked bonds might be good for ing the information ratio (alpha divided by replays” useful, where adjusted perfor- Nearly two-thirds (64%) of sponsor re- funds with liabilities that rise with inflation, tracking error) allows us to group OCIOs mance figures are aggregated using the spondents said they do not use and never and are therefore included in the policy into four performance categories, based on fund’s policy weights to determine how considered using an OCIO manager. portfolio, but they offer fewer opportunities their skill/luck profile: performance would look had each of the Of the plan sponsors surveyed that are to outperform the benchmark (mainly ■■Blessed OCIOs (skilled and lucky). OCIOs been engaged by the fund. This using an OCIO, 100% said they are satis- duration) because the benchmark has few ■■Doomed (unskilled and unlucky). historical replay is easy to understand and fied with their current manager. bonds and they are of similar quality (i.e., ■■Forlorn (skilled, but unlucky). more useful than the (unadjusted) perfor- The survey also found using an OCIO U.S. Treasuries). ■■Insufferable (unskilled, but lucky). mance against a 60/40 mix, which includes can result in a greater variety of invest- Alternatively, OCIOs add value more (Terms were developed by Richard Grinold far too much noise. n ment options offered to participants. n 12 | October 19, 2020 Pensions & Investments EXCHANGE-TRADED FUNDS BlackRock, Vanguard stay strong amid year of changes By ARI I. WEINBERG The regulatory burden for launch- Robert W. Baird & rounding out their ESG ing index and fully transparent ac- Co. Inc. in Louisville, Record ETF closures in 2020 offerings in the last few Today’s exchange-traded prod- tive products was lifted following Ky., “but they’re not Across-the-board product cuts due to consolidation and years, with Vanguard uct launches are increasingly to- the adoption of the ETF rule by the necessarily calling volatile asset markets have made this year one to forget. launching an ESG- morrow’s closures. Securities and Exchange Commis- out for active ETFs.” screened U.S. corporate Through Oct. 9, banks and asset sion last fall. Carolyn Wein- 330 bond ETF in September managers had shuttered a record “Volatility in March took out berg, managing di- 300 Launches and BlackRock offering 225 exchange-traded funds and some of the exotics (leveraged rector and global 270 Closures ESG versions of S&P in- exchange-traded notes this year, funds, ETNs) as the market swings head of product, 240 dexes to complement its according to FactSet Research Sys- made daily rebalancing a chal- ETF and index in- extensive offerings of 210 tems Inc. While some of the prod- lenge,” said Eric Balchunas, senior vestments at Black- ESG strategies tracking ucts had been on the market since ETF analyst at Bloomberg Intelli- Rock in New York, 180 MSCI indexes. Nearly 2002, 53 of the shuttered ETFs and gence in Princeton, N.J. “And for sees active products 150 one-third of BlackRock’s ETNs had been trading for less new launches, unless you already as effective comple- 120 38 new products than two years. know where the assets are going ments to a core in- launched this year fol- 90 Investor preference, issuer con- to come from, issuers are going to dex portfolio. “Inves- low up on the company’s solidation and market conditions be gnashing their teeth through tors can get intraday 60 commitment to building are each partly to blame for the the process.” execution on action- 30 out a fuller suite of ESG heightened closures, but so is the While many issuers are bring- able prices, but ulti- 0 strategies. brutally competitive market where ing out actively managed ETFs, mately active is all 2011 2015201420132012 2016 2017 20192018 2020 “Most areas of index- BlackRock Inc. and Vanguard both with daily transparency or about performance.” 2020 data are as of Oct. 9. Source: FactSet Research Systems ing are covered by high- Group manage nearly two-thirds utilizing one of several new struc- More than half of quality, low-cost prod- of the $4.7 trillion in ETP assets tures that offer the more limited this year’s launches have been ac- regulatory paperwork for an ETF ucts,” said Rich Powers, head of and capture nearly two-thirds of transparency of mutual funds, de- tive products, according to FactSet version of former active stalwart ETF product management for Van- net inflows as well. There has been mand is still scarce. data, including “buffered” ETFs Magellan Fund, and Dimensional guard in Malvern, Pa., which has some light for new launches with “Our clients continue to drive to- from several issuers that embed Fund Advisors LP revealed plans only launched four new products in 215 products introduced this year, ward products that are lower cost option strategies to limit draw- for ETFs of its core exposures. the last two years, three of which ahead of last year’s total of 188 at and tax efficient,” said Ross May- downs. While not yet launched, Fi- But Bloomberg’s Mr. Balchunas are ESG trackers. “But we’re watch- this point, according to FactSet. field, investment strategy analyst at delity Investments recently filed even sees these efforts as too little ing the active ETF market really too late for some storied brands. “It closely. Is there investor demand? hasn’t really sunk in how much the Does the ETF structure change the world has changed. Nineties-style dynamic? How are they trading? diversified core strategies just Might wider spreads eliminate won’t drive investors to new prod- some of the cost advantage?” ucts anymore.” Of Vanguard’s $6.4 trillion in to- 8LMWERRSYRGIQIRXETTIEVWEWEQEXXIVSJVIGSVHSRP] Instead, the new blueprint for tal global assets under manage- active management rests with an ment across traditional funds, issuer like New York-based ARK ETFs and trusts, 25% are in active Investment Management LLC, strategies. managing $15 billion primarily in Invesco Ltd., which manages highly concentrated growth- and $256 billion, closed 43 ETFs this innovation-focused ETFs. Indeed, year following the completion of its several launches this year have acquisition of OppenheimerFunds Davis Investment Ventures followed closely on the themes from MassMutual in mid-2019. driving ARK’s success. “So far, Other 2020 closures include 54 ARK is lapping the copycats,” Mr. ETNs issued by banks UBS, Credit Fund IV Balchunas said. Suisse and Barclays, primarily, as While active ETFs are dominat- well as a handful of one-off prod- ing launches, Baird’s Mr. Mayfield ucts from asset managers. And 40 says that he is seeing “increased de- of the closures came from both mand for ESG products and portfo- ProShares and Rafferty Asset $777,500,000 lios” from clients and advisers. So it Management (Direxion), known for should be no surprise that Black- offering leveraged and inverse-lev- Rock and Vanguard have been eraged ETFs. n %*YPP](MWGVIXMSREV]976IEP)WXEXI

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$0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2014 2015 2016 2017 2018 2019 2020 Source: Bloomberg LP iShares AUM back to record levels 4%6/1%(-7324%682)67%'8)(%7)<'097-:)+03&%0'%4-8%0%(:-736 At the end of the third quarter BlackRock’s iShares unit had $2.3 trillion of assets under management, an all-time high. This was an increase from the $2.2 trillion in the previous quarter and an increase from $2 trillion in the year-earlier quarter. The unit had $1 trillion at the end of the third quarter of 2015. For the third quarter of 2020, iShares represented 30% of BlackRock’s overall AUM and 38% of fee revenue; iShares net inflows have totaled $371 billion over the past eight quarters. MIND THE SIGNALS IGNORE THE NOISE

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20pi0216.pdf RunDate: 10/19/20 Full Page Spread Color: 4/C 14 | October 19, 2020 Pensions & Investments Special Report MEGAMANAGERS

Equity markets give Glass Peter North American rms a larger slice of pie

Largest managers in region Japan to $5.62 trillion and grew 4.5% for managers domiciled in the “rest of the world” to $6.66 trillion. see 20.3% AUM rise; market Longer term, managers based in China showed the highest compound annual growth rate for as- share increases to 59.7% sets under management in both local currency and in U.S. dollar terms at 25.5% and 22.3%, respectively, By PAULINA PIELICHATA over the past ve years. “China’s growth is not a surprise,” Mr. Phillips noted. “A lot of (assets in Chi- North America-based money managers record- na) used to be managed by shadow wealth systems, ed a 20.3% increase in assets under management in private wealth managers and domestic players that 2019 to $62.32 trillion, driven by exceptional gains aren’t money management rms,” he said. “You in U.S. equity markets. have seen a conversion (of these assets) into asset AUM for North America-based rms accounted management assets” following changes in the Chi- for 59.7% of total assets vs. 56.7% the year before, nese regulatory rules, he said, adding that regulat- according to the Pensions & Investments and Willis ed money managers will in the future take on more Towers Watson PLC’s Thinking Ahead Institute of these assets. ranking of the top 500 managers. In 2019, U.S.- India-domiciled rms recorded a ve-year based assets under management accounted for CAGR of 14.4% in local currency and 11.9% in dollar 54.6% of the total, up from 51.7% in 2018. terms to a total AUM of $216.1 billion. Brazil-based Benjamin F. Phillips, principal and lead invest- rms recorded a ve-year CAGR of 12.9% in local ment management strategist at Casey Quirk, a currency and 4% in dollar terms, while Australian practice of Deloitte Consulting LLP, based in New rms’ ve-year CAGR was 11.9% in local currency York, said the jump could be attributed to a big bull and 8.5% in dollar terms. market in the U.S. “Part of it is due to capital market Meanwhile, U.S.-based managers recorded a 7% appreciation. You had a big bull market run up to ve-year CAGR and eurozone countries had a ve- the end of 2019,” he said, adding that assets in year CAGR of 4.5% in euro terms and 2.8% in dollar North America also saw organic growth from new terms. Japan-based rms recorded a 5.6% CAGR in contributions. “That’s still going to grow over the local currency and a 7.6% increase in U.S. dollar next decade,” he added. terms and managers domiciled in the U.K. had a Assets managed by rms in Europe increased ve-year CAGR of 4.9% in pound sterling terms MARKET DRIVEN: Benjamin F. Phillips said the ‘big bull market’ in equities most likely was 5.3% in 2019 to $29.79 trillion, increased 24.9% in and 1.4% in dollar terms.  responsible for the stellar return performance of managers based in North America.

the rest of the year as assets under strategist at Casey Quirk, a practice 2020 and 2021 numbers,” he said. plementing, for example, ESG management, revenues, cash ows of Deloitte Consulting LLP, based in But Mr. Phillips said the resur- strategies. “Most of the new reve- Managers and earnings remain highly corre- New York, said the pandemic and a gence will occur less so because of nues for the industry are going to lated to the performance of nan- shift to ESG-driven investing has the traditional active vs. passive come from private equity or private CONTINUED FROM PAGE 3 cial markets. been driving the resurgence in ac- debate. Instead, he said managers debt and I think you’ll see a num- These trends have also become Benjamin F. Phillips, principal tive management. “There is a de- are required to add value in differ- ber of passive management rms differentiators for those managers and lead investment management bate that we will see that in the ent ways as asset owners are im- SEE MANAGERS ON PAGE 18 that can be “ef cient on cost.” In- vestors are looking for higher returns, for example, in areas such as private markets, she said. Inves- Growth of assets of the P&I/Thinking Ahead Institute World 500 tors are also moving away from in- By manager domicile, in U.S. trillions, as of June 30. vesting that is focused on risk and $104.39 return and into “3D” investing $6.66 Rest of world where impact is as important as $93.76 $90.95 $62.32 risk and reward. $5.42 Following the outbreak of the $6.37 $81.17 $54.55 coronavirus pandemic in late 2019, $78.15 $51.79 money managers’ businesses suf- $76.43 $76.83 $4.68 $3.84 fered from a subsequent market $3.51 $4.17 $47.40 $68.30 $42.02 $44.46 downturn. COVID-19 has piled fur- $64.71 $43.99 ther pressure onto managers to en- $63.09 $3.58 North America $3.29 $3.31 $35.91 hance user-friendly and value for $33.52 $33.14 money propositions and investors’ trust in their organizations, she added. Building more resilient portfolios able to withstand economic, societal or environment $5.62 systemic risks is key for investors, $4.52 $4.50 Japan $4.56 $3.90 she said. This can be done by in- $4.96 $4.82 $4.02 $3.75 $29.28 $28.29 $29.79 $5.28 $26.34 $25.95 vestors understanding the level of $23.99 $24.66 $25.34 $22.94 $21.36 risk that can be tolerated, maximiz- Europe (incl. ing diversity, removing unrewarded U.K.) risk and carefully managing liquidity needs, she added. Moody’s Investors Service said Sept. 29 that it expects to keep its 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 outlook for the money management Note: New data sources were used for some countries in 2019. Previous-year data have been changed to re ect the new source. industry in Europe at negative for Pensions & Investments October 19, 2020 | 15

P&I/Thinking Ahead Institute World 500: Largest money managers Ranked by total assets under management, in millions, as of Dec. 31.

Rank Manager Country Assets Rank Manager Country Assets Rank Manager Country Assets

1 BlackRock U.S. $7,429,632 53 Dai-ichi Life Holdings Japan $508,603 107 AQR Capital Mgmt. U.S. $186,016

2 Vanguard Group U.S. $6,151,920 54 Credit Suisse Switzerland $504,273 ICBC Credit Suisse China $184,599 108 Asset Mgmt. 3 State Street Global U.S. $3,116,424 55 Asset Management One Japan $490,837 109 Conning U.S. $179,262 4 Fidelity Investments U.S. $3,043,134 56 Nomura Asset Mgmt. Japan $488,788 110 American Century U.S. $178,050 5 Allianz Group Germany $2,539,842 57 Charles Schwab Investment U.S. $487,100 111 Resona Holdings Japan $174,110 6 J.P. Morgan Chase U.S. $2,364,000 58 LBBW Germany $481,389 112 China Asset Mgmt. China $171,600 7 Capital Group U.S. $2,056,991 59 Aviva U.K. $458,537 113 Mn Services Netherlands $171,342 8 BNY Mellon U.S. $1,910,000 60 Macquarie Group Australia $412,127 114 Royal London Group 5 U.K. $170,508 9 Goldman Sachs Group U.S. $1,859,000 61 Intesa Sanpaolo Italy $380,933 115 Harvest Fund Mgmt. China $169,518 10 Amundi France $1,617,280 62 Fidelity International 2 U.K. $380,900 116 Aon U.K. $169,000 11 Legal & General Group U.K. $1,568,891 63 Janus Henderson Group U.K. $374,829 117 Achmea Netherlands $165,145 12 Prudential Financial U.S. $1,550,982 64 Union Investment Germany $365,251 118 Swedbank Sweden $163,970 13 UBS Switzerland $1,413,000 65 BMO Wealth Mgmt.3 Canada $360,550 119 IFM Investors Australia $163,248 14 BNP Paribas France $1,257,603 66 Neuberger Berman U.S. $355,794 120 Colonial First State Australia $159,811 15 Northern Trust U.S. $1,231,300 67 Meiji Yasuda Life Insurance 2 Japan $352,593 121 EFG International Switzerland $158,395 16 Invesco U.S. $1,226,173 68 Shinkin Central Bank 1 Japan $351,954 122 PNC Financial U.S. $153,930 17 T. Rowe Price U.S. $1,206,800 69 MEAG Germany $332,962 123 China Southern Asset Mgmt. China $153,900 18 Wellington Mgmt. U.S. $1,154,735 70 Stifel Financial U.S. $329,500 124 Bosera Asset Mgmt. China $152,659 19 Morgan Stanley U.S. $1,131,824 71 Dodge & Cox U.S. $326,660 125 Victory Capital U.S. $151,832 20 Wells Fargo U.S. $1,091,100 72 Nordea Denmark $324,100 126 Raymond James U.S. $151,652 21 AXA Group France $1,085,547 73 Voya Financial U.S. $322,538 127 Ares Mgmt. U.S. $148,916 22 Nuveen U.S. $1,060,770 74 TD Asset Mgmt.3 Canada $314,130 128 Ninety One South Africa $148,883 Natixis Investment France 75 NN Investment Partners Netherlands $309,081 23 $1,048,507 Managers 129 Willis Towers Watson Ireland $147,881 76 Russell Investments U.S. $307,397 24 Aegon Group Netherlands $1,007,636 130 Union Bancaire Privee Switzerland $144,475 77 Mercer U.S. $305,100 Sumitomo Mitsui Trust Japan 131 Danske Bank Denmark $142,864 $928,145 25 Holdings 78 Sumitomo Life Insurance Japan $302,726 132 Vontobel Asset Mgmt. Switzerland $142,195 26 HSBC Holdings U.K. $867,000 79 Societe Generale France $300,122 133 AMP Capital Australia $142,043 27 Deutsche Bank Germany $859,379 80 Zurcher Kantonalbank Switzerland $287,035 134 NAB Asset Mgmt.6 Australia $140,927 28 Sun Life Financial Canada $841,264 81 Baillie Gifford U.K. $280,111 135 CIBC Asset Mgmt. Canada $140,852 29 Legg Mason U.S. $803,534 82 Zurich Financial Services Switzerland $275,423 136 Landesbank Hessen-Thuringen Germany $139,535 30 Manulife/John Hancock Canada $798,498 83 La Poste France $263,167 137 Robert W. Baird U.S. $138,522 Mitsubishi UFJ Financial Japan 84 Banco do Brasil 4 Brazil $263,128 $780,655 31 Group 138 Talanx Group Germany $137,337 85 DekaBank Germany $262,483 32 Ameriprise Financial U.S. $778,100 139 GAM Holding Switzerland $136,649 86 Swiss Life Asset Managers Switzerland $261,971 33 Principal Financial U.S. $735,300 140 China Merchants Fund China $133,583 87 Lazard U.S. $248,239 4 34 Affiliated Managers Group U.S. $722,500 141 Banco Bradesco Brazil $133,134 88 SEI Investments U.S. $244,561 35 Power Financial Canada $714,734 142 Fiera Capital Canada $130,843 89 CCB Principal Asset Mgmt. China $231,822 36 Franklin Templeton U.S. $698,305 143 Mesirow Financial U.S. $130,689 90 Scotiabank 3 Canada $230,820 37 Nippon Life Insurance 1 Japan $688,267 144 BBVA Spain $127,273 91 Banco Santander Spain $225,092 Sumitomo Mitsui DS Japan 38 Schroders U.K. $662,630 $123,188 92 NISA Investment U.S. $224,820 145 Asset Mgmt. 39 Standard Life Aberdeen U.K. $638,141 93 SEB Sweden $218,734 146 Fisher Investments U.S. $121,034 40 AllianceBernstein U.S. $622,915 94 Kohlberg Kravis Roberts U.S. $218,355 147 Artisan Partners U.S. $121,017 41 Dimensional Fund Advisors U.S. $609,337 95 Samsung Group South Korea $218,002 148 LSV Asset Mgmt. U.S. $120,591 42 MetLife Investment U.S. $600,030 96 TCW Group U.S. $217,480 149 Caixabank Spain $119,841 43 New York Life Investments U.S. $596,573 97 Guggenheim Investments U.S. $215,553 150 Payden & Rygel U.S. $119,100 44 Royal Bank of Canada Canada $592,337 98 Pictet Asset Mgmt. Switzerland $208,350 151 Groupama Asset Mgmt. France $117,720 45 Geode Capital Mgmt. U.S. $584,279 99 Lord, Abbett U.S. $205,217 152 Covea Group France $113,778 46 Federated Hermes U.S. $575,874 100 E Fund Mgmt. China $205,077 153 PFM Asset Mgmt. U.S. $113,147 47 Blackstone Group U.S. $571,122 101 BrightSphere U.S. $204,400 154 Wilmington Trust U.S. $112,981 48 MassMutual U.S. $567,000 102 Agricultural Bank of China China $200,912 155 CBRE Global Investors U.S. $112,900 49 Generali Group Italy $559,930 103 CITIC Securities China $199,590 156 Bayerischen Landesbank Germany $112,546 Canada $545,000 50 Brookfield Asset Mgmt. 4 104 Itau Unibanco Brazil $196,938 157 Caixa Economica Federal 4 Brazil $110,392 51 Prudential U.K. $543,900 105 Robeco Group Netherlands $194,733 158 Virtus Investment Partners U.S. $108,904 52 Eaton Vance U.S. $518,600 106 Anima Holding Italy $192,963 CONTINUED ON PAGE 16 Notes: 1 As of March 31, 2019; 2 As of March 31, 2020; 3 As of Oct. 31, 2019; 4 As of Feb. 29, 2020; 5 As of June 30, 2019; 6 As of Sept. 30, 2019; 7 As of April 30, 2020; 8 As of Sept. 16, 2019; 9 As of July 31, 2019; 10 As of April 30, 2019 16 | October 19, 2020 MEGAMANAGERS Pensions & Investments

P&I/Thinking Ahead Institute World 500: Largest money managers Ranked by total assets under management, in millions, as of Dec. 31.

Rank Manager Country Assets Rank Manager Country Assets Rank Manager Country Assets

159 Arrowstreet Capital U.S. $106,168 216 Oddo France $65,064 272 Adams Street Partners U.S. $40,727

160 Man Group U.K. $104,200 217 Record Currency Mgmt. U.K. $64,713 273 Gruppo Azimut Italy $40,723

161 China Universal Asset Mgmt. China $103,748 218 Grantham, Mayo v. Otterloo U.S. $64,199 274 Breckinridge Capital U.S. $40,243

162 CI Financial Canada $101,318 219 KLP Group Norway $63,993 275 Lexington Partners U.S. $39,922

163 Paci c Century Group Hong Kong $101,300 220 Prologis U.S. $63,926 276 Carmignac France $39,195

164 BCV Switzerland $100,752 221 Fort Washington U.S. $63,058 277 HUK Coburg Germany $38,651

165 First Eagle Investment U.S. $100,595 222 Tokio Marine Holdings 2 Japan $62,300 278 Korea ITMC South Korea $38,575

166 Ashmore Group U.K. $98,400 223 StepStone Group U.S. $62,172 279 Angelo, Gordon U.S. $38,000

167 Sompo Holdings Japan $96,799 Versicherungskammer Germany 280 Ameritas Mutual Holding U.S. $37,400 $61,918 224 Bayern 168 Metzler Asset Mgmt. Germany $96,308 281 NH-CA South Korea $37,214 Fukoku Mutual Life Japan Huatai-PineBridge China 225 $61,916 282 Comgest France $37,067 $96,200 Insurance 169 Investment 6 226 Pathway Capital U.S. $61,873 283 Orbis Investments Bermuda $36,785 170 Storebrand Group Norway $94,383 227 National Bank of Canada Canada $61,801 284 GAMCO Investors U.S. $36,475 171 Partners Group Switzerland $94,000 228 Baloise Asset Mgmt. Switzerland $61,477 285 Arca SGR Italy $36,319 172 Securian Financial U.S. $93,400 229 Sanlam South Africa $61,010 286 Aristotle U.S. $36,100 Bank of China China 173 $93,187 1 Investment Mgmt. 230 Marathon Asset Mgmt. U.K. $60,697 287 Mitsui Fudosan Investment Japan $35,763

174 Northill Capital U.K. $91,300 Connor, Clark & Lunn Canada 288 Mirabaud Group Switzerland $35,733 $60,454 231 Financial 175 OP Financial Group Finland $90,918 289 Nurnberger Germany $35,468 232 Gtja Allianz Fund Mgmt. China $60,102 176 Mirae Asset Financial Group South Korea $90,364 290 PAG Hong Kong $35,000 233 William Blair U.S. $58,429 177 IDUNA Gruppe Germany $90,171 291 Bankia Spain $34,862 234 Sterling Capital U.S. $58,175 178 Resolute Investment U.S. $86,700 292 Polen Capital U.S. $34,784 235 QIC Australia $58,049 179 F Van Lanschot Netherlands $85,669 293 Commerce Trust U.S. $34,434 236 Mediolanum Italy $57,417 180 Rothschild France $85,109 294 Goodman Group Australia $34,410 237 Challenger 5 Australia $57,189 181 New England Asset Mgmt. U.S. $83,236 295 Regions Financial U.S. $34,323 238 River and Mercantile U.K. $56,661 182 Svenska Handelsbanken Sweden $82,199 296 Birla Sun Life Asset Mgmt. India $34,254 239 Jupiter Asset Mgmt. U.K. $56,136 183 OFI AM France $81,750 297 Kiwoom AMC South Korea $34,038 240 Quintet Private Bank Luxembourg $56,105 184 Penghua Fund Mgmt. China $81,330 298 Hotchkis & Wiley U.S. $33,623 241 Van Eck Associates U.S. $55,555 185 Hanwha Group South Korea $80,034 299 STANLIB South Africa $32,732 Mondrian Investment U.K. $54,401 186 Guardian Life U.S. $79,300 242 Partners 300 MMI Holdings South Africa $32,676

187 Warburg Gruppe Germany $78,166 243 HDFC Asset Mgmt. India $53,455 301 Beutel, Goodman Canada $32,347

188 La Francaise France $77,270 244 Causeway Capital U.S. $53,218 302 GoldenTree Asset Mgmt. U.S. $32,335 Industrial Alliance Canada 303 Silchester International 2 U.K. $32,298 $76,709 245 Shinsei Bank Japan $52,871 189 Insurance 246 Rabobank Group Netherlands $52,745 304 Eagle Capital U.S. $32,000 190 ASR Netherlands $75,863 247 KB Asset Mgmt. South Korea $50,884 305 Caixa Geral de Depósitos Portugal $31,303 191 Old Mutual Investment Group South Africa $75,281 248 Lombard Odier Investment Switzerland $50,852 306 China Galaxy Securities China $30,991 192 Income Research & Mgmt. U.S. $75,105 249 State Bank of India India $49,970 307 Parnassus Investments U.S. $30,985 193 Brown Advisory U.S. $74,488 250 Asahi Mutual Life Insurance Japan $49,964 308 Alte Leipziger Group Germany $30,713 194 HuaAn Funds China $74,038 Berenberg Wealth & Germany 251 Everbright Securities China $49,895 309 $30,693 195 Renaissance Technologies U.S. $72,740 Asset Mgmt. 252 Patrizia Immobilien Germany $49,834 196 Cohen & Steers U.S. $72,182 310 Royal Bank of Scotland U.K. $30,429 253 Mawer Investment Mgmt. Canada $49,692 197 ACTIAM Netherlands $71,447 311 Kyobo Life Insurance South Korea $30,122 254 Folksam Sweden $48,713 198 Mapfre Spain $71,265 312 ASB Capital Mgmt. U.S. $30,035 Switzerland $48,535 255 J. Safra Sarasin Group 8 199 Pendal Group 6 Australia $70,219 313 Winton Capital Mgmt. U.K. $30,000 256 Universal-Investment Germany $48,465 200 Ivy Investments U.S. $69,958 314 AGF Mgmt. Canada $29,691 257 Raiffeisen Zentralbank Austria $48,415 201 Hines U.S. $69,707 315 Vantagepoint Investment U.S. $29,630 258 Colchester Global Investors U.K. $46,980 202 UBI Banca Italy $69,700 316 Merian Global Investors (UK) U.K. $29,380 259 Alan Biller U.S. $45,602 203 LaSalle Investment U.S. $69,452 317 Uniqa Finanz Group Austria $29,199 260 Heitman U.S. $45,508 204 LGT Switzerland $68,470 318 First Paci c Advisors U.S. $28,965 261 BTG Pactual 4 Brazil $43,304 205 Magellan Asset Mgmt. Australia $68,202 319 Tikehau Capital France $28,892 262 Shinhan BNPParibas South Korea $43,243 206 Desjardins Group Canada $67,553 320 Lindsell Train U.K. $28,800 Norway $43,149 263 DNB 6 207 Bank Degroof Petercam Belgium $67,192 321 Alexander Forbes South Africa $28,562 Switzerland $43,134 264 Edmond de Rothschild Group 1 208 Starwood Capital U.S. $67,179 322 Mitsubishi Estate Group Japan $28,519 Pinnacle Investment Australia $43,082 209 RhumbLine Advisers U.S. $67,062 265 Mgmt. Group 323 Hungkuk ITMC South Korea $28,111

210 Credit Mutuel France $66,856 266 Thornburg Investment U.S. $42,660 324 Banco Sabadell Spain $28,050

211 Monte dei Paschi di Siena Italy $66,410 267 SECOR Asset Mgmt. U.S. $42,344 325 Alger U.S. $27,816

212 Hamilton Lane U.S. $66,271 268 Intermediate Capital Group 1 U.K. $41,527 326 Tactical Global Mgmt. Australia $27,683

213 Banco BPM Italy $65,288 269 GF Securities China $41,279 327 Vinva Australia $27,635 Erste-Sparinvest Austria 328 Shenkman Group U.S. $27,620 $65,176 270 Pzena Investment U.S. $41,238 214 Kapitalanlage 7 271 Coronation Fund Managers South Africa $41,199 329 Ibercaja Spain $27,583 215 LGT Group Liechtenstein $65,141 330 Callan U.S. $27,357

Notes: 1 As of March 31, 2019; 2 As of March 31, 2020; 3 As of Oct. 31, 2019; 4 As of Feb. 29, 2020; 5 As of June 30, 2019; 6 As of Sept. 30, 2019; 7 As of April 30, 2020; 8 As of Sept. 16, 2019; 9 As of July 31, 2019; 10 As of April 30, 2019 Pensions & Investments MEGAMANAGERS October 19, 2020 | 17

Rank Manager Country Assets Rank Manager Country Assets Rank Manager Country Assets

331 Matthews International U.S. $27,314 388 Platinum Asset Mgmt. Australia $18,500 446 Beach Point Capital U.S. $12,917

332 Allan Gray Proprietary South Africa $27,227 389 Luther King Capital U.S. $18,248 447 CenterSquare Investment U.S. $12,878

333 Charter Hall Australia $27,226 390 Perpetual Australia $18,175 448 Cathay Securities Taiwan $12,822

334 Blue Sky Group Netherlands $27,178 391 Grupo Novo Banco Portugal $18,170 449 Troy Asset Mgmt.10 U.K. $12,723

Wiener Städtische Austria 392 DMFCO Netherlands $18,100 450 Hyundai Investment AMC South Korea $12,489 $26,959 335 Versicherung 393 Paci c Global Asset Mgmt. U.S. $18,000 451 Capital Investment Trust Taiwan $12,405 336 Portfolio Advisors U.S. $26,926 394 Axis Mutual Fund India $17,800 452 Gruppo Banca Carige 5 Italy $12,318 337 Los Angeles Capital U.S. $26,757 395 GPT Group Australia $17,731 453 World Asset Mgmt. U.S. $12,268 338 Laboral Kutxa Spain $26,417 396 CQS 5 U.K. $17,700 454 KGAL Germany $12,066 339 Canyon Partners U.S. $26,315 397 Opportunity 4 Brazil $17,390 455 International Value Advisers U.S. $12,003 340 DuPont Capital U.S. $26,264 398 T&D Asset Mgmt. Japan $17,369 456 Paradice Investment Australia $11,890 341 Calamos Advisors U.S. $26,133 399 Kepler Fonds 2 Austria $17,335 457 Renta 4 Spain $11,810 342 Burgundy Asset Mgmt. Canada $25,912 400 Hay n U.K. $17,022 458 CCLA Investment Mgmt. U.K. $11,804 343 Knights of Columbus Asset U.S. $25,807 401 Synovus Financial U.S. $17,000 459 Walton Street Capital U.S. $11,639 344 Commonfund U.S. $25,584 402 Boston Private Financial U.S. $16,768 460 DRA Advisors U.S. $11,614 345 Bank Syz Switzerland $25,332 403 Royal & SunAlliance 5 U.K. $16,673 461 PCCP U.S. $11,608 346 Hunt U.S. $25,193 404 Liontrust Asset Mgmt.1 U.K. $16,598 462 SPARX Group Japan $11,456 Generation Investment U.K. $25,100 347 Mgmt. 405 SDIC UBS Fund Mgmt. China $16,597 463 Mediobanca Italy $11,448

6 4 348 Ruffer 2 U.K. $25,052 406 Capital Dynamics Switzerland $16,476 464 SulAmerica Investimentos Brazil $11,389

349 Kotak Mahindra Asset Mgmt. India $24,970 407 Stockbridge Capital Group U.S. $16,346 465 WEDGE Capital U.S. $11,330 Lendlease Investment Australia 408 Leith Wheeler Investment 5 Canada $16,070 466 Reichmuth Switzerland $11,327 $24,619 350 Mgmt.5 409 Morrison Australia $15,984 467 Longfellow Investment U.S. $11,311 351 Canso Investment Counsel Canada $24,051 410 Independent Franchise U.K. $15,830 468 Inland Group U.S. $11,300 352 Guardian Capital Canada $23,835 Nomura Real Estate Japan 469 Boyd Watterson U.S. $11,104 411 $15,707 353 QBE Australia $23,790 Asset Mgmt. 470 Westwood Global U.S. $11,096 354 Dexus Australia $23,640 412 Cantillon Capital Mgmt. U.S. $15,558 471 Angel Oak Capital U.S. $11,011 355 Davis Advisors U.S. $23,622 413 Glenmede Investment U.S. $15,546 472 Fisch Asset Mgmt. Switzerland $10,998 9 356 Fiduciary Mgmt./Milwaukee U.S. $23,461 414 Close Brothers Group U.K. $15,310 473 Belle Haven Investments U.S. $10,980 357 Diamond Hill Capital U.S. $23,399 415 Sprucegrove Investment Canada $15,045 474 KTB South Korea $10,766 358 Unigestion Switzerland $23,311 416 Value Partners Hong Kong $15,007 475 Beacon Capital U.S. $10,763 359 Co-operators Group Canada $23,277 417 Adrian Lee & Partners U.K. $15,000 476 IBK AMC South Korea $10,508 360 SCOR France $23,037 418 Garcia Hamilton U.S. $14,997 477 Wasmer, Schroeder U.S. $10,475 361 Gruppo Credito Emiliano Italy $22,427 419 Tongyang Investment Mgmt. South Korea $14,785 478 Jensen Investment U.S. $10,398 362 Jackson Square Partners U.S. $22,348 420 Sage Advisory Services U.S. $14,621 479 Verde Asset Mgmt.2 Brazil $10,398 363 Kutxabank Spain $22,242 421 IDFC Asset Mgmt. India $14,580 480 London Co. U.S. $10,347 EdgePoint Investment Canada 422 West eld Capital U.S. $14,463 $22,115 364 Group 481 Global Endowment Mgmt. U.S. $10,300 423 XP Asset Mgmt.4 Brazil $14,438 365 Providence Equity U.S. $22,114 482 American Realty Advisors U.S. $10,260 424 Lansdowne Partners U.K. $14,381 366 Saro m Group U.S. $21,604 483 Martingale Asset Mgmt. U.S. $10,108 425 BOCI-Prudential Hong Kong $14,310 367 King Street Capital U.S. $21,600 484 Intercontinental Real Estate U.S. $10,096 426 Lion Fund Mgmt. China $14,310 368 Brandes Investment U.S. $21,426 485 KDB AMC South Korea $10,092 427 Rock Creek Group U.S. $14,300 369 Impax Asset Mgmt. U.K. $21,358 486 Capital Fund Mgmt. France $10,000 428 Champlain Investment U.S. $14,240 6 370 Minsheng Royal Fund China $21,300 487 Gulf International Bank U.K. $10,000 429 Polar Capital Holdings U.K. $14,222 371 UTI Mutual Fund India $21,101 488 Maple-Brown Abbott Australia $9,925 430 Majedie Asset Mgmt.6 U.K. $14,165 372 Capula Investment Mgmt. U.K. $20,990 489 Eugene Asset Mgmt. South Korea $9,876 431 Amalgamated Bank U.S. $13,859 373 Wasatch Global Investors U.S. $20,841 490 UNICAJA Spain $9,842 432 Af n Hwang Asset Mgmt. Malaysia $13,728 374 Letko Brosseau Canada $20,815 491 Great Lakes Advisors U.S. $9,804 433 Polaris Capital U.S. $13,728 1 375 RWC Asset Mgmt. U.K. $20,674 492 Sanderson Asset Mgmt. U.K. $9,789 434 Carnegie Investment Sweden $13,718 4 376 Stone Harbor Investment U.S. $20,423 493 Western Asset Brazil $9,776 435 Sit Investment U.S. $13,671 377 Bank of Comm. Schroder AM China $20,339 494 Cooke & Bieler U.S. $9,757 436 Hexavest Canada $13,584 378 Rockpoint Group U.S. $20,070 495 Chartwell Investment U.S. $9,701 437 Rongtong Fund Mgmt. China $13,529 379 Baring Private Equity Asia China $20,000 496 Abbott Capital U.S. $9,673 438 Westbrook Partners U.S. $13,455 4 380 Segall Bryant & Hamill U.S. $19,659 497 Votorantim Asset Mgmt. Brazil $9,673 439 Lupus Alpha Asset Mgmt. Germany $13,438 381 Chandler Asset Mgmt. U.S. $19,552 498 TISCO Asset Mgmt. Thailand $9,653 Navigator Global Australia 440 $13,370 382 Manning & Napier U.S. $19,480 Investments 499 Cooper Investors Australia $9,640 4 383 Hana Financial Group South Korea $18,965 441 Ariel Investments U.S. $13,216 500 SPX Brazil $9,637

384 EARNEST Partners U.S. $18,848 442 Jacobs Levy Equity U.S. $13,096 TOTAL $104,387,345

385 Bankinter Spain $18,802 443 Brown Capital U.S. $13,049

386 Silvercrest Asset Mgmt. U.S. $18,800 444 DB Asset Mgmt. South Korea $12,968

387 AJO U.S. $18,784 445 Johnson Investment Counsel U.S. $12,931

Notes: 1 As of March 31, 2019; 2 As of March 31, 2020; 3 As of Oct. 31, 2019; 4 As of Feb. 29, 2020; 5 As of June 30, 2019; 6 As of Sept. 30, 2019; 7 As of April 30, 2020; 8 As of Sept. 16, 2019; 9 As of July 31, 2019; 10 As of April 30, 2019 18 | October 19, 2020 MEGAMANAGERS Pensions & Investments

Distribution of assets of the P&I/ Thinking Ahead Institute World 500 Managers ESG assets on the rise Assets invested using ESG principles managed by P&I/Thinking CONTINUED FROM PAGE 14 U.S. Number of managers in top 500: 184 Ahead Institute World 500 rms increased by 42.9% in 2019, while 2009: 45.20% change their (businesses) to have allocations to ESG mandates increased 14.4%. Dollars are in U.S. 2014: 52.04% more exposure to private mar- billions. 2019: 54.59% kets,” he added. The implementation of envi- Invested using Invested in ESG principles ESG mandates U.K. Number of Largest managers: ronmental, social and governance 7.16% managers factors into investment strategies among Top Legal & General Group Rank: 11 $8,511 $999 8.66% 500: HSBC Holdings Rank: 26 continued to grow in 2019. “Inves- tors are looking for a value for 6.95% 45 Schroders Rank: 38 money product that doesn’t just do $873 France Number of Largest managers: well ( nancially)” but one that $803 managers does good, Ms. Hall added. “Man- 9.17% among Top Amundi Rank: 10 $5,957 7.24% 500: BNP Paribas Rank: 14 agers are recognizing their role,” she added, noting that they are re- $5,462 6.05% 18 AXA Group Rank: 21 alizing the industry is connected to Germany Number of Largest managers: society and that requires them to managers de ne what impact they want to 7.95% among Top Allianz Group Rank: 5 have. The annual ranking’s data 6.53% 500: Deutsche Bank Rank: 27 support that realization. Assets al- 5.57% 21 LBBW Rank: 58 located to ESG principles grew 42.9% in 2019 to $8.51 trillion. As- Japan Number of Largest managers: managers sets allocated to ESG mandates 6.94% Sumitomo Mitsui Trust Holdings Rank: 25 among Top increased by 14.4% in 2019 to $999 4.99% 500: Mitsubishi UFJ Financial Group Rank: 31 billion. 21 Nippon Life Insurance Rank: 37 5.39% Also, half of money management rms increased the number 2017 2018 2019 2017 2018 2019 Canada Number of Largest managers: managers of women and executives from 4.11% Sun Life Financial Rank: 28 Based on a subset of managers that provided relevant data for 2017, 2018 and 2019. among Top ethnic minorities serving in top 500: Manulife/John Hancock Rank: 30 4.85% positions, according to the re- Power Financial Rank: 35 5.11% 27 search. Still, 48% of managers did years. Major global market equity 2018. Fixed-income assets were not increase, while 2% recorded a indexes have broadly recovered 33.8% of total AUM down from Switzerland Number of Largest managers: managers moderate decrease. from their lows in March this 34.4% in 2018. In 2019, alternatives 4.31% among Top UBS Rank: 13 year but the shape of the recov- were 6.3%, up from 6% in 2018; 500: 4.06% Credit Suisse Rank: 54 20 largest grow 17.3% ery will be dependent on the s- cash was at 7%, down from 7.7%; 3.95% 23 Zurcher Kantonalbank Rank: 80 The 20 largest money managers cal and monetary support pack- and other investments were at 7%, in the world also saw assets grow ages developed in response to down from 8.3% in 2018. China Number of Largest managers: managers 17.3% overall to $44.92 trillion in the COVID-19 pandemic, she “Volatility will drive portfolio 0.44% among Top CCB Principal Asset Mgmt. Rank: 89 2019. added. construction,” Mr. Phillips said 500: 1.29% E Fund Mgmt. Rank: 100 The 10-year compound annual The MSCI All Country World in- adding that growth over the next 2.43% 25 Agricultural Bank of China Rank: 102 growth rate of the top 20 rms was dex was up 27.3 % in 2019, com- ve years will be shaped by dis- 6.1%, outpacing that of the 500 pared with a loss of 8.9% in the cussions over environmental tax- Netherlands Number of Largest managers: managers largest managers at 5.4%. Over a previous year. The Russell 3000 es, pandemic relief programs and 3.21% among Top Aegon Group Rank: 24 ve-year period, the CAGR for the index gained 31% in 2019 , com- potential nancial disruption due 1.98% 500: NN Investment Partners Rank: 75 top 20 was 6.7% and 6% for the top pared with a loss of 5.3% in 2018. to bankruptcies caused by the 2.09% 11 Robeco Group Rank: 105 500 managers. The median AUM The MSCI Europe index gained pandemic. Depending on whether of the 500 largest managers was 26.8% vs. a 10.1% loss the previous private debt is considered a xed- Australia Number of Largest managers: up 9.6% over the year to $49.9 bil- year; and the MSCI All Country income asset classes rather than managers 0.92% among Top Macquarie Group Rank: 60 lion. Asia Paci c Net Total Return U.S. as part of alternatives, “we could 1.38% 500: IFM Investors Rank: 119 Equity markets lifted AUM in Dollar index gained 19.9% in 2019, see an increase in that category in 1.55% 25 Colonial First State Rank: 120 these strategies and led year-on- following a 13.1% loss in 2018. All the next years,” he said. For some year AUM growth in 2019. Speak- gures are total returns. investors, a speci c allocation to Italy Number of Largest managers: ing about the market impact on Across the top 500 managers, alternatives could disappear as managers 2.58% among Top Generali Group Rank: 49 the overall AUM increase, WTW’s equity and xed-income alloca- investors consider all assets as ei- 1.94% 500: Intesa Sanpaolo Rank: 61 Ms. Hall noted that equities have tions made up the majority of as- ther equity or debt, he said. Be- 1.45% 12 Anima Holding Rank: 106 had a “fantastic set of perfor- sets under management. Equities cause the dollar markets have had mances,” but the asset class could accounted for 45.9% of aggregate to face interest rates at zero or Brazil Number of Largest managers: be challenged over the coming AUM in 2019, up from 43.6% in near zero, the hunt for yield is go- managers 1.04% among Top Banco do Brasil Rank: 84 ing to lead to discussions about 0.87% 500: Itau Unibanco Rank: 104 looking further a eld for xed- 0.79% 12 Banco Bradesco Rank: 141 Surge in passive assets income instruments that pay higher coupons, Mr. Phillips add- Passive assets managed by P&I/Thinking Ahead Institute World South Korea Number of Largest managers: ed. managers 500 rms increased 25.3% in 2019, while active assets grew 0.74% Samsung Group Rank: 95 All data in the survey are con- among Top 12.5%. Dollars are in U.S. trillions. 0.61% 500: Mirae Asset Financial Group Rank: 176 verted into U.S. dollars. The euro Hanwha Group Rank: 185 depreciated 2.21% against the dol- 0.72% 18 $30.0 lar in 2019 . The pound sterling in-

Spain Number of Largest managers: $27.5 creased 3.94% against the dollar managers 1.78% among Top Banco Santander Rank: 91 over the same period. The Chinese 0.79% 500: BBVA Rank: 144 $25.0 yuan lost 1.22% against the U.S. 0.69% 12 Caixabank Rank: 149 dollar, while the Japanese yen $22.5 gained 0.99% vs. the dollar. Sweden Number of Largest managers: managers $20.0 Consolidation 0.52% among Top SEB Rank: 93 0.62% 500: Swedbank Rank: 118 Ms. Hall noted that consolida- $17.5 tion in the sector is continuing at a 0.51% 5 Svenska Handelsbanken Rank: 182 Active assets faster pace than before, with the $15.0 research nding that over the 10- Denmark Number of Largest managers: Passive assets managers year period ended 2019, 232 mon- 0.00% among Top Nordea Rank: 72 $12.5 ey managers dropped out of the 0.00% 500: Danske Bank Rank: 131 list of the top 500 rms in the 0.45% 2 $10.0 world. “We continue to see new South Africa Number of Largest managers: $7.5 rms popping out,” Ms. Hall add- managers ed. 1.22% among Top Ninety One Rank: 128 $5.0 Assets run by the top 20 manag- 0.46% 500: Old Mutual Investment Group Rank: 191 ers represented 43% of total AUM, 8 Sanlam Rank: 229 0.43% $2.5 up from 42.1% last year. These rms run between $1.09 trillion Other Number of Largest managers: $0.0 managers and $7.43 trillion in assets. Manag- 1.96% Willis Towers Watson (Ireland) Rank: 129 among Top 2015 2016 2017 2018 2019 ers ranked 21st through 50th, 1.42% 500: Pacific Century Group (Hong Kong) Rank: 163 Based on a subset of managers that provided relevant data for the years shown. which manage between $545 bil- 31 Storebrand Group (Norway) Rank: 170 1.28% lion and $1.09 trillion, saw their Pensions & Investments MEGAMANAGERS October 19, 2020 | 19

AUM fall to 21.2% from 21.9% of the total share. The data show that money man- Temasek creates holding company for 4 managers agers in places 51 through 250, whose assets range from $50 bil- By DOUGLAS APPELL specialist with AUM of S$54.9 bil- der management, as well as drive nate of Seviora. lion to $543.9 billion, grew as a lion as of June 30. capital allocation to meet business Mr. Phoon will hold both posi- share of the market to 30.3% in Singapore’s Temasek has set up ■ Azalea Investment Manage- requirements and growth opportu- tions until a successor can be ap- 2019 from 30% in 2018. Firms in a holding company for four money ment, a manager of private equity nities,” the release said. pointed as CEO of Seatown Hold- the second half of the top 500, run- management subsidiaries with and other private market assets, However, the four companies ings International. ning between $9.6 billion and combined assets under manage- with S$7 billion. “will retain operational autonomy Mr. Goh said in the release that $49.9 billion, saw their share de- ment of S$75 billion ($54.9 billion) ■ InnoVen Capital, an Asia-fo- and continue to manage their in- the structure will offer opportuni- crease to 5.5% from 5.9% the previ- to better leverage synergies in cused venture debt manager with vestment strategies and organiza- ties “to accelerate business growth ous year. meeting client needs. $650 million invested in more than tional decisions, guided by their re- through creation of scale, synergis- Casey Quirk’s Mr. Phillips said According to a news release, the 225 startups. spective boards and management.” tic product offerings and greater private markets players’ AUM as S$306 billion government-owned ■ Seatown Holdings Interna- Goh Yew Lin, a director on investment in technology.” well as that of quantitative provid- investment company established tional, a manager focused on global Temasek’s board and chairman of A Temasek spokesman said Se- ers are rising quickly. Seviora Holdings as the operation- alternative absolute-return strate- Seatown Holdings, will take on the viora’s team will also work to “seed There were also changes to the al holding company for the four gies with S$7.9 billion in AUM. additional role of chairman of Se- new strategies, to allocate capital manager lineup in the top 20. Capi- subsidiaries: A dedicated management team viora, while Jimmy Phoon, CEO of and coordinate across platforms,” in tal Group Cos. Inc. moved ahead of ■ Fullerton Fund Management at Seviora will “oversee the group’s Seatown Holdings International, areas like product development and Bank of New York Mellon Corp. and Co., an Asia-focused investment strategies and growth of assets un- has been appointed CEO-desig- cross-marketing to third parties.  Amundi in the 2019 ranking to the seventh position, growing its assets 22.6% to $2.06 trillion in 2019 from $1.68 trillion a year earlier. BNY Mellon and Amundi dropped to the eighth spot and the 10th spot, respectively. AXA Group dropped off the top 10 list and into 21st place in the ranking and was replaced by Goldman Sachs Group Inc., which moved up to the ninth place from The Evolution of OCIO the 11th spot . Goldman Sachs increased its AUM 20.8% to $1.86 tril- New Virtual Format | November 3-6 lion in 2019 from $1.54 trillion a year earlier. During these volatile times more and more asset owners are turning toward OCIO New managers entered the top 20 in 2019, with Invesco and Mor- solutions to diversify into non-traditional asset classes and improve returns. Have you gan Stanley joining the group for considered outsourcing? Should you consider outsourcing? What should you be looking the rst time, at 16th and 19th plac- for in a provider? es, respectively. Invesco’s AUM grew 38.1% over Join P&I for The Evolution of OCIO Virtual Series that will address the ‘why’ and the the year, to $1.23 trillion. Morgan ‘how’ of the OCIO model and will share best practices on how to implement, evaluate, Stanley, which agreed to acquire Eaton Vance Corp. on Oct. 8, in- benchmark and evolve for the best outcomes. creased its institutional and wealth assets to $1.13 trillion in 2019 from $916 billion a year earlier. The rm’s investment management NOVEMBER 4 AT 1PM ET | FIRESIDE CHAT unit AUM at the end of 2019 was $552 billion. The OCIO Marketplace - Past, Present & Future Assets run in factor-based strat- Kevin Quirk egies increased in 2019, with alloca- Casey Quirk & Associates tions growing 18.7% to $2.23 trillion. Also, assets managed in liability- driven investment strategies grew to $3.70 trillion in 2019 from $3.41 trillion a year earlier. Figures are based on a subset of managers that NOVEMBER 5 AT 1PM ET | FIRESIDE CHAT have provided relevant data for all years since 2017.  Asset Owner that has successfully implemented an OCIO model Jerey Mindlin. CFA Arizona State University Foundation

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Contact Laura Picariello (732) 723-0569 [email protected] Questions? For more details please contact Elayne Glick at (212) 210-0247 or [email protected]. *Only asset owners and a limited number of consultants are invited to attend. All registration requests are subject to verification. P&I reserves the right to refuse any registrations not meeting our qualifications. The agenda for The Evolution of OCIO is not created, written or produced by the editors of Pensions & Investments and does not represent the views or opinions of the publication or its parent company, Crain Communications Inc. White papers from the industry’s leading investment management firms

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20pi0221B.pdf RunDate: 10/19/20 Full Page Color: 4/C 22 | October 19, 2020 Pensions & Investments Special Report DC MUTUAL FUNDS Pandemic mars an otherwise strong year

for the period ended June 30, and reached $166 billion for the 12 Target-date and proprietary mutual funds the rankings of industry leaders months ended June 30, up 14% from see growth in AUM despite virus volatility barely changed from the year-ago the year-ago period and up 68.8% period. from ve years ago. Among the top three, Vanguard “I expect contributions to target- By ROBERT STEYER I suspect we will start to see normal Group Inc.’s mutual fund AUM rose date funds will continue because levels of activity as we get closer to 2.9% to $930.6 billion; Fidelity In- they are the most popular QDIA,” Shrugging off the coronavirus’ year end and into the new year.” vestments AUM gained 10.6% to said Ross Bremen, a partner with damage to the economy and stock The coronavirus “has absorbed $667.3 billion; and Capital Group NEPC LLC, Boston. market, asset managers serving the bene ts staff with the CARES Act,” Cos. Inc. added 4.4% to $430.7 bil- The growth of commingled trusts de ned contribution industry post- Martha Tejera, project leader of the lion. ts in with sponsors’ desire for lowed AUM gains for their mutual DC consulting rm Tejera & Associ- Fourth-ranked T. Rowe Price er-cost investments as well as with funds and target-date series for the ates LLC, Seattle, wrote in an email, Inc.’s AUM slipped 1.2% to $255.2 their concerns about being sued for 12 months ended June 30, an an- referring to the Coronavirus Aid, billion and fth-ranked J.P. Morgan ERISA violations by participants nual survey by Pensions & Invest- Relief and Economic Security Act. Asset Management’s AUM dropped claiming plans’ investment fees ments reveals. “Investment committees have 3.8% to $101.1 billion. were too high, he added. Total proprietary mutual fund had to deal with increased market Beyond the three largest mutual Among Mr. Gardner’s clients, the assets under management rose volatility and shifts between invest- fund providers, a majority of the top large plan segment — $500 million 2.2% to $3.26 trillion vs. the year- ment strategies,” she wrote. “Senior JUST STAYING AFLOAT: Martha Tejera 25 rms experienced AUM declines. or more in total plan assets — “are ago period. Over ve years, mutual management has had to address said sponsors were too busy with virus Target-date funds drove the more likely to consider or be eligi- fund AUM grew by other workforce is- concerns to do much on innovation. gains in the mutual fund industry. ble for CITs (collective investment 31.5%. MORE ON MUTUAL sues that arose with For the 12 months ended June 30, trusts) in the target date asset class, Total target-date FUNDS MOST USED COVID. So there has “The average participation rate target-date mutual funds’ AUM primarily as a way to explore lower AUM climbed to $1.91 BY DC PLANS been limited capaci- in plans slipped only marginally rose 7% from the year-ago period, costs for participants,” he said. With trillion for the 12 For the full report, ty by plan sponsors from 81% in 2019 to 80% in the sec- reaching $939 billion. Target-date more than 620 DC clients, the aver- months ended June 30, including a complete to do anything cre- ond quarter of 2020,” he wrote. “Av- funds now contribute 28.8% of total age plan’s asset size is $205 million. up 12.5% for the year- set of data, go to ative or innovative erage savings rates increased mutual-fund AUM; ve years ago, it Approximately 245 clients have as- ago period and double pionline.com/ during 2020.” slightly from 8.1% to 8.2%, likely due was 20.2%. sets of $100 million or more, he said. the AUM from ve dcmutualfunds20 Ms. Tejera added to the impact of automatic contri- Among target-date series, com- “I expect CITs to continue to gain years ago. that she hoped that bution escalation.” mingled trusts surged to $792.7 bil- due to lower operations’ costs rela- These gains were the impact caused by Although there was “brisk” net lion AUM by June 30, up 17.1% from tive to either mutual funds or sepa- achieved essentially, in poker par- the coronavirus “will ease in 2021 trading activity during the rst the year ago period and up 136.5% rate accounts,” Ms. Tejera wrote. lance, due to sponsors’ playing a and we will see progress with help- quarter of 2020, “it has been more over ve years. Commingled trusts The CIT costs and “growing com- pat hand with their investment ing workers be nancially prepared measured” during the second and now account for 41.5% of aggregate fort of the plan sponsors” has led to lineups and plan designs due to for retirement.” third quarters, Mr. Austin wrote. target-date fund AUM; ve years their greater popularity, she added. the coronavirus. The DC asset management in- “The overall net trading activity ago, it was 35.2%. “I do not think participants have a “Prior to the market decline as a dustry’s performance for the 12 through September 2020 was 2.85% Mutual funds still lead the target view one way or the other.” result of the pandemic it was large- months ended June 30 bene ted in of starting balances,” he added. “In date universe with 49.2% of the total ly business as usual for many com- general from a paucity of partici- 2019, it was 2.29%. If the trend con- AUM, but their market share has Vanguard still on top mittees,” said Ryan Gardner, the pant panic. tinues, 2020 will be the year with declined from ve years ago when Among the 20 largest target-date Windsor, Conn.-based managing “Even though there have been the highest trading activity since they owned 52.6% of the AUM. providers, 13 posted AUM gains, partner and senior consultant for wild swings on Wall Street in 2020, 2008. Trades have almost univer- The AUM of target-date funds four experienced declines; one es- DiMeo Schneider & Associates LLC. most 401(k) participants have sally been out of equities and into using separate accounts rose to sentially broke even; and results for “As the market decline unfolded stayed the course with their retire- xed income funds.” $169 billion for the 12 months end- two were incomplete because they and into the summer months, many ment savings behaviors,” Robert ed June 30, up 24.5% from the year didn’t provide information for the committees elected to defer non- Austin, the Charlotte, N.C.-based Mutual fund growth ago period and up 50% from ve year-ago period. critical changes and/or other director of research for Alight Solu- Among the mutual fund manag- years ago. Vanguard continued to dominate changes to their investment menus. tions, wrote in an email. ers, most of the biggest got bigger Custom target-date funds’ AUM with an AUM of $631.6 billion, up

DC mutual fund/target-date Growth of DC assets in The largest managers of proprietary mutual funds manager stats at a glance proprietary mutual funds most used by DC plans U.S. de ned contribution assets under management, in millions, Assets are in trillions as of June 30. Ranked by total U.S. defined contribution assets, in millions, as of June 30. as of June 30. $3.26 Rank Manager Assets One-year Five-year $3.19 Assets change change $3.02 1 Vanguard Group $930,592 DC assets managed in $3,256,381 2.23% 31.55% $2.84 proprietary mutual funds 2 Fidelity Investments $667,279 Assets managed under ESG $2.55 $247,845 N/A N/A 3 Capital Group $430,701 principles $2.48 Mandates $46,961 N/A N/A 4 T. Rowe Price Group $255,188

5 J.P. Morgan Asset Mgmt. $101,070 DC assets managed in proprietary target-date $1,908,816 12.49% 100.43% 6 BlackRock $83,628 strategies Internally managed $1,521,067 13.48% N/A 7 PIMCO $69,838

Target-date investment vehicles: 8 Nuveen $68,108

Mutual funds $938,952 7.04% 87.39% 9 Invesco $67,504 $792,714 17.13% 136.46% Commingled trusts 10 Dodge & Cox $62,794 Separate accounts $169,047 24.54% 50.02% 11 John Hancock Funds $62,503 Custom target-date $165,533 13.99% 68.81% 12 MFS Investment $59,677 Internally managed $59,533 30.52% N/A 13 Federated Hermes $49,661 Historical data may include retroactive updates. 2015 2016 2017 2018 2019 2020 Pensions & Investments October 19, 2020 | 23

6.6% from the year-ago period. vintage fund, he added. The mutual funds most used by DC plans, by asset class Vanguard’s AUM is greater than the combined AUM of firms Looking ahead U.S. defined contribution assets, in millions, as of June 30. ranked 5 through 20. Future growth among partici- BlackRock Inc. had an AUM of pants’ retirement assets will de- Domestic equity Domestic fixed income $255 billion, up 12.3% from the pend on the speed and scope of Rank Fund Assets Rank Fund Assets year-ago period, which enabled it the health care, employment and 1 Fidelity 500 Index $110,585 1 PIMCO Total Return $30,458 to move into second place from general economy recoveries from 2 Vanguard Inst'l Index-Inst. Pl. $71,107 2 Vanguard Total Bond Mkt. Idx.-Inst. $26,961 fourth. the damage caused by the corona- Fidelity Investments stayed in virus pandemic, consultants said. 3 Vanguard Institutional Index $46,014 3 Fidelity U.S. Bond Index $21,889 third place with an AUM of $253.6 One source of potential growth, 4 American Funds Growth Fund Amer. $45,133 4 Dodge & Cox Income $15,436 billion, up 10.4%. T. Rowe Price they said, is the SECURE Act, the Group slipped to fourth from sec- provisions and benefits of which 5 Fidelity Contrafund $41,542 5 PGIM Total Return Bond-R6 $13,135 ond even though its AUM rose essentially have been obscured by 6 T. Rowe Price Blue-chip Growth $30,935 6 PIMCO Income $12,829 6.9% to $247.6 billion. the coronavirus and sponsors’ ef- 7 Dodge & Cox Stock $30,580 7 Vanguard Tt. Bd. Mk. Idx.-Inst. Pl. $10,979 Among the various categories, forts to implement the CARES Act. Vanguard retained its dominant Mr. Bremen said one immedi- 8 Vanguard PRIMECAP-Adm. $30,246 8 Vanguard Total Bond Mkt. Idx.-Adm. $9,756 first-place positions for mutual ate benefit of the Setting Every 9 Vanguard 500 Index-Adm. $25,380 9 Western Asset Core-plus Bond $7,903 fund target-date series and for Community Up for Retirement commingled trust series, while Enhancement Act, passed in De- 10 Fidelity Growth Co. $21,200 10 Fidelity Total Bond $5,908 BlackRock maintained its leader- cember 2019, is the raising to 15% ship in the separate account and from 10% the safe harbor cap on International/global equity Balanced/asset allocation custom categories. employees’ contributions to re- Rank Fund Assets Rank Fund Assets Despite the dominant roles in tirement accounts. 1 American Funds EuroPacific Growth $86,943 1 American Funds American Balanced $29,856 mutual funds and target-date Another safe harbor may take 2 American Funds New Perspective $19,581 2 Vanguard Wellington-Adm. $28,563 funds played by a relative hand- longer to produce results — the ful of asset managers, DC consul- one that protects sponsors from 3 Vanguard International Growth-Adm. $14,960 3 Fidelity Balanced $10,640 tants said sponsors shouldn’t feel liability if they take certain steps 4 Vanguard Total Int'l Stk.-Inst. $12,660 4 Fidelity Puritan $8,426 squeezed on price or choice of and receive certain assurances $11,660 $7,569 investments. from insurers about in-plan an- 5 Dodge & Cox International Stock 5 John Hancock Multimgr. Life Gr. “Given the fierce competition nuities and other retirement in- 6 American Funds Capital World G&I $10,941 6 John Hancock Multimgr. Life Bal. $7,391 among target date managers, fees come products. 7 Invesco OFI Developing Markets $9,938 7 BlackRock Global Allocation $6,354 have continued to come down,” “Anything that Washington does said Mr. Bremen. to benefit participants is great,” 8 Fidelity International Index $9,352 8 Vanguard Balanced Index-Inst. $6,202 “I do not have concerns regard- said Mr. Bremen, citing the law’s 9 American Funds New World $6,676 9 American Funds Income Fund Amer. $5,778 ing lack of choice or options, as safe harbor and product portabili- 10 Vanguard Dev. Mkt. Idx.-Inst. Pl. $6,258 10 Vanguard Wellesley Income-Adm. $5,427 there are still many choices for ty provisions. “The reality of the my clients,” wrote Ms. Tejera. COVID environment is that spon- Mr. Gardner said his clients sors are focusing on ensuring par- Money market Other haven’t experienced any pricing ticipants stay the course” rather Rank Fund Assets Rank Fund Assets squeezes among mutual funds or than adding new features quickly. 1 Vanguard Federal Money Market $30,064 1 Vanguard Inflation Protected-Inst. $5,081 target date funds. “Eighty percent “With everything going on and 2 Fidelity Gov't Cash Reserves $16,811 2 PIMCO Real Return $4,114 of target date funds isn’t pricing,” with market volatility, we haven’t he said. The glidepath, underly- seen a lot of activity on retirement 3 Fidelity Gov't Money Market $15,993 3 Fidelity Inflation-protected Bond $2,524 ing asset classes and asset vola- income,” he said. 4 Fidelity MM Gov't Portfolio $8,634 4 Vanguard Inflation Protected-Adm. $2,162 tility are crucial issues for clients’ Ms. Tejara noted that it’s too 5 Federated Hermes Gov't Obligations $6,955 5 DFA Inflation-protected Secs. $1,983 choosing a target-date provider, early to assess the impact of the he said. So is the choice of a “to” SECURE Act and that her clients 6 Vanguard Treasury Money Market $6,168 6 PIMCO International Bond (USD-H) $1,666 series, in which the equity com- also aren’t forging ahead on re- 7 Vanguard Cash Res. Fed. MM-Adm. $6,016 7 DFA Global Real Estate Secs. $1,218 ponent remains the same after tirement income. “Plan sponsors the retirement-age vintage fund have been busy with COVID on 8 American Funds U.S. Gov't MM $5,429 8 DFA Real Estate Secs. $1,212 or a “through” series, in which the investments, withdrawals and 9 Federated Hermes Treasury Oblig. $2,845 9 Invesco Real Estate $1,007 equity component continues to loans, which has caused a pause,” 10 Federated Hermes U.S. Tr. Cash $2,085 10 American Century Inflation Adj. $983 decline after the retirement-age she added. n

The largest managers of proprietary mutual funds Average allocation of U.S. DC The largest managers of most used by DC plans assets in proprietary mutual funds proprietary mutual fund Ranked by total U.S. defined contribution assets, in millions, as of June 30. As a percentage of the total of mutual funds reported in each category, as assets under ESG of June 30. Data in parentheses are previous year. principles Rank Manager Assets Domestic Target date International/ U.S. defined contribution assets, in millions, 14 Franklin Templeton $45,799 equity 26.7% global equity as of June 30. 39.7% (25.8%) 10.6% 15 Dimensional Fund Advisors $43,691 (41.3%) (11.4%) Total Rank Manager assets Mandates 16 American Century $29,531 1 Dodge & Cox $62,794 17 $25,300 Prudential Financial 2 MFS Investment $59,677

18 Principal $21,838 3 Federated Hermes $47,575

19 Wells Fargo Asset Mgmt. $21,076 4 Franklin Templeton $45,799 $45,799

20 Voya Investment Mgmt. $20,732 5 American Century $19,569 $37 6 Harris Associates $8,349 21 Columbia Threadneedle $17,695 Domestic 7 Ariel Investments $1,237 22 Great-West Investments $11,677 xed income 10.5% 8 Russell Investments $541 $263 23 AllianceBernstein Invest. $11,365 (9.5%) 9 GAMCO Investors $449 $104 24 Victory Capital $11,035 Balanced/ 10 Amundi Pioneer $414 $414 Other Money asset 25 Loomis, Sayles $10,657 1.3% market allocation (1.3%) 4.4% 6.8% (3.3%) (7.4%) 24 | October 19, 2020 DC MUTUAL FUNDS Pensions & Investments

The largest managers of proprietary target-date Growth of DC assets in strategies used by DC plans proprietary target-date strategies Ranked by total U.S. de ned contribution assets, in millions, as of June 30. Assets are in billions as of June 30. $1,908.8

Number of Number of Rank Manager Assets series Rank Manager Assets series Total assets $1,696.8 Custom strategies 1 Vanguard Group $631,554 12 11 John Hancock Funds $13,950 3 $1,530.0

2 BlackRock $255,016 4 12 Voya Investment Mgmt. $11,538 6 $1,293.0 3 Fidelity Investments $253,616 13 Russell Investments $9,411 4 $1,070.7 4 T. Rowe Price Group $247,586 5 14 Wells Fargo Asset Mgmt. $9,296 3 $952.4 5 Capital Group $140,076 1 15 Charles Schwab $9,168 4

6 J.P. Morgan Asset Mgmt. $117,794 6 16 Prudential Financial $7,885 4

7 Principal $69,252 4 17 Putnam Investments $6,961 3

8 Nuveen $43,607 18 Great-West Investments $6,355 6

9 AllianceBernstein Invest. $42,660 2 19 Northern Trust Asset Mgmt. $6,277 1 $165.5 $98.1 $98.1 $109.2 $137.0 $145.2 10 American Century $19,757 1 20 MFS Investment $2,842 1 2015 2016 2017 2018 2019 2020

Aggregate assets of proprietary target-date strategies used by DC plans The largest target-date U.S. de ned contribution assets by target year, in billions, as of June 30. mutual funds most used $315.0 by DC plans

$280.1 $276.2 U.S. de ned contribution assets, in millions, as of June 30. $256.9 $252.6 2020 2019 $241.7 $223.7 Rank Fund Assets $210.2 $196.1 1 Vanguard Inst’l Target Ret. 2025 $31,117 $181.4 $171.3 2 Vanguard Inst’l Target Ret. 2030 $30,053 $152.6 $157.9 $154.3 3 Vanguard Inst’l Target Ret. 2035 $27,431 $128.3 $121.0 4 American Funds 2030 Target Ret. $24,302

$84.9 5 Vanguard Inst’l Target Ret. 2040 $24,097 $67.2 6 Fidelity Freedom 2030 $23,904

$29.1 7 American Funds 2025 Target Ret. $21,745 $18.5 $2.2 $0.8 8 Vanguard Inst’l Target Ret. 2020 $21,682

Income/ 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 9 Vanguard Inst’l Target Ret. 2045 $20,541 pre-2020 10 Fidelity Freedom 2025 $20,321 Assets might be less than target-date total if some rms did not provide breakouts.

The largest managers of The largest managers of Managers of proprietary target-date proprietary target-date proprietary custom strategies used by DC plans: to vs. through mutual funds used by DC target-date strategies Managers primarily using “to” or “through” strategies, as of June 30. plans used by DC plans Manager Strategy Manager Strategy

U.S. de ned contribution assets, in millions, as U.S. de ned contribution assets, in millions, as AllianceBernstein Invest. Through Northern Trust Asset Mgmt. Through of June 30. of June 30. American Century To Nuveen Through Rank Fund Assets Rank Fund Assets BlackRock To PIMCO To 1 Vanguard Group $302,724 1 BlackRock $62,906 Capital Group Through T. Rowe Price Group Through 2 Fidelity Investments $197,077 2 AllianceBernstein Invest. $41,622 Dimensional Fund Advisors Through Principal Through 3 Capital Group $137,953 3 J.P. Morgan Asset Mgmt. $26,054 Fidelity Investments Through Prudential Financial Through 4 T. Rowe Price Group $115,074 4 T. Rowe Price Group $9,983 Franklin Templeton To Putnam Investments To 5 J.P. Morgan Asset Mgmt. $48,790 5 Russell Investments $7,780 Great-West Investments Through Russell Investments To 6 Nuveen $43,607 6 Wells Fargo Asset Mgmt. $7,584 John Hancock Funds Through Charles Schwab Through 7 BlackRock $41,357 7 Principal $4,218 Invesco Through Vanguard Group Through 8 John Hancock Funds $13,950 8 Prudential Financial $3,088 Manning & Napier Through Voya Investment Mgmt. To 9 American Century $10,808 9 Northern Trust Asset Mgmt. $1,717 MFS Investment To Wells Fargo Asset Mgmt. Through 10 Voya Investment Mgmt. $8,629 10 Voya Investment Mgmt. $301 J.P. Morgan Asset Mgmt. To The Eddy Awards recognize outstanding eorts of both plan sponsors and service providers to educate participants about how to invest their deﬁned contribution plan assets wisely for retirement.

ENTER IN THE FOLLOWING CATEGORIES: • Ongoing Investment Education • Special Projects | Covid-19 Communications • Conversions/403(b) Consolidations • Plan Transitions • Pre-Retirement Readiness • Financial Wellness

Plan sponsors, service providers and retirement plan advisors

CALL FOR ENTRIES CALL FOR are all encouraged to enter.

For full details and access to the online entry system go to: www.pionline.com/EddyEnter

Deadline extended to Oct. 23

If you have questions about the Eddy Awards, contact Michelle DeMarco at [email protected].

20pi0223.pdf RunDate: 10/19/20 Full Page Color: 4/C 26 | October 19, 2020 Pensions & Investments

Governance CalPERS gets tougher on executive compensation Fund wants to hold corporate Typically, say-on-pay shareholder propos- “This is relatively new for us,” Mr. Nzima als are supported by an overwhelming major- said. directors’ feet to fire for failure ity of shareholders. Executive compensation CalPERS is leading engagements at 22 proposals received 90% average support in companies, including six Japanese firms on to link pay with performance the 2020 proxy season, about the same as last the issue of climate change. However, CalP- year, according to analysis from Willis Towers ERS votes against corporate directors on cli- By ARLEEN JACOBIUS Watson PLC released in September. The ma- mate change issues only on an ad hoc basis, jority of shareholders voted against 3% of Mr. Nzima said. When it comes to executive compensation say-on-pay proposals in 2020, also flat with “We may vote against directors on other issues at the corporations in CalPERS’ portfo- the year-earlier proxy season. thematic issues as well,” he added. In March, lio, pension fund officials have made corpo- The Willis Towers Watson analysis was the team will report to the board on its new rate board member actions personal. based on information from 2,003 Russell 3000 ideas for 2021. In 2020, the $410 billion California Public companies from Jan. 1 to July 17. CalPERS officials have been holding 15 to Employees’ Retirement System, Sacramento, Proxy advisory firm Institutional Share- 20 meetings with company executives on cor- for the first time voted against compensation holder Services Inc., Rockville, Md., recom- porate governance issues each week since committee members when voting against ex- mended negative votes on say-on-pay pro- the middle of June. ecutive compensation plans, said Simiso Nzi- posals 11% of the time in 2020, down from CalPERS’ willingness to vote against board ma, investment director and head of corpo- 13%. ISS recommended shareholders vote members has gotten the attention of compa- rate governance, in an interview. against compensation committee members ny executives. Almost half of those engage- In the 2020 proxy season, CalPERS voted at only 14% of the companies at which the ment meetings that CalPERS held through against 2,716 board members on the annual most shareholders voted against say-on- mid-September on executive compensation meeting ballot due to their roles as compen- pay proposals, Willis Towers Watson analy- HARD STUDY: Simiso Nzima doesn’t think other included at least one board member in atten- sation committee members in failing to prop- sis revealed. large funds look closely at compensation panels. dance, Mr. Nzima said. This is a huge differ- erly align executive pay and performance. This is the second year CalPERS has used ence. In general, a board member will attend If CalPERS officials are unhappy with a a new five-year quantitative pay-for-perfor- spond to meeting requests in September, Oc- a proxy meeting, regardless of the issue, only company’s compensation plan, they are now mance model as part of the framework it uses tober and November. 5% of the time, he said. holding corporate directors accountable for to review executive compensation proposals, “This is true for most investors,” that board failing to institute a plan in which executive Mr. Nzima said. CalPERS officials compare More diversity members attend shareholder engagement pay and performance are aligned, Mr. Nzi- the pay of the company’s CEO with the pay of Executive compensation issues are not the meetings only on rare occasions, Mr. Nzima ma said. his or her peers. For example, if a CEO’s com- only ones leading to a CalPERS vote against said. Out of 2,256 say-on-pay votes cast as of pensation is in the 50th percentile but the board or committee members. On the issue of Institutional investors generally end up June 30, CalPERS voted against the execu- company’s performance is in the 25th per- making corporate board’s more diverse, CalP- meeting mostly with corporate counsel or in- tive compensation plan 52% of the time, centile, then the CEO is being overpaid rela- ERS voted against 164 directors at companies vestor relations executives, he said. down slightly from 53% during the 2019 tive to peers, he explained. where meetings or other contact with execu- “When you talk to a board member ... you proxy season. CalPERS voted against com- CalPERS officials also consider the CEO’s tives about the lack of diversity on its board have a conversation where you are actually pensation committee members at every compensation compared to rank-and-file failed to produce constructive outcomes. By solving the problem,” Mr. Nzima said. “At the company it voted against executive pay. It workers, Mr. Nzima said. The problem is that comparison, CalPERS voted against 314 di- end of the day, for us, this is about investment did not vote against members who had been how companies pay contract workers is not rectors in 2019 and 468 directors in 2018. returns.” on the compensation committee for a year or standardized. Every company uses a different The decline is a sign of progress, Mr. Nzima As large as it is, CalPERS on its own does less, he added. business model for employee pay relative to said. Some 67% of the 733 companies CalP- not own that much of a single company, he “I don’t think others of our size are voting its peers, he said. ERS officials met, spoke or otherwise en- explained. CalPERS’ largest public holdings against members of compensation commit- Also new this year, CalPERS not only voted gaged with since July 2017 have added a di- are Microsoft Corp. and Apple Inc, which tees,” he said. against committee members when it voted verse director to their boards. each accounted for 1% of the pension fund’s Since say-on-pay votes are advisory, voting against say-on-pay plans, pension plan offi- In the past, CalPERS tended to vote against total assets as of June 30. against compensation committee members is cials followed up with requests to discuss board directors on an ad hoc basis such as “If more investors really hold people ac- a way to hold company executives account- their votes with company executives. when company executives exhibited poor countable, we will see change,” Mr. Nzima able for their actions. The response rate was low, 30% as of the oversight resulting in a controversy, he said. said. ”We need directors, we need boards “We don’t want to say that we don’t like end of August, most likely due to the pan- Now CalPERS is voting against board working for us. We are using our capital the what you are doing, but will vote for you any- demic, Mr. Nzima said. He added that the rate members on thematic issues such as climate right way so we can have the investment re- way,” he said. is likely to rise as some companies wait to re- change. turns.” n

outflows in 2018 and $27.4 billion in related to previous acquisitions. capable of doing on a stand-alone son also declined to comment on net outflows in 2019. Ms. Seifert said that she is not basis,” she said. market rumors or speculation, but Invesco-Janus sure, however, that Janus would be An Invesco spokeswoman said in said in an emailed statement that Activism as a positive “the right firm,” for Invesco to com- an emailed statement that the firm the firm regularly engages with and CONTINUED FROM PAGE 6 Despite concerns about secular bine with. “welcomes high quality investors in considers input from its sharehold- also pointed to secular challenges trends in asset management, Ms. “In the last five years, both firms our firm.” ers, though it is the company’s poli- in the industry that would still im- Seifert said she sees activism as a have had net outflows in the ma- “We value shareholder input and cy “not to comment on the specifics pact a combined Invesco-Janus positive for Invesco and Janus Hen- jority of those years. Both firms engage with our major sharehold- of discussions with individual Henderson. derson, “because it injects a catalyst have a lot of the same challenges, ers in a constructive dialogue aimed shareholders.” “Activism is not going to remove into these names.” (such as) a lack of organic asset to strengthen our business. We are “We continue to make significant the fact that there is a secular At Invesco, in particular, “the growth. I’m not sure how combin- committed to being the most client- progress to increase profitability, change in the asset management presence of an activist has lit a fire ing two firms with challenges is centric firm in the industry as we drive organic growth, and identify space — and that is a shift away under the firm and may accelerate going to help those firms, other additionally focus on our employ- and deliver cost savings, and are from active equity strategies to pas- some steps that may have already than by gaining economies of scale ees and shareholders,” the state- committed to delivering meaning- sive investment management. been underway,” such as completing through some cost cutting, which ment said. ful value for shareholders,” the While activism is going to force integration and costs savings plans may be something that Invesco is A spokesman for Janus Hender- statement said. n companies to be more proactive in dealing with this challenge, it doesn’t remove the challenge,” Ms. job done,” said Ms. Lee, a former needed immediately, officials said. comes with climate risk-related Seifert added. SEC enforcement lawyer. Alliance steering committee mem- strings. Companies will now have to In March, a Pensions & Invest- Regulators bers include representatives from report annually on their climate in- ments analysis of the largest money Net-zero push the $410 billion California Public vestments and how they will reduce CONTINUED FROM PAGE 6 manager combinations in recent In the meantime, global investors Employees’ Retirement System; the their environmental footprints, plus years, including between Invesco the authority to mandate disclosure are taking matters into their own 271 billion Danish kroner ($42.6 show how they support Canada’s and OppenheimerFunds, found of systemic climate risk. hands. In October, 30 of the world’s billion) PensionDanmark; the commitments made under the Paris that institutional assets represent- Ms. Lee is pushing for an agency largest investors with a collective $5 C$330 billion ($247.9 billion) Caisse climate agreement. ed a shrinking portion of firmwide task force to talk with market par- trillion in assets, the United Nations- de Depot et Placement du Quebec; The outcome of the American AUM for firms that acquired other ticipants about structuring a man- convened Net-Zero Asset Owner Al- the €32.7 billion ($38.3 billion) elections could potentially drive peers. Additionally, the analysis datory climate risk disclosure reliance, unveiled concrete portfolio Fonds de Reserve pour les Retrait- more disclosure mandates that mir- found that mergers did not stem or gime as more countries, from New decarbonization targets that follow es; and Wespath Benefits and In- ror those in other countries, said reverse bleeding at firms that suf- Zealand to the European Union, the Intergovernmental Panel on Cli- vestments, an agency of the United Michael Ferguson, head of North fered outflows before the deals. For begin requiring it. She cites a re- mate Change scenario for the next Methodist Church, with more than America sustainable finance at example, in 2016, Henderson Group cent Swiss Finance Institute survey five years on limiting global warm- $24 billion in assets. S&P Global Ratings, New York. PLC and Janus Capital Group Inc. that found many institutional in- ing by 1.5 degrees Celsius. U.S. regulators will have a lot of “Certainly the investment commu- reported a combined $7.9 billion in vestors believe climate risk report- The alliance’s 2025 Target Set- catching up to other countries to do nity has been clamoring for it. The net outflows prior to completion of ing is as important as traditional ting Protocol is intended to send “a when it comes to climate risk disclo- tools that are at their disposal are their merger in May 2017. The com- financial reporting and should be very loud signal” to companies and sure mandates. Canada, for exam- quite substantial, but the desire is bined firms had $10.2 billion in net mandatory and standardized. “Vol- governments that movement to- ple, recently launched a program of to have that be more harmonized. outflows in 2017, $18.1 billion in net untary disclosure is not getting the ward a lower-carbon future is COVID-19 relief for companies that We know that climate is a risk.” n VIRTUALLY MEET THE PLAN SPONSORS AT DCWEST DCW Fall Virtual Series Gay Lynn Bath Martin Booker OCTOBER 26-30, 2020 University of Oregon AARP

Make sure you register for the 2020 DCW Fall Virtual Series October 26-30. You’ll experience a unique online format where you can interact with attendees, learn the latest communication techniques that are resonating with plan participants and take part in small group discussions. Michon Caton Margaret Daun More than 150 plan sponsors are already registered and more sign up every day. You don’t Gap, Inc. Milwaukee County want to miss the one event this fall where the Deﬁned Contribution community is coming together to discuss the best ways retirement plans are moving forward in this uncertain environment. You owe it to your clients to make sure you know what other plan sponsors are thinking, the steps managers are taking to maximize returns and minimize risk, and how service providers are communicating with participants who are justiﬁably concerned for their Reuben Escobedo Lisa Joe futures. Valero Energy Corporation USG You’ll hear from a mix of large and small plan sponsors from public and corporate plans as well as leading managers and DC consultants. Featured keynotes include:

INSIDER’S VIEW KEYNOTE SPEAKER Hon. Preston Rutledge Kevin L. Walsh Charles Lee Kathy Makowski Former Assistant Secretary Principal Fireeye Inc. SCL Health Employee Beneﬁts Security Groom Law Group Administration, U.S. Dept. of Labor Founder and Principal Rutledge Policy Group LLC

Sam Martin Daniel Miller AECOM NYC Board of Education OPENING KEYNOTE CLOSING KEYNOTE Retirement System Jerey Brown, PhD, MPP Lisa Bodell Professor of Business and Dean Chief Executive Ocer Gies College of Business Future Think University of Illinois Author: Why Simple Wins

Herbert Nishii Debra L. Roberts County of LA Treasurer Maryland Supplemental and Tax Collector Retirement Plans REGISTER AT PIONLINE.COM/DCW2020 COMPLIMENTARY REGISTRATION FOR PLAN SPONSORS

Katie Selenski Marvin Tong CalSavers Sempra Energy

Teddy Tzotchev Anita Volta Amgen Inc. Micro Focus

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20pi0226.pdf RunDate: 10/19/20 Full Page Color: 4/C 28 | October 19, 2020 Pensions & Investments DC ROUNDUP

P&I extends entry deadline for 2021 Eddy Awards to Oct. 23

Pensions & Investments is ex- high fees, employed too many re- However, the judge refused to tending the deadline for entering cord keepers and offered too many dismiss the complaint against the 2021 Eddy Awards to Oct. 23. investment options. Real estate’s dismal returns Alight Solutions, the record keeper, The annual program recognizes They contended two federal ap- a drag on DC plan assets and a co-defendant in the case. plan sponsors and service provid- peals courts “have held that a plan The participant is a former em- Real estate has had a rocky year. The FTSE NAREIT All Equity Total ers that exhibit best practices in of- participant can adequately plead a ployee of Abbott who kept her re- fering investment and financial ed- breach of fiduciary duty by claim- Return index fell 23.44% in the rst quarter, and is still down tirement money in the company’s ucation to defined contribution ing that the retirement plan 12.27% this year through the end of the third quarter. 401(k) plan. plan participants. charged excessive fees when lower- Real estate assets in U.S. de ned contribution plans have declined In the complaint, Ms. Bartnett Because of the COVID-19 crisis, cost alternatives existed,” according for the past two years, driven by the drop in REIT assets, which have said that $245,000 was transferred P&I has changed how entries are to to their petition. seen limited growth since 2014. Real estate equity assets, on the from her account without her be submitted. All materials — in- However, they said the appeals other hand, have steadily increased since 2014. knowledge. She blamed the defen- cluding participant communica- court in the Northwestern case dants for allowing the money to be tions distributed as part of a de- “held that virtually identical plead- Growth of real estate assets in DC plans, in billions transferred to an internet address fined contribution educationings are insufficient to state a in India before she could take steps campaign — must be included as claim.” $45.6 to stop the fraud. Real estate equity part of the online entry, via PDFs of Attorneys for the university re- $8.2 $43.4 “The complaint fails to allege any printed materials, high-resolution sponded in an Aug. 24 petition to REITs $9.0 fiduciary acts taken by Abbott Labs, $38.8 JPEGs or website links. Regardless the Supreme Court: “There is no $37.6 no less link them to the alleged of whether they were distributed to disagreement among the lower $10.3 theft,” U.S. District Court Thomas N. $4.2 $37.3 participants in print or online, the courts regarding the proper legal $34.1 Durkin wrote in his Oct. 2 opinion. $34.4 entry materials must be submitted standard for evaluating a motion to $3.8 $33.4 “And while the complaint alleges online via the entry system. dismiss or the scope or content of $29.4 that the call center and website $30.3 The award categories, in alpha- ERISA’s duty of prudence.” $3.5 were used to perpetuate the theft, it $28.5 betical order, are: conversions; fi- The participants “mischaracter- also indicates that both are operat- $25.9 nancial wellness; ongoing invest- ize” the ruling by the Chicago ap- $22.4 ed by Alight.” ment education; plan transitions; peals court “in an attempt to con- $2.4 pre-retirement preparation; and jure a ‘circuit split,’ but none exists,” $20.0 Salesforce.com ERISA suit special projects. they wrote. Complete rules, category defini- The Northwestern University dismissed by federal court tions and entry forms are available Retirement Plan had assets of $2.83 A federal District Court judge in at pionline.com/EddyEnter. billion, as of Dec. 31, 2018, and the San Francisco dismissed a lawsuit Please note: Materials submitted Northwestern University Voluntary by participants in a 401(k) plan run by mail will not be judged. Savings Plan had assets of $704 by Salesforce.com who contended Sponsors of plans of all sizes are million as of Dec. 31, 2018. the company and its fiduciaries act- encouraged to enter, with materials ed imprudently and violated ERISA judged against those from their in managing the plan. NEST embarking on test of 2014 2015 2016 2017 2018 2019 2020 peers based on the number of plan One of the allegations in the law- participants. emergency sidecar account Data from Nuveen are excluded due to an incomplete dataset. Source: P&I Research Center suit filed in March was that Sales- Defined contribution record NEST Insight is starting a trial to force.com fiduciaries should have keepers and retirement plan advis- see the effectiveness of adding an Reliance Trust settles and in keeping with their fiduciary considered offering passively man- ers can submit their own generic emergency savings sidecar account responsibilities under ERISA.” aged mutual funds instead of ac- entries or can enter in conjunction to a retirement plan. ERISA suit for $40 million tively managed ones for compara- with plan sponsor clients. NEST Insight, which is the re- Reliance Trust Co. agreed to pay Participant in Nestle USA ble investments. In the latter instance, both will search unit of the £13 billion ($16.8 $40 million to settle a lawsuit accus- The participants also argued that receive trophies for a winning billion) multiemployer defined ing it of ERISA violations related to 401(k) plan files lawsuit the fiduciaries failed to explore us- entry. contribution plan National Savings its role as trustee of an Insperity A participant in the 401(k) plan ing lowest price share classes in the Winners of the Eddy Awards will and Employment Trust, London, Holdings Inc. 401(k) plan sold to In- of Nestle USA Inc., Solon, Ohio, plan’s investment lineup. be announced at P&I’s annual East found that DC plan participants are sperity clients. filed a class-action lawsuit alleging “The court is not persuaded by Coast Defined Contribution Con- keen to save for emergencies Four participants in plans that the company, its board of directors the reasoning,” the judge wrote, ference March 7-9. through rainy day accounts, known were clients of Insperity, which pro- and numerous officials breached adding plaintiffs failed to state im- For a look at last year’s winners, as sidecar accounts, but they need vides outsourced human resources their fiduciary duties in the man- prudence claims. visit pionline.com/eddyawards. incentives. services, sued in December 2015. agement of the plan. The judge also rejected the In a rainy day account model re- Insperity and subsidiaries were The suit, filed Oct. 9 in U.S. Dis- plaintiffs’ argument that fiduciaries High court seeks more on searched by NEST Insight, plan defendants in the lawsuit, but they trict Court in Green Bay, Wis., al- should have chosen collective in- participants could accumulate sav- aren’t paying any of the settlement, leges the company, its board and vestment trusts and separate ac- Northwestern 403(b) case ings through payroll deductions according to a preliminary settle- officials violated their fiduciary du- counts instead of certain mutual The U.S. Supreme Court asked made directly to sidecar accounts. ment document filed Oct. 12 in a ties under ERISA by paying unrea- funds, remarking again that they the acting U.S. solicitor general for When savings reach a certain level U.S. District Court in Atlanta. sonably high fees for the record “failed to state an imprudence an opinion in an ERISA fee fight in the rainy day account, any addi- Insperity’s own 401(k) plan is keeping and administration of the claim.” case before the justices decide if tional savings are moved into the unaffected by the lawsuit or the 401(k) plan and for managed ac- The Salesforce 401(k) Plan, San they will hear the complaint involv- retirement account. settlement. count services. Francisco, had $2 billion in assets as ing two 403(b) plans run by North- Starting in January 2021, NEST The plaintiffs alleged Insperity The lawsuit also alleges the de- of Dec. 31, 2018, according to the western University, Evanston, Ill. Insight will start to gather data and its subsidiaries charged exces- fendants engaged in “self-dealing latest Form 5500. Participants in the two plans pe- from employers participating in the sive record-keeping fees, among with regard to the administration of titioned the Supreme Court on June sidecar account trial.The employ- other complaints. the plan,” according to the filing. U.K. record keeper starting 19 after having lost at both the fed- ers are retailer Timpson, the Uni- They accused Reliance of mak- As of Dec. 31, the Nestle 401(k) eral District Court and federal ap- versity of Glasgow, telecommunica- ing “imprudent” investment deci- Savings Plan had $6.3 billion in U.S. pooled employer plan peals court levels in their allegations company BT, and StepChange sions, including selecting and re- assets. Smart, a large London-based on- tions that the university and its Debt Charity. taining “its own high cost and Paul M. Secunda, partner at Wal- line record keeper, has established fiduciaries violated ERISA guide- The trial aims to test the effec- poorly performing” investments, cheske & Luzi, attorney for the operations in the U.S. to take ad- lines in managing the plans. tiveness and impact of a workplace the complaint said. plaintiff, said companies like Nestle vantage of anticipated business op- They argue that the ruling by the savings tool called Jars, which com- The plaintiffs also had request- “will continue to be sued if they do portunities emanating from the SE- appeals court upholding dismissal bines short- and long-term savings. ed certain non-monetary terms, not follow a prudent process for re- CURE Act, the company announced. conflicts with decisions by other “So far, we’ve consistently seen including removal of Reliance as cord keeping, for share classes and The company will launch re- federal appeals courts regarding that employers and employees are the Insperity plan’s discretionary for managed account services.” cord-keeping services for pooled similar ERISA complaints. attracted to the idea of a payroll trustee. Lauren Rubbo, Nestle USA employer plans in the U.S. in 2021 The plaintiffs want the Supreme deduction emergency savings tool “Those non-monetary terms spokeswoman, could not be imme- and will also bring technology to Court to rule on the so-called cir- with a pension saving rollover. have been satisfied (or effectively diately reached for comment. facilitate retirement income ser- cuit split to establish uniform People like the idea of being able satisfied) through changes that vices, it said. guidelines for lower courts’ reviews to ‘set and forget,’ allowing the sav- have occurred with respect to the Court tosses ERISA claims The company will support advis- of ERISA cases. ings to build up automatically be- plan,” the settlement document ers just beginning to serve retire- The court, which didn’t set a fore their wages reach their bank said. “Reliance no longer has any targeting Abbot Labs ment plans as well as experienced timeline for a response, periodically account. And, importantly, to have relationship with the plan.” A U.S. District Court Judge in retirement plan advisers, it said. asks the solicitor general’s office for the peace of mind that a buffer of “Defendants have denied and Chicago dismissed a complaint Smart enters the U.S. with more its opinion. short-term savings can bring,” Jo continue to deny the claims and against Abbott Laboratories and its than 70,000 U.K. retirement plans The participants filed their com- Phillips, NEST Insight’s director of contentions” made by the plaintiffs, fiduciaries that alleged ERISA vio- on its platform. It runs the U.K. de- plaint in 2016 alleging that the uni- research and innovation, said in a the document said. “Defendants lations because a participant’s ac- fined contribution multiemployer versity’s plans charged excessively news release. contend that they acted prudently count was looted by an impostor. Smart Pension Master Trust. INTERESTED IN SUSTAINABLE INVESTING?

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Arkansas Teacher Retirement Management, Montanaro Asset issued an RFP in May because of state to NB Partners Fund III through the System, Little Rock, committed up to Management and American Century legislation and board policy that CONNECTICUT TAPS Empire GCM RE Anchor Fund, and $90 million to two real estate funds Investments to run a £300 million mandates the services are put up for advised by GCM Grosvenor, an and made a $30 million follow-on allocation to global small-cap equities. bid every five years, Ms. Farhadieh EMERGING FIRMS emerging manager program partner commitment to a fund of funds, The size of each mandate was not said at the time. with the pension fund. NB Partners documents from the $16.7 billion provided. Marquette Associates and RVK TO RUN $1 BILLION Fund III is a real estate joint venture pension fund show. Brunel’s member funds have about were the other finalists. Connecticut Retirement that will acquire small to midsize At its Sept. 28 meeting, the board £30 billion in assets. warehouses near urban areas Plans & Trust Funds, Hartford, committed up to $50 million to Kayne Imperial County Employees’ sponsored by NorthBridge Partners. Anderson Real Estate Partners VI, an California State Teachers’ Retirement System, El Centro, hired three managers to run $1 Also, up to $10 million was committed opportunistic real estate fund; and up Retirement System, West Calif., committed $20 million to TPG billion in three strategies as to Locust Point Seniors Housing Debt to $40 million to PGIM Real Estate Sacramento, committed $1 billion to Sixth Street Partners TAO Contingent part of its expanded and Fund II, also made through the Empire Capital VII, which specializes in junior private credit manager Owl Rock Fund, said Scott W. Jarvis, retirement enhanced emerging and GCM RE Anchor Fund. and senior debt in the European real Capital for a custom mandate across administrator. diverse managers program, In absolute return, $150 million was estate market. the firm’s business, including The $875 million pension fund’s committed to Insight Partners said an announcement from The retirement system also made a allocations to opportunistic credit and board approved the commitment to the Opportunities Fund I, which will target $30 million follow-on commitment to diversified lending strategies, CalSTRS global multiasset-class fund investing the office of Shawn T. Wooden, minority, structured preferred equity Franklin Park Corporate Finance spokesman Thomas Lawrence said. in special situations, middle-market state treasurer and principal positions in leading, sponsor, venture Access Fund, a fund of funds that The strategic partnership aligns direct lending and distressed credit fiduciary of the $37 billion capital or founder-owned companies. invests in smaller buyout, growth and with “CalSTRS collaborative model lending at its Sept. 16 meeting, Mr. state pension plan. turnaround private equity funds. The investment strategy, which focuses on Jarvis said. At the state investment Pennsylvania Public School board currently had $53 million in the leveraging our partners to reduce Employees’ Retirement System, advisory council’s Oct. 14 fund of funds as of June 30. costs, increase investment returns Kern County Employees’ Harrisburg, committed roughly $370 meeting, Mr. Wooden said and control risk,” said Scott Chan, Retirement Association, million to three private equity funds, Border to Coast deputy CIO of the Bakersfield, Calif., committed $50 Attucks Asset Management documents from the $55.8 billion Pensions Partner- HAVE SOME NEWS? $262.5 billion pension million to Crown Global Secondaries V, was hired to manage $500 pension plan show. ship, Leeds, England, fund, in a joint news a fund managed by LGT Capital million in a global fixed-income At its Oct. 9 meeting, it committed Please submit news of hired UBS Asset release. Partners that focuses on acquiring strategy, while Rock Creek nearly $170 million to Insight Partners changes to David Management and private equity stakes in global Group was selected to run Opportunities Fund I, a growth fund FountainCap Research Schepp, news editor, at Frederick County secondary markets. that targets investment opportunities $300 million in emerging & Investment (Hong [email protected] (Md.) Employees It is the $4.5 billion pension fund’s in the software sector. Kong) to run China Retirement Plan first commitment to a fund managed markets equities and Xponance The board also committed ¥10.6 equity allocations. hired Columbia Threadneedle by LGT Capital, said CIO Daryn Miller. Asset Management to run billion ($100 million) to Polaris Private The local government pension Investments to manage about $70 $200 million in developed Equity Fund V, a Japan-focused buyout scheme pool expects to allocate million in active domestic large-cap Lockton Cos. selected Transam- international equities. fund managed by Polaris Capital Group, between £300 million ($388 million) value equities. erica to serve as record keeper for a Also at the meeting, it was and $100 million to Greenoaks Capital and £500 million total to the two The hiring was a result of the $721 pooled employer plan the insurance announced that Advent Capital Opportunities Fund III, a venture managers, a news release said. million pension fund’s search for a brokerage firm expects to launch Jan. capital fund. Management and Calamos The new allocation will be funded replacement for LSV Asset Manage- 1, Lockton spokesman Michael through a restructuring of the pool’s ment, which ran a similar portfolio, due Duckett confirmed. Advisors were selected to Saint Mary’s College of £700 million emerging markets fund, a to underperformance. The anticipated PEP is called the manage $93 million and $32 California, Moraga, hired Wilshire spokesman said. The emerging Lockton Northeast Series pooled million, respectively, in Associates as outsourced CIO for its markets allocation, which is currently Hollywood (Fla.) Police employer plan, Transamerica said Oct. convertible bond strategies. $187 million endowment, confirmed managed in-house, will be split into an Officers’ Retirement System 14 in a news release. Finally, Mr. Wooden also Susan H. Collins, vice president for ex-China portfolio and the two new committed $5 million to Crescent NPPG Fiduciary Services, an affiliate finance and administration. announced his decision to allocations run by UBS and Fountain- Direct Lending Fund III. of employee benefits consultant Wilshire was selected to replace the Cap. The $324 million pension fund’s Northeast Professional Planning commit $100 million to endowment’s current OCIO because The pool’s 11 member LGPS funds board approved the commitment to the Group, will serve as the pooled plan value-added real estate fund “the investment committee was not have about £46 billion in assets. direct lending fund managed by provider, while NPPG’s Pinnacle Waterton Residential Property pleased” with the incumbent service Crescent Capital Group at its Aug. 21 Financial Services unit will serve as Venture XIV. provider. The identity of the incumbent Boston Retirement System meeting, said John McCann, senior the plan’s third-party administrator. was not disclosed. committed $20 million to Oaktree Real consultant at AndCo Consulting, the Estate Debt Fund III, confirmed John pension fund’s investment consultant. Merced County (Calif.) Asia-Pacific regions. San Antonio Fire & Police Kelly, investment analyst for the $5.3 Employees’ Retirement Asso- The council is an investor in the Pension Fund hired WCM Invest- billion retirement system. Houston Firefighters’ Relief ciation committed a total of $8 main fund and in a co-investment with ment Management as an active and Retirement Fund committed up million to two venture capital funds that fund. emerging markets equity manager. Brunel Pension Partnership, to $30 million to EQT Infrastructure V. managed by Khosla Ventures. The $3.3 billion pension fund’s Bristol, England, hired four managers The $4.2 billion pension fund’s The $961 million fund approved the New York State Common board approved the hiring Aug. 26. to run a £1.2 billion ($1.6 billion) board approved the commitment to the commitments of $6 million to Khosla Retirement Fund, Albany, made up The board also approved the diversifying returns subfund, a infrastructure fund Sept. 15. Ventures VII and $2 million to Khosla to $568 million in commitments, termination of incumbent emerging spokesman confirmed. Seed funds, said Kristen Santos, according to the website of Thomas markets equity manager Acadian Asset William Blair, Lombard Odier Houston Police Officers’ retirement administrator. DiNapoli, the state comptroller and Management; the reason for the Investment Managers and J.P. Morgan Pension System committed $35 sole trustee of the $216.3 billion change, and the portfolio size, were Asset Management will run similar million to Starwood Distressed New Mexico State Investment pension fund. All commitments were not available. allocations in terms of size, with UBS Opportunity Fund XII. Council, Santa Fe, committed up to made in August. Also, the board committed $20 Asset Management running a smaller The $5.6 billion pension fund’s $75 million to Brookfield Infrastructure In real estate, it committed €200 million to Charlesbank Equity Fund X, a investment, the spokesman said. board approved the commitment to the Fund IV Renewable Power Sidecar million ($238 million) to Nordic middle-market and growth equity fund. The new diversifying returns global opportunistic real estate fund at Fund, said Charles Wollmann, Strategies Fund IV, a diversified subfund was launched by the local its Aug. 13 meeting. spokesman for the $27.7 billion opportunistic fund managed by NREP San Francisco City & County government pension scheme pool in endowment. that invests in commercial and Employees’ Retirement System response to requirements set by its 10 Illinois State Board of The sidecar fund seeks to raise residential real estate in the Nordics, disclosed commitments totaling $223 member pension funds asking Brunel Investment, Chicago, rehired Meketa $500 million to invest in renewable and $150 million to Cortland En- million in a report from CIO William J. to create a portfolio that offered Investment Group as general invest- power projects alongside the main hanced Value Fund V, which buys and Coaker Jr. “meaningfully different exposures to ment consultant, said Johara fund, Brookfield Infrastructure Fund IV. operates suburban apartments In private equity, SFERS committed others in their strategic asset Farhadieh, executive director and CIO. The sidecar will focus on value-added primarily in the U.S. Southeast and $75 million to OrbiMed Private allocations,” a news release said. The board, which oversees $20.9 renewable power assets in the Southwest. Investments VIII, a venture capital Brunel also hired Kempen Capital billion in defined benefit plan assets, Americas, Western Europe and It also committed up to $20 million fund; $50 million to Asia Alternatives

Here’sHeree’s what yoyou missed since Sept. 1, 2019. GET ACCESS TODAY. SEARCHES HIRES TERMINATIONS $26.7B $99.7B $24.1B Access to the P&I Searches and Hires Database is 214 Manager and 881 Managers and 121 Managers and only available with a P&I Daily Enterprise License. Contact Elayne Glick at [email protected] Service Provider searches Service Providers hired Service Providers terminated or 212.210-.0247 for details. Pensions & Investments October 19, 2020 | 31 HIRINGS

Capital Partners VI, a private equity The $155.2 billion pension fund Pretium strategies by Trans-Canada, The portfolio consists of fixed- Wyoming State Loan and fund of funds managed by Asia Alterna- committed $200 million to Starwood which manages the assets of Air income and equity investments, Investment Board, Cheyenne, hired tives Management; $25 million to Distressed Opportunity Fund XII Canada’s Canadian pension plan as exchange-traded funds and real estate Eaton Vance Management and Hillhouse Focused Growth Fund V, a Global, an opportunistic real estate well as other asset owners. Trans- investment trust allocations. Finisterre Capital to run active late-stage venture capital fund; and fund; $100 million each to Actis Arroyo Canada Capital has C$23 billion The pension fund had €19.3 billion emerging markets debt portfolios, $23 million to Lead Edge Capital V, a PIV, an infrastructure fund, and ($17.3 billion) in assets under ($21.7 billion) in assets as of June 30. confirmed CIO Patrick Fleming. late stage venture capital fund. Crestview Partners IV (Bluebonnet), a management. Mr. Fleming said portfolio sizes Within private credit, SFERS small- and middle-market buyout fund; Vanguard Group added Spruce- have yet to be determined. committed $50 million to Blue Torch and $20 million to SLP Mistral Valtion Elakerahasto, Helsinki, grove Investment Management as a Separately, the board made Credit Opportunities Fund II, a special Co-Invest, a large buyout co-investment selected J.P. Morgan Bank Luxembourg subadviser on its it $9.8 billion commitments to buyout fund GTCR XIII situations fund. fund managed by Silver Lake. as custodian, according to a notice International Value Fund. and growth equity fund Valor Equity posted on European procurement Sprucegrove will join existing Partners V. Mr. Fleming said the San Joaquin County Employ- Trans-Canada Capital Inc., website Tenders Electronic Daily. subadvisers Lazard Asset Manage- commitment sizes have yet to be ees’ Retirement Association, Montreal, committed a total of $110 J.P. Morgan will provide settlement ment and ARGA Investment Manage- determined. RVK had recommended Stockton, Calif., hired GQG Partners to million to opportunistic corporate and and safekeeping services as well as ment, Vanguard announced in an Oct. commitments of $100 million and $50 manage $50 million in active emerging structured credit strategies managed support corporate actions and proxy 9 news release. million, respectively, according to markets equities. by Pretium Partners, confirmed Nahed voting outside of Finland. The firm will Sprucegrove will manage 35% of the meeting memos. The $3.1 billion pension fund’s Sabri, director of investments. also conduct income collection and fund, which was previously overseen by The board oversees $22.7 billion in board approved the hiring at its Aug. It is an additional investment in handle tax reclaims. Edinburgh Partners. permanent funds. 14 meeting, CEO Johanna Shick said.

San Mateo County Employ- ees’ Retirement Association, Redwood City, Calif., invested $75 million in two hedge funds, committed $30 million to a private equity fund and made a follow-on commitment of $35 million, an announcement on the $4.4 billion fund’s website said. At its Sept. 29 meeting, the board agreed to invest $45 million in Acadian Asset Management’s Multi-Asset Fixed Income & Credit Virtual Series Absolute Return Strategy and $30 million in CFM Systematic Global Macro strategy, managed by Capital November 17-19 Fund Management. The board also agreed to commit $30 million to Clayton, Dubilier & Rice Register today for P&I’s Fixed Income and Credit Virtual Series. The conference Fund XI, a buyout fund. will provide a survey of fixed income assets and strategies, their pros and cons, Finally, the retirement association made a re-up commitment of $35 and how they fit into a risk profile while balancing a fund’s liquidity needs. million to White Oak Yield Spectrum Fund V, a direct lending fund. The plan had $33 million with the White Oak Yield fund as of June 30. KEYNOTE: A Post-Election State of A airs John Sitilides Santander Asset Management Washington, D.C. Government A airs Specialist and hired Schroders as subadviser to Consultant to the Department of State manage £1.2 billion ($1.6 billion) in U.K. equities following a review. The asset management arm of Santander currently manages the SPEAKERS INCLUDE: allocation through its own U.K. equity desk. Schroders will take over the management of Santander AM’s three U.K. equity strategies: the Santander U.K. Growth Unit Trust, Santander Equity Income Unit Trust and Santand- er Enhanced Income Portfolio, as well as three U.K. equity mandates within the firm’s multiasset funds. The funds will continue to be managed under Collin Geninatti Scott Grimberg Jason Josephiac Russell Kampfe Michael Nguyen Santander AM’s brand. American Airlines CalPERS Raytheon Technologies Corporation UTIMCO Virginia529 Tacoma (Wash.) Employees’ Retirement System committed $25 million to Melody Communica- tions Infrastructure Fund II, a telecommunications fund managed by Melody Capital Management, said Tim Allen, retirement director and CIO. The $1.7 billion pension fund’s actual allocation to real assets was 4.5% as of June 30, he said. Geo Nolan Kashif Siddiqui Daniel Schmitz Terence Thompson Catherine B. Ulozas Texas County & District Oregon State Treasury CRICO Hartford HealthCare DF Enterprises Drexel University Retirement System, Austin, made two new private equity commitments totaling $175 million. COMPLIMENTARY REGISTRATION AT PIONLINE.COM/FIC2020* The $30.7 billion fund committed $125 million to TCV XI, a private equity SPONSORS: fund that focuses on technology firms managed by Technology Crossover Ventures, and $50 million to OrbiMed Private Investments VIII, a venture capital fund.

Texas Teacher Retirement Questions? For more details please contact Elayne Glick at (212) 210210-00224477 or [email protected]. System, Austin, made four new *Only asset owners, endowments, foundations and a limited number of investment consultants are invited to attend. All registration requests are subject to veriﬁcation. P&I reserves the right to refuse any registrations not meeting our qualiﬁcations. The agenda for Fixed Income & Credit alternative investment commitments is not created, written or produced by the editors of Pensions & Investments, and does not represent the views or opinions of the publication or its parent company, Crain Communications, Inc. totaling $420 million in September, spokesman Rob Maxwell said. 32 | October 19, 2020 Pensions & Investments

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The $19 billion Kentucky Retirement Systems (KRS) plans to fill the position of Executive Direc- tor Office of Investment (CIO). KRS manages a diversified portfolio of marketable securities and private vehicles with 82% being managed by outside investment managers and 18% being passively managed internally. The CIO is responsible for the overall management of our assets including advising the Invest- ment Committee and the Board of Trustees, making asset allocation decisions, manager hiring and firing recommendations, compliance with the investment policy and State Statutes, and staff development. KRS’s investment office is located in suburban Louisville, KY. For more information contact: David Eager - Executive Director Kentucky Retirement Systems Advertise your RFP in Pensions & Investments, 502-696-8444 * [email protected] reach the top investment managers and service providers THE COMMONWEALTH OF KENTUCKY DOES NOT DISCRIMINATE ON THE BASIS OF RACE, COLOR, RELIGION, NATIONALORIGIN, SEX, AGE, DISABILITY, SEXUAL ORIENTATION, GENDER IDENTITY, GENETIC INFORMATION OR VETERAN STATUS. REASONABLE ACCOMMODATIONS ARE PROVIDED UPON REQUEST. in the money management industry. Optimize your returns. Where the movers, shakers and decision Meet your next investment services partner in P&I. makers find their next career move. | Have a position you need to fill? P&I RFPs Print. Online. Email. Contact Erin Smith at 212.210.0719 or [email protected] Search job opportunities Place your ad today. Go to www.pionline.com/careers Contact Erin Smith at (212) 210-0719 for details. CAREERS www.pionline.com/RFPs EXCLUSIVE ACCESS TO TOP TALENT

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that time frame. be transparent about what your versity of British Columbia and To- important (to us),” the spokesman “The big step change in the year plans are, (including) climate goals,” ronto-based York University, re- said, adding that the plan’s overall Net zero ahead will be taking all of those Mr. Orsagh said. cently published research that exposure to fossil fuels is “relatively learnings and applying them to the Nick Silver, a London-based highlighted CPPIB’s risky public underweight and small.” CONTINUED FROM PAGE 2 portfolio,” Mr. Manley added. managing director at Callund Con- and private investments in the oil Additionally, from his perspec- He confirmed that CPPIB does sulting Ltd., said CPPIB and other and gas sectors. Breathing room needed tive, the pension fund is “not show- not set targets for its exposure to Canadian pension funds ultimately The report also noted the pen- Sebastien Betermier, an associ- ing any signs of winding down their fossil fuels over time. Over the next need a long-term strategy that puts sion fund’s private investments ate professor of finance at Montre- fossil-fuel portfolio,” Mr. Scott add- 10 years, however, Mr. Manley ex- them “on the path toward divest- have funded companies that en- al-based McGill University’s De- ed. pects to see the oil and gas industry ment” from fossil fuels. gage in hydraulic fracking in the sautels Faculty of Management, “They don’t have any measur- “lean in very aggressively” and Mr. Silver is also an ac- said a “big fund like CPP able pathway or plan about climate transition to being “integrated en- tuary and economist spe- should have the ability to change, like goals to align the emis- ergy companies” with reduced car- cializing in public-sector transact” without facing sions reduction in the portfolio” bon emissions. pensions, social insurance public pressures to exit an with existing sustainability initia- CPPIB’s annual report on sus- and climate change fi- investment in a certain tives like the Paris Agreement, tainable investing, published last nance at Callund. window and potentially which targets net-zero emissions month, notes that as a long-term sell at a discount. by 2050, Mr. Scott said. investor, the pension fund prefers ‘Doubling down’ “(CPPIB) needs band- CPPIB’s investments in fossil fu- to “actively engage with, and at- Canadian pension width to operate and not els accounted for 2.8%, or C$11.6 tempt to influence, companies funds, in particular, are es- destroy value for its pen- billion, of its total portfolio as of when we disagree with a position sentially “doubling down sioners. But that said, set- March 31, according to data the taken by management or a board of on their risk” when invest- ting long-term goals with pension fund provided. The plan’s directors of our active holdings,” ing in fossil fuels, due to five-year milestones exposure to fossil fuels is defined as rather than simply divesting. the risk of investment should be feasible,” Mr. Be- investments in oil, gas and coal pro- “Selling our shares and walking losses as the demand for termier said. ducers, oil-field services providers away is easy, yet achieves very little. oil peaks and gradually “I actually think it’s a and pipelines, and includes debt, We can be a patient provider of declines, Mr. Silver said. good thing CPP has a long- equity, and public and private hold- capital and work with companies to Additionally, the Canadian term view on investments ings. bring about change,” the report economy also faces transi- and a set of ESG stan- The 2.8% exposure to fossil fuels said. tion risks as it moves to a dards,” he continued. in CPPIB’s total portfolio is down Matt Orsagh, the Charlottesville, low-carbon economy due “Having a fund that is from 4.6%, or C$14.5 billion, as of Va.-based senior director of capital to its reliance on the sector. SOME KUDOS: Adam Scott gives the fund credit for invest- monitored carefully by the March 31, 2017. markets policy at the CFA Institute, “You (as a pension fund) ments in clean energy even though fossil fuels dominate. public, that has to report to In comparison, the pension said divestment is typically a “last are relying on your econo- the public on a regular ba- fund’s equity and debt exposure to option” for an institutional investor my paying into your future because U.S. and expanded oil sands extrac- sis, may (put the fund) in better renewable energy companies was if the asset owner can instead en- the pension fund needs workers tion in Alberta and Saskatchewan, shape to lead the transition of these C$6.6 billion, or 1.5% of its total as- gage with a company. paying into its fund,” he said. If the among other activities. (fossil-fuel) firms than if they were sets as of June 30, up from C$67 He believes, however, that “slow- energy sector, and its workforce, A spokesman at CPPIB said in held by private owners who may million three years earlier. ly enough, the world and Canada were to take a hit, public pension response to the research paper that not have the same need to report to will move away from fossil fuels,” funds may see lower contributions the pension fund agrees “climate the community.” More due diligence and there should be transparency from workers, Mr. Silver added. change is real, is here and is seri- “I think what’s important is not Richard Manley, managing direc- by both oil and gas companies as Canada’s oil and gas industry ac- ous,” but the fund does not take the so much the level of investment in tor and head of sustainable invest- well as public investors about their counted for 7.7%, or C$160 billion, position of simply divesting from fossil fuels they have right now, but ing at CPPIB, said the fund has transition plans. of the country’s nominal GDP in fossil-fuel investments. rather how they are planning to done a lot more due diligence on its “(There should be) transparency 2018, according to data from Natu- “There are groups whose per- transition to a zero-carbon econo- investments in the past 12 months on carbon emissions from a corpo- ral Resources Canada. spective is we should be divesting. my within the next 20 years, and and “applied our climate change se- rate point of view for investors to The Canada Climate Law Initia- We buy and sell assets every day. It’s what are they planning to do with curity selection due diligence pro- better analyze these companies … tive, a cross-disciplinary research the consideration in how we make the fossil-fuel stocks that they cess to around 100 transactions,” in and it’s best practice as a steward to initiative of Vancouver-based Uni- those decisions that’s fundamentally hold,” Mr. Betermier said. n

Bartomeu Amengual cess and those less technologically ers roll out their default electronic urged the Securities and Exchange savvy will likely have problems. disclosure initiatives. “Record keep- Commission to update its prior in- Disclosure “The participants have to do all ers are working to get things in terpretive guidance and regulations the work of finding these disclo- place to take advantage of the rule to allow for the default electronic CONTINUED FROM PAGE 2 sures and they also need the elec- as much as possible, as soon as pos- delivery of investor communica- away I think there can be a renewed tronic devices that are capable of sible, but it’s not happening in one tions. The three firms wrote a letter focus to best implement the elec- searching a complex financial web- fell swoop,” she said. to the SEC in September. tronic disclosure rule.” site,” said Jane Smith, policy analyst Fidelity Investments, the nation’s Later that month, financial in- The rule provides a safe harbor at the Pension Rights Center, a largest record keeper, is targeting dustry associations like the Securi- for employers that want to make re- Washington-based non-profit. sometime in the fourth quarter to ties Industry and Financial Markets tirement plan disclosures accessi- Added Karen Friedman, the have its electronic delivery offering Association and Investment Advis- ble on a website, rather than send- Pension Rights Center’s executive widely available to plan sponsors, er Association published a discus- ing volumes of paper documents vice president and policy director: spokesman Eric Sandwen said. sion paper with similar goals. through the mail. “We think it’s going to be hard Roughly 77% of the 23.7 million The default delivery change in enough for many people who al- participants in the Fidelity record- investor communications by bro- Participants can opt out ready know how to navigate com- keeping system have an email ad- ker-dealers, mutual funds, invest- Retirement plan administrators puters to do this but it’s going to be dress on file, Mr. Sandwen added. ment advisers, public companies have the option to use email to send a real nightmare for the millions of ‘REAL NIGHTMARE’: Karen Friedman “We have a team dedicated to de- and business development compa- disclosures directly to participants, people who don’t have broadband, said the change won’t be good for the veloping our offering to ensure nies should include prospectuses but participants who prefer printed who don’t have printers. Plans are millions without broadband or a printer. compliance with the regulation and and other important investor com- disclosures can opt out of electronic going to save money but they’re that the change is easy for our par- munications, like customer account delivery. Moreover, a plan adminis- putting all the burden back on indi- found that if you get something in ticipants to understand and doesn’t statements, customer confirmations trator may not default a participant viduals.” the mail you put it aside and then come as a surprise,” Mr. Sandwen of sale, and investment adviser bro- into electronic delivery unless the There’s a “digital divide” in the think ‘OK I’ll log on and maybe do said. chures, the associations said in the participant has an email address country based on geography, edu- something with my account.’ There’s A spokesman for TIAA-CREF discussion paper directed at the and notifies the participant by pa- cation, income, race/ethnicity and very little connectivity there,” he said in an email that the record SEC. per that retirement documents will age, Ms. Friedman said. said. “But if I get an email and I keeper is still reviewing how it can be furnished electronically. In unveiling the rule, the Labor click on it, I am now in the system. I support its plan sponsors with ex- Electronic world Administrators also must notify Department referenced a 2019 Pew can increase my deferral rates, up- panded electronic delivery options, SEC Chairman Jay Clayton, participants by paper about the on- Research Center study that found date my beneficiaries or adjust my but added that wider use of e-deliv- while testifying in June before the line disclosures, provide informa- that 90% of U.S. adults use the inter- allocations.” ery will result in “decreased costs House Financial Services Subcom- tion on how to access the disclo- net. for plan sponsors, as well as im- mittee on Investor Protection, En- sures, and inform participants of Mr. Hansen said the rule’s opt- ‘System of inertia’ proved retirement outcomes for in- trepreneurship, and Capital Mar- their rights to request paper or opt out measures are clear and suffi- But Ms. Friedman is concerned dividuals, both in the amount Amer- kets, was asked about electronic out completely. The new rule in- cient for any participant who would that if participants miss the initial icans save for retirement and the delivery. He said his “view on this cludes additional protections for like to continue receiving paper paper disclosure alerting them to ways savers understand, monitor has been further shaped by the retirement savers, such as accessi- materials. Moreover, the rule will the new electronic system, they will and manage their retirement plans.” work we have done in this COVID bility and readability standards for lead to more participant engage- be defaulted in and suffer. “The De- The Labor Department estimates environment. It is clear that we live online disclosures and system ment, he said. “By moving in this partment of Labor has sort of a sys- the rule will save $3.2 billion over in an electronic communication checks for invalid electronic ad- direction it enables a plan sponsor tem of inertia that works against the next decade for ERISA-covered world. Let me say that I am of the dresses. to tailor the communications spe- people’s best interests,” she said. retirement plans by cutting down view that anyone who wants paper But not all parties are happy with cially to the participants,” Mr. Han- Jennifer Eller, a principal at on materials, printing and mailing should be able to get paper, but the rule. Groups like the AARP and sen said. Groom Law Group LLP and co- costs. what this period has shown us is Pension Rights Center have voiced Sending disclosures via a web head of its fiduciary practice group Fidelity and fellow major money the importance of electronic deliv- concerns about it, saying partici- link will lead to more savings, Mr. in Washington, said it will likely managers BlackRock Inc. and ery and the effectiveness of elec- pants without reliable internet ac- Rouse said. “Our members have take some time before record keep- Charles Schwab Corp. have also tronic delivery.” n 34 | October 19, 2020 Pensions & Investments

UPCOMING WEBINARS | REGISTER TODAY Morgan CONTINUED FROM PAGE 3 active manager Eaton Vance Man- agement, which runs equity, fixed income, multiasset and alternatives strategies and accounts for about 29% of AUM; systematic, custom- ized solutions firm Parametric Port- Trends in DC: DC Plans Pass Pandemic Test folio Associates LLC, which accounts for about 61% of AUM; active Live, Wednesday, October 21 • 2:00 p.m. - 3:00 p.m. ET equity and fixed-income manager Atlanta Capital; and responsible in- COVID-19 has presented unprecedented challenges for defined contri- vestment manager Calvert Re- bution plan sponsors and participants but they have leveraged resourc- search and Management. Atlanta es such as the CARES Act to navigate 2020. Join us for an in-depth and Calvert each account for about discussion on what lies ahead for DC plan sponsors as market volatility 5% of Eaton Vance’s total AUM. and uncertainty remain. Our expert panel will discuss major retirement The firm also owns 49% of global plan issues including participant communications, the growing role of equity manager Hexavest Inc., technology, legislation and others. which has $8.5 billion in AUM. Morgan Stanley Investment Topics will also include: Management Inc. has $715 billion GOOD BUSINESS: Dan Simkowitz, leader of Morgan Stanley Investment Manage- • The retirement tier in assets across strategies including ment, sees the merger as ‘creating one of the leading asset managers in the world.’ • Target-date funds active fundamental equities, fixed • SECURE 2.0 income, multiasset, real assets, and billion in the second quarter. gross sales for the first six months • ESG in ligh of the DOL private credit and equity. Eaton Vance revenue for the of this year were international, vs. three months ended July 31 totaled 5% for Eaton Vance over the nine In addition, the panel will answer questions from the audience. ‘Positions of strength’ $421 million, down 2.3% year-on- months ended July 31. “Post transaction close, MSIM will year but up 4.5% vs. the three The deal solves “what had been a have high-quality franchises in spe- months ended April 30. AUM grew strategic sticking point for Eaton Register Now: pionline.com/TrendsinDCWebinar cific segments of secular growth and 5% year-over-year. Vance — international distribu- a unique ability to provide meaning- Morgan Stanley “paid a fair price tion,” said Gabriel Altbach, Boston- Sponsored by: ful, world-class solutions to inves- for this — it’s not a cheap buy, but a based president and head of North tors,” Dan Simkowitz, head of MSIM, very interesting acquisition as it’s America at investment manage- said in an emailed comment. “By not one of these acquisitions you ment-focused marketing consul- partnering with an organization that see in the market that’s just scale tancy White Marble Marketing Inc. is highly complementary in invest- for scale’s sake. They’re buying a “Add in the fact that MSIM has a ment and distribution capabilities, good asset in this type of environ- strong institutional bent while Ea- we will be creating one of the lead- ment that seems to be more durable ton Vance has focused more on in- Investing Beyond the Pandemic: ing asset managers in the world.” than the competition,” Mr. Tu said. termediaries, and you can see an Mr. Simkowitz also highlighted For Eaton Vance, the deal will appealing joining of puzzle pieces,” A Reset for Portfolios on the call that the firms are com- bring scale and distribution oppor- he said. Live, Wednesday, November 4 • 10:00 a.m. - 11:00 a.m. ET ing together from “positions of tunities in particular. “From the Ea- MSIM has no plans to change strength.” MSIM’s third-quarter net ton Vance perspective, that comes how Eaton Vance and its invest- The pandemic’s arc and its impact on political and policy developments are revenue was $1.1 billion, up 19.2% from the ability for our investment ment affiliates operate and invest, a resetting expectations and will continue to define the investment landscape. from the prior quarter and up 38.2% teams to leverage the extraordinary Morgan Stanley statement said. All What can we expect on these three critical fronts – the pandemic, politics, year-over-year, while assets under reach of Morgan Stanley in the U.S. of the funds and separate account and policy – in 2021? And how should investors prepare for a year that will management were up 7.5% for the but more importantly, internation- strategies in the U.S. intermediary likely have long-term implications for portfolio allocations? Join us to hear quarter and 41% over the year. ally,” said Robyn Tice, a spokes- channel will maintain their existing how we’re positioning amid market conditions that are often unpredictable, Long-term net inflows were $10.4 woman for Eaton Vance. The ana- brands, as well as the distribution and how we’re tapping into opportunities emanating from the disruptions. billion in the third quarter, vs. $15.4 lyst presentation said 65% of MSIM and client service organization sup- We’ll explore: • Which sectors and industries will benefit as we await the end of the pandemic’s grip on markets -- and daily life? ‘Entirely virus-related’ gies that would do well in volatile • What impact will politics have on portfolios driven by the US election, a post-Abe regime change in Japan, critical elections in Europe, and “Importantly, neither the col- environments – “multiyear invest- China’s full-steam-ahead capital market reform amid mounting ten- Risk lapse nor subsequent recovery ments using derivatives focused have anything to do with economic (predominantly) on currencies and sions with the U.S.? CONTINUED FROM PAGE 1 • How will policy shift gears, from fiscal and monetary moves to re- fundamentals — they’re entirely fixed income. ... We believe there is sponses to the social justice movement and the focus on operational billion ($83.8 billion) in assets as of virus-related — and that is likely to substantial risk monetary and fiscal resiliency? March 31. “This is because, while be the case over the next few policy will lead to future volatility in the markets rebounded relatively months,” said Rupert Watson, head financial markets,” he said. The Register Now: pionline.com/PineBridge-Webinar quickly after the initial impact in of asset allocation at Mercer Ltd. in hedges will be structured to benefit March, there are many clouds on London. Over the coming months, from an increase in volatility “while Sponsored by: the horizon.” “the degree and speed of that eco- still maintaining value if this vola- Sources highlighted that much of nomic recovery will be very much tility comes later down the road the recovery in global markets and down to the virus, government re- than we expect.” Firmwide, SEI had across asset classes is thanks to un- sponse and individual response.” $181 billion in global OCIO/discre- Preparing for the unexpected: Portfolio precedented monetary and fiscal The election and other risk tionary assets under management policies, with trillions of dollars events, as well as have led some as of June 30, of which $85.6 billion solutions for the modern investor pumped into developed market OCIOs running assets on behalf of were institutional assets. We understand that investors today expect more, and believe that asset economies and various employ- institutional investors to take equity Protecting assets against further managers can deliver more by listening. Join experts from Aberdeen ment and fiscal schemes adopted risk off the table, moving instead market falls has been implemented Standard Investments as we discuss the evolution of the investor-asset by governments and central banks. into credit markets to play on the by some pension funds in the U.K. manager relationship. In this webcast, we illustrate how asset managers The fear that this support may be economic recovery but without add- and Europe. can partner with institutional investors to meet their specific, modern withdrawn is, in some cases, leading exposure to equity valuations. needs through solutions including: ing to cautious positions. Monetary policy is what worries Downside protection • Managing equity risk in the current higher uncertainty/volatility “The U.S. and European econo- SEI Investments Co. the most, said Brunel Pension Partnership, regime mies have been on life support for Andy Daly, Philadelphia-based Bristol, England, launched a £1.2 • Adding diversification using ‘alternative’ passive/beta strategies the last few months but there is se- managing director and investment billion ($1.6 billion) subfund on Oct. • Partnering with asset managers for ESG resources and tools rious risk of unemployment build- strategist in the institutional group. 7 that aims to provide downside • Fixed income investing in an ultra-low-yield environment including up and business failures if that sup- The presidential election, in con- protection during market turbu- port is pulled back too quickly. And trast, is “no biggie.” lence. The pool’s member funds LDI considerations that is without the risks arising While inflation is yet to test mar- asked Brunel to create a diversify- from the political dimension,” Mr. kets, “once money stops contract- ing returns subfund to offer “mean- Replay available: Cardinale said, citing the U.S. elec- ing and (we start) getting into a ingfully different exposures to oth- tion and the potential no-deal out- lending environment, we will start ers in their strategic asset pionline.com/AberdeenStandardWebinar come for Brexit. to see inflationary forces (taking) allocations,” acting as a stabilizer Global markets plummeted in hold,” he said. when returns in other portfolios are Sponsored by: March following the outbreak of That would be unsettling for under pressure. the coronavirus pandemic and sub- markets, particularly as economies Emily Booth, senior investment sequent lockdowns in western continue to recover from the im- officer at the £30 billion pool of economies. However, markets pacts of COVID-19 and subsequent U.K. local authority pension funds, quickly recovered: the MSCI ACWI lockdowns, Mr. Daly said. is also cognizant of the market vol- For a full list of webinars, go to pionline.com/webinars is up 4.88% for the year through Oct. Within OCIO portfolios, SEI has atility. 15 on a total return basis. started to add exposure to strate- “Whether (Mr.) Trump gets an- Pensions & Investments October 19, 2020 | 35

porting them. Other recent hires include: you, New Yorkers and Bostonians “Truly, there is almost no overlap Calvert seen as crown jewel ■■Earlier this month, the $22.7 don’t always see eye to eye, to put it as you look at the investment teams billion Wyoming State Loan and In- mildly,” White Marble’s Mr. Altbach between what Eaton Vance excels vestment Board, Cheyenne, hired said. at and what Morgan Stanley excels in Eaton Vance acquisition Eaton Vance Management to run an at,” the statement said. active emerging markets debt port- ‘Bigger isn’t better’ Tom Faust, chairman, CEO and Morgan Stanley’s acquisition counsel platform ESG Infinite. folio. Despite small concerns over the president of Eaton Vance, will be- gives it access to a shining jewel Morgan Stanley in September ■■In May, the $27.7 billion New merger, sources are more positive come chairman of MSIM, reporting in Eaton Vance Corp.’s crown: committed to net-zero carbon Mexico State Investment Council, on it compared with other recent to Mr. Simkowitz, and will join the responsible investment manager emissions in its financing Santa Fe, rehired Parametric for de- big deals, where money managers Morgan Stanley management com- Calvert Research and Manage- activities by 2050 and supports rivative overlay services. have cited cost savings as rationale mittee and the MSIM operating ment. the United Nation’s sustainable ■■In February, the $30 billion for tie-ups, rather than comple- committee, the Morgan Stanley Calvert is a leading franchise development goals. Nebraska Investment Council, Lin- menting existing businesses. statement said. within the money management In Calvert, “Morgan Stanley will coln, committed $181 million to the “Bigger isn’t better in asset man- For analysts covering Morgan Morgan Stanley Prime Property agement today,” said Michael industry, said Stephen Tu, New be acquiring a framework, Stanley, the move was not a surprise Fund. Spellacy, senior managing director, discipline and a model to invest in given the firm’s openness about a York-based based vice president Institutional investors that are global capital markets lead at Ac- desire to grow the asset manage- and senior credit officer in a sustainable and more socially clients of MSIM or Eaton Vance did centure PLC in New York. “The old ment units. It also follows on the Moody’s Investors Service Inc.’s acceptable manner,” Ms. not respond to requests or declined style — where two asset managers heels of the close of Morgan Stan- financial institutions group. “We Saunders said. “It will give them to comment. combine and put everything to- ley’s deal to buy trading platform E- would think (Morgan Stanley) will an immediate runway to meet its But Eaton Vance subsidiary gether in one big shop — doesn’t Trade Financial Corp. on Oct. 2. probably try to keep that intact as UN SDG commitment, enter into Hexavest has suffered a number of work well in today’s market.” Moody’s upgraded Morgan Stan- much as possible and help it the huge demand for ESG-friendly terminations over recent months The challenge for money manley on the back of that deal “and this along, use resources at Morgan funds and offers great timing to for performance reasons. agement deals is that consumers really is part of Morgan Stanley’s Stanley to make it better and attract new assets looking to In August, the $1.2 billion Chica- “want personal, customizable and strategy toward tilting its business go Metropolitan Water Reclamation direct-to-them solutions.” The se- stronger,” he said. invest sustainably.” mix toward the type of activities District Retirement Fund terminat- cret, Mr. Spellacy said, is to offer She added that Morgan Stanley that E-Trade and Eaton Vance offer: Morgan Stanley Investment ed Hexavest from its $73 million ac- something that is “an absolute de- lower risk (revenue) streams com- Management Inc. integrates ESG historically has voted with tive international large-cap equity mand for the client and marketplace. pared with Morgan Stanley’s tradi- into investments and has its management “more than 95% of portfolio and in July the Florida Eaton Vance has such products.” tional (capital markets) business,” Morgan Stanley Institute for the time on shareholder propos- State Board of Administration, Tal- And M&A may be reaching an said Donald Robertson, New York- Sustainable Investing, but Calvert als,” while Calvert “has a strong lahassee, which oversees $210.3 inflection point in money manage- based senior vice president in the runs about $25 billion in history of voting against manage- billion in assets, terminated a $715 ment. “What we’ve been seeing is financial institutions group at dedicated responsible investing ment, especially when it has a million active global equity portfo- driven a lot through the growth of Moody’s. assets. soft approach to climate change. lio with Hexavest. Ms. Tice declined passive, oligopolies gobbling up While other large investment Calvert was responsible for this to comment. (smaller players), and those man- Hires and terminations Regarding cultural fit, Mr. Faust agers with some of the largest, most managers are slowly dipping a toe area of proxy voting while under Both MSIM and Eaton Vance noted on the conference call that the sophisticated distribution (plat- into strong environmental and Eaton Vance, so it is safe to picked up a number of contracts 25 senior employees that hold the forms) vacuuming up assets from from institutional investors in 2020. social investing, “Morgan Stanley assume they will play a large role voting stock in the firm voted unani- managers with (similar) products In April, the North Dakota State just dove into the deep end of the at Morgan Stanley as well. We mously in favor of the deal — a point but not the same distribution,” said Investment Board, Bismarck, asked pool,” said Elizabeth Saunders, anticipate that support level to that analysts also highlighted. Jonathan L. Doolan, Frankfurt- Parametric to establish a synthetic Chicago-based partner at investor shift downward shortly after the But the geographic headquarters based principal, head of Europe, rebalancing overlay program to ad- relations and communications acquisition closes,” Ms. Saun- of the two firms did come up as one Middle East and Africa at Casey dress market volatility caused by firm Clermont Partners and ders said. potential sticking point. Quirk, a practice of Deloitte Con- the coronavirus pandemic. At the founder of Clermont’s virtual ESG — SOPHIE BAKER “Morgan Stanley is the quintes- sulting LLP. “Now we are starting to time, the equity overlay program for sential N.Y. firm and Eaton Vance is (come) into a place (where) … M&A the board, which has oversight of as Boston as could be, with the nau- activity is focused more on how to $16.3 billion in pension, insurance tical imagery, sponsorship of the pivot to wealth, with quality prod- and legacy trust fund assets, ac- cap strategies for North Dakota. said in an email that the acquisition Boston Pops’ (annual Fourth of ucts that can fit neatly into a more counted for $450 million in assets. David J. Hunter, executive direc- would not lead to Parametric being July) fireworks event and legacy in diverse set of clients vs. just pound- Parametric also runs about $500 tor and CIO of the North Dakota put on watch or any changes to the Boston going back to the 1920s. And ing the pavements and knocking on million in U.S. small-cap and large- Retirement and Investment Office, allocation. as Red Sox and Yankee fans can tell the doors of big institutions.” n

sets, said Ajeet Manjrekar, co-head Watson. “I spend a lot of my time economic impact going forward and of River and Mercantile solutions talking (about whether) central the likelihood of a contested U.S. in London. banks will tighten policy and bring election is decreasing. On the Mr. Manjrekar said a slowdown the party to a close — that’s not a downside, there is the risk of a pla- in the rate of new stimulus — which risk over the next several quarters teau in the economy and what would stall global asset prices and and probably years.” might happen until a vaccine for economic support — as well as ris- The biggest risk is inflation, he the coronavirus is found. ing COVID-19 cases and the U.S. said, although not for the next two On credit, though, LGIM sees an election, are the biggest risks to or so years, and lingering China- “asymmetrical” case for the asset markets in the fourth quarter. River U.S. tensions are another concern. class. For example, investment- and Mercantile has £14.6 billion in And some OCIO managers are grade credit has “retraced almost OCIO assets. holding onto equity risk, despite an all of the credit spread widening Risk and investment manage- uncertain outlook, and cutting back from earlier this year. We’re back to ment firm Cardano, which had £14 on credit. a point where there is quite limited billion ($17.3 billion) in fiduciary Earlier in the year, Mercer “had upside protection, but in a worst- assets under management as of as much credit risk as we were al- case scenario, it could go back up June 30, came into 2020 “very lightly lowed to have under mandates … as higher.” The firm owns less credit allocated to risk assets,” which paid we saw the opportunities (as) being in portfolios, particularly invest- dividends for clients at the height of exceptional. That was not a view on ment grade. the coronavirus pandemic, said Ni- the economy particularly, but on the And on global inflation, “where gel Sillis, London-based client port- support from governments and we tend to take more exposure, the folio manager. central banks.” upside … from here is quite limit- The firm started adding risk Credit had a “huge rally” and ed” — another asymmetrical out- DIFFERENT CONCERNS: Andy Daly said monetary policy worries SEI Investments through inflation-sensitive assets while it is still attractive, “valuations look. more than the U.S. presidential election, which he called ‘no biggie.’ and credit. “That’s where our pref- particularly on investment grade With some OCIO clients, their erence would be right now. We are aren’t massively out of whack with “risk tolerance is dropping as well” other term or there’s a Democrat said he is expecting equity markets still minded to have increased risk normal,” Mr. Watson said. as that of the manager, since spon- clean sweep, the election is not to be volatile in the first few months in the portfolio, but credit and carry soring employers have also been widely expected to derail the two following the election, regardless of assets are probably preferred to eq- Equity headwinds battered by the impact of the virus, main forces that have driven mar- whether Donald Trump or Joe uities because of valuations.” Legal & General Investment added Tim Dougall, London-based kets since March, which are a flood Biden wins. As a result, executives Management Ltd. executives think head of fiduciary management at of liquidity from the central banks are considering launching a deriva- Inflation risk gains in equities are being held LGIM. “Schemes are saying (the vi- and some gigantic fiscal measures tives strategy on 25% of its 264.5 bil- While some investors are con- down because of the fourth quar- rus is) not going away anytime soon designed to prop up the economy. lion kronor equity exposure to cerned that supportive monetary ter’s risk events, including the elec- and are starting to have strategy (But) were the results to be contest- weather the volatility. and fiscal policies may be pulled tion and the path that COVID-19 conversations, renegotiating con- ed, it would not be unprecedented, OCIOs, meanwhile, are also add- back quicker than expected, lead- might take. versations (with their sponsors).” but could cause investors to worry, ing protection to portfolios. ing to cautious risk positions in the John Roe, London-based head of One question is whether trustees leading volatility to spike upwards,” Executives at River and Mer- fourth quarter, others are not par- multiasset funds, said there are should be taking less risk at the she said in an emailed comment. cantile Investments Ltd. have “em- ticularly worried. “quite symmetrical” upsides and moment since they are taking in And Mikael Angberg, CIO of the bedded downside protection “For the first time in my career, I downsides to equities. On the up- less in terms of employer contribu- 355 billion Swedish kronor ($39.7 against further market falls” while don’t think one of the biggest risks side, slowing the spread of the virus tions due to the impacts of the pan- billion) AP1, Stockholm, Sweden, maintaining exposure to risk as- is central banks,” said Mercer’s Mr. could be done with relatively little demic on businesses, he said. n 36 | October 19, 2020 Pensions & Investments AT DEADLINE tors are working to get individual Everyone is “gobsmacked,” said a investors to focus more on the long Hong Kong-based market veteran Vanguard term when they invest — a direc- who declined to be named. overall pension plan assets tion of travel that should open up Downward pressure on fees, Va. commits $1.25B CONTINUED FROM PAGE 1 totaled $1.649 billion, while opportunities for Vanguard, he said. against the backdrop of relatively The $83.8 billion Virginia projected benefit obligations — it gave no hints of the changes The decision to step away from small passive allocations by big Retirement System disclosed new totaled $1.661 billion, for a that would be unveiled months lat- the pursuit of segregated mandate Asian institutional investors to- commitments totaling $1.25 er. The release cited the opening of business in the region — bringing gether with growing moves to man- funding ratio of 99.3%, according billion in a transaction report the Tokyo office in 2000 as the start Vanguard’s Asia-Pacific business in age allocations in-house, could be a to the company’s most recent included in materials at its Oct. of the firm’s operations in Asia-Pa- line with its operations elsewhere factor driving that move away from 10-K filing. 15 board meeting. cific, and went on to highlight two — is “all a matter of focus,” he added. passive institutional mandates in Within its credit strategies decades of expansion “serving in- Even so, the firm isn’t leaving in- the region, Mr. Yap said. asset class, the pension fund HarbourVest raises $8.1B stitutional clients in mainland Chi- stitutional investors in the region Too many managers have come na, Hong Kong and across Asia.” high and dry across the board. In to accept minuscule fees from committed $1 billion to Carlyle HarbourVest Partners has Mr. Conking, in an Oct. 16 inter- Australia, for example, Vanguard heavyweight institutional investors closed its latest new secondaries Diversified Credit, a fund man- view, depicted the recent changes to will continue to accept institutional in China in the belief that those aged by Carlyle Group that is to fund, Dover Street X, at its $8.1 Vanguard’s Asia-Pacific strategy as mandates for pooled investment connections will benefit them else- focus on private credit invest- billion at its hard cap. a return to the company’s heritage vehicles, even as it eschews cus- where, said Peter Alexander, man- ments. The fund was oversubscribed, a of helping individual investors tomized, segregated accounts. aging director of Z-Ben Advisors In private equity, VRS commit- spokeswoman said in an email. make smart, rewarding investment But in China and Australia it will Ltd., a Shanghai-based research ted $200 million to Virginia Asia HarbourVest’s new fund decisions. increasingly focus on investment house focused on financial market Investors III, a separate account investing on the alternative Roughly eight years ago, Van- vehicles that allow for direct rela- opportunities on the mainland. with Asia Alternatives Manage- investments secondary markets guard decided the pursuit of segre- tionships with individual investors Bloomberg News reported earli- gated mandates — something the or their financial advisers, includ- er this month that Vanguard re- ment’s private equity fund of is 70% larger than its predeces- firm hasn’t done elsewhere around ing a planned launch of its own su- turned a combined $21 billion in funds. sor, Dover Street IX, which closed the globe — offered opportunities perannuation fund for workers in passive mandates to China Invest- Within real assets, Virginia with $4.8 billion in 2016. “for us to get a toehold in Asia,” and Australia and its own fund management Corp., the $1.05 trillion Bei- committed $50 million to Apollo Limited partners include the on that score, the strategy was suc- ment company on the mainland. jing-based sovereign wealth fund; U.S. Real Estate Fund III, $72.2 billion Michigan Retirement cessful, Mr. Conking said. In the U.S., where the firm sourc- the State Administration of Foreign managed by Apollo Global Systems, the $37 billion Con- es more than 90% of its total assets, Exchange; and the National Coun- Management. necticut Retirement Plans & Trust Regulatory reform Vanguard’s financial adviser ser- cil for the Social Security Fund. Funds and the $5.8 billion Vanguard oversaw an almost vices segment and its retail investor Market veterans peg the fee Defaults seen increasing Ventura County (Calif.) Employ- $190 billion mix of institutional and group account for 39.1% and 33.7%, money managers earn for running ees’ Retirement Association. retail client assets in the Asia-Pacif- respectively, of total assets. Its U.S. passive strategies for those asset Most credit portfolio managers ic region as of Aug. 31 — $122 bil- institutional business — predomi- owners at low single digits — believe credit defaults will rise in lion from Australian clients and $67 nantly serving 401(k) and 403(b) around 2 basis points. the coming months, according to Texas fund slates $125M billion from the rest of the region, plan members, noted Mr. Conking With fee pressures leaving reve- the third-quarter survey from the The $30.7 billion Texas County according to a company spokes- — accounts for the remaining quar- nues for passive institutional man- International Association of Credit & District Retirement System woman. ter or so of its AUM there. dates on a one-way path lower, Portfolio Managers. committed $125 million to two More recently, however, the mo- Still, the decision to shut down Vanguard’s latest move on the insti- mentum of regulatory reform in an Asia-Pacific institutional busi- tutional side may be “smart but that The majority of surveyed credit new venture capital funds run by China has convinced Vanguard’s ness that accounts for more than doesn’t mean that what they have managers, 73%, forecast rising existing manager Khosla Ven- team that focusing on that country’s half of Vanguard’s AUM in the re- in place to target the Chinese retail loan defaults over the next 12 tures, a transaction report said. retail market segment is the firm’s gion left some industry analysts space will work,” Mr. Alexander months globally. By region, 81% The fund committed $95 biggest opportunity now to have a scratching their heads. said, noting that demand in China see defaults rising in Europe, 75% million to Khosla Ventures VII, “positive impact on the way the remains weak for the passive offer- in North America, 65% in Australia which plans to seek investments world invests,” Mr. Conking said. ‘Surprising move’ ings for which Vanguard is best and 56% in Asia. in clean technology and informa- Foreign managers, starting this “It’s a surprising move,” said Ken known. The Aggregate Credit Default tion technology companies in year, won the ability to set up retail- Yap, Singapore-based managing di- Mr. Conking said while there’s Outlook index for the next 12 North America. TCDRS committed focused fund management compa- rector, Asia, with Cerulli Associates reason to anticipate growing interest in passive strategies among in- months rose to -74.5 in the most $30 million to Khosla Ventures nies on the mainland, while regula- Asia Pte. Ltd. recent survey, improving from Seed E, which plans to invest in -83.5 in the previous quarter. A early stage U.S. health-care and closer look at what their business negative number indicates credit technology companies. does and how they do it.” conditions are expected to In 2018, the system committed Data Even so, companies are in very worsen, while positive numbers a total of $100 million to the two early innings on figuring out how to CONTINUED FROM PAGE 1 mean conditions are expected to predecessor funds in Khosla use technology to increase compa- improve. Ventures’ fund families. “There will not be a reversion to nies’ growth, said John Park, Menlo The majority of surveyed TCDRS’ private equity/venture a pre-pandemic economy,” said Ja- Park, Calif.-based partner and head managers also believe credit capital portfolio totaled $5.3 son Thomas, Washington-based of Americas technology private eq- managing director and head of uity at KKR & Co. LP. spreads will widen over the next billion as of June 30. global research at The Carlyle “Not every company that sits at With the addition of the two three months in all regions and Group LP. the crossroads of lots of data is nec- categories. new Khosla funds, TCDRS has As the pace of digitization accel- essarily worth more. Companies The survey was conducted committed a total of $1.6 billion erates, investors should think more that sit on a preponderance of rich among IACPM members, which year-to-date Oct. 16 to 25 funds in terms of business model varia- data should have the ability to cre- consist of credit portfolio run by 21 private equity/venture tions than differences between in- ate products around that data. They managers at more than 100 capital managers. dustries, Mr. Thomas said. should be able to leverage that data financial institutions in the U.S., In a few years, technology may NO RETURN: Jason Thomas believes to grow faster,” said Mr. Park, who Europe, Asia, Africa and Australia. not be viewed as its own sector but tech-enabled businesses will cope leads the technology industry team Women make gains instead as a differentiator between better in a post-pandemic economy. within KKR’s Americas private eq- Women hold a record 22.6% of businesses that thrive or falter in a uity business. Times inks deal board seats among the largest post-pandemic reality, irrespective ing needs were the ones that need- “The issue today is that compa- New York Times Co. entered Russell 3000 index companies, of the industry, he said. ed to finance their physical assets nies are very nascent in terms of into an agreement with Massa- according to the 2020 Gender Companies able to shift to a and inventory,” Mr. Thomas said. understanding how to use the data chusetts Mutual Life Insurance Diversity index released Oct. 16 technology-enabled model with “Whereas, their biggest assets were at their fingertips and creating Co. to purchase a group annuity by the 2020 Women on Boards fewer assets will be in better finan- their brand, people and data. So, ways to monetize it,” he said. cial condition than comparable they started to sell off their physical However, KKR evaluates most contract to transfer about $235 organization. companies at the start of the pan- assets.” investment opportunities these million in U.S. pension plan The 2020WOB Gender Diversity demic that didn’t make that shift, Advances in technology are days through a tech lens. For every liabilities. index marked a 2.2 percentage- Mr. Thomas said. making it easier for companies to deal now, KKR executives look at The contract will transfer the point increase from last year, and Right now, the main focus is on shed their assets, making them the market, the company, the prod- benefit payment responsibilities a 6.5 percentage-point increase sectors, he said. Companies not more resilient, he said. Carlyle had uct set and the strategy from a tech- for about 1,850 retirees and over the past four years. But a making big changes toward digi- $84 billion in private equity and nology viewpoint, Mr. Park said. beneficiaries in the New York third of companies still have one tized, technology-enabled business $221 billion in total assets as of June “In the next decade, we will see Times Cos. Pension Plan to woman or no women on their models are losing market share, 30. real advancements around the use MassMutual, according to an Oct. boards. and their private equity owners will And these aren’t the only chang- of data,” he said. “As investors you have tough exits in their futures, es companies are making. have to get ahead of the curve and 13 8-K filing with the SEC. “Companies that understand Mr. Thomas said. what we are doing is trying to figure The transaction, which the com- the business imperatives and Asset-light companies such as Revised expectations out how to use it as a tool that’s both pany expects to finalize in early benefits of women directors manufacturers that own neither “Businesses have revised down offensive and defensive in allowing 2021, will be funded through propelled us to this milestone,” their plants nor the trucks that take their expectations for revenue and us to help price risk.” existing pension plan assets, said Stephanie Sonnabend, goods to market started after the staffing needs relative to pre-pan- While he does not think the in- according to the filing. 2020WOB co-founder and board Great Recession, he said. demic levels,” he said. “This is not dustry is yet at a place where it can As of Dec. 31, New York Times’ chairwoman, in a statement. “In the global financial crisis, the just because of increased conserva- value a company based only on its businesses with the biggest financ- tism but because they’re taking a use of data, data usage is a factor Pensions & Investments October 19, 2020 | 37

Loreen Kelley STATEMENT OF OWNERSHIP, MANAGEMENT AND CIRCULATION anticipates that the funds — is well placed to take the 3FRVJSFECZ64$ fund management long-term approach needed to 1VCMJDBUJPO5JUMF1FOTJPOT*OWFTUNFOUT 1VCMJDBUJPO/P company Vanguard is crack that market. 'JMJOH%BUF *TTVF'SFRVFODZ#JXFFLMZ moving to set up on “We’re not in a race,” he said. /PPG*TTVFT1VCMJTIFE"OOVBMMZ "OOVBM4VCTDSJQUJPO1SJDF the mainland will Vanguard will submit its applica- $PNQMFUF.BJMJOH"EESFTTPG,OPXO0GGJDF PG1VCMJDBUJPO$SBJO$PNNVOJDBUJPOT *OD / complement what the tion for a license to operate a fund .JDIJHBO"WF $IJDBHP *- $PPL$PVOUZ $PNQMFUF.BJMJOH"EESFTTPG)FBERVBSUFST joint venture is doing. management company on the PS(FOFSBM#VTJOFTT0GGJDFPG1VCMJTIFS$SBJO $PNNVOJDBUJPOT *OD /.JDIJHBO"WF Meanwhile, Van- mainland early next year and $IJDBHP *- $POUBDU1FSTPO+JN$BOUMFZ1IPOF guard still hasn’t ap- should be fully operational by 2022 'VMM/BNFTBOE$PNQMFUF.BJMJOH"EESFTTFTPG 1VCMJTIFS &EJUPS BOE.BOBHJOH&EJUPS1VCMJTIFS plied for the fund or early 2023, he said. On Sept. 23, $ISJTUPQIFS+#BUUBHMJB $SBJO$PNNVOJDBUJPOT *OD 5IJSE"WFOVF /FX:PSL &EJUPS "NZ# management license Vanguard appointed Dengpan Luo, 3FTOJDL $SBJO$PNNVOJDBUJPOT *OD 5IJSE the firm will need to the CEO of a Shenzhen-based fund "WFOVF /FX:PSL .BOBHJOH&EJUPS +VMJF 5BUHF $SBJO$PNNVOJDBUJPOT *OD /.JDIJHBO offer its own strategies management company, as general "WF $IJDBHP *- 0XOFS$SBJO$PNNVOJDBUJPOT*OD(SBUJPU directly to individual manager of the firm’s prospective "WF %FUSPJU .*,&$SBJO (SBUJPU "WF %FUSPJU .* investors in China, fund management company, and ,OPXOCPOEIPMEFST NPSUHBHFFTBOEPUIFSTFDVSJUZ IPMEFSTPXOJOHPSIPMEJOHQFSDFOUPSNPSFPGUPUBM even as U.S.-based Mr. Conking said a head of distribu- BNPVOUPGCPOET NPSUHBHFTPSPUIFSTFDVSJUJFT/POF 5BY4UBUVT5IFQVSQPTF GVODUJPO BOEOPOQSPGJU competitors Black- tion will be announced shortly. TUBUVTPGUIJTPSHBOJ[BUJPOBOEUIFFYFNQUTUBUVTGPS 'FEFSBMJODPNFUBYQVSQPTFT Rock Inc., Fidelity In- t)BT/PU$IBOHFE%VSJOH1SFDFEJOH.POUIT t)BT$IBOHFE%VSJOH1SFDFEJOHNPOUIT ternational and Neu- Other opportunities ,IFKDQJHGSXEOLVKHUPXVWVXEPLWH[SODQDWLRQRI FKDQJHZLWKWKLVVWDWHPHQW berger Berman Group While Vanguard’s immediate fo- 1VCMJDBUJPO/BNF1FOTJPOT*OWFTUNFOUT LLC have already cus is China, other countries — in- *TTVF%BUFGPS$JSDVMBUJPO%BUB#FMPX4FQUFNCFS done so. cluding Japan and India — will re- Extent and Average No. No. The Hong Kong- main on the firm’s radar screen for Nature of Copies Copies of Circulation Each Issue Single based market veteran, possible opportunities down the During Issue Proceeding Published who declined to be road, he said. 12 Months Nearest to Filing Date named, said the tough, Industry veterans predict Black- B5PUBM/VNCFSPG$PQJFT 1HWSUHVVUXQ competitive market in Rock, the world’s largest money C -FHJUJNBUF1BJEBOEPS 3FRVFTUFE%JTUSJCVUJPO China that Vanguard manager, could pick up a big chunk %\0DLODQG2XWVLGHWKH0DLO 0VUTJEF$PVOUZ1BJE is targeting should of the business Vanguard is relin- 3FRVFTUFE.BJM 4VCTDSJQUJPOT4UBUFE REASONS: Cerulli’s Ken Yap cited several factors that might have played into Vanguard’s decision. prove even more so quishing in China and Australia but PO14'PSN for a firm that has with Vanguard giving clients six to ,QFOXGHGLUHFWZULWWHQ UHTXHVWIURPUHFLSLHQW vestors on the mainland, “we’re not to manage the retirement accounts made it a point of pride not to pay 24 months to make new arrange- WHOHPDUNHWLQJDQG ,QWHUQHWUHTXHVWVIRU just an indexer.” Vanguard will of Australians. But “at this stage no intermediaries to distribute their ments, there’s no rush of activity. UHFLSLHQWSDLG VXEVFULSWLRQVLQFOXGLQJ bring the same active subadviser launch date has been set,” an Aus- products — the dominant practice Ian Patrick, the chief investment QRPLQDOUDWH VXEVFULSWLRQV selection skills it has relied on to tralia-based spokeswoman said. on the mainland. officer with A$68 billion Sunsuper, DGYHUWLVHU·VSURRI FRSLHVDQG build a substantial U.S. active fund Likewise, on the mainland a joint Unless Vanguard has some in- said the “sensible” lead time Van- H[FKDQJHFRSLHV *O$PVOUZ1BJE business “to make a difference in venture Vanguard established this side knowledge that China is plan- guard has given clients leaves them 3FRVFTUFE.BJM 4VCTDSJQUJPOT4UBUFE China” as well, he said. year with giant online technology ning to transition to a “no-commis- ample time to make a transition. PO14'PSN ,QFOXGHGLUHFWZULWWHQ platform Ant Group to offer invest- sion future,” the firm’s decision to Vanguard manages roughly a quar- UHTXHVWIURPUHFLSLHQW Work in progress ment advisory services to individu- forgo, at minimum, $4 million in ter of the Brisbane-based fund’s WHOHPDUNHWLQJDQG ,QWHUQHWUHTXHVWVIRU In both China and Australia, al investors has attracted more than fees for that $21 billion in institu- portfolio. UHFLSLHQWSDLG VXEVFULSWLRQVLQFOXGLQJ meanwhile, the investment vehicles 200,000 users in its first 100 days of tional AUM in anticipation of rising Others say they’re moving expe- QRPLQDOUDWH VXEVFULSWLRQV Vanguard is counting on to power operations through mid-July. Z- retail revenues could prove to be ditiously. Cbus, a A$52.6 billion, DGYHUWLVHU·VSURRI FRSLHVDQG its business serving individual in- ben’s Mr. Alexander, while conced- one that carries considerable ca- Melbourne-based super fund for H[FKDQJHFRSLHV 4BMFT5ISPVHI%FBMFST vestors remain a work in progress. ing the two firms make a powerful reer risk, he said. which Vanguard manages more BOE$BSSJFST 4USFFU 7FOEPST $PVOUFS4BMFT The firm — which is giving up combination, noted that the deal is Mr. Conking said while his team than A$6 billion in fixed-income BOE0UIFS1BJEPS 3FRVFTUFE%JTUSJCVUJPO tens of billions of dollars of man- structured to leave ownership of is well aware that “it’s going to take assets, “is well advanced in review- 0VUTJEF6414¥ 3FRVFTUFE$PQJFT dates garnered over the years from the client with Ant Group rather a while for us to get going and get ing its options, which will most like- %JTUSJCVUFECZ0UIFS .BJM$MBTTFT5ISPVHI Australian superannuation funds — than the joint venture. established” in China, a firm like ly include bringing a component of UIF6414 FH'JSTU$MBTT.BJM¥ is looking to establish its own fund, Mr. Conking said “we’re very Vanguard — which is ultimately this in-house,” said Brett Chatfield, D 5PUBM1BJEBOEPS Vanguard Super, to compete directly happy with our joint venture” and owned by investors in its mutual deputy CIO. n 3FRVFTUFE$JSDVMBUJPO <4VNPGC BOE > E /POSFRVFTUFE%JTUSJCVUJPO %\0DLODQG2XWVLGH0DLO 0VUTEJF$PVOUZ KKR executives consider to value “We have portfolio companies six to nine months, Monroe execu- month but you don’t have a con- /POSFRVFTUFE$PQJFT 4UBUFEPO14'PSN and evaluate a business, Mr. Park where data collection is core to the tives have seen companies with a tract,” he said. If times get tough, LQFOXGH6DPSOHFRSLHV 5HTXHVWV2YHU\HDUV said. KKR managed $79 billion in business model and where we be- “COVID premium,” Mr. Uddin said. customers could discontinue the ROG5HTXHVWVLQGXFHG E\D3UHPLXP%XON private equity out of firmwide $222 lieve that improving software algo- “Some companies have done better service at will. 6DOHVDQG5HTXHVWV LQFOXGLQJ$VVRFLDWLRQ billion as of June 30. rithms/machine learning capabili- than expected in COVID. A lot of 5HTXHVWV1DPHV ties will result in significant those companies tend to be on the REWDLQHGIURP%XVLQHVV Higher valuations 'LUHFWRULHV/LVWVDQG RWKHUVRXUFHV Calabrio investment value-added services and solu- tech side,” he said. Even before COVID-19, compa- *O$PVOUZ One example Mr. Park gave of a tions,” he said. Loans to software companies in nies were trying to put a tech twist /POSFRVFTUFE$PQJFT 4UBUFEPO14'PSN technology theme driving KKR’s At the same time, access to struc- Monroe’s portfolio have held up on what they were doing because LQFOXGH6DPSOHFRSLHV 5HTXHVWV2YHU\HDUV investment thesis is an investment tured and relevant data “definitely “very, very nicely,” Mr. Uddin said, as typically it would lead to higher ROG5HTXHVWVLQGXFHG E\D3UHPLXP%XON in Calabrio, a company that assists provides more pertinent informa- these companies have proven more valuations, said Scott Hendon, Dal- 6DOHVDQG5HTXHVWV LQFOXGLQJ$VVRFLDWLRQ customer service call centers. The tion/insights about certain risks resilient. las-based global and national lead- 5HTXHVWV1DPHV REWDLQHGIURP%XVLQHVV company uses tools like speech-to- and opportunities associated with a “It’s no surprise that everyone is er of private equity at BDO USA 'LUHFWRULHV/LVWVDQG RWKHUVRXUFHV text analytics and data maps to give given investment opportunity,” Mr. trying to go to the subscription LLP, an assurance, tax and financial /POSFRVFTUFE$PQJFT companies insights into support in- Lewin said. model” because they have higher advisory firm. %JTUSJCVUFE5ISPVHIUIF 6414CZ0UIFS$MBTTFT teraction and an agent’s perfor- Executives at private debt firm valuations, he said. However, since the pandemic, PG.BJM FH'JSTU$MBTT .BJM /POSFRVFTUPS$PQJFT mance on calls. This technology Monroe Capital LLC are seeing Companies with subscription modeling future cash flow and rev- NBJMFEJOFYDFTTPG gives Calabrio’s customers a view more companies present them- models have recurring revenues enue stream of a business is an un- -JNJUNBJMFEBU4UBOEBSE .BJM¥PS1BDLBHF into why their own customers are selves as technology companies, with value based on multiples of certain process, Mr. Hendon said. 4FSWJDFT3BUFT /POSFRVFTUFE$PQJFT unhappy or issues with products. said Zia Uddin, Chicago-based that revenue. Those valuations are Some 77.5% of private equity and %JTUSJCVUFE0VUTJEFUIF .BJM ,QFOXGH3LFNXS KKR invested in the company as a managing director and portfolio higher than businesses without re- venture capital respondents to a 6WDQGV7UDGH6KRZV 6KRZURRPVDQG disruptive force in the call center manger of private credit. curring revenues, which are valued BDO survey released in October 2WKHU6RXUFHV F 5PUBM/POSFRVFTUFE sector that was slow to adapt to the Some private credit managers based on multiples of earnings be- said assets will be sold or taken %JTUSJCVUJPO 4VNPG E BOE cloud and understand the data be- and other lenders are accepting the fore interest, taxes, depreciation public at prices 10% to 20% lower G 5PUBM%JTUSJCVUJPO hind customer service calls. Calab- substitute, giving these companies and amortization. than they would have pre-COV- 6XPRIFDQGH H $PQJFTOPU%JTUSJCVUFE rio’s business has tripled in four higher valuations, and some lend- To capture these higher valua- ID-19. 6HH,QVWUXFWLRQVWR 3XEOLVKHUV SDJH years. ers will push the leverage up on tions, some companies with “reoc- But the impact on price depends I 5PUBM 6XPRIIDQGJ J 1FSDFOU1BJEBOEPS David Lewin, Montreal-based companies with “reoccurring” reve- curring” revenues are being pre- on the company. And technology 3FRVFTUFE$JSDVMBUJPO FGLYLGHGE\ senior partner at private equity nue, Mr. Uddin said. sented as “just as good as” business companies and health-care private IWLPHV &MFDUSPOJD$PQZ$JSDVMBUJPO firm Novacap, said COVID-19 has “The market is pretty efficient. with recurring revenues, Mr. Uddin equity and venture capital-backed Average No. No. Copies Copies of accelerated the trend toward in- People are trying to dress up com- said. companies have had higher valua- Each Issue Single During Issue vesting in meaningful technology panies to be like tech companies,” There is a big difference between tions, Mr. Hendon said. Proceeding Published 12 Months Nearest to and a pivot from “what was histori- he said. “Some lenders are probably recurring and reoccurring reve- Initial public offerings of tech- Filing Date cally more of a legacy business in a dangerous position.” nues, he said. A recurring revenue nology and health-care companies B1BJE&MFDUSPOJD$PQJFT C5PUBM1BJE1SJOU$PQJFT -JOFD 1BJE&MFDUSPOJD model to a more tech-enabled one.” model is one in which the company have been “pretty frothy as well,” he $PQJFT -JOFB D5PUBM1SJOU%JTUSJCVUJPO -JOFG 1BJE&MFDUSPOJD But that trend is being sped up in Pandemic bolsters tech trend has a contract with customers tying said. $PQJFT -JOFB E1FSDFOU1BJE #PUI1SJOU&MFDUSPOJD$PQJFT C industries that were already mi- Most companies want to have a them to regular payments for a spe- Right now, private equity and EJWJEFECZD9 *DFSUJGZUIBUPGBMMNZEJTUSJCVUFEDPQJFT FMFDUSPOJD grating to digital alternatives and technology aspect to them as tech- cific time period. Businesses with venture capital firms are trying to BOEQSJOU BSFQBJEBCPWFBOPNJOBMQSJDF 1VCMJDBUJPOPG4UBUFNFOUPG0XOFSTIJQ solutions, he said in an email. nology has become “more and more reoccurring revenues have custom- sell companies or take them public *GUIFQVCMJDBUJPOJTBHFOFSBMQVCMJDBUJPO QVCMJDB UJPOPGUIJTTUBUFNFOUJTSFRVJSFE8JMMCFQSJOUFEJOUIF Data collection is not only in- of everybody’s world,” Mr. Uddin ers that have a regular payment before a potential second wave of 0DUPCFS JTTVFPGUIJTQVCMJDBUJPO 4JHOBUVSFBOE5JUMFPG&EJUPS 1VCMJTIFS #VTJOFTT creasingly important to portfolio said. schedule but are not bound by con- COVID-19 and amid worries the .BOBHFS PS0XOFS $ISJTUPQIFS+#BUUBHMJB 1VCMJTIFS *DFSUJGZ companies but data also impacts The pandemic appears to be bol- tract, Mr. Uddin explained. presidential election in the U.S. UIBUBMMJOGPSNBUJPOGVSOJTIFEPOUIJTGPSNJTUSVFBOEDPNQMFUF*VOEFS TUBOEUIBUBOZPOFUIBUGVOJTIFTGBMTFPSNJTMFBEJOHJOGPSNBUJPOPOUIJT how Novacap executives analyze stering that trend. “A reoccurring bill is something might result in an economic down- GPSNPSXIPPNJUTNBUFSJBMPSJOGPSNBUJPOSFRVFTUFEPOUIFGPSNNBZCF TVCKFDUUPDSJNJOBMTBODUJPOT JODMVEJOHGJOFTBOEJNQSJTPONFOU BOEPS investments, Mr. Lewin said. It’s very early on but in the past like your cable bill. You pay it every turn, Mr. Hendon said. n DJWJMTBODUJPOT JODMVEJOHDJWJMQFOBMUJFT 38 | October 19, 2020 Pensions & Investments

“Our public equity managers really knocked it out of the park, pret- Endowments Brown leads endowment returns ty much in every category, which we All dollar values are in billions unless otherwise stated. Multiyear returns are annualized unless otherwise don’t always see,” Ms. Falls said. Do- CONTINUED FROM PAGE 1 noted. mestic, global and emerging mar- bridge, Mass.-based university’s kets equities returned a net 18%, 2020 2019 Three-year Five-year 10-year endowment, said in a note to Har- Endowment return return return return return Assets 15.9% and 2.2%, respectively, com- vard associates that the “team re- pared to their respective bench- mains confident that the changes Brown University 12.1% 12.4% 12.6% 9.8% 10.2% $4.7 marks of 7.5%, -5.1% and -3.4%. being made to both the portfolio Rockefeller University 10.7% N/A 10.1% 8.5% 9.6% $2.3 She noted the endowment also and the organization’s systems, benefited from the ability to rebal- Washington University in St. Louis 9.9% N/A 9.4% 7.1% 8.8% N/A structure and culture will serve the ance the portfolio when the market university well and generate the UTIMCO Permanent Fund* 9.5% 4.5% 7.7% 7.8% 8% $24.4 dropped in March thanks to a high- long-term returns on which Har- UTIMCO Long-term Fund* 9.4% 4.5% 7.8% 7.9% 8.1% $13.9 er cash level than most endow- vard relies.” ments. Since Mr. Narvekar became CEO Massachusetts Institute of Technology 8.3% 8.8% 10.2% 9.0% 11.4% $18.4 “We have a very high net draw,” in December 2016, he has remod- Dartmouth University 7.6% 7.5% N/A N/A 10.4% $6.0 Ms. Falls said. “We draw something eled HMC’s investment strategy to a between 5.3% to 5.5% (and) we don’t Harvard University 7.3% 6.5% N/A N/A N/A $41.9 generalist model in which all mem- get a lot of net contributions into bers of the investment team take Yale University 6.8% 5.7% N/A N/A 10.9% $31.2 the endowment. So we really have ownership of the entire portfolio, Pennsylvania State University 5.7% 7.7% 7.0% 6.5% 9% $4.6 to be able to fund stuff. We tend to from the previous strategic ap- barbell our liquidity, so we have a proach. Columbia University 5.5% 3.8% N/A N/A 9.1% $11.3 higher cash level relative to our Both Yale and Harvard trailed University of Virginia** 5.3% 5.8% 5.2% 5.8% 8.1% $9.9 peers.” fellow Ive Leaguer Providence, As of June 30, the Rockefeller R.I.-based Brown University, which Michigan State University 5.1% N/A 8.0% 6.9% 8.3% $3.1 University endowment’s actual al- reported the highest return at a net University of California 5.0% 8.2% 7.4% 6.6% 8.9% $14.0 location to cash and cash equiva- 12.1%. lents was 8.5%. University of Colorado Foundation 4.2% 6.5% 7.2% 6.7% 8.4% $1.9 Its $4.7 billion endowment’s return well exceeded its primary University of Florida 3.7% 7.0% 6.7% 5.6% 7.2% $1.9 Runners up benchmark of 3.1% for the fiscal University of Pennsylvania 3.4% 6.5% N/A 7.0% 9.3% $14.9 Other top performers included year ended June 30. Washington University in St. Louis, In an Oct. 1 news release, the Cornell University 1.9% 5.3% 5.9% N/A N/A $7.2 which ranked third with a net 9.9% university cited its partnerships University of Missouri System 1.2% 5.7% 5.4% 5.9% 7.9% $1.7 return for the fiscal year ended with “exceptional investment man- June 30, and the University of Tex- University of Washington 1.1% 5.8% 5.4% 5.5% 7.8% $3.6 agers” as the primary driver of its as/Texas A&M Investment Man- performance. Ohio State University 1.1% 1.2% 3.3% 4.0% N/A $2.0 agement Co., Austin, which had the Information regarding individual Duke University 0.7% 6.9% N/A N/A 9.1% $8.5 fourth-ranked performance among asset classes was not disclosed, and university endowments for the two spokesman Brian Clark said Jane University of Kansas 0.4% 5.6% 5.4% 5.4% 7.4% $1.6 pools it oversees, for its fiscal year Dietze, the university’s vice presi- Vanderbilt University -0.1% 6.7% N/A N/A N/A $6.9 ended Aug. 31. The $24.4 billion dent and chief investment officer, Permanent University Fund and University of Nebraska -1.3% 2.1% 3.3% 3.7% 6.7% $1.7 was not available for an interview. $13.9 billion Long Term Fund’s net University of Illinois Foundation -2.5% 2.6% 2.8% 4.1% 7.2% $1.9 returns for that period were 9.5% Better performance and 9.4%, respectively. These larger endowments bene- *Fiscal year ended Aug. 31. **Gross of fees. There was a wide range of re- Source: Institutional reports fited from significant exposures to turns for the fiscal year, which saw private investments. some endowments post negative Kristin Reynolds, Boston-based ing to be the really star performers pandemic, said Andy Daly, Con- ent sources of liquidity to “balance returns, such as the Urbana, Ill.- partner and co-head of the founda- and second-quarter private invest- shohocken, Pa.-based managing di- the financial equation,” she said. based University of Illinois Foun- tions and endowments practice at ment performance is going to make rector, investment strategist at SEI Among Cambridge’s clients, the dation’s $1.9 billion endowment NEPC LLC, said endowments with a material difference.” Investments Co. median percentage of endowment pool, which returned a net -2.5% for higher allocations to private invest- “I was preparing materials for a “The universities struggling the assets that even has the flexibility the fiscal year ended June 30. Asset ments in general performed better public university where we are just most prior to this were private uni- as unrestricted funds to be distrib- class breakdowns were not avail- during the most recent fiscal year. getting the last of the private in- versities that didn’t have a specialty uted is only 27%, Ms. Walker said. able and foundation spokeswoman Yale, for example, home of the vestment results,” Ms. Walker said. angle, were typically smaller in size Many don’t even have that level Sue Johnson did not reply to re- “Yale model” portfolio, has targets “They only have a 10% private allo- and located in rural areas,” Mr. Daly of flexibility, she said. Among Cam- quests for further information. of 23.5% each to absolute return cation, but their private invest- said. “They don’t have a large po- bridge’s clients there are two uni- Rockefeller University’s Ms. Falls and venture capital and 17.5% to ments pumped up their fiscal-year tential student population in close versities in the western U.S. whose said even though she loved having leveraged buyouts. returns by 1 percentage point, and proximity (and) they were already endowments consist of nearly 100% a high return in the most recent fis- “Performance centered on the that was only for one quarter at a feeling the impact quite a bit from restricted funds. cal year, endowment staff is work- level of private investment that 10% allocation. It truly moves the demographic trends.” Some endowments were ex- ing on reducing the risk in its port- folks had in their portfolios,” Ms. needle.” Ms. Walker that it’s been a bit of a tremely successful for the fiscal folio given “this degree to which the Reynolds said. “The reason I say The second best-performing financial “triple whammy” for uni- year despite the financial challeng- equity markets have moved, the that is trailing one-year returns for university endowment was the $2.3 versities. es universities face. degree to which interest rate policy private equity and venture capital billion endowment of The Rocke- Not only is there the revenue Timothy T. Yates Jr., president has been uber-accommodative, were positive — and there are a feller University, New York, which loss from declining enrollment and and CEO of Commonfund Asset (and) I think there’s a lot of debt out couple of reasons for that — but returned a net 10.7%. attendance, but also declines in fa- Management in New York, noted there.” usually people report that on a lag That endowment benefitedcility revenue, bookstores, dining the fiscal year saw “really a very un- Overall, Ms. Walker doesn’t ex- and those returns were less impact- greatly from the performance of its halls and other sources of high- even recovery in many ways, which pect institutions to make radical as- ed by the near-term effects of CO- private equity portfolio, CIO Amy C. margin revenue, and canceled re- I think has led to some of the un- set allocation changes as a result of VID.” Falls said in a telephone interview. unions and other events that pro- even performance you’re seeing.” the current challenges facing uni- Wendy Walker, San Francisco- That asset class, which compris- mote giving by alumni, she said. Specifically, he notes the wide versities. based managing director at Cam- es 30.5% of the overall endowment’s “Many public universities have dispersions in equity markets, par- “I don’t think asset allocation is bridge Associates LLC, said in a portfolio, returned a net 33.7% for already experienced budget cuts ticularly in the gaps between do- in itself an obstacle to meeting telephone interview that private the fiscal year. and face the likelihood of more im- mestic and international equity spending needs for more institu- investments have had a significant plemented expense curtailment, in performance, as well as the recov- tions,” she said. “I think in the con- effect on returns. Liquidity concern some cases furloughs,” Ms. Walker ery of the fixed-income markets, versations I’ve been privy to be- “Our data suggests this is all pre- But liquidity is a primary source said. after the extreme market disloca- tween investment and financial liminary (but) that the median per- of concern among colleges with There has been an acceleration tion in March. committees there’s an understand- formance will broadly go to low smaller and midsize endowments, of meetings between investment Rockefeller University’s Ms. Falls ing that there’s a tricky balancing single digits,” she said. “I think particularly among those that committees and universities’ finan- said the endowment had success in act between near-term spending those outliers on the upside are go- struggled prior to the COVID-19 cial committees to evaluate differ- public markets as well. needs and long-term support.” n

sociation terminated AJO for man- System, Oklahoma City, did not cite to talk about the firm closing; they folio of cartoons about the money agement of an $111 million portfolio a reason for terminating AJO from want to talk about how we all are management industry and invest- AJO for performance reasons in August. an $80 million strategy in June. doing and what will happen to our ing that the firm has commissioned ■■In July, the $19.4 billion Los Mr. Aronson and Ms. Moore said employees.” over the years and shared with in- CONTINUED FROM PAGE 4 Angeles City Employees’ Retire- they have been on the phone with She said many investors also vestors and others on the firm’s AUM of $31 billion managed for 114 ment System terminated AJO from clients “a lot” over the past few days. were thankful that Mr. Aronson has website. asset owners in 2007. a $183 million portfolio because its Ms. Moore said reaction to the been “such a strong voice for inves- “I’m not going away,” Mr. Aron- Among terminations of AJO this relative performance had not im- firm’s closure from its investors tors within the industry.” son said. “I hope AJO people will year for management of active proved after three years on the surprised her a little. “I really am OK. It has been a stay together and do something dif- large-cap U.S. value strategies were: pension fund’s watchlist. “Overwhelmingly, they have good ride and so much fun,” he said, ferent without me as head. I will be ■■The $4.5 billion Fresno County ■■The $2.9 billion Oklahoma been appreciative of what the firm noting that one of his favorite contribute capital to what they do (Calif.) Employees’ Retirement As- Firefighters Pension & Retirement has done for them. They don’t want things about AJO is the large port- and be a silent partner.” n Pensions & Investments October 19, 2020 | 39 CHANGES AHEAD knowledged that some of the in- The Securities Industry and Fi- formation can be found in other nancial Markets Association, the PPPs filings but nevertheless justified U.S. Chamber of Commerce and Worcester (Mass.) Retirement System and Norwood (Mass.) the duplicative efforts due to the others echoed similar concerns CONTINUED FROM PAGE 3 Contributory Retirement System are searching for opportunistic near two-year lag that could and urged the Labor Department co-investment hedge fund-of-funds manager. Meketa Investment Group, Ms. Jacobson said. elapse between a PPP starting op- to limit or define the types of ad- consultant to the $977 million Worcester and $164 million Norwood plans, is The comment period, which erations and the filing of a PEP’s ministrative proceedings that assisting with the searches. Worcester is looking to allocate $20 million to closed Oct. 1, drew 22 responses Form 5500. must be disclosed. $25 million and Norwood, $10 million. The RFPs are available on Meketa’s from record keepers, third-party Still, some stakeholders held Stakeholders also agreed that website. Proposals are due at noon EDT on Oct. 28. administrators, consultants, and their ground, refusing to be disclosures be limited to adminis- plan sponsor, broker-dealer and swayed by the Labor Department’s trative proceedings against offi- HAVE SOME NEWS? Plymouth County (Mass.) Retirement asset manager trade groups. thinking. “This lag may be rele- cers and directors of the PPP or Association is searching for an active domestic Among other things, the Labor vant, but the DOL did not explain the PPP itself but not employees. Please submit news of midcap value equity manager to run about $55 Department is asking pooled plan why it needs to know whether a “Many PPPs will have hundreds changes to David million. The $1.1 billion pension fund is consider- providers to furnish a description plan exists sooner than Congress if not thousands of employees and Schepp, news editor, at ing only commingled funds or mutual funds, of administrative and investment requires for any other type of this data element would require [email protected] according to an RFP posted on the website of services that they will offer, in- plan,” Ms. Jacobson said. multiple supplemental filings re- Meketa Investment Group, the pension fund’s cluding identification of any affili- The American Retirement As- garding matters that may have lit- investment consultant. Proposals are due at noon EDT on Oct. 30. ates expected to have role in the sociation was more forgiving on tle or no impact on the PEP,” Ms. provision of those services. It is this point. While some of the in- Wielobob said. James City County, Williamsburg, Va., is searching for a record keeper for also asking for disclosures of on- formation is duplicative, “it is Some industry participants also its $34 million 457 plan and $3 million 401(a) plan. The county is seeking a going criminal, civil or administra- helpful to have everything in one took issue with the supplemental single vendor to provide record keeping, administrative and investment tive proceedings. place, especially if this is intended filings required under the Labor services for the plans, according to an RFP posted on the county’s website. to be useful to plan sponsors and Department’s proposal if there Proposals are due at 2 p.m. EDT on Nov. 5. Too much detail “I completely understand the Solano County, Fairfield, Calif., is searching for record keepers for its $201 desire to protect participants, ben- million 457 plan and $2 million 401(a) plan. The county issued an RFP for eficiaries and employers joining a firms to provide record keeping, communications, education and investment- PEP, but some of the detail is ex- related services for the plans, said Farid Atmar, senior buyer for the county. The tremely in the weeds,” said David RFP is available on the county’s procurement website. Registration is required. Levine, a principal at Groom Law Proposals are due 5 p.m. PST on Nov. 5. Group in Washington. “Some sim- plification would be helpful.” Weymouth (Mass.) Retirement System is looking to allocate about $12 Mr. Levine noted that the regis- million to an active U.S. smidcap core-value equities strategy. DiMeo Schnei- tration of PPPs was meant to help der & Associates, investment consultant to the $225 million defined benefit the Labor Department identify system, is assisting with the search. The RFP is available on DiMeo Schnei- PPPs before they filed a Form der’s website. Proposals are due 4 p.m. EST Nov. 9. 5500 for the PEPs they established. The Labor Department’s Rochester-Genesee Regional Transportation Authority, Rochester, proposal, however, would require N.Y., is searching for a discretionary investment consultant and custodian for the “disclosure of information that its two non-union pension plans. The transportation authority is seeking a firm goes materially beyond what is to provide investment management services, custodial and trustee services. necessary to simply identify PPPs,” The pension funds are the $21 million Regional Transit Service Non-Union Mr. Levine said. Employee Plan and the $3 million Lift Line Inc. dba RTS Access and Rural Stakeholders argued that the Properties Non-Union Employee Plan. The RFP can be obtained by emailing proposed information in some in- Sarah Clark, junior procurement officer, at [email protected]. Proposals are stances is more extensive than the due at 5 p.m. EST on Nov. 9. disclosures demanded of single- ‘IN THE WEEDS’: David Levine said the PPP disclosure forms need to be simplified. employer plans. PPPs, for exam- Iowa Public Employees’ Retirement System, Des Moines, is looking to ple, would be required to report participants,” said Allison Wielo- were any change to the informa- allocate up to $850 million in opportunistic credit strategies, said Gregory significant changes to their or bob, ARA’s general counsel in tion the PPP reported or if the Samorajski, CEO of the $34 billion pension system. The search is being their affiliates’ corporate or busi- Washington. PPP or a plan it sponsors under- conducted because the board recently agreed to increase its allocation to ness structure on an ongoing ba- went a reportable event such as a private credit to 8% from 3%. Mr. Samorajski expects that the board will select sis, a requirement “for which there Troublesome requirement merger or acquisition. more than one manager for this mandate. The RFP is available on IPERS’ is no current analog in the single- Industry stakeholders, howev- “The ARA believes that the website. Proposals are due by 4:30 p.m. CST, Nov. 10. employer plan reporting regime,” er, almost all agreed on the need Form 5500 is more appropriate for Ms. Jacobson said. to tone down what they saw as a disclosing reportable events to the Cook County Annuity & Benefit Fund and the Cook County Forest “You don’t want to put more particularly troublesome require- DOL,” Ms. Wielobob said. Preserve District Employees' Annuity & Benefit Fund, both of Chicago, requirements or make it more ment. They urged the Labor De- Others called for streamlining are searching for a custodian. The board of the pension funds, which have expensive for them to do the partment to streamline disclo- supplemental filings or removing combined assets of $11.3 billion, is searching for a firm to provide global pooled plans than for them to do sures of ongoing administrative them altogether given that PPPs custody and other ancillary services, according to an RFP posted on the the single-employer plans,” she proceedings against the pooled would likely go through frequent pension funds’ website. Registration is required. Proposals are due at 3 p.m. said, referring to pooled plan plan provider or any officer, di- changes as the market for pooled CST on Nov. 16. providers. rector or employee of the pooled employer plans evolves. Industry participants also noted plan provider. Asking for this level of detail New York State Deferred Compensation Plan, Albany, is seeking a that some of the required informa- The requirement is overly when the market is still develop- stable value structure manager, responsible for managing the risk characteris- tion is duplicative and can be broad and could be interpreted to ing can stifle innovation, said tics of the $8.3 billion Stable Income Fund, including liquidity strategy, credit found in other places, such as the include routine Labor Department Groom Law’s Mr. Levine. “I com- quality and duration. The manager provides advice, analysis and recommenda- Form 5500 and filings made with or IRS audits or investigations or pletely understand people’s need tions to board members for selecting portfolio managers and providers of the SEC and other regulators. The mere inquiries from governmental to have information, but there’s a wrapped separate account fixed-income products. The RFP is available on the service provider information re- entities, Ms. Wielobob said. balancing act here,” he said. $28.1 billion state plan’s website. Proposals are due Nov. 20. quired under the Labor Depart- “I don’t know what an interest- Ms. Jacobson summed it up ment’s proposal, for example, will ed plan sponsor would think if tightly in her comment letter to the Philadelphia Board of Pensions and Retirement is seeking a global be reported on the Form 5500 for they saw that a particular pooled Labor Department: “At this stage custodian for the $6 billion pension plan. The RFP is available on Philadel- future PEPs that PPPs launch. plan provider had an ongoing au- in the development of the PEP phia’s procurement website. Registration is required. Proposals are due by 5 “If the DOL wants to collect in- dit,” she said. “It could be poten- marketplace,” she said, “DOL p.m. EDT on Nov. 30. formation on the services being tially unfair if the plan sponsor should not be requiring PPP regis- provided by PPPs, it could collect were to draw conclusions about a tration statements to report any For a comprehensive database of search and hiring activity, visit researchcenter. this information using Form 5500,” service provider based on that in- information other than the PPP’s pionline.com/archive/piq. Ms. Jacobson said. formation, which may not be any- basic contact and identifying in- The Labor Department has ac- thing.” formation.” n

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