Secondary Market Likely to Be Aided by GP-Led Deals
Total Page：16
File Type：pdf, Size：1020Kb
December 28, 2020 PIonline.com $16 an issue / $350 a year THE INTERNATIONAL NEWSPAPER OF MONEY MANAGEMENT Alternatives GETTING OUT: Jill Shaw said the secondary market gives Secondary market likely limited partners a chance to leave longtime to be aided by GP-led deals funds or investors a Big increase in deals seen COVID-19 pandemic. reasons. Firstly, the pandemic has cer- way to part GP-led transactions involving sin- tainly delayed GPs’ exit plans — IPOs, with as industry adjusts after gle assets or portfolios are not just for trade sales, etc.,” said Larry Abraham- managers troubled funds. Alternative invest- Ajayi, Toronto-based vice president at that don’t fit COVID-19 disruptions ment managers with some of the secondary market broker Setter Capi- in their most sought-after assets in sectors tal Inc. “Accordingly, GPs have tapped portfolio By ARLEEN JACOBIUS such as health care and software are the secondary market to speed up li- anymore. recapitalizing on the secondary mar- quidity for their LPs while staying on Alternative investment general kets to give them more time and cap- to manage assets for longer.” partner-led secondary market trans- ital to accelerate growth of the port- Second, Setter Capital executives actions are expected to increase in folio companies in the funds, industry have seen a “stronger buyer appetite 2021, giving managers additional experts say. for GP-led transactions” from man- exit options and relieving the pres- “We’ve recently seen an upsurge in agers that invest on the alternative sure of selling companies during the GP-led transactions for a couple of SEE SECONDARIES ON PAGE 22 Investing SPECIAL REPORT THE TOP 10 STORIES OF 2020 A most unusual year chronicled by P&I Value managers Virus dominates welcome uptick the news, with ESG and Washington in performance d3sign/Getty Images action close behind November surge hoped to be only the beginning of sustained trend By ROB KOZLOWSKI By SOPHIE BAKER The wide-ranging ripple ef- fects of a once-in-a-century Value managers are once again hoping that global pandemic dominated recent outperformance of their picks will stick headlines this year, but an around, potentially marking the start of a rota- evolving approach to ESG in- tion out of growth vesting, a contentious U.S. pres- stocks. idential election and a flurry of Executives are sure regulatory activity were also that this rally could among the notable themes in have the legs to run Pensions & Investments’ top 10 through 2021. stories of 2020. Value stocks made The top story this year — cho- huge gains in Novem- sen by P&I’s editors — will sur- ber, reversing years of prise no one. The COVID-19 underperformance vs. pandemic has wreaked havoc the broader market with the lives of nearly everyone EASILY NO. 1: The many stories surrounding COVID-19 were deemed the most important by editors at P&I. and growth stocks. No- EXECUTIVE PUSH? Ian on the planet in a seemingly in- vember’s surge in val- Butler said value has finite number of ways. For one, ID-19 on the retirement indus- ue stocks vs. growth in outperformed after the the editorial staff of the newspa- try specifically after passage of The biggest stories of 2020 terms of performance past six U.S. elections. per you’re reading hasn’t seen the CARES Act, the impact of the was likened by sourc- each other in person for more pandemic and the summer ra- ϐ COVID-19 and markets ϐ New SEC rules, CAT es to gains in April 2009, when value stocks ral- than nine months. cial injustice protests on ESG ϐ COVID-19 and retire- ϐ CalPERS’ CIO resigns lied as markets emerged from the global finan- However, among all the seis- investing, the election of Joe ment cial crisis. mic events the pandemic has Biden as U.S. president, new ϐ Manager, consultant The MSCI World Value index gained 15.07% elicited, it is the economic im- regulatory moves by the SEC ϐ ESG after COVID-19, consolidation in dollar terms in November, vs. 12.83% for the pact that has led P&I’s coverage and DOL and the surprising res- protests ϐ Significant ERISA MSCI World and 10.9% for the MSCI World in 2020. ignation of Yu “Ben” Meng as Growth index. That followed years of under- ϐ President-elect Biden lawsuit rulings Other big stories of the year CalPERS’ chief investment offi- performance for the value index vs. both the included the impact of COV- CONTINUED ON PAGE 14 ϐ The DOL’s new rules ϐ U.S.-China tensions world and growth indexes. In 2019, value gained 22.74% vs. 28.4% for the world index and 34.14% SEE VALUE ON PAGE 26 SOUND BITE Industry pondering the future of SSGA GROOM LAW GROUP’S JOSH SHAPIRO: State Street Chairman and ‘I believe that variable plans will lead CEO Ronald P. O’Hanley to a resurgence of defined benefit looks to have something in pension programs.’ Page 2 mind for his money manage- ment subsidiary. Page 3 2 | December 28, 2020 Pensions & Investments IN THIS ISSUE Pension Funds VOLUME 48, NUMBER 26 Defined contribution Market opening up for more variable plans Target-date managers see greater opportunities for lifetime income products Agreement between grocers, plans that combine defined “I think we’re seeing in DC plans. Page 25 benefit and defined contri- more variable plans than we union sparks new interest as bution features to share ever have before, and more Endowments multiemployer reform fades more investment risk with variations of them. ... They Smith College announced plans to seek its plan participants. certainly come up in con- first CIO and manage its $2 billion portfolio “After the dust settles on versation,” even among cor- By HAZEL BRADFORD 2020, it will provide support porate plan sponsors, said in-house after working with an OCIO. Page 6 for arguments we often Mr. Cadenhead, chief actu- Exchange-traded funds The aftereffects of the COVID-19 pan- make for defined benefit ary for Mercer’s global and ETFs are on track for a record-breaking year demic on retirement plans and Congress’ plans — the asset allocation U.S. wealth businesses in recent failure to achieve multiemployer and investment manage- New York. of net new flows in 2020. Page 13 pension reform could mean a boost for vari- ment advantages” that have The basic premise of a Investing able pension plans, pension experts say. historically averaged higher variable defined benefit or Singapore’s GIC will establish a $750 The concept gained more visibility this net returns than defined EVERYBODY’S TALKIN’: Bruce variable annuity pension year with a new variable annuity pension contribution plans, said Cadenhead said the topic of plan is that the plan adjusts million joint venture with ESR to develop plan agreement between three major gro- Bruce Cadenhead, chairman variable plans has come up benefits up or down based and acquire industrial and logistics assets cery companies and the United Food and of the American Academy of more than ever before. on investment returns. An in India. Page 16 Commercial Workers International Union, Actuaries’ pension commit- assumed rate of return called Pension risk transfer Washington. tee. He notes that some defined contribu- the hurdle rate, typically between 4% and And while congressional negotiations to tion plan participants were spooked enough 6%, determines whether benefits for all par- Pension funds transferred $14.5 billion reform multiemployer pension funds broke by market volatility caused by the pandemic ticipants, including retirees, go up or down in liabilities through deals announced in down in December, the incoming 117th to withdraw some assets, missing out on on a plan year basis. Some variable plans December. Page 4 Congress could revive the one area of bipar- gains realized by professionally managed have floors limiting how low benefits can Pension risk transfer premiums fell in tisan agreement allowing for composite defined benefit assets. SEE VARIABLE ON PAGE 26 November as decreases were seen in discount and annuity purchase rates, Defined Contribution Milliman said. Page 23 Regulation The SEC will broaden the focus of its Sponsors returning Regulation Best Interest compliance examinations in 2021. Page 24 MacGregor/Bloomberg Luke Washington to questions about Leveraged lending is not posing a major risk to U.S. financial stability but financial in-plan annuities regulators are still cautious. Page 16 Departments Issues surrounding lifetime income options At deadline ....................24 Frontlines ........................8 surface again after virus took precedence By the numbers ..............17 Hirings...........................18 Changes ahead ..............27 News roundup ................21 Classified ......................20 Other views ....................11 By ROBERT STEYER ESG roundup .................12 RFPs .............................20 ETFs ..............................13 Year in cartoons .............10 One year after the SECURE Act addressed a major road- block to defined contribution executives offering in-plan an- Last call for for responses nuities, some sponsors — as they try to recover from the im- to P&I’s sponsor survey pact of the coronavirus pandemic — are trying to regain the momentum of investigating if these options make sense for A final reminder, Pensions & Investments their participants. is still accepting late responses to The coronavirus played a major role in diverting execu- the annual survey of the largest U.S. tives’ attention from an already-complex plan design con- retirement funds. Sponsors with cept. Some recent research suggests that in-plan lifetime combined U.S. pension and defined income options remain a tough sell to sponsors and to par- contribution plan assets of $1.3 billion ticipants. Other surveys cite some interest, but they cannot or more are eligible. Results will run tell if the intensity of the interest — ranging from “very” to Feb.