July 26, 2021 PIonline.com $16 an issue / $350 a year

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Shoko Takayasu/Bloomberg Defined Contribution Defined Contribution Fidelity enjoys big year among Empower bulks lineup changes up by adding in 401(k) plans

By ROB KOZLOWSKI Prudential unit

More than 100 U.S. corporate 401(k) Acquisition will solidify firm’s position plans made changes to their investment as second-largest record keeper in U.S. options in 2020 amid the challenges of the COVID-19 pandemic, continuing to emphasize cost savings in reviewing By MARGARIDA CORREIA their fund lineups, a Pensions & Invest- ment analysis of recently released 11-K The fight for dominance among record keepers intensi- filings shows. fied this month as Empower Retirement stepped forward Less than 1 in 8 plans disclosed chang- with plans to acquire Prudential Financial Inc.’s retirement es in their lineups, but many of those business for $3.55 billion. that did so changed their index fund The deal, announced July 21, will add more than 4,300 providers, with Fidelity Investments workplace retirement plans with about 4 million partici- seeing a number of pants and $314 billion in wins and Vanguard assets to Empower’s Group Inc. seeing EXPOSURE: Masataka Miyazono said despite gains, GPIF is still below its private markets target. rapidly growing plat- a number of losses form. When the deal Pension Funds for the second year closes as anticipated in Antonio Esposito in a row. the first quarter of 2022, P&I compared Empower will have 16.6 880 11-K filings with Japan funds’ private markets million participants, the Securities and narrowing the gap with Exchange Com- diversification proceeds slowly its next nearest rival — NEXT LEVEL: Jessica mission between and record-keeping in- Ludwig cited strong May 28 and June 30 By DOUGLAS APPELL RELATED CONTENT dustry leader — Fidelity returns as pushing with filings in 2020 Investments, which as of smaller plans’ assets and found that 101 Japan’s top public pension funds — Active managers earn their pay. Page 10 Sept. 30 had 25.7 million high enough for CITs. U.S. corporate 401(k) led by the ¥186.2 trillion ($1.7 trillion) participants, according plans added at Government Pension Investment Fund ¥397.5 billion to ¥1.34 trillion, less than to Pensions & Invest- GROWING: Edmund F. Murphy III least one investment option last year. — continued adding private equity, in- half of the fund’s roughly ¥3 trillion in ments data. said the deal will let Empower Those plans had assets totaling $229 frastructure and real estate assets to outstanding commitments to alterna- Empower’s record- continue to build scale. billion and added 281 individual invest- their portfolios last year but with little tives managers. keeping assets will swell ment options and 21 target-date fund to show for it in terms of lessening But with last year’s huge stock mar- to approximately $1.4 trillion administered in some 71,000 lineups from 57 managers in the year their reliance on equity market beta. ket rebound from pandemic lows ac- workplace retirement plans. By comparison, Fidelity had ended Dec. 31. Plans in that same uni- Masataka Miyazono, GPIF’s presi- counting for 94% of GPIF’s record $2.58 trillion in assets in almost 30,000 plans as of Sept. 30. verse removed 274 individual invest- dent, in a July 2 briefing on GPIF’s re- ¥37.8 trillion gains for the year, that To be sure, the transaction will solidify Empower’s posi- ment options and 15 target-date fund sults for the fiscal year ended March more than $3.5 billion increase in al- tion as the No. 2 record keeper in the U.S. The company will lineups from 66 managers during the 31, said the value of the fund’s private ternatives — focused on infrastructure widen its lead over TIAA-CREF, which as of Sept. 30 had same period. markets holdings for the year jumped SEE JAPAN ON PAGE 26 6.4 million participants and $656.5 billion in assets. It will SEE CHANGES ON PAGE 28 also leave fourth-ranked | SEE EMPOWER ON PAGE 25

SPECIAL REPORT DC MONEY MANAGERS AND RETIREMENT PLAN ADVISERS Daniel Burke Market returns make up for lower participant flows

Assets in DC plans increase RELATED CONTENT out the year. The outbreak of COVID-19, along with last year’s market volatility, 11.9% to $8.88 trillion in Advisers look to the PEP market for caused plan participants to either pull 2020, mostly on stock gains growth. Page 14 money out of their retirement plans or stay the course and not contribute more, By MARGARIDA CORREIA cording to Pensions & Investments’ a n - industry observers said. nual survey of U.S. institutional money “The biggest driver for the increase Assets in defined contribution re- managers. was asset appreciation as actual net tirement plans climbed to a new year- Internally managed defined contri- flows — due to the impact of the end high last year, thanks almost en- bution assets rose even more, jumping COVID-19 — were modest,” said Jim tirely to stock market gains. 14.7% to $7.95 trillion. Danaher, a principal and investment At the end of 2020, U.S. institutional The robust growth might have been consultant in the wealth practice at NO. 1: Matthew Brancato pointed to Vanguard’s target-date business as tax-exempt assets rose 11.9% to $8.88 stronger were it not for the pandemic, Buck Global LLC in St. Louis. one of the firm’s strengths that keeps it atop the industry. trillion from $7.94 trillion in 2019, ac- which stymied new asset flows through- SEE DC MANAGERS ON PAGE 18 SOUND BITE Divergent paths for U.S., Japan equities LASALLE INVESTMENT MANAGEMENT’S JACQUES U.S. and Japanese equities GORDON: ‘A lot of tenants are doing anything have diverged since the onset they can to cut losses and sublet office space.’ of the pandemic, with U.S. Page 3 stocks far outpacing Japan. PIonline.com/riskwatch 2 | July 26, 2021 Pensions & Investments

IN THIS ISSUE ESG VOLUME 49, NUMBER 15 Next climate summit inspires early movers

Some asset owners, managers CHANGE AGENTS: Jessica Fries thinks

and regulators want to get that while pension Aston Trevor a jump on achieving net-zero funds are exposed to risks because of climate change, they By HAZEL BRADFORD are ‘also powerfully positioned to As expectations build for the pivotal influence a United Nations climate-change conference sustainable this fall, many asset owners, managers and outcome.’ regulators are not waiting to take action. The goal of what is known as the COP26 summit beginning Oct. 31 in Glasgow, Scot- 20 land, is to accelerate action toward the goals of the Paris Agreement and the U.N.’s cli- Courts mate-change framework. Koch Industries agreed to pay $4 million Before then, many pension fund officials to settle a lawsuit accusing the company and regulators are taking matters into their of allowing the record keeper of its defined own hands, stepping up commitments to contribution plans to charge excessive net-zero emission goals and to enhanced fees. Page 19 disclosure recommended by the Task Force on Climate-related Financial Disclosures. Defined contribution One ambitious move came July 14 when the European Commission unveiled a The U.K. Department for Work and Pensions sweeping package of legislative proposals to holding their fiduciary duty to provide among other actions. The 14 signatories to is seeking views from trustees and plan reduce net greenhouse gas emissions by at long-term, risk-adjusted returns to their the A4S Pension Fund Chair Net Zero State- sponsors on its draft collective defined least 55% by 2030. The “Fit for 55” package is members. ment of Support pledge coordinated by the contribution plan regulation. Page 19 part of the European Green Deal aimed at That was the motivation for pension fund Accounting for Sustainability Project at the making it the first climate-neutral continent chairmen overseeing a collective £267.9 bil- Prince of Wales’s Charitable Foundation in- Pension funds by 2050. The ambitious plan calls for new lion ($372.2 billion) in pension assets in the clude the chairs of HSBC Bank Pension A CalPERS-backed bill that would have kept policies on climate, energy, land use, trans- U.K. and Australia on July 14 to commit to Trust U.K. Ltd., Barclays U.K. Retirement certain details related to its private debt portation and taxation to achieve 55% lower net-zero emissions targets and to align their Fund, Unilever U.K. Pension Fund, Tesco investments secret failed to pass out of emissions than 1990 levels. investment portfolios with a path toward a PLC Pension Scheme, BT Pension Scheme, committee. Page 6 For pension fund officials, it’s about up- temperature increase of 1.5 degrees Celsius, SEE CLIMATE ON PAGE 28

People Defined Contribution Angela Miller-May was named chief investment officer of the Illinois Municipal Retirement Fund, one of several leadership U.K. push for value could spark opportunity changes in July. Page 20 Master trusts likely participants could be getting bet- Special report: DC money ter value from another provider,

managers and retirement plan to gain as DC sponsors which could include a multiem- Jon Rowley advisers review plan providers ployer plan, known in the U.K. as a Retirement plan advisers are delving into master trust. the pooled employer plan market as 3(38) Meanwhile, plan sponsors that investment managers. Page 14 By PAULINA PIELICHATA have already outsourced their DC arrangements to master trusts over Washington U.K. defined contribution plan the years are looking at, and in sponsors are reviewing multiem- some cases already are, switching Leaders of a House committee’s Racial ployer plan providers as the U.K. providers because they are finding Equity Initiative would like retirement government continues to push em- that other master trusts can supply measures included in the infrastructure ployers and trustees to examine if a more attractive offering. package negotiations. Page 4 plan participants are receiving Consultants said that first moves good value for their investments. from one multiemployer plan to an- Departments The U.K. government said June other are underway as plan spon- At deadline ��������������������28 Frontlines ������������������������8 21 it wants to see further consolida- sors want to improve investment Changes ahead ��������������31 Hirings ��������������������������22 tion in the DC market to improve performance and improve partici- Classified ����������������������24 News roundup ����������������27 retirement outcomes, which sourc- pant engagement. Corrections ����������������������4 Other views ��������������������10 es said could push more employers Companies also want to reflect Editorial ������������������������10 Private fund roundup ������25 ESG roundup �����������������12 RFPs �����������������������������24 to consider outsourcing to a master their own sustainable investment trust. Sources said that trustees of strategies, including carbon emis- Entire contents ©2021 Crain Communications Inc. All rights larger plans also might be required sion reduction pledges, in the poli- reserved. Pensions & Investments (ISSN 1050-4974) is published to review investment providers in cies of their master trust providers. biweekly by Crain Communications Inc., 150 N. Michigan Ave., Chi- cago, Ill. 60601-7593. Periodicals postage paid at Chicago, Ill. and order to see if outsourcing could “We are doing one transfer at the at additional mailing offices. Postmaster: Send address changes help improve outcomes for plan moment from one well-known to Pensions & Investments, Circulation Dept., 1155 Gratiot Avenue, participants. Such reviews could master trust to another,” said Mark Detroit, Mich. 48207-2912. $16 per issue; $350 per year in the U.S.; $375 per year in Canada; all other countries $475. ‘‘Canadian encompass plans with assets of up Futcher, partner and head of DC at Post International Publications Mail Product (Canadian Distribution) to £5 billion ($6.9 billion), they said. consultant Barnett Waddingham Sales Agreement No. 0293539’’ GST #136760444. Printed in U.S.A. Trustees of smaller plans with LLP in Amersham, England, adding less than £100 million are already that the provider’s investment STARTING FRESH: Mark Futcher said one plan sponsor’s recent CRAIN COMMUNICATIONS INC required to determine if their plan SEE MASTER TRUST ON PAGE 30 change to a new master trust was due to performance. Keith E. Crain, Chairman Mary Kay Crain, Vice Chairman KC Crain, CEO Staffing Chris Crain, Senior Executive Vice President Lexie Crain Armstrong, Secretary P&I announces reporting changes in London, Washington Bob Recchia, Chief Financial Officer G.D. Crain Jr., Founder (1885-1973) Pensions & Investments senior reporter Ha- contribution plans. Mrs. G.D. Crain Jr., Chairman (1911-1996) zel Bradford, who covered Washington, has re- While in London, Ms. Bradford will continue Published every other Monday by Crain Communications Inc. located to work in the newspaper’s London to focus on environmental, social and gover- Boston: 101 Federal St., Suite 1615A, 02110; Chicago: 150 N. Michigan Ave., 19th Floor, bureau. nance in institutional investing, as well as re- 60601; London: 11 Ironmonger Lane, EC2V 8EY; El Segundo, Calif.: 400 Continental Blvd., 6th In addition, reporter Brian Croce, based in port on European regulatory issues, plan spon- Floor, 90245-5074; New York: 685 Third Ave., 10017; San Francisco: 71 Stevenson St., Suite 400, 94105; Washington D.C.: 601 13th St. NW, Suite 800 South, 20005. Washington, has been promoted to senior re- sors and money managers. Address all subscription correspondence to Pensions & Investments, 1155 Gratiot Ave., Detroit, porter in the Washington bureau, where he Ms. Bradford, who joined the newspaper in Mich. 48207-2912 or email [email protected]. will continue to cover a broad range of legisla- 2011, can be reached at [email protected]. Member of Business Publications Audit of Circulation tive and regulatory developments, including Mr. Croce joined P&I in 2018 and can be reached www.pionline.com Hazel Bradford Brian Croce the intersection of regulations and defined at [email protected]. n Pensions & Investments July 26, 2021 | 3

Andrew Collings Real Estate Asset Servicing Sorting properties as State Street deal with Mercatus to favored, unfavored allow for whole could hide nuances view of portfolios

By ARLEEN JACOBIUS vide between favored and unfavored By CHRISTINE WILLIAMSON sector was missing the best parts of Real estate managers and investors the unfavored sectors and glossing State Street Corp.’s pending addition of could be missing investment risks and over the  aws in the favored sectors,” private-market strategies to its digital opportunities by sorting their portfolios Mr. Gordon said. front-to-back-of ce platform for asset into favored sectors — industrial and Real estate took a hit during the pan- owners and money managers may spark a suburban apartments — and unfavored demic with transactions volume falling small element of competition in the nan- sectors — of ce and retail — as a result 64% year over year in the second quar- cial industry’s narrow asset-servicing niche. of the pandemic’s impact on those ter alone and pricing became challeng- The Boston-based bank agreed to ac- property types, a report said. ing, according to Real Capital Analytics quire Mercatus Inc., a front- and middle-of- But the devil is in the details. When data. In response, many investors repo- ce and data-management provider that the pandemic hit, asset owners and sitioned their real estate portfolios hop- focuses on alterna- managers quickly reclassi ed their ing to capture returns. tive investments, in portfolios based on the asset types, po- At the same time, values across many a deal expected to tentially missing out on the nuances of property types were propped up during close in September. speci c situations and deals, said the pandemic by long-term leases in State Street Jacques Gordon, Chicago-based global some sectors, which could lead to chal- spokesman Edward head of research and strategy and man- lenges in investors’ real estate portfoli- Patterson said - aging editor of LaSalle Investment os when the leases come up for renew- nancial terms of the Management’s midyear report. al, according to the midyear report. In deal are not being “That was the story we were nding some property types, conditions have BE CAREFUL: Jacques Gordon cited re-sorting as a way to miss the disclosed. in our own experience; the great di- SEE REAL ESTATE ON PAGE 30 best parts of the unfavored and mask aws in the favored sectors. In conjunction with the acquisition COMPLEMENTARY: of San Mateo, Ca- Spiros Giannaros said Governance lif.-based Mercatus, Mercatus ‘plugs the State Street said in a gap’ on private market July 21 news release investments. CalPERS nds proxy success it plans to launch State Street Alpha for Private Markets that would allow a range of investors, including by employing team approach asset owners and investment managers, to “manage the entire lifecycle of their infra- By ARLEEN JACOBIUS push by an investor group led by structure, private equity, real estate, private $473.4 billion California Public Em- debt and funds-of-funds investments Asset owners are collaborating ployees’ Retirement System, Sacra- through a fully integrated, digital front-to- on corporate governance issues, mento, the $306.7 billion California back, single platform.” giving them clout and the ability to State Teachers’ Retirement System, State Street said in the release that its make changes in the public compa- West Sacramento, the $254.8 billion private markets alpha solution would also nies in their portfolios. New York State Common Retire- provide cloud-based asset management, CalPERS of cials are seeing a ment Fund, Albany, and hedge fund deal management, ESG, investor relations noticeable increase in asset own- Engine No. 1 that replaced two di- and portfolio monitoring, “allowing clients ers supporting each other on cer- rectors on Exxon Mobil Corp.’s to make faster decisions as well as improve tain proxy issues such as climate board of directors. client service levels with better responsive- change as well as diversity, equity Another successful joint effort ness and transparency.” and inclusion. Some of these ini- involved a shareholder campaign at After acquiring Charles River Develop- tiatives are starting to pass and Toshiba Corp., Tokyo. Earlier this ment, which provides front- and middle-of- companies are beginning to take year, CalPERS, CalSTRS and the ce software technology, in 2018, State WORKING TOGETHER: Simiso Nzima hopes the cooperation among investors notice, they say. Florida State Board of Administra- Street combined Charles River’s public is a ‘watershed moment’ for effecting change at public companies. One of the biggest wins was a big SEE PROXY ON PAGE 26 SEE MERCATUS ON PAGE 31

High yield cooling off? July has seen yields increase and spreads widen, raising concerns about economic growth. The Bloomberg Barclays U.S. Corporate High Yield index’s yield-to-worst rose above 4% in mid-July and was at 3.89% as of July 22, compared with 3.53%, an all-time low, earlier in the month. Nonetheless, the asset class has had a remarkable run since the start of 2020, but investors may feel their returns pressured if spreads continue to widen.

Low yields, narrow spreads: Even with the Strong issuance: Despite a major Broad-based issuance: Coming due: About 12% to 14% recent uptick, yields remain at ultralow levels by issuance slowdown in March 2020, last Among sectors, issuance since the of the high-yield universe is coming historical standards, particularly for lower-rated year’s total was still more than $440 start of 2020 ranged from about $18 due annually from 2025 to 2029, high-yield bonds. Option-adjusted spreads range from billion. This year has gotten off to an billion to more than $190 billion. vs. less than 1% over the past 213 basis points to 506 basis points, about 180 even better start, with higher totals for Consumer discretionary, several years, creating uncertainty basis points to 485 basis points narrower since the the rst six months of the year. communications and nancials each about the condition of the market. end of 2019. have issued more than $100 billion. Quarterly U.S. high-yield issuance High-yield maturity Yield-to-worst by rating Issuance volume Number of issuances 2020 and 2021* issuance by year (billions) 30% (billions; left axis) (right axis) by sector (billions) $210 $180 270 28% BB yield-to-worst 26% $180 B yield-to-worst $160 240 24% Consumer discretionary: CCC yield-to-worst $140 210 $190.2 (24.7% of total) 22% $150 20% $120 180 Communications: $112.6 (14.6%) 18% $120 16% $100 150 14% Financials: $106.1 (13.8%) $80 120 $90 12% Energy: $92.6 (12.0%) 10% $60 90 $60 8% Materials: $66.6 (8.6%) 6% $40 60 Health care: $54.9 (7.1%) 4% Technology: $52.9 (6.9%) $30 $20 30 2% Industrials: $47.0 (6.1%) 0% $0 0 Consumer staples: $29.2 (3.8%) $0 ’212020201920182017201620152014201320122011201020092008200720062005 202120202019201820172016 Utilities: $18.4 (2.4%) ’29’28’27’26’25’24’23’22’21’20’19’18’17 *Through July 16; Sources: Bloomberg LP, Fitch Ratings Inc. Compiled and designed by Larry Rothman and Gregg A. Runburg 4 | July 26, 2021 Pensions & Investments

Washington Lawmakers want retirement steps in infrastructure deal Actions sought include for people who contribute to a re- “Together, Congress and the ad- ment that, “With Congress poised bipartisan senators announced tirement plan or individual retire- ministration can meet this historic to make historic investments in they’ve reached a deal that includes expanding coverage ment account and make under an moment by wielding federal policy our nation’s physical and human $579 billion in new spending for IRS-designated income threshold to mitigate adverse experiences infrastructure, we must ensure “core infrastructure” — to upgrade and creating auto IRAs — refundable, and create automatic and outcomes associated with these bold new policies are inclu- the nation’s roads, bridges, water, individual retirement accounts for generations of systemic discrimi- sive and equitable.” broadband and rail systems, among By BRIAN CROCE workers, according to a memo writ- nation and racism,” the lawmakers The Racial Equity Initiative was other improvements. ten by the Racial Equity Initiative said in the memo, which included formed in March to lead the com- A procedural motion to move The leaders of the House Ways co-chairs, Reps. Terri A. Sewell, a host of recommendations on a mittee’s work on addressing the forward with a bipartisan infra- and Means Committee’s Racial Eq- D-Ala., Jimmy Gomez, D-Calif., and variety of issues. “These vehicles role of racism and other forms of structure deal failed July 21 in the uity Initiative would like several re- Steven Horsford, D-Nev., to Ways represent rare opportunities to discrimination in perpetuating Senate, but a group of Republicans tirement initiatives to be included and Means Committee Chairman advocate for restorative and trans- health and economic inequalities and Democrats are still optimistic in the ongoing infrastructure pack- Richard Neal, D-Mass. formative legislation and equally in the U.S. the package will ultimately pass. age negotiations. The lawmakers would also like intentional implementation by the Lawmakers are currently negoti- Senators voted 49-51 on a mo- Congress should expand cover- the package to improve Social Se- executive branch.” ating two infrastructure packages tion to begin debate on the propos- age in employer retirement plans, curity benefits for caregivers and Mr. Neal welcomed the recom- of varying scopes and sizes. In June, al, but 60 votes were needed. All 50 make the saver’s credit — a credit families. mendations and said in a state- the White House and a group of 10 Republicans voted against the mo- tion as did Senate Majority Leader Chuck Schumer, D-N.Y., who did so to be able to reintroduce the motion in the future. Republicans voted against the motion because mem- bers have said the actual bill is still being written. “We made significant progress and are close to a final agreement,” Managing Pension Risk & Liabilities a group of 22 senators — 12 Demo- crats and 10 Republicans — said in a statement after the vote. “We will October 12-14, Virtual & Live In-Person continue working hard to ensure we get this critical legislation right — and are optimistic that we will The past year has seen funding ratios increase for most plans in line with a generally positive equity market. finalize, and be prepared to ad- However, with inflation concerns and an overvalued equity market, how can these gains be solidified? vance, this historic bipartisan pro- posal to strengthen America’s in- We’re excited to welcome back attendees in-person in Dallas, Texas on October 12 for a full day of exclusive, frastructure and create good-paying jobs in the coming days.” educational content. A two-day virtual series will follow for those who prefer to attend online. Space for the Late last week, the bipartisan in-person event is limited. Please register early. group agreed to pay for the package in part by delaying a costly Trump- era Medicare regulation, but they A special thank you to our 2021 Advisory Board don’t expect to announce details until at least July 26. Any deal could still face resis- tance from Democrats on both sides of the Capitol, making the prospects uncertain as the biparti- san group works out the final sticking points. Sen. Tom Carper of Delaware, a typically reliable Democratic vote and ally of President Joe Biden, sig- Sanjay Chawla Rochelle Dorn-Hayes Kurt Hoddinott naled July 22 that he would object if FM Global Ford Motor Company General Mills negotiators didn’t include more funding for water and sanitation. Other Democrats in the 50-50 Sen- ate have raised concerns about funding for their own priorities, like high-speed rail. The Medicare rule eliminates rebates drug companies give bene- fit managers in Medicare Part D Jonathan Glidden Jason Morton Celeste Reese and was aimed at reducing out-of- Delta Alcoa Celanese Corporation pocket costs for patients outside Medicare. The Congressional Bud- get Office estimated that repealing the rule would cut federal Medi- care spending by about $177 billion over a decade. “We had an agreement on 99% when we walked out yesterday af- ternoon,” Sen. Joe Manchin of West Dekia Scott Matthew Stroud Charles Van Vleet Virginia, one of 22 senators negoti- Southern Company Marsh & McLennan Textron ating the infrastructure deal, said in an interview. “The pay-fors are pretty much lined up.” n COMPLIMENTARY REGISTRATION AT PIONLINE.COM/MPRL2021* Bloomberg contributed to this story. PARTNER: LEAD SPONSORS: CO-SPONSORS: CORRECTIONS & CLARIFICATIONS INVESTMENT MANAGEMENT ■ Partners Capital Investment Questions? Please contact Kathleen Stevens [email protected] | 843.666.9849 or Geraldine O’Hara [email protected] | 212.210.0196 Group LLC’s name was incorrect in the page 4 story “Hedge fund *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 Managing Pension Risk & Liabilities is not created, written or produced investment jumps in part on by the editors of Pensions & Investments and does not represent the views or opinions of the publication or its parent company, Crain Communications Inc. prospect of inflation” in the July 12 issue. 7GL[EF6IXMVIQIRX 4PER7IVZMGIW-RG

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21pi0055.pdf RunDate: 07/26/21 Full Page Color: 4/C 6 | July 26, 2021 Pensions & Investments

Pension Funds CalPERS fails in effort to keep private debt documents secret

By ARLEEN JACOBIUS according to a July 11 analysis of so the staff could make private debt the amended version of the bill by investments and manage them in- A CalPERS-backed state assem- the Senate Judiciary Committee. house. CalPERS needs the exemp- bly bill that would have kept certain Officials at the $473.4 billion Cal- tion to be competitive with other information and documents related ifornia Public Employees’ Retire- private debt market participants, IN-HOUSE: CalPERS sought the legislation so the investments could be managed internally. to its private debt investments se- ment System, Sacramento, are eval- interim CIO Dan Bienvenue previ- cret failed to pass the state Senate uating their next steps, which could ously told Pensions & Investments. Pension fund officials will con- Opponents of the bill, which in- Judiciary Committee, killing the bill. include making what would be a By making such information tinue to invest in private debt cluded retiree organizations, prin- The bill would have exempted third attempt to get a bill passed, public, CalPERS officials believe it through external managers, Danny cipally the Retired Public Employ- certain private lending-related CalPERS spokeswoman Megan would be difficult to attract “worth- Brown, chief of the legislative af- ees Association; certain documents and information from White said in an email. while private debt borrowers,” the fairs division, told the CalPERS environmental groups; the City of California’s public disclosure laws, CalPERS wanted the legislation analysis said. board July 14. Pasadena; and the Howard Jarvis Taxpayers Association, argued the bill would not provide adequate public information, according to the Senate Judiciary Committee analy- sis. California’s public disclosure law already exempts “alternative investments,” meaning investments in private equity funds, venture capital funds, hedge funds or abso- lute-return funds, including propri- etary due diligence materials and Emerging Markets Virtual Series investment agreements, from being made public, the analysis said. The Retired Public Employees Association unsuccessfully asked September 28-30, 2021 that the bill be amended to make the loan agreements public. CalP- We’re excited to announce the agenda for P&I’s Emerging Markets Virtual ERS would not accept that amend- ment, Mr. Brown said July 14, which Series, which will provide a unique opportunity to hear directly from peers was the third day of the board’s vir- and thought leaders on how to get the most out of allocation to this space tual off-site meeting. while avoiding unnecessary risks. The staff estimates that external management of private debt would Through panel discussions, quickfire idea sharing, workshops and networking, cost $150 million in management and incentive fees for each $1 bil- attendees will have the opportunity to hear from allocators on topics such as: lion invested with an external man- ager over a five-year period, Ms. • How to avoid currency, geopolitical and regulatory risks White said. • Cyclical stories and theme that will influence how this space evolves But for CalPERS to internally make and manage private debt in- • What asset classes and strategies present the best opportunities vestments, pension fund officials would have to “build out a team,” • How China influences EM investing and opportunities outside of it which also would carry a cost, Mr. Bienvenue said. CalPERS board Vice President Thank You to our 2021 Advisory Board Theresa Taylor on July 14 ques- tioned whether CalPERS could cre- ate an asset allocation that would meet its expected 7% rate of return without the ability to invest in pri- vate debt in-house.

Update on CIO search Separately, CalPERS’ new execu- Alex Ambroz Jason Chang Cecelia Chen Esmeralda del Bosque Kevin A. Edwards tive search firm, Dore Partnership, Cleveland Clinic Lockheed Martin Seattle City ERS LACERA Hartford Healthcare does not expect the pension fund to Investment O‘ce Investment Mngmt. Co. have a new CIO in place until March, according to a presentation to the board July 14. CEO Marcie Frost expects to start the search process at the end of July or early August, conduct in- terviews in late summer and the fall, with final selection of a CIO in the fall or early next year, she said Scott Grimberg Grace Moore Han Pham Fawad Razzaque Tajeshwar Sidhu at the virtual meeting July 14. CalPERS Georgia Tech Foundation San Francisco Employees Alaska Permanent Fund Healthcare of Ontario Filling out the target timeline, Pension Plan Crawford Torell, a principal at Dore Partnership, said Dore executives COMPLIMENTARY REGISTRATION AT PIONLINE.COM/EM2021* expect the first round of candidate interviews by a subcommittee in SPONSORS: September with a selection in early to mid-December. “We only put early to mid-March as the candidate joining CalPERS as we know from experience that there are non-competition periods that can range from one to six Questions? Please contact Kathleen Stevens [email protected] | 843.666.9849 or Geraldine O’Hara [email protected] | 212.210.0196 months,” Ms. Torell said. The timeline means that a new *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 Emerging Markets Virtual Series is not created, written or produced CIO would not be in place until four by the editors of Pensions & Investments and does not represent the views or opinions of the publication or its parent company, Crain Communications Inc. months after the board is sched- uled to select a new asset allocation. SEE CalPERS ON PAGE 25 4GVKTGOGPVKUEJCPIKPI 5QKUVJGYC[YGRNCPHQTKV

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21pi0055.pdf RunDate: 07/26/21 Full Page Color: 4/C 8 | July 26, 2021 Pensions & Investments FRONTLINES

CHANGES AHEAD ‘Future World of Work’ imagines firm culture post-virus The working lives of money managers in Alejo Miranda/Shutterstock the U.K. might look very different now that COVID-19 restrictions have been lifted. The U.K.’s Investment Association, which represents money managers operating in the U.K. with £8.5 trillion ($11.8 trillion) in assets WELCOME TO THE CLUB under management, checked in with industry experts on what investment managers’ working lives might look like for its Future CalSTRS’ assets World of Work project. A series of case studies and thought leadership pieces take a look at some aspects top $300 billion of investment managers’ working lives that have changed and could evolve further due to for the first time the pandemic, such as the need for offices, work patterns and practices as well as CalSTRS’ portfolio has crossed the behaviors and skills. $300 billion mark for the first time, The project features, for instance, the U.K. despite a rugged 18-month period Financial Conduct Authority’s take on the that included shutdowns around the need for businesses to embrace hybrid globe, market volatility, virtual board models that include both remote and meetings and investment staff in-office work and balance technical skills as mostly working from home. well as staff values and habits. As of May 31, the California State The FCA is expecting firms to consider Teachers’ Retirement System, West whether management teams are diverse and to determine ... how they combine the best of remote work in the future. Sacramento, had $306.7 billion, and create an environment in which people of all aspects of both the physical and virtual office Pauline Hawkes-Bunyan, a director at the staff expects to end its June 30 fiscal backgrounds can thrive. to create a working environment that works Investment Association, said in an emailed year with an estimated $308.3 Olivia Fahy, head of culture at The Consult- for both the business and all its employees.” comment: “This is not designed to be billion portfolio. ing Consortium Ltd., which advises firms on In another piece, Samantha Alexander, prescriptive, but rather to stimulate and “The past fiscal year had spectacu- corporate culture, noted in a thought U.K. chief operating officer at DWS Group, support internal debate to help each firm lar investment returns pushed by leadership piece that younger generations of described her firm’s experience with remote reach the right approach for their employees unprecedented federal government employees tend to be more demanding of work during the pandemic, noting that a large and the clients and customers they serve.” stimulus, both fiscal and monetary,” their employers and organizations “will need number of DWS staff would like some degree — PAULINA PIELICHATA said CIO Christopher J. Ailman in a written statement for Pensions & Investments. “They not only softened COMMITTED TO TRANSPARENCY the impact of a global pandemic, they pushed assets to record high values.” But as Mr. Ailman has said often IMRF 1 of 4 funds to win financial ‘Triple Crown’ at board meetings, CalSTRS is a long-term investor with a diversi- Illinois Municipal Retirement that makes it possible for absolutely right is really, really important and fied portfolio. Fund, Oak Brook, is one of four investors and members of the the effort that it takes to do that really is a CalSTRS’ portfolio is broadly U.S. public pension plans that public to be able to look at a heavy, heavy lift,” Mr. Collins said, “and what diversified and its risk-mitigating won the Government Finance document (financial statements, we have tried to do is really excel at strategies, which accounted for 7.8% Officers Association’s “Triple etc.) issued by public bodies like everything across the board.” of its portfolio as of April 30, Crown” award. IMRF, make them understand- Of the 292 U.S. and Canada government “played a significant role in The award recognizes able, make them consistent.” organizations awarded the Triple Crown for weathering the public equity market downturn at the beginning government organizations that The oldest of the three awards, fiscal year 2019, the $53.1 billion Illinois of the COVID-19 pandemic,” said have received the association’s the Certificate of Achievement for Municipal Retirement Fund is one of only spokesman Thomas Lawrence. Certificate of Achievement for Excellence in Financial Reporting four public pension plans. CalSTRS’ risk-mitigating strate- Excellence in Financial Reporting Award, was created in 1945 and The others are the $306.7 billion AWARDED: IMRF’s gies was its second-best performing Award, the Distinguished Budget Brian Collins awards organizations for going California State Teachers’ Retirement asset class in fiscal year 2020 with a Presentation Award and the beyond the minimum require- System, West Sacramento; the $137.9 net 7.8% return, even though it Popular Annual Financial Reporting Award. ments of generally accepted accounting billion New York State Teachers’ Retirement underperformed its custom bench- “GFOA is an organization that we belong principles and “evidence the spirit of System, Albany; and the $18.3 billion Ohio mark return of 10.3%. CalSTRS’ total to, and it really sets guidelines for the whole transparency and full disclosure,” according Police & Fire Pension Fund, Columbus. portfolio return was a net 3.9% for industry in terms of financial reporting,” said to the GFOA’s website. The other two awards IMRF offers its financial reports on its the fiscal year ended June 30, 2020, above its 3.7% benchmark. Brian Collins, IMRF’s executive director, in a have similar aims. website. — ARLEEN JACOBIUS telephone interview. “That’s the institution “Being able to get (financial reporting) — ROB KOZLOWSKI

Celeste Sloman/Redux GOING GREEN against a record number of director nominees at those companies: 387 individual directors at 72 compa- New York Common logs 100% success nies, including Chevron Corp., Exxon Mobil Corp., Berkshire Hathaway Inc. and Caterpillar Inc. with its climate shareholder proposals The pension fund updated its proxy voting guidelines in 2020 New York State Common Retirement Inc., medical-supply company McKesson with criteria on how it reviews Fund, Albany, pitched a perfect game this Corp., commercial real estate company companies’ preparedness for the proxy season with its climate-related Realty Income Corp., and Advance Auto transition to a low-carbon econo- shareholder proposals, reaching agreements Parts Inc. — agreed to adopt the best my, including when it will general- with all seven portfolio companies with practice standards of the Science Based ly vote against director nominees which it filed. Targets initiative for reducing greenhouse at companies not managing State Comptroller Thomas P. DiNapoli, gas emissions. climate risks. trustee of the $254.8 billion pension fund, In other agreements, steel-maker Since 2007, the pension fund said in a news release this month that it was Cleveland-Cliffs Inc. set greenhouse gas has filed more than 150 cli- the first proxy season in which the fund emission targets and committed to co-fund- mate-related shareholder resolu- achieved agreements on all such proposals. ing an environmentally friendly hydrogen tions and reached 75 agreements “A low-carbon economy is becoming a project, while chemical-maker Albemarle with portfolio companies to reality with more and more companies Corp. committed to adopting emission VICTORY: Thomas P. DiNapoli’s office reached agreements analyze climate risks, set reduction recognizing the need to adapt their busi- targets, and water treatment company on all of its climate-related proposals this proxy season. targets for greenhouse gas nesses and address the financial risks posed Pentair PLC agreed to set targets for emissions, set renewable energy by climate change,” said Mr. DiNapoli, greenhouse gas emissions and clean energy. addressing climate risks were not so lucky. and energy efficiency goals and more. Four of the companies — Domino’s Pizza Directors of companies not perceived as Mr. DiNapoli said the pension fund voted — HAZEL BRADFORD CONFERENCES Retirement Income Virtual Series September 14-16, 2021

Register today for P&I’s Retirement Income Virtual Series and hear directly from our faculty of plan sponsors and advisers who will explore, share tips and debate the current strategies of how to plan for a lifetime of guaranteed income during retirement and what factors may further impact savings. 2021 Planned Agenda Topics Include: • Update and discussion on SECURE 2.0, Crypto investing and PE investing • ERISA excess fee litigation: What you should be doing and documenting to prepare for a possible audit • Financial Wellness: Enhanced messaging and budgeting 101 • Adding Retirement Tiers to your plan • Cybersecurity • A time and place for Annuities

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*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 Retirement Income Virtual Series 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.

Retiremnet Income.pdf RunDate: 07/26/21 Full Page Color: 4/C 10 | July 26, 2021 Pensions & Investments OPINION

Christopher J. Battaglia President and publisher, Pensions & Investments Joshua Suguitan Executive assistant to the publisher, special projects associate [email protected]

EDITORIAL

Julie Tatge Executive editor (312) 649-5442 Kevin Olsen Managing editor (312) 649-5223 David Schepp News editor Sophie Baker International news editor Meaghan Offerman Associate editor [email protected] Colette Jordan Chief content editor Patrick Roth Web producer John Frost Audience engagement editor [email protected] Trilbe Wynne Editorial assistant

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

ART Gregg A. Runburg Art director Roger Schillerstrom Editorial cartoonist

DATA/RESEARCH Aaron M. Cunningham Director of research and analytics Larry Rothman Data editor [email protected] Anthony Scuderi Directory manager Valerie Ge Research analyst EDITORIAL

SALES & MARKETING Nikki Pirrello Chief operating officer Julie Parten Head of sales JULIE.PARTEN@ Active managers earn their pay at Japan’s GPIF PIONLINE.COM Lauren DeRiggi Digital specialist/account executive [email protected] he most recent results from GPIF’s high-profile experiment To be sure, the almost across the board outperformance of GPIF’s with fee payouts should be reassuring for active money more than 20 overseas bond managers for the most recent year, REGIONAL SALES MANAGERS Anna Koules New York managers, at least those that can somewhat afford to live after almost equally across the board underperformance the year Ed O’Farrell Midwest & West ED.OFARRELL@ on the edge. before, points to macro influences for that about-face in perfor- PIONLINE.COM Some three years ago, the ¥186.2 trillion ($1.7 trillion) mance. In this case, that influence was the intersection of GPIF’s Steve Middleton EMEA +44-(0)77-1012-8464 Government Pension Investment Fund moved to achieve a better decision to boost its asset allocation target for foreign bonds to 25% Hideo Nakayama Asia (Tokyo) +81-3-3479-6131; T [email protected] T. NE.JP alignment of interests with its external managers, instituting higher from 15% starting April 1, 2020, at the expense of domestic bonds, Eduardo de Alcantara Machado Sao Paulo, Brazil +55-11-3167-0821; [email protected] performance fees but only passive payouts for managers that fail to and the market impact of the pandemic. top their benchmarks. But while fortune favored active managers under these market CONFERENCES/MARKETING Usha James Group director of conferences The move, GPIF executives insisted, was designed to spawn more conditions — with several garnering tens of millions in added fees [email protected] alpha rather than drive down fees. GPIF’s new approach underscores — GPIF’s feast-or-famine payout structure will continue to loom large Kimberly Jackson Director of conference sales a necessary focus on performance as pension funds confront for managers. The previous year’s big outperformer, Walter Scott & Diane Pastore Director of conference programming multiple challenges. Partners Ltd., underperformed its global equity benchmark in the Joshua Scott Director of conference programming For the fiscal year ended March 31, marked by pandemic-fueled latest fiscal year and saw its one-year fee total fall by $35 million to Kathleen Stevens Investor relations director volatility, GPIF’s annual report showed managers were able to share $1.8 million. Gerry O’Hara Investor relations manager [email protected] in the portfolio’s stellar 25% gain for the year: They collected a record Moving forward, managers might have to consider focusing more Michelle DeMarco Director of relationship ¥61 billion in fees, nearly double the ¥31.9 billion paid in the on other potential business segments with steadier revenue marketing Assel Chanlatte Conference marketing manager previous fiscal year. Indeed, more than 80% of the fund’s 50-some streams, such as wealth management or serving retail investors, as Mirjam Guldemond Conference manager, active managers outperformed their benchmarks. The approach performance-focused institutional flows become ever-more volatile. WorldPensionSummit +31-6-2333-2464 But as last year shows, the rewards are there for savvy managers Kristal Santos Client services project manager could serve as a model for other asset owners, especially the largest Ashley Perrucci Associate manager, client ones that can throw their weight around in fee negotiations. at the happy confluence of skill and market trends. n partnerships Rachel Lopez Conference administrative assistant

CUSTOM CONTENT/CLIENT SOLUTIONS Gauri Goyal Director of content solutions Corina Lewis Client solutions senior program OTHER VIEWS NIGEL SILLIS manager David Joseph Research analyst [email protected] Tetyana Saucedo Digital campaign manager Gamification of retail investing could affect institutions Deanna Speziale Senior marketing associate [email protected] n the internet age, network effects — rise, a central bank intervening with yield- SUBSCRIPTIONS/SITE LICENSES Nigel Sillis is a client curve control to flatten its risk-free curve Elayne Glick Director of audience marketing where an increased number of users can portfolio manager at risk and acquisition could also be thought of as similarly disrup- enhance interest in a product — are and investment manage- Ed Gorman Director, EMEA/international site driving a new wave of structural shifts tive in terms of network effects. +44-(0)20-3823-9891 ment firm Cardano Group licensing across markets, the economy and society Whether the disruption is incidental Erin Smith Sales manager, site licenses in London. Iat large. From the power of viral marketing to (GameStop) or premeditated (central banks), REPRINTS the spread of fake news, network effects both set conditions that are likely to have Laura Picariello Sales manager influence our interactions with one another permanent effects upon the investment in ways that could only be imagined just a landscape, delivering critical learnings for ADVERTISING PRODUCTION Robert T. Hedrick Media services manager few years ago. investors today — principally, that investors 312-649-7836; [email protected] Earlier this year we saw how such effects cannot assume that all market participants Subscription information - single copy can also influence investment markets as share their objectives or play the game sales: 877-812-1586 retail investors piled into the GameStop Corp. In many ways, the GameStop episode was according to traditional rules.

TO CONTACT A P&I STAFFER short squeeze — a shift that has potentially just a concentrated example of how things By extension, long-term investors will Unless otherwise noted above, email us at profound implications for market volatility, change when new players enter the market increasingly find it more difficult to invest [email protected] or find financial stability and investor behavior over and disrupt the status quo. There are large- solely upon the basis of fundamentals. Money phone numbers at pionline.com/staff. the long term. scale examples, too. As sovereign bond yields creation, credit conditions and trends derived Pensions & Investments July 26, 2021 | 11 OPINION

OTHER VIEWS ALEX BOTTE Factor analysis can hone institutional investors’ evaluations of managers icking the right investment explained by the manager’s factor Exhibit 1 Example of a demo portfolio’s factor exposures managers is a central exposures. This component, known challenge for any institu- as the residual, represents the (or factor sensitivities) tional investment program. unique, idiosyncratic risk the For the period Dec. 20, 2011, though May 27, 2021. The selection process can manager delivered above and Pbe complex, encompassing evaluat- beyond the factors used in the ing everything from track records to analysis. This risk may or may not Current portfolio operational and personnel practices. have been compensated over the Criteria widely used to evaluate manager’s history, and factor Equity 0.63 managers are known as the P’s: analysis will indicate whether the Interest rates 0.38 people, process, parent, partnership, residual return has been positive or Credit 0.02 negative. A positive residual return is Commodities 0.09 philosophy, price, and/or perfor- Alex Botte is a vice often referred to as “alpha,” or true mance. While some are expressed president on the Emerging markets 0.07 manager skill, however it could also numerically, most are qualitative in client portfolio Foreign currency 0.21 be explained by something else nature. Much of the information on management team at Local in ation 0.01 topics such as culture, adherence to (such as factors not used in the Two Sigma Advisers Local equity 0.28 strategy, risk management and analysis, differences in factor LLC and Two Sigma’s Equity short volatility -0.04 definitions, etc.). alignment of interests is typically investment and Accessing this quantitative risk Fixed income carry 0.02 gathered via questionnaires and portfolio analytics analysis can enhance qualitative Trend following 0.06 manager interviews — in other platform Venn. She is assessments because it arms the Low risk 0.03 words, qualitatively. based in New York. These questionnaires and investor with more detailed informa- Momentum -0.03 manager interviews often can be tion that can lead to better questions Quality -0.05 supplemented with a variety of quantitative and dialogue with a prospective manager. Value 0.14 insights. And now, following the shift to virtual Small cap 0.15 meetings from on-site visits, less time spent Trends in the manager’s risk exposures Crowding 0.10 traveling has opened up the opportunity for through time. While factor analysis can decon- more information gathering and quantitative struct a manager’s risk and returns into factors analysis before meetings with managers. and residual across its history, another pivotal Source: Venn by Two Sigma That quantitative analysis starts with the most question is how those factor exposures might quantitative of the P’s: performance. When have shifted over time. Applying factor analysis Exhibit 2 Example of a demo portfolio’s rolling factor evaluating an active manager, it’s easy to look at across rolling time periods can reveal interesting past returns on both an absolute basis and trends in a manager’s factor exposures (see exposures (or factor sensitivities) relative to benchmarks and peers. But the results Exhibit 2). Rolling 3-year data from Dec. 20, 2011, through May 27, 2021. of those analyses won’t explain how the manager For example, a manager may have averaged a achieved those returns. It is through factor certain factor exposure over its entire history, yet Current portfolio Excluded factor Current analysis that investors will find answers to a that exposure may have fluctuated, especially portfolio series of critical questions and determine during stretches of market turbulence. Scrutiniz- whether managers are meeting expectations and ing a manager’s equity beta in early 2020, for Equity 0.64 delivering what they claim. example, may indicate whether a manager was Interest rates 0.32 more exposed to global equity market risk than Credit -- What are the drivers of the manager’s risk and usual going into the COVID-19 market crisis. Commodities 0.06 returns? Looking at the raw historical perfor- And digging into the manager’s exposure to Emerging markets -- mance of a manager is a good starting point, but “crowding” risk might have identified whether Foreign currency 0.20 it tells an incomplete story. A potential investor the manager was overexposed to stocks that fell Local in ation -- may want to know how that manager generated prey to short-selling squeezes early in 2021. Local equity 0.18 the returns they did and what risks they were Changes in factor exposures could be very Equity short volatility -- exposed to. telling, especially when analyzed in the context Fixed income carry -- Factor analysis is designed to help an investor of the manager’s mandate. Changes could Foreign exchange carry -- understand the underlying sources of risk and indicate style drift for managers that seek to Trend following 0.08 return in a manager’s portfolio. By regressing a provide consistent factor exposures. Alternative- Low risk -- manager’s time series of returns on a set of ly, it could verify the strategy of another manager Momentum -- known risk factors, an investor can quantitatively whose mandate is to provide tactical and/or understand the manager’s average sensitivities style-agnostic exposures over time. Quality -0.08 to those risk factors and how they contributed to In addition to factor exposures, an investor Value 0.20 the manager’s volatility and returns over its can also quantitatively judge how a manager’s Small cap 0.13 history (see Exhibit 1). factor and idiosyncratic risks have changed Crowding 0.14 Another key output of this factor analysis is relative to each other, rising or ebbing in Dec. ’14 Oct. ’15 Aug. ’16 June ’17 April ’18 Feb. ’19 Dec. ’19 Oct. ’20 June ’21 the amount of risk and return that cannot be SEE BOTTE ON PAGE 19 Source: Venn by Two Sigma

from asset-class flows all have a part to gamification of retail trading. The market tion plans. The gamification of retail using retail platforms, rather than saving play. Investors will need to know who else is infrastructure worked efficiently; collateral investing could shape the views of young it through their retirement plans. There is in the game and what particular rules they calls were executed; there have not been investors, which in turn could impact how also a risk that any young investors who are playing by. The underlying motivations consequences for clearing houses; and much they choose to save and invest experience losses through gamified of an increasingly diverse range of market counterparty risk has not arisen. As a result, — both in their retirement plans and investing could become skeptical of all participants and how their actions might no tightening of institutional regulation is elsewhere. But it is also undoubtedly forms of investment. influence market conditions will become warranted — even if we observed funds driving short-termism into investment While retail brokers have been reporting increasingly important subjects for analysis. poorly manage their risk positions. Howev- approaches. huge numbers of new investors signing up, By way of example, going forward, er, we should expect some regulatory Today, message boards abound where data from the U.K.’s Office of National investors may be increasingly wary of changes on the retail side. stock pickers pitch their recommendations, Statistics that employee contributions to opening short positions in small caps when There is likely to be more public good triumph their successes (a casual disregard private-sector DC plans have only bounced the trade is already crowded, which may from regulations aimed at protecting for losses isn’t unusual either), curate back to levels seen pre-pandemic. well drive a permanent adjustment of consumers. Any shift in regulation should follower lists and generally engage in DC plans and policymakers may wish to behavior by hedge funds, which will set be aimed at enhancing consumer protec- behavior that makes the world of investing consider how to encourage young people to position-size limits in relation to shorting tions and curbing retail participants’ ability seem like a fantasy sports league. save in their retirement plans, rather than smaller companies. Fundamentally, to act irresponsibly, rather than adjusting Many new players are focused on through retail brokers and platforms, investors of all types must remain nimble market architecture to limit access to free investing as though it were a participa- perhaps using increased gamification to and dynamic — agile enough to respond to markets. tion sport rather than an objective-based reinforce the need for patience and evolving scenarios, yet equipped with a activity — and the DC industry must be long-termism in investing. n toolkit broad enough to respond in all f course, shifts in the dynamics alert to the potential knock-on impacts conditions. underpinning young people’s views for participation in DC plans. If young This content represents the views of the author. It While there may well be knock-on O on markets and, by extension, their people make short-term profits through was submitted and edited under Pensions & Invest- implications for regulation, there has been investment decisions, have potentially gamified retail investing, they could be ments guidelines but is not a product of P&I’s editorial no meaningful systemic impact from major implications for defined contribu- more likely to invest their spare income team. 12 | July 26, 2021 Pensions & Investments ESG ROUNDUP

Sustainable investment assets increase 15% to $35 trillion

Sustainable investment assets than 50% diverse-owned, while 11% globally grew 15% over the past two was managed by those that were years to reach $35 trillion, according 25% to 50% diverse-owned. ESG ratings show some improvement since 2018 to the Global Sustainable Invest- “In 2020, UC Investments made MSCI ESG ratings measure a company’s resilience to long-term, financially relevant ESG risks. AAA ment Review 2020 released July 19. significant progress in expanding With 36% of all professionally and implementing our diversified and AA ratings indicate a leader; A, BBB and BB mark a company as average; and B and CCC put the managed assets now sustainable returns program, which aims to in- company in the laggard group. Currently, 93 companies among the S&P 100 sport an MSCI ESG assets, “sustainable investing has crease our access to and inclusion rating; 25 are rated as leaders, 62 are average and six have a B rating. really become a major force across of diverse talent when we invest, In 2018, of the 92 companies that were rated, 24 were rated AAA or AA, 56 had an average rating, global capital markets,” said Simon when we hire, and when we exer- O’Connor, chairman of the Global cise our rights as a company share- and 12 were laggards, including two rated CCC. Sustainable Investment Alliance, holder,” wrote Jagdeep Bachher, the In 2016, only 21 of the S&P 100 companies had an MSCI ESG rating. during a news briefing call about university’s CIO, in a letter intro- the report from the GSIA and US ducing the report. Distribution of MSCI ESG ratings, by year SIF: The Forum for Sustainable and Mr. Bachher added: “Among oth- Responsible Investment. er things, we added several new di- 26 The report defines sustainable verse investment partners, put in investment as investment ap- place annual DEI goals for our proaches that consider environ- leaders and collaborated with other 22 mental, social and governance fac- institutional investors to advance 21 2018 2021 20 tors in portfolio selection and diversity and inclusion at the com- 19 management across seven strate- panies in which we invest.” gies of sustainable or responsible UC announced plans to invest at 17 investment, the most common be- least an additional $2 billion with 15 ing ESG integration, followed by diverse investment managers over 14 negative screening, corporate en- the next four years. gagement and shareholder action, norms-based screening and sus- Stonepeak closes first 10 tainability-themed investment. renewable energy fund The biennial report found that at 7 the start of 2020, the U.S. and Eu- Stonepeak closed its first renew- 6 6 rope dominated, with 80% of sus- able energy fund, Stonepeak Global tainable assets there. Canada’s Renewables Fund, at its $2.75 bil- market had the highest proportion lion hard cap, a news release shows. 2 0 of sustainable investment assets at The total capital raised by the AAA AA A BBB BB B CCC 62%, followed by Europe at 42%, fund is more than double its origi- Australasia at 38%, the U.S. at 33% nal $1.25 billion fundraising target, Source: MSCI Inc. and Japan at 24%. which it surpassed in early 2021. “Sustainable investing is now at The fund has already assembled an a really interesting point of transi- $800 million portfolio of invest- “We remain concerned that the tainable Development Goals and releases from both firms. tion. There’s is now a great deal of ments that include utility-scale so- TCFD’s proposals seem to have impact investments. QIC made the follow-on invest- variation,” said Mr. O’Connor, who lar and commercial and industrial been developed without consider- The growth will be prompted by ment in Generate on behalf of its is also CEO of the Responsible In- solar, such as solar panels installed ation of the feasibility and cost vs. retail investor demand, increased global funds and clients. Existing vestment Association Australasia. on factory and industrial roofs, as the benefits for pension funds or sustainability disclosure and mar- investor A$225 billion ($169.4 bil- Some of the fastest growth rates well as onshore and offshore wind asset owners. We see the attraction ket regulation, and widespread lion) AustralianSuper, Melbourne, over the past two years occurred in platforms. of the TCFD’s proposals for fund adoption by institutional asset own- co-led the fundraising alongside Canada with 48% growth, followed Investors in the fund include the managers looking to develop and ers and financial intermediaries, QIC. by the U.S. at 42%, Japan at 34% and $254.8 billion New York State Com- market green products, but do not the research said. Generate’s current portfolio of Australia at 25% growth. mon Retirement Fund, Albany; £55 see the same benefit for asset own- “The opportunity is there for roughly $2 billion is invested in Other markets are slowing down, billion ($76 billion) Border to Coast ers that have very different duties, active management to capture sustainable infrastructure assets but in the case of Europe and Aus- Pensions Partnership, Leeds, En- interests and responsibilities,” the market share from indexed strate- spanning the energy, waste, water tralia, some decline is attributed to gland; and £12.6 billion ($17.4 bil- letter said. gies and reap considerable eco- and transportation sectors. tightening of industry standards lion) London CIV. The most fundamental concern, nomic rewards if firm leaders can Other investors include Harbert and measurement methodology, not the TPI steering committee said, commit and execute on plans to Management Corp.; the A$150 bil- less activity, Mr. O’Connor said. Investors warn climate was that the proposals will drive retool with credible sustainable lion Aware Super, Sydney; 386.2 bil- metrics could be ‘onerous’ decisions that could undermine the investing processes,” said co-au- lion Swedish kroner ($44.4 billion) University of California transition to a low-carbon economy, thor Alyssa Buttermark, manager AP2, Gothenburg, Sweden; £32 bil- Climate-related financial metrics with one temperature benchmark and lead ESG analyst for Casey lion ($43.6 billion) Railways Pen- making progress being considered by the Task Force being considered having the poten- Quirk, in a news release. sion Scheme, London; and £32.6 The University of California has on Climate-related Financial Dis- tial “to create wide misunderstand- Yet despite the “massive oppor- billion ($44.4 billion) The Wellcome reported that 60% of the investment closures could be “onerous” for as- ing and to drive the carbon washing tunity,” said Casey Quirk principal Trust, London, and CBRE Caledon, firms the Oakland-based university set owners and lead to “carbon of portfolios.” and co-author Benjamin F. Phil- according to the Generate Capital partnered with in 2020 are Black- washing” of portfolios instead of lips, “we believe many asset man- news release. and/or women-owned, according to standard measurements, the Tran- Dedicated sustainable agers are still unprepared for this a progress report on the managers sition Pathway Initiative said in a broad and long-term shift in inves- MSCI offers quarterly the university invests with. comment letter July 15. assets to hit $13 trillion tor preferences, especially U.S.-do- The report reveals that of the five The TPI letter was responding to Dedicated sustainable investing miciled firms.” net-zero report card investment managers UC partnered a TCFD consultation on new for- assets could reach $13 trillion glob- The paper shows Europe, the MSCI launched a new tool July with last year, two were Black- ward-looking climate metrics for ally by 2025, according to a paper Middle East and Africa are likely to 12 that shows how far public com- owned, two were woman-owned the financial sector and a related released July 15 by asset manage- make up almost three-fourths of panies are from meeting the goals (one of the firms also being Black- temperature-metric proposal. ment consultant Casey Quirk, a sustainable investing assets by of the Paris Agreement to address owned) and two were firms whose The portfolio alignment metrics practice of Deloitte Consulting. 2025. That would be $9.5 trillion, climate change. ownership demographics were less being considered “will have a se- That would be more than four compared with $2.2 trillion at the The MSCI Net-Zero Tracker will than 25% diverse. ries of undesirable consequences times the total at the end of 2020. It end of 2020. The rest would be $2.5 be published quarterly to show how UC also surveyed its 123 invest- for asset owners potentially forc- includes $3.2 trillion of new mon- trillion for the U.S. and $1 trillion companies are progressing, or not. ment managers on their diversity ing them to breach their fiduciary ey, $5.6 trillion of strategy conver- for the Asia-Pacific region, com- The first Net-Zero Tracker shows metrics, and found that of the 118 duties, imposing significant addi- sions and $1.3 trillion of market pared with $400 billion and $200 that globally, companies’ annual that responded, 18 (15.3%) were tional costs on asset owners,” appreciation. billion, respectively, in 2020. emissions are still at 2013 levels, more than 50% diverse-owned (“di- warned the letter from the TPI The estimated $13 trillion would despite the increasing emphasis on verse” in this case including wom- steering committee, chaired by represent about 12% of total assets Generate Capital raises addressing climate change. en, Latinx, Native American, Black, Adam Matthews, director of the under management by 2025, com- The MSCI Net-Zero Tracker Asian/Pacific Islander, LGBTQ, vet- £2.8 billion ($3.6 billion) Church of pared with 3.4% by the end of 2020. $2 billion from investors gauges climate-change progress eran and disabled), while 28 (23.7%) England Pensions Board. Casey Quirk defines dedicated Generate Capital, a sustainable across a global universe of 9,300 were 25% to 50% diverse-owned, TPI assesses companies’ pre- sustainable investing as a subset of energy financing company, has publicly listed companies based on and 72 (61%) were less than 25% di- paredness for the transition to a ESG investing strategies and only raised $2 billion through a second the MSCI All Country World Invest- verse-owned. low carbon economy; it is led by 105 includes strategies with a primary round of direct investments from ible Market index. It will also pro- As of June 30, 2020, 5% of UC’s institutional investors and support- investment objective to positively money managers and asset owners, vide aggregate progress on tem- $102 billion in total AUM was man- ed by asset managers with a com- promote sustainability, such as including Brisbane, Austra- perature alignment and highlight aged by managers that were more bined $29 trillion in assets. positive tilt, alignment with Sus- lia-based QIC, according to news industry leaders and laggards. INTERESTED IN SUSTAINABLE INVESTING?

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GFS Equity.pdf RunDate: 05/31/21 Full Page Color: 4/C 14 | July 26, 2021 Pensions & Investments Special Report DC MONEY MANAGERS AND RETIREMENT PLAN ADVISERS Advisers look to PEP market for growth

investment manager, provides about 30% of Pooled employer plans seen as a way for sponsors its plan sponsors with 3(38) services, draw- ing on the expertise of an internal invest- to of oad administration,  duciary responsibility ment committee that reviews, monitors and vets all the funds in plan sponsors’ invest- ment lineups, said Michael Gheen, the rm’s By MARGARIDA CORREIA plans in general. In addition to (k)Praetori- Cleveland-based vice president of retire- an, Lockton offers the EZ(k) Flex Pooled ment plan services. “We have been doing it, As pooled employer plans hit the market, Employer Plan, which like (k)Praetorian is we have a process in place, so it seemed like advisers increasingly are putting them on designed for sponsors of midsize plans with a natural progression for us to be the 3(38) their radar as potential options for their plan up to $500 million in assets, as well as the on the PEP,” he said. sponsor clients. Lockton Pooled Retirement Plan designed RIA rms also see PEP offerings as a way Matthew Hoesch, a retirement plan con- for sponsors of startup and micro plans. to fend off competitors that decide to offer sultant with registered investment adviser Lockton serves all three in a 3(38) duciary employers pooled retirement plan options. rm Lockton Investment Advisors LLC in capacity. “If we didn’t have a PEP, our competitors Washington, sees the new pooled plans as a Lockton, an RIA rm with $102 billion in down the street would,” Mr. Gheen said. “silver bullet” for many of his clients. They’re assets under management, is among a Still, some RIA rms with large retirement a great t, he says, for employers that “have a handful of rms that are delving into the plan businesses are sitting tight. Kathleen lot of other things they need to do than deal pooled employer plan market as 3(38) in- Hopkins, a spokeswoman for CAPTRUST Fi- with the administration of a 401(k).” vestment managers, a move they say will nancial Advisors LLC, an RIA rm with more Mr. Hoesch has helped three employers give them a head start in a business they see than $600 billion in assets under advisement with stand-alone 401(k) plans ranging from as promising. RIA OneDigital Investment and more than $60 billion in assets under $3 million to $10 million move into a pooled Advisors, for instance, is acting as the 3(38) management, for instance, said it has no im- employer plan called (k)Praetorian, one of investment manager for the OneDigital minent plans to launch a PEP or participate three PEPs his rm advises as the 3(38) in- Pooled Employer Plan it launched in July. Pooled employers plans are in one as a 3(38). Jenna Shields, a spokes- vestment manager, the duciary overseeing PlanMember Financial Corp. also rolled out a ‘silver bullet’ for many woman for Hub International, an insurance plan investment lineups. Mr. Hoesch de- a pooled employer plan in April in which its broker whose RIA business has about $105 clined to name the rms, saying only that RIA rm, PlanMember Securities Corp., clients. They’re a great fit billion in assets under advisement, declined they’re in the consulting and technology in- serves as the 3(38). for employers that ‘have a to disclose the company’s plans, saying only dustries. The rms anticipate that the new pooled that it continues to evaluate options that will In addition to the three companies, he 401(k) plans will resonate with a wide swath lot of other things they support its client base. Hub has been acquir- has a half-dozen other plan sponsors that of employers looking to of oad plan admin- need to do than deal with ing retirement-focused rms since 2017 in a he says are considering joining (k)Praetori- istrative duties and lower plan costs through push to bulk up its retirement plan and an to “get administrative work off their greater economies of scale. the administration of a wealth management business. plates,” of oad most of their duciary re- The new plans, which started rolling out 401(k).’ SageView Advisory Group LLC, mean- sponsibility and avoid having to conduct Jan. 1 under the SECURE Act, give employers while, is holding off on a decision to convert and pay for an audit. in unrelated businesses a big incentive to LOCKTON INVESTMENT ADVISORS’ its current multiple employer plan — the “It’s a huge time and cost saver,” he says. pool their assets as they no longer need to MATTHEW HOESCH USA Retirement Savings Plan, which has Mr. Hoesch estimates plan sponsors can save le separate Form 5500s and conduct sepa- three sponsors and $5.2 million in assets — an average of 15% to 25% in costs depending rate annual audits as they were previously into a pooled employer plan until further on plan size and other factors. Most plan required to do. They also allow plan sponsors Logical move guidance from the Department of Labor, said sponsors, though, “value the outsourcing to outsource their day-to-day administrative For RIA rms that already serve sin- Jon T. Upham, a Newport Beach, Calif.-based above any savings,” he says. work and the bulk of their duciary respon- gle-employer plans as 3(38) managers, the principal at SageView. Mr. Hoesch joins other Lockton retire- sibilities to third-party service providers, jump into the PEP market as 3(38) providers ment plan advisers that have been educat- such as 3(38) investment managers that take is a logical move, industry sources said. Range of options ing plan sponsor clients about Lockton’s over the selection and management of in- Oswald Financial Inc., an RIA rm that of- For now at least, Lockton appears to be three PEPs and about the bene ts of pooled vestment lineups. fers clients a PEP in which it acts as the 3(38) SEE ADVISERS ON PAGE 18

DC manager statistics at a glance U.S. institutional, tax-exempt assets, in millions, as of Dec. 31.

One-year Five-year One-year Five-year One-year Five-year Assets change change Assets change change Assets change change Total DC assets managed $8,879,320 11.9% 64.4% Passive domestic equity $2,245,946 15.0% 110.8% Stable value $417,168 14.7% 0.1% Internally managed DC $7,950,358 14.7% 68.5% Active non-U.S. equity $367,257 6.1% -6.4% Managed as a $53,102 5.8% 24.4% subadviser Passive non-U.S. equity $228,144 11.9% 12.3% Internally managed DC assets by plan type: Active global equity $79,618 4.8% N/A Balanced/asset 401(k) $5,205,043 15.0% 92.3% $2,424,993 17.7% 126.3% Passive global equity $118,050 7.2% N/A allocation Pro t-sharing $53,169 26.6% 50.7% Active domestic bonds $1,257,918 12.4% 24.5% Target date $2,208,926 16.9% 145.1% 457 $142,218 25.7% 106.9% Passive domestic bonds $577,907 20.2% 157.3% Custom target date $165,842 24.9% 74.9% 401(a) $527,715 17.8% 81.8% Active global/non-U.S. $65,752 1.4% 48.1% Assets managed under 403(b) $633,295 8.8% 27.6% bonds $2,041,721 30.3% N/A ESG principles Other $993,522 13.3% 38.9% Passive global/non-U.S. $6,833 60.1% 31.7% Mandates $34,310 82.0% N/A bonds Internally managed DC assets by investment vehicle: Real estate equity $5,285 -34.7% 325.2% Number of SECURE Act 3 50.0% N/A Mutual funds $3,275,366 12.9% 50.1% pooled plan providers Cash $235,130 46.3% 73.3% ETFs $3,413 -32.6% 26.6% Other $473,727 9.3% 99.8% Breakouts may sum to less than total because certain firms did not provide Other pooled/commingled $2,755,673 15.9% 77.8% data. Specialty mandates Investment strategy breakout includes specialty mandates and balanced/ Separate accounts $1,696,894 16.3% 81.7% asset allocation assets. REITs $26,930 -9.6% 26.9% Balanced/asset allocation assets include target-date, lifecycle and lifestyle Internally managed DC assets by investment strategy: In ation-protected portfolios. $76,374 20.2% 109.1% securities Historical data may include retroactive updates. Active domestic equity $2,078,047 15.9% 54.5% Pensions & Investments July 26, 2021 | 15

The largest managers of defined contribution assets Ranked by total U.S. institutional, tax-exempt assets under management, in millions, as of Dec. 31.

Rank Manager Assets Rank Manager Assets Rank Manager Assets Rank Manager Assets

1 Vanguard Group $1,736,020 53 Payden & Rygel $6,166 108 Champlain Investment $608 163 Great Lakes Advisors $98

2 BlackRock $1,205,863 54 Arrowstreet Capital $6,053 109 Stacey Braun Associates $601 164 Fuller & Thaler $97

3 Fidelity Investments $1,036,327 55 LSV Asset Mgmt. $5,810 110 D.F. Dent $595 165 Dana Investment $94

4 T. Rowe Price $611,586 56 Eaton Vance Mgmt. $5,529 111 CenterSquare Investment $581 River & Mercantile 166 $93 Solutions 5 Nuveen $563,045 57 TCW Group $5,277 112 Aegon Asset Mgmt. $577 167 Breckinridge Capital $91 6 Capital Group $523,034 58 TimesSquare Capital $5,109 113 Hood River Capital $552 168 Burgundy Asset Mgmt. $87 7 State Street Global $464,022 59 AQR Capital Mgmt. $4,995 114 Smith Graham $551 169 Heritage Investors Mgmt. $84 8 Prudential Financial $288,310 60 Baillie Gifford Overseas $4,797 115 Sage Advisory Services $516 170 TT International $83 9 J.P. Morgan Asset Mgmt. $269,783 61 Income Research & Mgmt. $4,663 116 Cardinal Capital $459 171 Frontier Capital $82 Northern Trust Asset 62 RhumbLine Advisers $4,288 117 Sound Shore Mgmt. $458 10 $217,034 Mgmt. 172 Todd Asset Mgmt. $80 63 Macquarie Asset Mgmt. $4,287 118 Bridgeway Capital $427 11 Invesco $147,450 173 Kennedy Capital $75 64 Alger $3,937 119 PineBridge Investments $415 12 Wells Fargo Asset Mgmt. $127,301 174 Dolan McEniry $74 65 Atalanta Sosnoff Capital $3,913 120 Pugh Capital $410 13 PIMCO $125,523 175 Smith Asset Mgmt. $71 66 DuPont Capital $3,827 121 Thompson, Siegel $391 14 Principal Global Investors $120,319 176 Foundation Resource $67 67 Ivy Investments $3,613 122 Cohen & Steers $390 15 Dodge & Cox $103,868 177 Sawgrass Asset Mgmt. $62 68 Mondrian Investment $3,234 123 Quest Investment $387 16 Voya Investment Mgmt. $96,123 178 NewSouth Capital $58 69 Manning & Napier $3,171 124 O’Shaughnessy $367 17 BNY Mellon $95,346 179 PENN Capital $58 70 Parametric $2,985 125 GIA Partners $341 18 MFS Investment $81,668 180 Sadoff Investment $58 71 Aristotle Capital Mgmt. $2,690 126 Stone Harbor Investment $336 19 Manulife Investment $72,497 181 Chicago Capital $54 72 Polen Capital $2,660 127 Rice Hall James $328 20 Mercer $70,263 182 Security Capital Research $50 73 Emerald Advisers $2,649 128 Jensen Investment $322 21 AllianceBernstein $69,256 183 Davidson Investment $47 74 Marathon-London $2,602 129 AFL-CIO Housing Trust $315 22 Federated Hermes $57,801 184 AMI Asset Mgmt. $36 75 Hotchkis & Wiley $2,596 130 Chartwell Investment $314 Janus Henderson Minneapolis Portfolio 23 $55,875 185 $35 Investors 76 WEDGE Capital $2,565 131 Weatherbie Capital $266 Mgmt.

24 American Century $48,683 77 PNC Financial $2,237 132 Brookfield Asset Mgmt. $253 186 Boyd Watterson $34

Dimensional Fund 78 Jackson Square Partners $2,056 133 Snow Capital Mgmt. $250 187 Hexavest $28 25 $47,622 Advisors 79 Jacobs Levy Equity $2,054 134 Monarch Partners $242 188 Carmel Partners $27 26 Franklin Templeton $41,868 80 Barrow, Hanley $2,051 135 MFG Asset Mgmt. $236 189 Wilbanks, Smith & Thomas $26 27 Aon $41,328 81 Ninety One $2,007 136 Cornerstone Investment $230 190 Flippin, Bruce & Porter $25 28 Great-West Investments $37,996 82 NISA Investment $1,952 137 Kayne Anderson Rudnick $213 191 Sterling Capital $24 29 Loomis, Sayles $31,448 83 Commerce Trust $1,919 138 GW&K Investment $201 192 Osborne Partners $23 Charles Schwab 30 $31,179 84 Highland Associates $1,770 139 CBRE Global Investors $200 Investment 193 Alan Biller and Associates $22 85 Harding Loevner $1,768 140 Congress Asset Mgmt. $181 31 Vantagepoint Investment $30,153 194 Chandler Asset Mgmt. $21 86 Fisher Investments $1,644 141 GlobeFlex Capital $176 32 Wellington Mgmt. $23,852 195 James Investment $14 87 Bivium Capital $1,510 142 Riverbridge Partners $174 33 Barings $23,323 196 EAM Investors $13 88 Brown Advisory $1,428 143 Parnassus Investments $173 34 Putnam Investments $20,904 197 Campbell Newman Asset $11 89 Westfield Capital $1,376 144 Shelton Capital $172 35 Russell Investments $20,838 198 Wedgewood Partners $11 90 Los Angeles Capital $1,347 145 Scout Investments $171 36 Artisan Partners $17,598 199 Heartland Advisors $8 91 Fiera Capital $1,342 146 Stephens Inv. Mgmt. Group $171 37 Neuberger Berman $16,620 200 Oak Associates $5 Grantham, Mayo v. 147 Driehaus Capital $169 92 $1,280 Affinity Investment 38 SEI Investments $14,418 Otterloo 201 $4 148 Guardian Capital $168 Advisors 39 Callan $13,334 93 Schroders $1,199 149 Agincourt Capital $166 202 Logan Capital $4 40 Victory Capital $12,454 94 GAMCO Investors $1,112 Miller/Howard 150 Allianz Global Investors $163 203 $3 41 Lord, Abbett $11,703 95 AEW Capital $1,073 Investments 151 Glenmede Investment $149 42 William Blair $11,450 96 Aristotle Capital Boston $1,047 204 SouthernSun Asset Mgmt. $2 152 Segall Bryant & Hamill $145 43 Harris Associates $11,184 97 Longfellow Investment $945 205 Bridge City $1 153 Foundry Partners $144 44 New York Life Investments $11,142 98 Diamond Hill Capital $927 206 James Pappas Investment $1 154 Ariel Investments $140 45 Morgan Stanley $10,113 99 Sprucegrove Investment $895 207 SMH Capital Advisors $1 Epoch Investment 155 $135 46 American Beacon Advisors $9,923 100 Lyrical Asset Mgmt. $814 Partners 208 Teton Advisors $1

47 Harbor Capital Advisors $9,413 101 Davis Advisors $808 156 Garcia Hamilton $132

48 Lazard Asset Mgmt. $8,750 102 Altrinsic Global Advisors $779 157 DDJ Capital $129 Legal & General 49 $7,870 103 Atlanta Capital $684 158 Hoisington Investment $118 Investment 104 River Road Asset Mgmt. $659 159 C.S. McKee $114 50 PFM Asset Mgmt. $7,031 105 Ramirez Asset Mgmt. $632 160 First Quadrant $103 51 Securian Asset Mgmt. $6,873 106 Mar Vista Investment $631 161 GLOBALT $102 52 Boston Partners $6,295 107 RBC Global Asset Mgmt. $610 162 Wright Investors’ Service $99 16 | July 26, 2021 Pensions & Investments DC MONEY MANAGERS AND RETIREMENT PLAN ADVISERS

The largest managers of internally managed Growth of DC assets under management DC assets Assets are in trillions as of Dec. 31.

U.S. institutional, tax-exempt assets, in millions, as of Dec. 31. $8.88

Rank Manager Assets Rank Manager Assets $7.94 Total assets 1 Vanguard Group $1,569,469 14 Wells Fargo Asset Mgmt. $110,433 $7.95 Internally managed $7.08 2 BlackRock $1,205,863 15 Dodge & Cox $103,868 $6.69 $6.93 3 Fidelity Investments $742,340 16 BNY Mellon $95,346 $6.03 $6.17 4 T. Rowe Price $611,586 17 MFS Investment $81,668 $5.47 $5.40 $5.84 $5.14 5 Nuveen $563,045 18 Voya Investment Mgmt. $78,994 $5.32 $4.29 $4.77 6 Capital Group $523,034 19 Federated Hermes $57,801 $4.55 $4.72 $3.68 $3.78 7 State Street Global $464,022 20 Janus Henderson Investors $55,875 $3.94 8 J.P. Morgan Asset Mgmt. $266,538 21 American Century $48,683 $3.31 $3.46

9 Northern Trust Asset Mgmt. $217,034 22 Dimensional Fund Advisors $47,622

10 Prudential Financial $212,936 23 Franklin Templeton $41,868

11 PIMCO $125,523 24 Manulife Investment $32,908

12 Principal Global Investors $120,319 25 Loomis, Sayles $31,448

13 Invesco $117,319 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

The largest managers of DC assets by plan type U.S. institutional, tax-exempt assets managed internally, in millions, as of Dec. 31.

401(k) plans Profit-sharing plans 457 plans 401(a) plans Rank Manager Assets Rank Manager Assets Rank Manager Assets Rank Manager Assets

1 Vanguard Group $1,450,326 1 Vanguard Group $29,563 1 Vanguard Group $29,651 1 BlackRock $442,870

2 BlackRock $762,993 2 J.P. Morgan Asset Mgmt. $6,540 2 T. Rowe Price $21,024 2 Fidelity Investments $26,674

3 Fidelity Investments $524,313 3 Invesco $4,663 3 BNY Mellon $15,258 3 Vanguard Group $22,763

4 Capital Group $489,392 4 T. Rowe Price $2,142 4 State Street Global $12,934 4 BNY Mellon $14,930

5 State Street Global $433,265 5 Manning & Napier $1,945 5 Voya Investment Mgmt. $11,952 5 Prudential Financial $6,641

6 T. Rowe Price $285,107 6 Harding Loevner $1,768 6 Wells Fargo Asset Mgmt. $10,623 6 DuPont Capital $3,827

7 J.P. Morgan Asset Mgmt. $239,509 7 MFS Investment $1,446 7 Prudential Financial $8,432 7 Principal Global Investors $2,033

8 Northern Trust Asset Mgmt. $217,034 8 Principal Global Investors $1,246 8 Fidelity Investments $7,759 8 Great-West Investments $1,652

9 Prudential Financial $190,481 9 Harris Associates $1,049 9 Nuveen $6,281 9 Wells Fargo Asset Mgmt. $1,402

10 Principal Global Investors $98,186 10 West eld Capital $412 10 Great-West Investments $5,280 10 Fiera Capital $1,342

The largest managers of DC assets by The largest managers of DC assets by investment vehicle investment strategy U.S. institutional, tax-exempt assets managed internally, in millions, as of Dec. 31. U.S. institutional, tax-exempt assets managed internally, in millions, as of Dec. 31.

Mutual funds Pooled/commingled vehicles* Active domestic equity Passive domestic equity Rank Manager Assets Rank Manager Assets Rank Manager Assets Rank Manager Assets

1 Vanguard Group $903,283 1 BlackRock $497,057 1 T. Rowe Price $550,826 1 Vanguard Group $1,136,032

2 Fidelity Investments $535,499 2 Nuveen $459,565 2 Fidelity Investments $404,486 2 BlackRock $583,932

3 Capital Group $511,563 3 Vanguard Group $431,585 3 Capital Group $256,496 3 State Street Global $242,960

4 T. Rowe Price $302,875 4 State Street Global $343,306 4 Nuveen $208,601 4 Northern Trust Asset Mgmt. $132,868

5 J.P. Morgan Asset Mgmt. $121,059 5 T. Rowe Price $216,403 5 J.P. Morgan Asset Mgmt. $129,836 5 Nuveen $51,533

6 Nuveen $103,480 6 Northern Trust Asset Mgmt. $209,042 6 Dodge & Cox $50,066 6 Principal Global Investors $33,837

7 BlackRock $99,031 7 Fidelity Investments $164,983 7 MFS Investment $49,521 7 T. Rowe Price $10,062

8 Dodge & Cox $73,936 8 J.P. Morgan Asset Mgmt. $82,043 8 American Century $44,134 8 Prudential Financial $7,929

9 Invesco $73,690 9 Prudential Financial $61,748 9 Prudential Financial $43,245 9 Voya Investment Mgmt. $7,258

10 PIMCO $72,880 10 Principal Global Investors $47,804 10 Invesco $37,110 10 Legal & General Invest. $7,231

Separate accounts Exchange-traded funds Active domestic fixed income Passive domestic fixed income Rank Manager Assets Rank Manager Assets Rank Manager Assets Rank Manager Assets

1 BlackRock $609,775 Charles Schwab 1 Nuveen $241,772 1 Vanguard Group $281,979 1 $3,376 Investment 2 Vanguard Group $234,601 2 Prudential Financial $140,093 2 BlackRock $103,105 2 Fidelity Investments $37 3 State Street Global $112,263 3 PIMCO $104,754 3 State Street Global $80,879

4 Prudential Financial $93,367 4 Fidelity Investments $103,706 4 Fidelity Investments $65,500

5 T. Rowe Price $92,308 5 Wells Fargo Asset Mgmt. $79,440 5 Northern Trust Asset Mgmt. $32,523

6 Principal Global Investors $65,471 6 J.P. Morgan Asset Mgmt. $77,159 6 Neuberger Berman $4,296

7 J.P. Morgan Asset Mgmt. $63,436 7 Capital Group $74,114 7 Parametric $2,331

8 PIMCO $46,882 8 Voya Investment Mgmt. $55,802 8 Wells Fargo Asset Mgmt. $1,845

9 Wells Fargo Asset Mgmt. $45,254 9 Principal Global Investors $47,347 9 Voya Investment Mgmt. $1,461

10 Fidelity Investments $41,821 10 Invesco $40,973 10 Nuveen $1,295 *Excludes mutual funds/ETFs. Pensions & Investments July 26, 2021 | 17 DC MONEY MANAGERS AND RETIREMENT PLAN ADVISERS

DC managers’ average The largest managers The largest managers The largest managers asset mix of DC assets in of DC assets in of DC assets in U.S. institutional, tax-exempt assets REITs TIPS stable value managed internally; weighted average, as of Dec. 31. Data in parentheses are U.S. inst’l, tax-exempt assets managed U.S. inst’l, tax-exempt assets managed U.S. inst’l, tax-exempt assets managed previous year internally, in millions, as of Dec. 31. internally, in millions, as of Dec. 31. internally, in millions, as of Dec. 31. Rank Manager Assets Rank Manager Assets Rank Manager Assets Fixed Stable Alts Cash income value 0.4% 2.1% 1 Vanguard Group $6,336 1 Fidelity Investments $14,276 1 Prudential Financial $81,600 16.9% 8.2% (0.6%) (2.8%) (18.7%) (5.9%) 2 State Street Global $5,687 2 State Street Global $14,006 2 Wells Fargo Asset Mgmt. $64,552

Equity 3 Principal Global Investors $3,245 3 PIMCO $11,623 3 Fidelity Investments $39,124 Other 67.1% (67.2%) 5.3% 4 Dimensional Fund Advisors $2,562 4 BlackRock $11,329 4 Invesco $38,327 (4.8%) 5 BlackRock $1,547 5 Vanguard Group $9,504 5 T. Rowe Price $30,813

6 Invesco $1,533 6 Nuveen $7,409 6 PIMCO $25,876

7 Nuveen $1,170 7 Northern Trust Asset Mgmt. $1,989 7 Vanguard Group $25,775

8 AEW Capital $1,024 8 Dimensional Fund Advisors $1,958 8 Barings $18,877

9 Northern Trust Asset Mgmt. $772 9 Franklin Templeton $1,205 9 Voya Investment Mgmt. $15,672

10 CenterSquare Investment $581 10 American Century $935 10 Principal Global Investors $12,602

The largest managers of DC The largest managers The largest managers assets in balanced/asset of DC assets in of DC assets under The largest managers of DC assets by plan type allocation strategies* target-date strategies ESG principles U.S. inst’l, tax-exempt assets managed U.S. inst’l, tax-exempt assets managed U.S. inst’l, tax-exempt assets managed U.S. institutional, tax-exempt assets managed internally, in millions, as of Dec. 31. internally, in millions, as of Dec. 31. internally, in millions, as of Dec. 31. internally, in millions, as of Dec. 31.

403(b) plans Rank Manager Assets Rank Manager Assets Rank Manager Assets Rank Manager Assets 1 Vanguard Group $746,986 1 Vanguard Group $729,993 1 Fidelity Investments $742,340 1 Nuveen $394,913 2 BlackRock $322,006 2 BlackRock $309,929 2 Nuveen $563,045 2 Fidelity Investments $97,278 3 T. Rowe Price $299,704 3 T. Rowe Price $288,352 3 J.P. Morgan Asset Mgmt. $259,229 3 Capital Group $30,706 4 Fidelity Investments $267,969 4 Fidelity Investments $233,552 4 Dodge & Cox $103,868 4 Voya Investment Mgmt. $28,151 5 Capital Group $244,156 5 Capital Group $176,612 5 Voya Investment Mgmt. $67,737 5 Vanguard Group $23,669 6 J.P. Morgan Asset Mgmt. $155,970 6 J.P. Morgan Asset Mgmt. $152,898 6 Federated Hermes $55,037 6 T. Rowe Price $16,981 7 State Street Global $122,574 7 State Street Global $113,811 7 Prudential Financial $52,518 7 Invesco $10,349

8 State Street Global $7,203 8 Principal Global Investors $57,357 8 Principal Global Investors $55,723 8 American Century $42,334

9 Prudential Financial $6,818 9 Nuveen $55,743 9 Nuveen $55,363 9 Barings $23,323

10 Principal Global Investors $5,343 10 American Century $24,526 10 American Century $22,357 10 Russell Investments $20,838

*Includes target-date, lifecycle and lifestyle funds.

Active non-U.S. equity Passive non-U.S. equity Active global equity Passive global equity Rank Manager Assets Rank Manager Assets Rank Manager Assets Rank Manager Assets

1 Fidelity Investments $99,804 1 State Street Global $119,858 1 Capital Group $38,788 1 BlackRock $117,584

2 Capital Group $90,506 2 Vanguard Group $54,084 2 Invesco $11,893 Northern Trust Asset 2 $385 Mgmt. 3 MFS Investment $27,025 3 Northern Trust Asset Mgmt. $31,294 3 Fidelity Investments $5,982 Legal & General 3 $51 4 Invesco $21,721 4 Principal Global Investors $7,207 4 BlackRock $2,868 Investment

5 Dimensional Fund Advisors $18,367 5 Nuveen $6,545 5 T. Rowe Price $2,435 4 Parametric $18 6 Dodge & Cox $13,114 6 BlackRock $4,644 6 Franklin Templeton $2,336 Charles Schwab 5 $8 7 T. Rowe Price $10,436 7 Voya Investment Mgmt. $1,784 7 Arrowstreet Capital $1,588 Investment

8 Principal Global Investors $9,446 8 Prudential Financial $1,035 8 Prudential Financial $1,546 6 AllianceBernstein $4

9 J.P. Morgan Asset Mgmt. $8,434 9 Charles Schwab Invest. $921 9 Morgan Stanley $1,361

10 Lazard Asset Mgmt. $8,006 10 Legal & General Invest. $588 10 Manulife Investment $1,080

Active global/non-U.S. fixed income Passive global/non-U.S. xed income Real estate equity Rank Manager Assets Rank Manager Assets Rank Manager Assets

1 Nuveen $23,842 1 State Street Global $4,523 1 Prudential Financial $3,255

2 Capital Group $12,082 2 Vanguard Group $1,387 2 Nuveen $1,170

3 Prudential Financial $10,152 3 BlackRock $769 3 Principal Global Investors $475

4 PIMCO $3,545 4 Wells Fargo Asset Mgmt. $102 4 New York Life Investments $238

5 AllianceBernstein $2,583 5 Northern Trust Asset Mgmt. $48 5 AEW Capital $50

6 Franklin Templeton $2,489 6 AllianceBernstein $4 6 Franklin Templeton $34

7 Invesco $2,001 7 Carmel Partners $25

8 J.P. Morgan Asset Mgmt. $1,844 8 Quest Investment $25

9 Dimensional Fund Advisors $1,649 9 Boyd Watterson $12

10 Manulife Investment $1,044 10 Eaton Vance Mgmt. $1 18 | July 26, 2021 Pensions & Investments DC MONEY MANAGERS AND RETIREMENT PLAN ADVISERS

Ms. Ackerley noted that Black- Rock’s target-date platform is used DC managers by DC plans of all sizes, including about 25% of the Fortune 100.

“BlackRock pioneered the indus- JP Yim/Getty Images CONTINUED FROM PAGE 1 head of Vanguard Institutional In- try’s  rst target-date fund in 1993 vestor Services in Paoli, Pa., noted and has a unique track record of David Blanchett, Lexington, Ky.- the strength of Vanguard’s tar- enhancing LifePath strategies to based managing director and head get-date business, which leads the meet evolving participant needs,” of retirement research in the DC industry. At the end of 2020, the she said. solutions group at QMA LLC, PGIM money manager’s target-date strat- Fidelity posted the most growth Inc.’s quantitative equity and multi- egies managed internally held $730 of the three, jumping to $1.04 tril- asset specialist, also didn’t see much billion in U.S. institutional tax-ex- lion, up 20.9% from the year before. in the way of net new ows, explain- empt assets, more than twice its The money manager attributed the ing that money in and out of retire- next nearest rival BlackRock, ac- increase to “positive market perfor- ment plans have been “pretty much” cording to P&I data. mance of 2020” as well as its open equal for the last  ve to 10 years. “I Vanguard’s target-date funds architecture approach, technology didn’t see a large net change,” he use “a simple, yet sophisticated, and its target-date business, Michael said of last year’s asset ows. “It low-cost portfolio solution,” Mr. Shamrell, a Boston-based Fidelity would have been more positive had Brancato said. spokesman, said in a statement. we not had the COVID crisis.” Overall, Vanguard remained at At the end of 2020, Fidelity’s tar- Some observers noted increased the top of the leaderboard with get-date strategies held $233.6 bil- hardship withdrawals from plans at $1.74 trillion in U.S. institutional lion in assets, up 14.7% from the the onset of the pandemic. “Many tax-exempt DC assets, up 14.3% previous year, according to P&I plans observed heavy distribution from 2019. data. activity in the  rst and second BlackRock, ranked second with “We’ve seen continued growth in quarter of 2020 due to the liberal- $1.21 trillion in assets, also attribut- our Freedom Fund business as an ization of withdrawal policies under ed the 15.7% jump it posted in DC increasing number of participants the CARES Act,” Mr. Danaher said. assets in part to its “strong tar- invest their retirement savings in The 11.9% upswing in total de- get-date franchise,” said Anne Ack- target-date funds,” he said.  ned contribution assets noted in erley, the New York-based head of Mr. Shamrell noted that as of P&I’s survey was in line with broad BlackRock’s retirement group. March 31, more than half of all Fi- ROBUST GROWTH: Anne Ackerley attributed BlackRock’s 15.7% increase in DC market returns. U.S. equities, as BlackRock’s target-date fund assets delity participants (56%) held all of assets in part to the rm’s ‘strong target-date franchise,’ which grew 21.5%. measured by the Russell 3000, and grew 21.5% over the year to $309.9 their 401(k) savings in a target-date non-U.S. equities, as measured by billion, taking over the No. 2 spot fund, up from 43%  ve years ago. growth, outpacing mutual funds, as grew marginally faster than passive the MSCI ACWI ex-US, climbed 21% from T. Rowe Price Group. Unquestionably, target-date plan sponsors looked to reduce domestic equity last year, it still trails and 11% in 2020, respectively. Mean- funds continue to dominate DC as- fees, observers said. passive on a  ve-year basis. Assets while,  xed income, as measured by set ows. Target-date funds had Commingled vehicles had $2.76 in passive domestic equity more the Bloomberg Barclays U.S. Aggre- $2.21 trillion in assets to end 2020, trillion in assets in 2020, up 15.9% than doubled since 2015, growing gate Bond index, rose 7.5%. Non-U.S. up 16.9% from 2019 and more than from 2019, while separate accounts 110.8%, while active grew 54.5%. On bonds, as measured by the FTSE double the $901.4 billion total in totaled $1.70 trillion, a 16.3% year- a one-year basis, growth rates were WGBI ex-U.S., jumped 10.8%. 2015, according to P&I data. over-year increase, according to similar, with passive growing 15% Equity accounted for the greatest “Target-date funds are without P&I data. Mutual funds, in contrast, and active growing 15.9%. share of assets in de ned contribu- a doubt the most popular default grew at a more moderate 12.9% to “I think that a lot of plan spon- tion plans. The top 100 DC manag- investment in de ned contribu- $3.28 trillion. sors are focused on cost and one ers had 67.1% of assets in equities tion plans,” QMA’s Mr. Blanchett “It’s all about lowering fund ex- way to reduce the overall expenses managed internally, essentially un- said. “I do think they will continue penses,” Mr. Danaher said, referring is to go with a passive or indexed changed from 2019. Fixed income, to achieve a growing share of DC to growing use of commingled equity strategy,” Mr. Blanchett said. the next largest asset category, assets.” funds and separate accounts. “DC Also notable was the dramatic edged down almost 2 percentage Buck’s Mr. Danaher was particu- plan sponsors are drawn to the growth of passive domestic  xed points to 16.8%, while stable value larly impressed with the growth of more attractive pricing available income, which climbed 20.2% year- rose 2.3 percentage points to 8.2%. custom target-date funds, which under both collective investment over-year to $577.9 billion. Active had $165.8 billion in assets at the trust and separate account struc- domestic bonds, in contrast, rose Same 3 on top ‘While much of this end of 2020, up nearly 25% from tures for distinct asset classes.” 12.4% to $1.26 trillion. The three largest DC money 2019 and up 74.9% from 2015, P&I Michael Volo, a Boston-based “I think the trend of investors managers in terms of U.S. institu- growth is being driven data show. principal at CAPTRUST Financial choosing passive  xed income over tional tax-exempt assets — Van- by jumbo and mega “While much of this growth is Advisors LLC, echoed similar views. actively managed funds follows the guard Group Inc., BlackRock Inc. plan sponsors, it’s not being driven by jumbo and mega “The growth in commingled funds trend we’ve seen in equity funds and Fidelity Investments — de- plan sponsors, it’s not hard to see is driven by plan sponsors being fee over the past decade,” Mr. Volo said. fended their positions in the top hard to see the the eventual democratization of conscious and wanting to mitigate “Another contributing factor is that three spots, with Fidelity breaking eventual that trend as target-date funds in- their  duciary risk,” he said. many of the largest, most wide- $1 trillion in assets, a milestone that democratization of that creasingly dominate DC plan bal- The focus on fees also helps ex- ly-held actively managed  xed-in- thrust it into the company of its two trend as target-date ances driven by their role as the plain the continuing preference of come funds underperformed in rivals. The $1 trillion-plus trio, primary quali ed default invest- passive investments over active. In 2020’s choppy waters.” which each posted double-digit as- funds increasingly ment alternative,” Mr. Danaher said. 2020, assets in passive domestic eq- set growth rates, attributed the dominate DC plan uity totaled $2.25 trillion, compared Stable value a haven gains at least in part to the continu- balances.’ Fee conscious with active domestic equity at $2.08 While the market volatility may ing popularity of target-date funds. Commingled vehicles and sepa- trillion, according to P&I data. have hurt active bond funds, it Matthew Brancato, principal and BUCK GLOBAL’S JIM DANAHER rate accounts also posted robust While active domestic equity helped stable value funds, which

sors with about $650 million in as- sign given that the PEP is only a plan also uses collective invest- employees. The PEP provides “a sets between them and at least 35 month old, Mr. Henson said. ment trusts along with a diversi- bundled, easy-to-administer solu- Advisers additional plan sponsors evaluating Each of the three PEPs use dif-  ed core menu of “name-brand tion” for the resource-strapped CONTINUED FROM PAGE 14 whether either PEP makes sense ferent service providers: (k)Praeto- mutual funds” as well as alterna- small business owner, he said. for them, said Michael Duckett, rian uses Principal Financial Group tives, index funds, actively man- the most aggressive about pursu- Lockton’s Washington-based direc- as the record keeper, while EZ(k) aged funds and target-date funds, ‘Here to stay’ ing the PEP market. With three tor of outsourced administrative re- Flex uses Transamerica Corp. and said Vince Morris, president of The opportunity is such that PEPs in place, the  rm is looking sponsibilities. the Lockton plan uses Newport OneDigital Retirement + Wealth in  rms opting not to offer PEPs may to provide clients with a range of “As the third quarter begins, I ex- Group Inc. Overland Park, Kan. be “missing the boat,” said Robb plan options, said Samuel Henson, pect interest in the PEPs to explode The three PEPs also have differ- The PEP, which was  led with Smith, the Cape Canaveral, Fla.- Lockton’s Kansas City, Mo.-based among sponsors looking for a solu- ent investment lineups consisting the Department of Labor in July, based president of consulting  rm chief client of cer. tion like this for Jan. 1,” he said. of actively managed, index, tar- does not yet have any adopting em- RS Fiduciary Solutions and the “As we evaluated PEP opportu- The third Lockton PEP — get-date, stable value,  xed-income ployers as the  rm is just beginning founder of PEP-RFP.com, an online nities for us and our client base, we launched in June for employers and international fund options, Mr. to ramp up its marketing efforts. It business that helps plan sponsors quickly realized that a one-size- without workplace retirement plans Henson said. They use collective in- is aimed at small employers that and advisers search the PEP uni-  ts-all solution wouldn’t do,” Mr. as well as sponsors of small plans vestment trusts where possible to don’t have the resources to run and verse and identify pooled plans that Henson said. with up to $10 million in assets — keep costs low, he said. manage their retirement plans, Mr.  t their needs. Lockton’s two PEPs aimed at has not yet onboarded any clients. “The Lockton PEPs have been de- Morris said. Mr. Smith urges RIAs to offer sponsors of mid- to large-size plans However, the  rm has already writ- signed speci cally to bring the scale Mr. Morris sees the new PEP of- PEPs to their plan sponsor clients. with assets between $15 million to ten many proposals in response to and ef ciency typically only accessi- fering as “pairing well” with the “It’s absolutely another arrow in $500 million — (k)Praetorian and plan sponsor requests explaining ble to the megaplan market to plans health insurance brokerage services their quiver to offer to plan spon- EZ(k) Flex — went live on Jan. 1. the bene ts of the Lockton Pooled of all sizes,” Mr. Henson said. that the  rm offers some 28,000 sors because if they’re not going to The two PEPs have 10 plan spon- Retirement Plan, an encouraging OneDigital’s pooled employer small employers with less than 100 offer it, somebody else is going to Pensions & Investments July 26, 2021 | 19

Defined Contribution Courts posted strong asset gains. In 2020, U.K. agency releases proposal about Koch Industries assets in stable value swelled 14.7% to $417.2 billion, according to P&I data. agrees to settle “I think part of the growth in sta- collective defined contribution plans ble value can be attributed to par- David Mirzoeff/PA Wire ERISA lawsuit ticipants moving into the asset class By PAULINA PIELICHATA given the volatility in 2020 and all the uncertainty in the market,” The U.K. Department for Work for $4 million QMA’s Mr. Blanchett said, explain- and Pensions is seeking views from ing that stable value funds can be “a trustees and plan sponsors on its By JAMES COMTOIS very attractive place to park money draft collective defined contribution for the short-term.” plan regulation published July 19. Koch Industries agreed to “It’s an incredibly attractive op- The proposal follows the U.K. pay $4 million to settle a law- tion for someone who is worried Pension Schemes Act 2021, which suit accusing the company of about a market drop or any kind of permitted employers for the first allowing the record keeper other future economic uncertainty,” time to launch collective DC plans, of its 401(k) and other de- he said. also referred to as collective money fined contribution plans to Money managers also posted purchase plans. charge excessive fees in vio- healthy growth in assets managed In a CDC plan, income is secured lation of ERISA. under ESG principles, which surged by pooling plan participants’ assets The preliminary settle- to $2.04 trillion, up 30.3% from 2019, and investments, and participants ment agreement, which was according to survey data. bear the longevity and investment filed July 12 in federal court “ESG is obviously an area of in- risk. That is in contrast to defined in Atlanta, now awaits court creased interest not just in DC but benefit funds for which the spon- approval. across all investors,” Mr. Blanchard soring employer bears all the risk. MORE TO COME: Guy Opperman said the proposal is just the first step in regulation. The class action, filed July said, noting that concerns about The arrangement can give em- 16, 2020, by David Kinder ESG strategies in 401(k) plans ployers more predictable running The U.K. government said July 19 until Aug. 31. and Tracy Scott, said that have abated somewhat with the costs of plans, the DWP said July 19, that the regulation is aimed at sin- Commenting on the proposal, Si- Koch Industries breached its new administration. “I think it’s a also noting that CDC plans have gle-employer and industrywide mul- mon Eagle, senior director at con- fiduciary responsibilities as definite growth area and would ex- more potential to invest in illiquids tiemployer pension funds. The pro- sultant Willis Towers Watson, who administrator of the $8.1 bil- pect assets managed under ESG and could be more resilient to sud- posed regulation currently excludes advised Royal Mail, said that “the lion Koch Companies De- principles to continue to increase den market downturns. non-industrywide multiemployer government’s launch today of its fined Contribution Master in the future.” Under the government’s propos- plans such as master trusts from consultation on CDC regulations Trust, by failing “to prudent- al, a CDC plan could operate in the launching CDC plans or introducing represents another major step to- ly and loyally monitor and Looking ahead U.K. after satisfying the regulator’s CDC plans as a decumulation option. wards the introduction of CDC pen- control” the expenses in- As money managers head into authorization criteria regarding fi- “Right now our priority is to en- sions to the U.K.” curred by the plans’ record the final five months of 2021, indus- nancial sustainability, sound plan sure the full framework for single However, he added that only larg- keeper, Alight Solutions. try observers are cautiously opti- design and effective communica- employers and connected multiem- er employers with material resourc- Alight was not named in the mistic that market performance tion processes, verified by trustees ployer CDC schemes is in place as es are likely to set up their own CDC suit, Kinder et al. vs. Koch will enable the growth of DC assets and actuaries. soon as we can, and this consulta- plans in accordance with these, Mr. Industries Inc. et al. to surpass last year’s rate. Plan sponsors are required to tion is rightly focused on delivering Eagle said. The complaint further “DC assets will continue their as- have sufficient financial resources that. But we are not deaf to calls Chris Bunford, principal at con- said that Alight charged “up cent, supported by the rebound in and well-considered strategies to from those who wish us to go fur- sultant Lane Clark & Peacock, said to six times more than what the U.S. economy, the reopening of meet the costs of setting up and run- ther,” Guy Opperman, U.K. minister in an emailed comment: “It’s good similarly sized plans would America and employers shifting ning a CDC plan, DWP said. The reg- for pensions and financial inclusion, news that progress is being made in have paid for such services,” their focus to programs designed to ulator will require evidence of the said in a statement accompanying this space and we can now see a and that these actions cost re-engage their workforce,” Buck’s cost estimates, details of the plan’s the consultation. draft framework but a note of cau- the plans and their partici- Mr. Danaher said. sources of income, and the trustees’ “Once this first step is done, we tion needs to be struck.” pants “millions of dollars in The market, too, can help. If the strategy for meeting any of the plan’s will turn our attention to the grow- “Whilst these regulations might excessive fees.” market cooperates and continues asset shortfall vs. its target funding ing demand for these other types of facilitate the Royal Mail scheme, they David Dziok, a spokesman its upward trajectory, DC assets will level due to lower returns. provision,” he added. are potentially restrictive in terms of for Koch Industries, and Kai grow along with it. “As the equity Plan sponsors are also required The proposed regulation also ac- the acceptable designs. Companies H. Richter, a partner at the and fixed-income markets go, so to show they are ensuring commu- commodates Royal Mail’s ongoing wanting to implement CDC schemes law firm Nichols Kaster PLLP goes the growth of defined contri- nication is not misleading to plan plan to replace its £10 billion ($13.9 with different features to Royal Mail and attorney for the plaintiffs, bution plan assets,” Mr. Volo said. participants and that they are gath- billion) defined benefit fund with a may find they have to wait for future could not be immediately Mr. Blanchett sees other trends ering feedback from plan partici- CDC arrangement. regulations to give them a manage- reached for comment. n that could begin to boost DC assets pants through necessary IT systems. The consultation will be open able pathway,” he added. n beyond what the market returns for the year. The growing use of au- tomatic increases in employee con- Exhibit 3 Example of a demo portfolio’s rolling factor research kit when performing tributions and efforts to retain re- due diligence on prospective tiree assets in-plan, he says, are Botte contributions to return managers. It goes beyond trends that could help the overall surface-level performance CONTINUED FROM PAGE 11 Rolling 3-year data from Dec. 20, 2011, through May 27, 2021. asset growth. metrics to the underlying sources “I think that there are things importance over time. Current portfolio of risk and return. Excluded factor happening that could result in as- Current portfolio This just scratches the surface sets in DC plans growing more than How stable is the manager’s of the insights that factor analysis just the market lift,” he said. n residual return? As Citigroup Equity 8.21% can unlock. Breaking down a observed in a report last year, Interest rates 1.02% manager’s risk and return into “leading asset owners have Credit -- their underlying drivers can open do it for them,” he said. enhanced their ability to identify Commodities -0.17% other useful lines of quantitative So far, more than 100 PEPs and and measure idiosyncratic as Emerging markets -- inquiry, such as drawdown simula- some 65 pooled plan providers opposed to factor-driven returns Foreign currency -0.44% tions, estimates of forward-looking have registered with the Depart- and are shifting their allocation Local in ation -- performance during market ment of Labor, he said. He antici- approach to emphasize the Local equity 0.49% shocks and regime analysis. pates that the number of registered former.” Factor analysis can Equity short volatility -- More importantly, factor PEPs could easily surpass 200 by reveal not only whether a Fixed income carry -- analysis empowers the investor to the end of 2021. manager has delivered positive Foreign exchange carry -- ask questions that otherwise “I believe the PEP market is here residual returns historically, but Trend following 0.70% wouldn’t have been asked and to to stay,” Mr. Smith said, noting the also whether those residual Low risk -- identify gaps between what’s demand for PEP searches on PEP- returns have been consistent. Momentum -- shared in a marketing deck and RFP.com. Rolling factor return attribu- Quality -0.35% risk exposures that are evident in “We’re seeing a lot of interest tion can uncover deterioration in Value -2.09% past returns. Such insights can both from advisory firms and plan a manager’s ability to produce Small cap -0.48% greatly enhance an investor’s sponsors,” he said. returns that surpass what can be Crowding -0.15% overall picture of a prospective To Mr. Smith’s surprise, even earned by exposures to known Residual 1.37% manager when paired with the larger plans with $50 million to risk factors. Any decay in the Risk-free rate 1.26% qualitative side of their assess- $500 million in assets and more residual return might be some- Total 9.37% ment process. n than 100 participants are looking at thing worth digging into to Dec. ’14 Oct. ’15 Aug. ’16 June ’17 April ’18 Feb. ’19 Dec. ’19 Oct. ’20 June ’21 PEP options. “We never thought understand how a manager Source: Venn by Two Sigma This content represents the views of the we’d see the amount of interest at expects to turn it around, author. It was submitted and edited under the large plan market that we’re especially if the investor is source to diversify their portfolio Factor analysis can be an Pensions & Investments guidelines but is seeing,” he said. n seeking an uncorrelated return (see Exhibit 3). effective tool in a quantitative not a product of P&I’s editorial team. 20 | July 26, 2021 Pensions & Investments PEOPLE MOVES

by April 2020 legislation to sepa- Illinois Municipal Retirement gets new CIO from Chicago Teachers rate the oversight of the state’s County Employees Retirement Angela Miller-May was named T.J. Carlson was named CIO at System from the Kentucky Retire- chief investment officer of the Illi- Missouri State Employees’ Retire- ment Systems. nois Municipal Retirement Fund, ment System, Jefferson City, con- The entity now known as Ken- Oak Brook. firmed spokeswoman Candy Smith tucky Retirement Systems oversees Ms. Miller-May will join the in an email. the administration of the Kentucky $53.1 billion pension fund on Aug. Effective Oct. 1, Mr. Carlson re- Employees Retirement System and 16, spokesman John Krupa said in places Shannon Davidson, who is the State Police Retirement System. an email. retiring from the $9 billion pension Mr. Owens previously was a con- She will replace Dhvani Shah, fund on Nov. 1. He will report to sultant for Project Golden Eagle, a who left in December to become Ronda Stegmann, MOSERS’ execu- group of African American busi- CIO of Deerfield Beach, Fla.-based tive director. Angela Miller-May T.J. Carlson Rebecca Wyke Rod Paris nessmen seeking to acquire a pub- JM Family Enterprises Inc. Mr. Carlson is CIO at the $34.5 bil- licly traded middle-market compa- IMRF Executive Director Brian lion Texas Municipal Retirement CIO, the spokeswoman confirmed. 15 years ago from the merger of two ny, and Mr. Chilton, a board member Collins has been serving as interim System, Austin. He was named to the Instead, abrdn, which is the new smaller funds with A$21 billion in of the former KRS, was the state’s CIO since Ms. Shah’s departure. position in 2013. A TMRS spokes- name for Standard Life Aberdeen, retirement assets. budget director and former mem- Ms. Miller-May is currently CIO woman confirmed his departure but is changing its investment man- ber of the Public Pension Oversight of the $12.8 billion Chicago Public declined to comment further. agement structure. Heads of pub- Sarah Green was named execu- Board. School Teachers’ Pension & Retire- lic markets, real assets, solutions tive director of the Oklahoma ment Fund. She said in an email Rebecca Wyke was named CEO and central investments will re- Teachers’ Retirement System, the Yu “Ben” Meng was named exec- that her last day at that pension of the Maine Public Employees Re- port directly to the firm’s CEO, Ste- $22 billion pension fund said in a utive vice president and chairman fund will be Aug. 13 and staff and tirement System, Augusta. phen Bird. news release. of Asia-Pacific at Franklin Temple- the board are meeting internally to Ms. Wyke, who will join the $17.6 Ms. Green succeeds Tom Spen- ton, spokeswoman Lisa Gallegos discuss an interim CIO. billion Augusta-based pension fund Ian Silk plans to step down as cer, who retired June 30. confirmed in an email. Earlier in the month, Carlton W. later this summer, will replace San- chief executive of A$230 billion She has served as general coun- It is a new position. Effective July Lenoir Sr. was named executive di- dra J. Matheson, who has the title of ($172.2 billion) Melbourne-based sel for the Oklahoma Teachers’ Re- 15, the former CalPERS CIO will be rector of the Chicago Public School executive director. AustralianSuper later this year af- tirement System since 2018. Prior responsible for expanding Franklin Teachers’ Pension and Retirement Ms. Wyke is the current presi- ter 15 years leading the country’s to that, she was a partner at Bullard Templeton’s investment offerings Fund, pension fund spokeswoman dent of the University of Maine in biggest superannuation fund. & Associates, an Oklahoma City- within the Asia-Pacific region, par- Michelle L. Holleman confirmed in Augusta and had previously served A spokesman for the fund said based law firm. ticularly the firm’s private equity, an email. as vice chancellor for finance and the chief executive’s term has no venture capital and other alterna- Effective Aug. 2, he replaces Jef- administration at the University of set end date but he will give up the Ed Owens III was named CEO of tives capabilities. He will report to fery Blackwell, who became interim Maine System. helm before the end of 2021. the $8.1 billion Kentucky County Jennifer M. Johnson, president and executive director in March after Paul Schroder, the fund’s chief Employees Retirement System, and CEO, and serve on the firm’s execu- Mary Cavallaro retired in January. Rod Paris, CIO of abrdn is de- risk officer, will take on the chief John Chilton was named CEO of the tive committee. Mr. Lenoir was chief benefits of- parting from the firm at the end of executive position at that time, a $3.7 billion Kentucky Retirement Franklin Templeton had about ficer at the $62.2 billion Illinois the year, a spokeswoman said. news release said. Systems, spokesman Chris Clair $165 billion in assets under man- Teachers’ Retirement System, Following Mr. Paris’ decision to He has guided the organization said in an email. agement for the Asia-Pacific region Springfield. retire, abrdn is not hiring a new since AustralianSuper was formed Both are new positions, created as of May 31. Connect with us.

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DCW.pdf RunDate: 07/26/21 Full Page Color: 4/C 22 | July 26, 2021 Pensions & Investments HIRINGS

„ Abilene (Texas) Firemen’s Crewcial Partners did rebid for the Street Equity Advisors at its July 8 Relief and Retirement Fund hired services, she said. Three finalists meeting, said James Bennett, chief PGIM Fixed Income to run $1 million in were interviewed, but the names of BRUNEL TAPS 3 FOR MULTIASSET CREDIT investment officer. active emerging markets debt. the finalists are confidential, Ms. Brunel Pension Partnership, Bristol, England, hired three managers The commitment is subject to final The $57 million pension fund’s Davis said. to run a £2.1 billion ($2.9 billion) allocation to multiasset credit, a due diligence, legal review and board approved the hiring at its May An asset allocation was not spokesman confirmed. negotiations, Mr. Bennett said. 18 meeting, recently released meeting available, but she said the founda- The pool of local authority pension funds, which manages £30 MainePERS previously committed minutes show. tion’s investment pool “relies on a up to $25 million to High Street Real billion in assets on the funds’ behalf, selected Neuberger Berman, Other finalists in a shortlist search long-term investment strategy — one Estate Fund VI in 2018. were Capital Group and Lazard Asset that’s diversified across a wide range Oaktree Capital Management and CQS. As of March 31, the pension fund’s Management. of asset classes, including alternative Neuberger Berman will manage 60% of the allocation, while actual allocation to real estate was The funding source was not assets such as private equity, hedge Oaktree and CQS will run 20% each. The portfolio will consist of 8.3%; the target is 10%. provided in the minutes. funds and absolute return strategies.” high-yield corporate bonds, bank loans, asset-backed securities and Investment consultant AndCo Alpha Capital Management assisted emerging market debt. „ Maryland-National Capital Consulting assisted. with the search. “After a rigorous search and analysis process, we identified three Park and Planning Commission Rodney Goodman, plan administra- managers who displayed the investment expertise and responsible Employees’ Retirement System, „ tor, could not be immediately reached Shawn T. Wooden, state treasurer investment acumen we were looking for — as well as providing a Riverdale, Md., committed $45 million for further information. and fiduciary of the $43 billion to Wilshire Private Markets Group diversity of styles,” David Cox, head of listed markets at Brunel, said Connecticut Retirement Plans Series III. „ Alameda County Employees’ & Trust Funds, Hartford, announced July 22 in a news release. The $1.1 billion pension fund’s Retirement Association, Oakland, at the state’s investment advisory The selected managers are aligned with Brunel’s climate change board approved the private equity fund Calif., committed $50 million to council meeting July 14 his decision to policy. of funds at its June 1 meeting, recently Starwood Distressed Opportunity commit €150 million ($178 million) to The RFP was issued in July 2020. released meeting minutes show. Fund XII. ICG Europe Fund VIII, a middle-market The pension fund’s target allocation The $10.1 billion pension fund’s debt fund managed by Intermediate to private equity is 7.5%. board approved the commitment to the Capital Group; $150 million to boutique Cameron Hume to manage a plan committed $100 million to Smart Investment consultant Wilshire opportunistic real estate fund Strategic Value Special Situations A$125 million ($93 million) ESG-fo- Infrastructure Capital Partners Fund I, assisted. Also at the meeting, the managed by Starwood Capital Group at Fund V, a special situations fund cused fixed-income allocation, a fund focusing on smart technologies board approved a waiver of certain its June 17 meeting, managed by Strategic confirmed Bill Watson, the A$3.4 in the energy and transportation prohibitions of its code of ethics and ACERA spokesman HAVE SOME NEWS? Value Partners; and billion super fund’s CEO. sectors managed by Smart Infrastruc- an annual review of any potential Michael Fara $125 million to Basis A news release from Cameron ture Managers. conflicts of interest between Wilshire confirmed. Please submit news of Investment Group Real Hume said there’s “scope for the LACERA also committed up to Private Markets Group and Wilshire’s As of March 31, the changes to David Schepp, Estate Fund II. mandate to increase to A$500 million $125 million to Webster Capital V, a consulting group. news editor, at dschepp@ pension fund’s actual Mr. Wooden told the as First Super implements its middle-market buyout fund focused Andrea L. Rose, administrator, could pionline.com allocation to real council that he is also responsible investing policy,” but Mr. on health-care services companies not be immediately reached for further estate was 6.2%; the considering commit- Watson, in an email, said no decisions and managed by Webster Equity information. target is 8%. ting a total of $275 million to two have been made at this point regarding Partners, and up to $100 million to funds and making a follow-on future commitments. Bain Capital Real Estate Fund II, a „ New Jersey Division of „ Baltimore City Employees’ commitment to another fund within the The fund’s most recent annual non-core real estate fund investing Investment, Trenton, selected PGIM Retirement System committed pension fund’s portfolio. report for its fiscal year ended June across property sectors. to manage up to $1 billion in a global $30 million to Avance Investment The possible commitments include 30, 2020, showed a total of eight fixed diversified private credit strategy. The Partners. a $200 million commitment to income allocations with combined „ Louisiana Assessors’ Retire- division, which oversees the invest- The $2 billion pension fund’s board Centerbridge Partners Real Estate assets under management of ment Fund, Baton Rouge, hired ment management of the $90.7 billion approved the commitment to the Fund II; and $75 million to Aldrich A$623.3 million. Driehaus Capital Management to run New Jersey Pension Fund, Trenton, is buyout fund managed by Avance Invest- Capital Partners Fund II, a growth An assistant to Mr. Watson, in an about $13 million in active internation- underweight its 8% target to private ment Management at its May 20 equity fund. email, said the fund’s allocation to al small-cap equities. credit, so the allocation seeks to help meeting, spokeswoman Aja Dorsey Finally, Mr. Wooden said he is Cameron Hume marks its first The $511 million pension fund hired bring it back on target. Jackson said in an email. considering making a follow-on ESG-focused fixed income allocation. the manager to add further diversifica- The division also committed up to As of March 31, the actual commitment of $50 million to Leeds In the Cameron Hume news release, tion to the international equity asset $300 million in a separate account allocation to private equity was 10.3%; Equity Partners VII, a private equity Mr. Watson predicted “you will see class, said Jon Breth, senior consul- managed by TGM Associates, which the target is 13%. fund investing in education, training, more institutional investors looking for tant at AndCo Consulting, the pension targets non-core multifamily real Investment consultant Marquette information services and software managers in this asset class ... with a fund’s investment consultant. estate investments; and up to $200 Associates assisted. companies. Mr. Wooden originally good ESG methodology.” Funding comes from rebalancing, million to TPG Rise Climate, a buyout committed $75 million to the fund in Mr. Breth said. Some funding will come fund with an impact investing focus. „ Belmont (Mass.) Contributory June 2020. „ Lexington (Mass.) Contributo- from domestic equities, which are Retirement System selected Eaton ry Retirement System made two above their target, with some funding „ NGS Super hired American Vance to manage $6 million in an „ East Bay Municipal Utility new direct lending commitments from slight reductions in the portfolios Century Investments to manage A$150 emerging markets debt blended District Employees’ Retirement totaling $10 million. of existing active international equity million ($112 million) in global currency strategy, board meeting System, Oakland, Calif., rehired The $198 million pension fund’s managers Capital Group and Thomp- small-cap equity, an investment minutes from the $130 million defined Northern Trust Corp. as custodian, said board approved committing $5 million son Siegel & Walmsley, and passive executive with the A$12 billion benefit plan show. Sophia D. Skoda, the district’s director each to funds managed by Golub international equity manager State Sydney-based fund confirmed July 19. NEPC, the retirement system’s of the finance. Capital and Monroe Capital at its June Street Global Advisors. He could not The allocation was funded, in part, investment consultant, assisted with The $2.3 billion pension fund 24 meeting, recently released meeting immediately provide specific amounts. by a shift into small-cap equities from the search. issued an invitation-only request for minutes show. The minutes did not AndCo Consulting assisted. developed market large-cap equities The RFP was issued in March at information to a shortlist of firms provide fund names. and some emerging markets equities, NEPC’s recommendation. It is a new earlier this year because it had not put The pension fund had issued an „ Louisiana School Employees’ said Lucas Hartmann, senior manager allocation for the plan. Funding will the services up for bid since 1997, RFP in March for “managers of Retirement System, Baton Rouge, of liquid assets, in an interview. come from rebalancing. Ms. Skoda said in an earlier interview. diversified strategies that directly committed $30 million to Henderson That money was initially moved into The selection was made at the U.S. Bank was the other finalist. originates and invests in the senior Park Real Estate Fund II. passively managed small-cap global board’s May 24 meeting. MetLife Separately, the board at its meeting secured debt,” the RFP said at the The $2 billion pension fund’s board equities during the second half of Investment Management, Neuberger July 15 voted to move its actively time. approved the commitment to the 2020 while NGS conducted a Berman and Ninety-One were the other managed international equity assets Investment consultant Meketa opportunistic real estate fund manager search, which ultimately finalists. to existing passive international equity Investment Group assisted. managed by Henderson Park Capital culminated in the selection of Robert Soohoo, the pension fund’s manager Northern Trust Asset Marguerite Oliva, administrator, Management at its meeting July 12, American Century, he said. executive director, could not be Management. could not be immediately reached for said Matthew Freedman, chief American Century said in a news immediately reached for additional At its May 20 meeting, the board further information. investment officer, in an email. release that its business in Australia information. had voted to move all its international LSERS previously committed $30 has grown to A$2.5 billion since the equity assets to passive management „ Los Angeles County Employ- million to Henderson Park Real Estate firm planted its flag there in 2018. „ Community Foundation of to eliminate growth bias and signifi- ees Retirement Association, Fund I in 2018, and made a follow-on A spokeswoman for the firm said Greater Atlanta hired Disciplina cantly reduce management fees. Pasadena, Calif., committed a total of commitment of $10 million to that institutional mandates account for Group as non-discretionary investment The move will result in the termina- up to $825 million to four alternative fund in 2019. A$1.75 billion of that total, with consultant for its $400 million tion of Fisher Investments from its investment funds, the $70.9 billion As of Dec. 31, the actual allocation wholesale/platform business investment pool, said Diana Champ $187 million active portfolio, pension fund reported. to real estate was 12.1%; the target accounting for the remaining A$750 Davis, vice president, capacity, and increasing Northern Trust Asset The board on July 14 in closed is 12%. million. chief financial officer. Management’s portfolio to $619 session committed up to $500 million Globally, American Century reported The foundation issued an RFP million. to KKR Diversified Core Infrastructure „ Maine Public Employees’ roughly $238 billion in assets under because its incumbent consultant of Investment consultant Meketa Fund, a core infrastructure fund Retirement System, Augusta, management as of July 12, the news 17 years, Crewcial Partners (formerly Investment Group assisted with the managed by KKR & Co. that is approved a commitment of up to $35 release said. Colonial Consulting), had hired a new custodian search and international expected to focus on investments in million to High Street Real Estate CEO with a new vision and the equity changes. utilities, renewables, telecommunica- Fund VII. „ Ohio School Employees foundation felt it was a good time to tions, transportation, energy transition The $17.6 billion pension fund’s Retirement System, Columbus, review the current market, Ms. Davis „ First Super, Melbourne, hired and other sectors. board approved the commitment to the approved a manager hiring and said. Edinburgh-based fixed income Also in infrastructure, the pension real estate fund managed by High commitment totaling $250 million. Pensions & Investments July 26, 2021 | 23 HIRINGS

The $17.5 billion pension fund’s Nautic Partners X, a transaction transaction report showed. infrastructure portfolio. minutes show. investment committee approved hiring report showed. In 2020, the system’s investment The $33.5 billion pension fund Investment consultant Cambridge State Street Global Advisors to manage Nautic Partners is an existing of ces committed $2 billion to 32 originally committed $50 million to the Associates assisted. $200 million in passive domestic manager for the $38.5 billion pension private equity/venture capital funds fund in June 2018. University spokeswoman Erin large-cap value equities and commit- fund, which committed $50 million in from 25 rms, a transaction report As a matter of policy, the system Dickinson referred questions to the ting $50 million to GoldenTree 2019 to the previous fund in the showed. does not identify the manager or minutes. Distressed Fund IV, a distressed debt series. investment target of co-investments. fund managed by GoldenTree Asset Nautic Partners’ portfolio managers  Texas Employees Retirement  Wichita Falls (Texas) Fire- Management, at its July 15 meeting, will seek investments in U.S. growth System, Austin, committed $90  University of Vermont and men’s Relief & Retirement Fund spokesman Tim Barbour con rmed in middle-market buyout opportunities in million to two co-investment funds in State Agricultural College, agreed to commit $2 million to Carlyle an email. health care, industrial and out- June, a transaction report showed. Burlington, committed $3 million to Property Investors, an open-end Funding comes from cash. SERS sourced-services sectors. The largest commitment was $75 TrueBridge Seed & Micro-VC Fund I for core-plus real estate fund managed by previously committed $50 million to As of March 31, TCDRS’ private million to CO20210602, a real estate its $625 million endowment pool. the Carlyle Group, con rmed Chris GoldenTree Distressed Fund III in equity/venture capital portfolio totaled co-investment, from ERS’ $4 billion The university’s investment Duncan, plan administrator for the $47 2019. $7.8 billion. private real estate portfolio. subcommittee approved the commit- million pension fund, in an email. As of May 31, the actual alloca- As of July 19, TCDRS committed An additional $15 million commit- ment to the early stage venture The commitment was made at the tions to domestic equities and global $1.2 billion to 20 private equity/ ment was made to CO20180629, a capital fund managed by TrueBridge pension fund’s June 16 meeting. private credit were 25.9% and 1.9%, venture capital funds run by 15 private infrastructure co-investment, Capital Partners at its May 18 AndCo Consulting assisted with the respectively. managers, the system’s 2021 from the system’s $1.3 billion meeting, recently released meeting decision.

 Philadelphia Board of Pen- sions & Retirement hired MFS Investment Management and Fidelity Investments to manage $75 million each in global low-volatility equities strategies and selected Northern Trust Introducing Digital HTML Reprints as its global custodian, con rmed Christopher DiFusco, CIO of the $7.2 billion pension fund, in an email. The board selected the managers A new way to share Pensions & Investments’ and custodian on May 27. The low-volatility search was launched in January 2020 as part of content with your digital community the board’s long-term asset allocation plan. It is a new allocation for the pension fund. PanAgora Asset Management was the other nalist. The search for a custodian was launched in October to comply with city ordinance requiring contracts to go out to rebid every four years. Northern Trust replaces the board’s current custodian, J.P. Morgan Chase, which did not rebid, according to meeting minutes.

 Royal Mail Group, London, hired Equiniti as administration software provider for its new collective de ned contribution plan, a Royal Mail spokeswoman con rmed. Equiniti’s platform Compendia was chosen by Royal Mail Group to meet the speci c requirements of its Royal Mail Collective Pension Plan such as working out the target value of the collective retirement assets and the gap between the target and actual level of asset/liability value. In a collective de ned contribution plan retirement, income is secured by pooling plan participants’ assets and investments, and participants bear the risk, in contrast to de ned bene t funds where the sponsoring employer bears all the risk. At the same time, in We're excited to oer the next level of article reprints! a CDC plan the employer contribution Customize your P&I Digital is xed. A stand-alone HTML link that will never be placed behind a Royal Mail is replacing its £10 HTML Reprints with: billion ($13.9 billion) de ned bene t subscription paywall. The HTML Reprint can be licensed to • Your corporate logo plan with a CDC plan. It expects to post to your website, share on social media, used in email start enrolling its U.K. employees into • Highlighted quotes or the new plan beginning in 2022. correspondence, presentations and so much more. call-out boxes

 Texas County & District Retirement System, Austin, made Select from news articles (print and digital), rankings, opinion • Custom hyperlinks within its 20th commitment to private pieces, editorials, awards and more. HTML Reprints have the article text equity/venture capital so far this year with $100 million earmarked for same look and feel as traditional reprints including photos, • Key contact details charts and infographics. • Photos • and more... Search our archives. Contact Laura Picariello at [email protected] or 732.723.0569 for pricing and details.

www.pionline.com 24 | July 26, 2021 Pensions & Investments

Pensions & Investment July 26th 1 col x 2” CAREERS RFP RFP

Metropolitan Transportation Authority The New York State Common Retirement Fund Request For Proposals Chief Investment Officer Requests for Proposals (RFPs) The Metropolitan Transportation Authority (MTA) on behalf of itself, its subsidiaries and affiliates are RFP 21-10 soliciting responses from qualified firms interested Take your portfolio management skills to the next level. We in providing Investment Consulting Services for offer an exceptional opportunity. Join this prominent New York Investments Counsel MTA’s 401k and 457 Plans. To obtain information about the request for proposal and register for this City-based not-for-profit. This is a professional, hands on en- The New York State Common Retirement Fund has a diversifi ed investment portfolio procurement, please contact Adam Ellsworth at (203) 434-3918 or at [email protected]. Any vironment. At the outset the CIO will have responsibilities with a range of investments in public equity, fi xed income, credit, real estate, private firm that registers is under no obligation to submit a equity, real assets, absolute return and opportunistic strategies. The Comptroller of the proposal. It is anticipated that the documents will be including manager selection, based on strong risk analysis, State of New York, as the Trustee of the New York State Common Retirement Fund, available on or about July 19, 2021. Pre-Proposal Conference will be held on August 16th, 2021. RFP quantitative and analytic market positioning. seeks to select and retain qualifi ed law fi rms to provide expertise and legal services in Due date is August 31, 2021. Prospective suppliers four different Service Modules: who wish to participate in the Pre-Proposal Conference are requested to notify Alexander Botkhin at [email protected] no later than As a strategic thinker, the CIO will work alongside senior man- Module 1: Real Estate Investments Counsel 4:00pm on August 12th, 2021. agement. We welcome an industry veteran with a minimum of Module 2: Private Funds Investments Counsel five to ten years of direct experience across all asset classes Module 3: Corporate Transactional Investments Counsel (equity, fixed income, real estate, alternatives, liquid and illiquid Module 4: Affordable Housing Permanent Loan Program Counsel Proposals may be submitted for one or more Service Modules. investments). The right fit will have been in the first or second investment chair at a university endowment, foundation, pension RFP 21-11 NOTICE fund or family office. MBA or CFA (major in finance) preferred. Fiduciary Counsel RFP Direct experience in attribution analysis required. The Comptroller of the State of New York, as the Trustee of the New York State Com- THE TEACHERS’ RETIREMENT mon Retirement Fund, seeks to select and retain a qualifi ed law fi rm to serve as outside SYSTEM OF LOUISIANA THE TEACHERS’ RETIREMENT SYSTEM OF LOUISIANA SOLICITS GLOBAL FIXED INCOME Please e-mail, on a strictly confidential basis, your resume Fiduciary Counsel to provide expertise, legal services and advice on fi duciary matters relatingSOLICITS to investments GLOBAL and FIXED application INCOME and interpretation MANAGER of SERVICES ERISA-based principles MANAGER SERVICES with cover letter and salary expectations to and similar New York State law and regulations. [email protected]. The Board of Trustees of the Teachers’ Retirement System of Louisiana, with assets of The Board of Trustees of the Teachers’ approximately $26 billion,Information solicits aboutproposals these for RFPs Global may Fixedbe obtained Income at: manager. To Retirement System of Louisiana, with obtain a copy of the SFP go http://www.osc.state.ny.us/procurementto www.trsl.org. The deadline for receipt of responses is assets of approximately $26 billion, so- no later than 4:30 p.m., CDT, August 16, 2021. licits proposals for Global Fixed Income manager. To obtain a copy of the SFP go to www.trsl.org. The deadline for re- CAREERS 8” Display Ad + Online + E-mail Blasts ceipt of responses is no later than 4:30 2” Display Ad p.m., CDT, August 16, 2021. RFP$4,752 STRS Ohio $1,638 per issue Chief of Staff, Investments The New York State Common Retirement Fund The State Teachers Retirement System of Ohio (STRS Ohio) is seeking a Chief of Staff, Invest- Requests for Proposals (RFPs) ments. Under the direction of the Deputy Executive Director, Investments, and Chief Invest- ment Officer (CIO), this position will assist the CIO in thePlease management sign of below the entire to Invest approve- the above ad for publicationRFP in (21-06) Pensions & Investments. 13 Line Ad + Online + E-mail Blasts ment Department to ensure quality management and performance of the total investment $1,380 assets. STRS Ohio currently manages investment assets of $93.4 billion, with approximately Securities Litigation Counsel, Corporate Governance Counsel, 70% of STRS Ohio’s investment assets managed internally by more than 100 Investment De- Delaware Corporate Law Counsel, and Securities Litigation partment professionals. Established in 1920 and serving X______more than 495,000 active, inactive Evaluation Counsel and retired Ohio educators, STRS Ohio is one of the nation’s premier retirement systems pro- viding retirement benefits, access to health care coverage and many other services to its mem- The Comptroller of the State of New York, as the Trustee of the New York State Com- bership. STRS Ohio is located in downtown Columbus, Ohio’s capital city. To apply or view the mon Retirement Fund, seeks to select up to four pools of qualifi ed law fi rms to serve as position requirements, visit www.strsoh.org/jobs/htm. counsel to perform services in connection with: 1. securities class action litigation, direct litigation, or shareholder derivative Advertise your RFP in Compensation & Benefits actions, corporate governance matters related to such litigation, Pensions & Investments, Salary: Competitive investment-related litigation, and investment or securities matters generally, whether or not the subject of litigation; and reach the top investment STRS Ohio provides a comprehensive benefits package including free on-site parking, educa- 2. corporate governance matters; managers and service providers tion assistance, subsidized medical insurance, fully paid dental and life insurance, vacation and 3. Delaware corporate law matters; and in the money management industry. sick leave, retirement benefits and an on-site fitness center. 4. evaluation of securities litigation matters. P&I RFPs | Print. Online. Email. Information about this RFP may be obtained at: 6” Display Ad+ Online + E-newsletters https://www.osc.state.ny.us/procurement Place your ad today. $4,250 per issue Contact Erin Smith at CAREERS (212) 210-0719 for details. 6” Display Ad + Online + E-mail Blasts Vice President, Alternatives Research $3,714 www.pionline.com/RFPs Wilshire is seeking to recruit an investment professional to help lead research and due Your company’s best diligence efforts across all private market segments (private equity, private credit, real investment strategy! assets) in North America.Reach a targeted audience of executive investment professionals. Minimum 5 years of direct experience in private equity industry. MBA or CFA preferred. Place your ad today! 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X______Pensions & Investments July 26, 2021 | 25 PRIVATE FUND ROUNDUP CalPERS CONTINUED FROM PAGE 6 While it’s the board’s job to select Hellman & Friedman’s largest buyout fund hits $24.4 billion the asset allocation, a key part of the CIO’s job is to advise the board on Hellman & Friedman closed its sissippi Public Employees’ Retire- GHO Capital Fund III, a European manager’s inaugural drawdown its asset allocation and manage the largest buyout fund to date, Hell- ment System, Jackson; the $21.1 health-care buyout fund, at €2 bil- fund well exceeded its $750 million pension fund’s investments, accord- man & Friedman Capital Partners billion Kansas Public Employees lion ($2.4 billion). fundraising target, a spokeswoman ing to CalPERS’ last CIO job posting. X, at its $24.4 billion hard cap, ac- Retirement System, Topeka; the The fund closed above its fund- said in an email. According to information pro- cording to a news release. $12.8 billion Chicago Public School raising target of €1.25 billion, a The fund targets “distressed and vided to the board on the first day of Hellman & Friedman is the Teachers’ Pension & Retirement spokesman said in an email. The stressed corporate debt, structured its meeting on July 12, Mr. Bien- largest investor in the fund with a Fund; and the $1.7 billion Memphis previous fund, GHO Capital Fund products, and asset-backed invest- venue told the board that he ex- $1.8 billion general partnership (Tenn.) Light, Gas & Water Division. II, closed at €975 million in 2019. ments, as well as claims and pected to complete the asset-liabil- commitment. The Madison-based State of The newly closed fund will claim-related opportunities,” a ity management process with a new The fund focuses on making Wisconsin Investment Board, “maintain GHO’s thematic focus in news release said July 22. asset allocation in November, a large-scale equity investments in which manages $148.8 billion in as- identifying attractive health-care Investors include the $65.5 bil- month before a new CIO is selected high-quality, growing companies, sets, including the $132 billion Wis- subsectors, building businesses of lion Maryland State Retirement & under the target timeline. primarily in the U.S. and Europe. consin Retirement System, is strategic global value,” a July 21 Pension System, Baltimore. Mr. Bienvenue said the new asset “HFCP X represents both our among investors in Heitman Real news release said. allocation could include an expan- largest fund and the largest com- Estate Debt Partners II. Investors include the $70.9 bil- Kohlberg joins BlackRock, sion of private equity and real asset mitment from H&F to date, reflect- lion Los Angeles County Employ- GIC for continuation vehicle allocations, a new private debt allo- ing our deep conviction in the firm’s EQT Exeter closes $2.5B ees Retirement Association, Pasa- cation and leverage added to the en- strategy and strong alignment with dena, Calif. Kohlberg & Co. has completed a tire portfolio. The approaches are our investors,” said Philip Ham- European logistics fund GHO Capital has €5 billion in as- general partner-led transaction similar to approaches favored by marskjold, executive chairman, in EQT Exeter closed European lo- sets under management. closing its first continuation vehicle, CalPERS’ former CIO Yu “Ben” Meng. the news release. gistics fund EQT Exeter Europe co-led by BlackRock, Singapore During the discussion, Dore Investors in the fund include the Logistics Value Fund IV at €2.1 bil- H.I.G. WhiteHorse raises sovereign wealth fund GIC and Partnership presented the board $148.8 billion State of Wisconsin lion ($2.5 billion), a spokeswoman Lexington Partners, a spokeswom- with five CIO criteria: relevant in- Investment Board, Madison, $38.1 confirmed. $1.65B direct lending fund an confirmed. vestment experience, leadership, billion Texas County & District Re- The firm did not disclose the H.I.G. Capital’s credit business The continuation vehicle holds communication, fitness for a public tirement System, Austin, $34.5 bil- fund’s initial target, the spokes- closed its latest fund, H.I.G. White- the remaining four assets in Kohl- role and a sense of mission. lion San Francisco City & County woman said. Horse Direct Lending Fund – 2020, berg Investors VII, a 2012 fund that Dore executives told the board Employees’ Retirement System, $33 The value-added strategy is fo- with about $1.65 billion in total as- had raised $1.6 billion, and is the their data analysis showed that billion New Mexico State Invest- cused on acquiring, developing, sets, exceeding its fundraising tar- first continuation vehicle to be es- top-performing CIOs at other funds ment Council, Santa Fe. leasing, operating and selling big- get, according to a news release. tablished by Kohlberg & Co. had been internal candidates. box warehouse facilities as well as H.I.G. WhiteHorse’s latest fund Kohlberg gave limited partners in Rich Hutton, a partner at Dore, Heitman hauls in last mile and light industrial prop- will originate senior secured loans it is seventh fund the options to fully who leads the firm’s engagement erties in Western Europe. primarily for non-private equi- liquidate their investments, roll over with the global asset management $3.2B from 3 funds Investors across North America, ty-backed U.S. companies. their investors or reinvest new capi- community, noted that 48% of asset Heitman closed three of its private Europe, Asia and the Middle East “The next several years will pres- tal in the continuation fund. owner CIOs whose plans earned a funds, raising about $3.15 billion in committed to the fund, the firm said ent a compelling opportunity to “GIC is pleased to work with our five-year annualized 7% rate of re- capital commitments among them. in a news release July 19. partner with non-sponsor-owned partners at Kohlberg, BlackRock, turn or more had been promoted, The real estate money manager Among investors was the $254.8 companies in need of private debt and Lexington to provide a fair and with remainder being external can- said July 20 that it raised roughly billion New York State Common solutions,” said Stuart Aronson, transparent option to existing Fund didates. Dore Partnership’s data $1.9 billion for Heitman Value Part- Retirement Fund, Albany, which head of U.S. direct lending, in the VII limited partners,” said Choo showed that the average tenure of ners V, a North American closed- committed €200 million, according release. Yong Cheen, CIO of private equity the organizations with returns of an end value-added real estate fund, to its website. Investors in the fund include the at GIC. annualized 7% return was 5.1 years. exceeding its hard cap. It also re- In January, private equity firm $137.9 billion New York State Teach- Investors in Kohlberg Investors “Putting these two datasets to- ceived $750 million in capital com- EQT agreed to acquire real estate ers’ Retirement System, Albany. VII include $25.9 billion Louisiana gether ... it is clear that continuity is mitments for Heitman Global Real manager Exeter Property Group in Teachers’ Retirement System, Ba- one of the key drivers” of invest- Estate Partners II, a global core- a $1.8 billion deal, creating EQT King Street drawdown ton Rouge; $23.5 billion Idaho Pub- ment performance, Mr. Hutton said. plus fund; and $500 million for Exeter. lic Employee Retirement System, Heitman Real Estate Debt Partners fund gets $1.2 billion Boise; and $17.4 billion Ohio School Few diverse CIOs II, a North American high-yield GHO Capital brings in King Street Capital Management Employees Retirement System, Co- During the discussion, a number debt fund. closed the King Street Global lumbus. of board members noted that there Investors in Heitman Value Part- $2.4B for health-care fund Drawdown Fund at $1.2 billion. Kohlberg & Co. declined to com- were very few diverse CIOs. Only 10 ners V include the $33.7 billion Mis- GHO Capital Partners closed The closing for the private credit ment further. of the 100 pension plans, endow- ments, foundations and sovereign wealth funds in Dore’s dataset are Gaining scale acquisition as a way to broaden the female and just four are from his- Shawn O’Brien, a Boston-based base of corporate, government and torically underrepresented groups. Empower senior analyst with Cerulli Associ- non-profit defined contribution Betty T. Yee, California state con- ates who leads its U.S. retirement plans it serves. CONTINUED FROM PAGE 1 troller and board member, said there business, agreed, saying that gaining Experiential’s Mr. Chao noted may need to be some “trade-offs.” Vanguard Group Inc., with 5.5 mil- scale — as Empower is doing by that the deal with Prudential will “I think while the net will be cast lion participants and $592.7 billion buying Prudential’s retirement add large plan sponsors to Empow- wide ... this is a discipline where in assets, further in the dust. business — is critical because record er’s platform, unlike the MassMutu- there is a severe underrepresenta- “We will continue to leverage keeping is a low-margin business. al acquisition, which had a heavier tion” of historically underrepre- our scale and resources to chal- “We think that the economics of concentration on smaller plans. sented groups, she said. lenge the status quo and be unique- record keeping favor an oligopoly “They have more big-plan busi- Ms. Yee said that in order to con- ly positioned to serve the retire- of large-scale providers and Em- ness than MassMutual,” he said. sider a diverse set of candidates, ment and wealth management power is looking more and more The deal may prompt other re- she said she hoped the board needs of millions of retirement like one of those large-scale pro- cord keepers to consider buying would have the flexibility to look at savers in every phase of their re- viders that will prevail over the long other firms or exiting the business, non-CIO candidates who are tirement journey,” Empower Presi- run,” Mr. O’Brien said. ESSENTIAL: Shawn O’Brien said in a said Dennis Gallant, a Boston-based “ready to ascend to a CIO position.” dent and CEO Edmund F. Murphy Investment bank CIBC World low-margin business such as record senior analyst at financial services Ms. Yee added that the candi- III said in the news release an- Markets Inc. gave the deal a keeping, gaining scale is important. advisory firm Aite-Novarica Group. date should have direct investment nouncing the transaction. thumbs up, citing the benefits of Record keepers not seeing experience. The acquisition comes as re- greater scale. record-keeping business. “enough ROI to keep investing in the “We’ve seen a lot of candidates cord keepers continue to consoli- “Strategically, it enhances Em- The three acquisitions added business” are likely to call it quits, who have been ... around great in- date amid growing pressure to power’s competitive position,” CIBC roughly $178 billion to Empower’s while those with greater scale are vestment teams,” but they have not lower fees. Empower’s purchase analysts wrote in a note to inves- platform, with the MassMutual deal likely to bulk up even more, he said. had direct investment experience of Prudential’s record-keeping tors. “We see scale as an important accounting for $167 billion, accord- Mr. Gallant declined to name themselves, she said. and administration business will driver of efficiencies, which in turn ing to news releases announcing firms that would be good candi- Charles Dore, founder and CEO give the firm “more negotiating leads to a pricing advantage over the transactions. dates for possible buying and sell- of Dore Partnership, said his team power with asset managers,” said smaller competitors,” the note said. As part of its latest deal, Empow- ing activity but sees Principal Fi- is in general agreement with the Philip Chao, a consultant to insur- The transaction follows Em- er will acquire Prudential’s defined nancial Group as likely to seek an board’s direction and that he would ance carriers and asset managers power’s acquisition of the retire- contribution, defined benefit,acquisition following its purchase present Ms. Frost and her team who is also founder and principal ment plan record-keeping busi- non-qualified and rollover IRA of Wells Fargo’s retirement busi- with an updated copy of the CIO of Experiential Wealth Inc., a reg- ness of Massachusetts Mutual Life business. It will also acquire Pru- ness in 2019. criteria to share with the board. istered investment adviser firm in insurance Co., which closed on dential’s stable value and separate “We know they have bought in The CIO’s job criteria and the re- Vienna, Va. Jan. 4. It also bought Fifth Third account investment products and the past and are investing in their cruitment process do not need to “They need as many people on Bank’s record-keeping business in platforms, each with about $50 bil- platform so it only makes sense that come back to the board for a vote, their platform as possible,” Mr. November, and in February lion in assets under management. they would be looking for other ac- Ms. White said. n Chao said, referring to Empower. scooped up part of Truist Bank’s Empower also touted the pending quisition opportunities,” he said. n 26 | July 26, 2021 Pensions & Investments

lion increase in alternatives hold- vate markets programs has been UPCOMING WEBINARS | REGISTER TODAY ings to ¥180.9 billion, or 79 basis slower than he anticipated. Putting Japan points of its portfolio, up from 70 a solid alternatives investment pro- basis points the year before. gram in place takes years but Ja- CONTINUED FROM PAGE 1 The two leading funds’ continued pan’s big public funds have had six and real estate assets — only lifted embrace of equity market beta has or seven years to lay that ground- the fund’s combined private markets produced the occasional stress test. work and the growth being seen exposures by 9 basis points to 70 ba- By way of example, when the pan- now “is not what I personally ex- sis points of its portfolio, well below demic crushed global equity mar- pected,” he said. the government’s 5%, or $85 billion, kets early last year, GPIF’s stock And continued reliance on equi- ceiling for alternatives allocations. holdings accounted for more than ty market beta hasn’t proved prob- That modest exposure to private 99% of the ¥17.7 trillion in losses lematic yet against a backdrop of Long Short Credit May Oer All- markets has left GPIF’s gains or the fund reported for the first quar- consistently attractive returns from Weather Protection losses almost entirely dependent ter of 2020. holding stocks. on the ups and downs of its equity Even so, to date going slow on Live, Wednesday, August 11 • 2:00 p.m. - 3:00 p.m. ET holdings since late 2014, when private markets exposures hasn’t Equity bull run then-Prime Minister Shinzo Abe’s been an issue. Tokyo-based executives with In today’s complex markets, long short credit can be a compelling government engineered a dramatic The shift into equities seven global managers running private diversifier to a traditional fixed income portfolio. With a focus on credit shift into stocks from domestic years ago has led to “huge returns,” markets mandates for GPIF or Chi- fundamentals, downside protection, and liquidity, including long short bonds as part of its signa- Kiyoshi Ota/Bloomberg kyoren cited the ongoing credit in a broader asset allocation should provide for risk mitigation ture “Abenomics” economic bull run by global equity and reduced volatility in a variety of market environments. Joshua revitalization program. markets as either a direct Lofgren, portfolio manager – Investment Grade Credit and Andrew Equity allocation targets or indirect cause for the Kronschnabel, portfolio manager - Head of Investment Grade Credit for GPIF and other public slow growth of those funds’ at MetLife Investment Management, will be speaking with Pensions & In- funds more than doubled to private markets programs. vestments to discuss his views on long short credit and why we believe 25% each for domestic and The Tokyo-based head it oŽers all-weather protection for both institutional and retail investors. overseas stocks from 12% of one global firm’s Japan each, with an offsetting business, who declined to Register Now: pionline.com/MetLifeWebinar 25-percentage-point plunge be named, said persistently in domestic bond alloca- strong gains for stocks have tions to 35%. left those big asset owners Sponsored by: Since that time, GPIF’s facing less pressure to ac- performance — for better celerate private market or worse, but mostly for programs capable of cush- better — has been largely ioning returns in a bear dependent on the gyrations market — especially in of global equity markets. light of the career risk those BIG GAINS: Takatoshi Ito said a shift into equities has led to pension executives would Chikyoren’s path ‘huge returns,’ while the market outlook remains robust. face if one of their private The story has been simi- markets investments were The Retirement Income Ecosystem: lar at Japan’s second-biggest public and the market outlook remains to blow up for any reason. fund, the ¥23 trillion Pension Fund pretty robust for the coming year or The head of institutional sales A 360 View Association for Local Government so, said Takatoshi Ito, the Columbia for another global manager, who Officials, or Chikyoren, despite dif- University professor who chaired likewise declined to be named, said For participants, retirement income is about creating confidence: ferences in the two funds’ approach- the government advisory panel that to some extent that slow growth is a the confidence to retire on time and to structure a financial plan that es to private markets investments. drove GPIF’s big move into risk as- matter of appearances: “Public can absorb some of the unknowns of later life. For plan sponsors, the For example, Chikyoren over the sets in 2014. funds are making steady efforts ... confidence equation is more complex, including investment, policy and past five years has focused on allo- Still, if boosting equity alloca- to build up exposures (to) private fiduciary angles. cating money directly to managers tions at the expense of domestic markets/alternative assets but the of private equity, real estate, infra- bond allocations was “the main sto- results haven’t looked very impres- In this webinar, attendees will hear from subject matter experts address- structure and bank loans, awarding ry” of the panel’s push to raise the sive because of (the) global equity ing all dimensions of decumulation: more than 35 mandates. GPIF, by level of sophistication of portfolio market’s rally,” he said. contrast, has relied almost entirely management for public pension Columbia University’s Mr. Ito • Academic insights on demographic trends and investment struc- on funds-of-funds managers. funds in Japan, adding exposure to noted that the economic and mar- tures But in terms of total private mar- alternatives was also on the agenda, ket backdrop could change. If the • Public policy updates on active legislation furthering retirement kets exposures, there’s little sun- Mr. Ito said in a recent interview. U.S. Federal Reserve starts raising income constructs light between the two. For the past On that front, Mr. Ito said prog- interest rates in 2023, “it will be an • Fiduciary considerations for sponsors, including insurer assessment year, Chikyoren reported a ¥51 bil- ress in expanding those funds’ pri- interesting moment” and maintain- • Participant education and engagement best practices to bolster adoption But, he added that time will tell alignment on environmental, social Replay Available: pionline.com/SSGAWebinar whether this is a “watershed mo- and governance issues such as cli- ment.” mate change, and diversity, equity Sponsored by: Proxy and inclusion in the investments CONTINUED FROM PAGE 3 Climate-change proposals industry,” said spokesman Thomas tion, Tallahassee, which oversees a Investors are also having some Lawrence. total of $245.8 billion including the success with climate-change pro- But there is a gaping exception to $193.2 billion Florida Retirement posals, Mr. Nzima said. Ten out of 24 this developing trend. CalPERS of- System, joined in support of hedge climate-related proposals in the ficials still haven’t seen widespread Canadian Pension Risk Strategies fund Effissimo Capital Manage- U.S. succeeded, up from three in support from other asset owners ment Pte. Ltd.’s successful proposal 2020 and zero in 2019, according to when it comes to voting against ex- Risk management for pension plan sponsors is always top of mind but to conduct an independent investi- Institutional Shareholder Services ecutive compensation plans, partic- today, amid the COVID-19 pandemic, which has wreaked economic gation of the 2020 annual general Inc.’s governance and research unit. ularly when the pandemic has ex- havoc around the world, it’s become more critical than ever. Hibernation meeting. Effissimo contended that There were 10 such proposals in acerbated misalignment between and pension risk transfer remain valid strategies but the approach may an earlier internal investigation by 2020 and 12 in 2019. executive pay and company perfor- have to be diŽerent. At the same time, managing volatility has taken on Toshiba’s audit committee “was in- For the first time this proxy sea- mance, Mr. Nzima said. renewed urgency. This Canadian Pension Risk Strategies webinar pro- adequate and inherently conflicted” son, institutional investors, including In the 2021 proxy season, CalP- vides pension plan sponsors with actionable information for decision- because committee members were New York State Common, submitted ERS voted against a larger percent- making, planning and implementation of risk management strategies investigating allegations of miscon- proposals that CalPERS supported age of say-on-pay plans its history that best fit their pension plan. duct directly connected with their asking for racial equity audits, Mr. of casting such votes. In the six own election as directors, a news Nzima said. Of the 20 filed, 12 wound months ended June 30, CalPERS Replay Available: pionline.com/CRISKWebinar release said. In June, shareholders up on ballots and averaged 30.4% voted against 55.6% of say-on-pay including CalSTRS also ousted support, ISS’ governance and re- plans, up from 51.6% in 2020 and Sponsored by: Toshiba Chairman Nobuyuki Ko- search unit data showed. above its previous high of 53% in bayashi. Mr. Nzima said this support was 2019, according to a staff report ex- “The vote at Exxon Mobil shows high for a first-time proposal, which pected to be released to the board investors have the power in their typically get support of “7% to 10%, in September. hand to effect changes at public if that.” Part of the reason is that a num- companies,” said Simiso Nzima, “It’s one thing to have diversity, ber of companies made unjustified CalPERS’ investment director, glob- equity and inclusion policies,” but adjustments to executive perfor- al equity, and head of corporate companies need to do these audits mance metrics due to the pandem- governance, in an interview. “The to determine if there are differenc- ic, Mr. Nzima said. These companies real question is whether this is a es between the stated policies and “stripped out” the impact of one-time event or whether inves- the outcomes, he said. COVID-19 crisis from consider- tors will, going forward, exercise CalSTRS officials have had suc- ation for executives’ compensation For a full list of webinars, go to pionline.com/webinars that power. My hope is that there is cess collaborating with like-minded packages, he said. an awakening.” investors — ”especially in our “We’re not against the board us- Pensions & Investments July 26, 2021 | 27 NEWS ROUNDUP ing large equity holdings could be- It’s fair to say that “even at 5% the come less comfortable in that envi- ability to have an impact is small,” ronment, he said. unless it involves allocations tar- Mr. Miyazono, in his July 2 news geting aggressive returns of 20% or briefing, gave no indication that more, said Michael Sofer, principal are expected to improve. GPIF is feeling pressure to acceler- consultant and head of strategy and AIG, Blackstone ink deal By region, North America’s num- ate its push into private markets. business solutions with Mel- ber is in positive territory for the While reiterating that such invest- bourne-based investment consul- second quarter in a row with an in- ments offer both diversification tant Frontier Advisors Pty. Ltd. for life and retirement unit dex of 7.7, up from -16.7 three benefits and a liquidity premium, he Frontier is moving now to lever- months earlier. In the fourth quarter, said GPIF will continue to pursue age the experience the consulting Blackstone Group is acquiring a that they offered “objective” and North America’s number was -44.7. high-quality assets “deliberately.” firm has gained advising Australian 9.9% equity stake in American In- “non-commissioned” advice, “put Overall enthusiasm is slightly By contrast, other big institution- clients on making infrastructure ternational Group’s Life & Retire- the client first,” and acted in the cli- tempered by concerns about infla- al investors in the region say they and real estate investments on be- ment business for $2.2 billion in a ent’s best interest while holding tion, Mr. Leung said. are moving now to expand private half of other institutional clients in multipronged all-cash transaction themselves out as fiduciaries, the “One of the biggest questions is, markets programs that already the Asia-Pacific region, including in that includes the firm managing an order noted. But the SEC said that ‘What does inflation look like going dwarf those of GPIF and Chikyo- Japan, Mr. Sofer said. initial $50 billion of the business was misleading because TC Ser- forward?’” Mr. Leung said. “Is it tran- ren. Sue Brake, the chief invest- While conceding the big Japa- unit’s assets, said a joint news re- vices’ financial incentives for its ad- sitory? Which seems to be a rough ment officer of Australia’s A$178.6 nese funds are moving slowly, Mr. lease issued July 14. visers rendered their advice consensus now, but there’s still not billion ($130.9 billion) Future Fund, Sofer said he has some sympathy In October, AIG announced a non-objective and TC Services did clarity, and I think that’s one of the Melbourne, recently said that low for the challenges those investors plan to spin off its Life & Retire- not ensure that advisers’ recom- things that people are watching.” expectations for “bulk beta” in com- face, both in terms of moving up the ment unit into an independent mendations were actually in the The index for Australia rose to ing years is driving a buildup of the learning curve in a complicated company. best interest of its clients. 15.0 from neutral (0.0) the previ- sovereign wealth fund’s investment segment of the market as well as Under the terms of the transac- TC Services simultaneously ap- ous quarter, while Europe rose to team in part to expand holdings of dealing with an environment now tion, Blackstone will begin manag- plied continual pressure to compel 12.1 from -31.4 and Asia rose to 9.1 private equity, debt, infrastructure where a flood of institutional mon- ing the initial sum upon the trans- advisers to prioritize the rollover of from -13.0. and property that already account ey is inflating asset prices. action’s closing, which is expected retirement plan assets into Portfolio for roughly 35% of its portfolio. Cameron Systermans, senior by the end of the third quarter. Over Advisor over lower-cost alternatives, Pactiv unloads nearly South Korea’s 882.5 trillion won portfolio manager and head of main- the next six years, the assets man- the SEC found. The order also stated ($765.8 billion) National Pension stream investments, Japan, with aged by Blackstone would increase that TC Services failed to adopt and $1 billion in liabilities Service, Jeonju, meanwhile, is tar- Mercer Investments (Japan) Ltd., to $92.5 billion. implement written policies and pro- Pactiv LLC, Lake Forest, Ill., en- geting a 15% alternatives weighting said while client type, regulations When the transaction closes, cedures reasonably designed to pre- tered into an agreement to purchase for its portfolio by 2025 from a tar- and geographic location could factor Jonathan Gray, Blackstone presi- vent violations of the Investment a group annuity contract from Mas- get of 13.2% by the end of 2021. into the details, for a “best-ideas dent and chief operating officer, Advisers Act in connection with roll- sachusetts Mutual Life Insurance portfolio,” Mercer would “probably plans to join the Life & Retirement over recommendations. Co. to transfer about $950 million in Too small an impact recommend that clients put some- board of directors. Rollovers of retirement plan as- U.S. pension plan liabilities. Meanwhile, analysts contend thing like 20% in private markets.” Separately, Blackstone’s real es- sets “are of paramount importance The agreement, signed July 14, that Japan’s 5% ceiling on alterna- tate investment trust, Blackstone to investors seeking financial se- transfers the responsibility of pay- tives allocations remains a consid- Looking at other models Real Estate Income Trust will ac- curity in retirement, and advisers ing benefits to about 16,300 retirees erable hurdle to making private Mr. Ito said he saw that 5% ceil- quire AIG’s interests in a U.S. af- acting in a fiduciary capacity need and beneficiaries to the insurer be- markets a meaningful component ing in 2014 as “a good testing fordable housing portfolio for about to provide their clients with com- ginning Nov. 1, according to an 8-K of public pension fund portfolios. ground. It wouldn’t be too risky and $5.1 billion, in an all-cash transac- plete and accurate disclosure so filing July 20 from parent company At that level, “it’s really a toe in (it) shouldn’t be too difficult to get tion. The deal is expected to close in that they may make fully informed Pactiv Evergreen Inc. the water towards a longer-term there” — even if it’s taking longer to the fourth quarter. investment decisions,” Melissa The buyout represents about meaningful exposure,” said John reach that goal than he anticipated. “We believe our leading private Hodgman, acting director of the 22% of the Pactiv Evergreen Pen- Ross, senior vice president, risk Even back in 2013 and 2014, he credit origination platform will play SEC enforcement division, said in sion Plan’s total liabilities and will management with Farmington, said his advisory panel was looking an important role to help meet a news release. be funded directly from plan assets, Conn.-based investment consultant at pension funds in Canada and long-term policyholder obligations TIAA cooperated with regulators according to the filing. Segal Marco Advisors. Europe, especially the Dutch, for while maintaining strong credit and is pleased to settle the matter, a Pactiv Evergreen’s most recent For example, shifting 5% of a good models to study — institution- quality,” Mr. Gray said. representative said in an email. “We 10-K filing said the Pactiv Ever- portfolio to a private markets allo- al investors with large allocations to The deal is Blackstone’s second regret the times that we did not live green Pension Plan represented cation that may get 9% from fixed private markets back then and even insurance company transaction this up to our clients’ expectations of 100% of the company’s defined ben- income yielding 3% to 4% can con- larger allocations now. year. In January, Blackstone an- us,” the representative said. “We efit plan assets and 99% of its liabil- tribute directionally to a fund’s re- If his committee were brought nounced the acquisition of 80% of have learned some valuable lessons ities as of Dec. 31. turns but making a meaningful dif- together again today, it would likely Allstate Corp.’s life insurance busi- and have applied those lessons to As of Dec. 31, DB plan assets to- ference in portfolio returns and be studying pension funds with ness, Allstate Life Insurance Co., for enhancing our training, superviso- taled $4.19 billion, while projected asset growth would require greater more than 50% of their portfolios in $2.8 billion. Mr. Gray said at the ry controls and disclosures.” benefit obligations totaled $4.66 exposures, he said. alternatives, he said. n time, that Blackstone’s insurance The company began implement- billion, for a funding ratio of 89.9%. solutions team will manage All- ing enhancements before regula- state’s assets, bringing the firm’s tors opened their investigations, the Sonoma County increases ing its discretion,” Mr. Nzima said. which it has posted on its website, pro forma insurance AUM then to representative added. CalPERS officials object when he said. about $100 billion. farmland, infrastructure there is a misalignment between The reason CalPERS developed Credit managers expect Sonoma County Employees’ Re- executive pay and corporate per- the framework and model “is that TIAA subsidiary settles tirement Association, Santa Rosa, formance, he said. Some companies we realized that it is not easy to defaults to drop or stay same Calif., increased the target alloca- also increased executives’ corporate evaluate pay and performance. It with SEC over rollovers Two-thirds of credit portfolio tions to farmland and infrastruc- stock awards in March of 2020, at a takes a lot of time. It takes a lot of TIAA-CREF Individual & Insti- managers feel corporate credit de- ture to 8% each. stock market low, giving these exec- effort ... to understand the inputs,” tutional Services, a subsidiary of faults will fall or remain unchanged The $3.1 billion pension fund’s utives more shares at depressed Mr. Nzima said. TIAA-CREF, agreed to pay $97 mil- over the next 12 months, according investment committee voted on prices, he said. CalPERS officials also wanted to lion to settle charges filed by the to the second-quarter survey from May 27 to increase the targets to When the stock market rebound- be transparent on the reasoning SEC alleging it issued inaccurate the International Association of farmland and infrastructure from ed, these awards gave executives behind its votes. At the end of proxy and misleading statements and Credit Portfolio Managers. 5% each, said Steven Marsh, senior “so much upside potential that has season, CalPERS sends letters ask- failed to adequately disclose con- The liquidity provided by gov- investment officer. nothing to do with value creation,” ing to meet with company directors flicts of interest to retirement plan ernment stimulus over the past Farmland and infrastructure fall Mr. Nzima said. to explain why the pension plan participants while making rollover year has resulted in a sea change in within the pension fund’s real as- Some of these companies also voted against a company’s compen- recommendations. managers’ outlooks, said Som-lok sets portfolio. The target to real es- were getting government bailouts sation plan and also its compensa- The $97 million will be distribut- Leung, IACPM’s executive director, tate remains unchanged at 10%. and then used the money to give tion committee directors, he said. ed to investors affected by the mis- in a phone interview. Funding comes from the reduc- corporate executives additional eq- Since say-on-pay votes are advi- conduct and settles both the SEC’s “Things have been improving tion of the target to total fixed in- uity while lowering the bar on per- sory, starting last year CalPERS be- case and a parallel action also an- and notably improved relative to come to 15% from 19% and total eq- formance, he said. gan voting against compensation nounced July 13 by the office of the the last quarter,” Mr. Leung said. uities to 59% from 61%. Specific committee members for failing to New York attorney general. Globally, about a third of sur- sources have yet to be determined, Pay plans supported create a plan aligning executive The subsidiary, also known as TC veyed credit managers, 34%, fore- Mr. Marsh said. Even so, shareholders, including compensation with company per- Services, did not admit to or deny cast rising loan defaults over the He also noted that the pension large institutional investors, “over- formance. Pension fund officials the SEC’s findings in agreeing to next 12 months, down from 40% of fund’s investment committee will whelmingly support say-on-pay voted against 3,532 compensation the settlement. managers that responded with that vote on a potential infrastructure plans,” Mr. Nzima said. In the 2021 committee members as of June 30, From Jan. 1, 2013, through answer in the first quarter (and 61% commitment at its July 29 meeting, proxy season, only 2.4% of say-on- up from 2,716 the year before. March 30, 2018, TC Services and its in the fourth quarter). and a shortlist search for farmland pay plans failed to get 50% of the “I don’t know of any asset owner wealth management advisers did The Aggregate Credit Default is still pending. vote, “marginally higher” than 1.7% or asset manager that are doing not adequately disclose the full na- Outlook index for the next 12 Separately, the pension fund ter- as of June 30, 2020, he said. what we are doing,” Mr. Nzima said. ture of their conflicts of interest in months rose to 2.6 in the most re- minated Hexavest from its $219 Part of the reason could be a lack “It’s disappointing when you recommending rollovers into a cent survey, improving from -39.7 million active global equity portfo- of resources to evaluate executive think about it because you see out- managed account program called in the previous quarter (and -64.2 lio, Mr. Marsh said. The termination pay plans in-house, Mr. Nzima said. cries from investors on high execu- “Portfolio Advisor,” according to in the quarter before that). A nega- was due to organizational changes, CalPERS officials went through a tive compensation levels,” Mr. Nzi- the SEC order. tive number indicates credit condi- and the pension fund has yet to de- two-year process to develop an ex- ma said. “But that has not turned Moreover, TC Services trained tions are expected to worsen, while termine specifically how to reallo- ecutive pay framework and model, into action.” n advisers to make representations positive numbers mean conditions cate those assets. 28 | July 26, 2021 Pensions & Investments AT DEADLINE a total of 192 removed. have been a bit more receptive to negotiations,” Ms. Ludwig said. Changes Litigation worries “Perhaps a CIT may have had a sources of deal flow and industry Ross Bremen, a partner at in- pretty high barrier, but we’ve seen Oregon drops return target CONTINUED FROM PAGE 1 expertise. RidgeLake is a partner- vestment consultant NEPC LLC, that really come downstream where Oregon Public Employees ship between PA Capital and Overall, the majority of changes Boston, agreed most fund lineup even smaller plans can access a CIT Retirement System’s board Ottawa Avenue Private Capital that involved equity investment options, changes in 2020 represented a con- and pass along those savings to preliminarily lowered its assumed data show. tinuation of priorities from the pre- participants.” acquires minority equity stakes in rate of return to 6.9% from 7.2%, As of Sept. 30, according to P&I vious year. Those priorities include While there were not a great middle-market private equity firms. at its July 23 meeting. data, the average asset allocation of an emphasis on fee savings, and many changes by her clients in The move comes after reports corporate defined contribution while that has resulted in active 2020, Ms. Ludwig did point to an- by the Oregon Investment Council, Merced commits $8M plans within the 1,000 largest U.S. funds being dropped for passive other trend in plans hiring a new which oversees the $85.5 billion The $1.1 billion Merced County plan sponsors was 33.5% domestic funds, it also means existing pas- active manager. equities; 24.6% target-date funds; sive lineups are under increasing “I would say there was an uptick pension plan, investment (Calif.) Employees’ Retirement 10.5% stable value; 7.8% fixed in- scrutiny. in movement changes that were Association committed up to $8 consultants and others indicated come; 7.2% sponsoring company “I think to the extent that (ERISA made due to personnel departures,” lower expected returns in many million to Marlin Heritage Fund III. stock; 7% other; 6.7% international fiduciary) litigation has been on the Ms. Ludwig said. “That could be re- asset classes as a result of The pension fund’s board equities; 1.9% cash; 0.5% infla- forefront and we continue to see re- tirements — there are some star relatively high asset prices and approved the commitment to the tion-protected securities; and 0.3% cord numbers of fee-related cases, portfolio managers that are getting price-to-earnings ratios. middle-market buyout fund annuities. passive investments have not been up there in age — and like so many The pension fund board is managed by Marlin Management Among the 880 11-K filings ob- immune,” Mr. Bremen said. “While a industries, many of these firms expected to finally adopt the new Co. at its July 22 meeting, said served over the period, 67% of add- lot of plan sponsors had moved to have had voluntary separation assumed rate of return at its Oct. Kristen Santos, retirement plan ed funds were equity options, while cheaper index funds in recent packages and we have seen some 16% involved fixed-income funds. years, we continued to see some active managers (affected by that).” 1 meeting, after providing public administrator. The pension fund New target-date fund lineups ac- plan sponsors moving to cheaper notice of the action as required by previously committed €7 million counted for 7% of changes, 3% in vehicles in 2020.” Not slowing down state law on Aug. 2. ($8 million) to Marlin Heritage asset allocation/bal- D. Micah Fannin, The COVID-19 pandemic had Europe Fund II in 2020. anced funds and the Omaha, Neb.-based little effect on 401(k) plan sponsors ERISA suit grounded As of June 30, the pension rest in other asset partner and senior in- monitoring and taking action on fund’s actual allocation to private The 5th Circuit Court of classes. A total of sev- vestment consultant at their fund lineups in 2020, Mr. Fan- equity was 7.3%; the target is 15%. en plans also made Mercer Investments, nin said. Appeals upheld a federal judge’s new disclosures on re- said fees remain on “Plan sponsors still have that ob- decision to reject a suit against Hedge funds near $4T cord-keeper changes. the foremost of plan ligation to follow their governance American Airlines Inc. by partici- Among the 302 new sponsors’ minds due to processes,” Mr. Fannin said, “and so pants in a 401(k) plan claiming Worldwide aggregate hedge investment options re- the growing number while meeting became more diffi- the company violated its fiduciary fund assets reached an estimat- corded in 11-K filings, of ERISA lawsuits in cult initially, the transition from duties under ERISA. In the ed $3.96 trillion as of June 30, plan sponsors turned recent years claiming meeting in person to meeting virtu- decision, filed July 19 in federal according to data from HFR most frequently to Fi- plans had breached ally happened overnight. Once they court in New Orleans, the circuit (formerly Hedge Fund Research). delity Investments, their fiduciary duties got into a cadence, it was like we judges described the plaintiff’s The total represents a 4.2% adding 105 individual FEE-FOCUSED: D. Micah in offering high-cost had been doing that for a really investment options, Fannin believes lawsuits investment options. long time.” claims as “meritless” and lacked increase from $3.801 trillion three which totaled $1.9 bil- have put fees foremost in “There were a re- Mr. Fannin said, however, that a “constitutional standing.” months earlier, the fifth straight lion as of Dec. 31, and plan sponsors’ minds. cord number of law- lot of plans did re-evaluate their “Defendants argue that quarter of rising assets, according two target-date fund suits in 2020 relative to governance structures in 2020. plaintiffs do not have constitution- to the firm’s quarterly asset flow lineups, which totaled $206 million prior years,” Mr. Fannin said. “My “Do we want to continue ... meet- al standing for their claims. We report released July 22. Estimated in assets as of Dec. 31. understanding is that pace of those ing quarterly and having advice agree,” the decision stated. net inflows totaled $12.3 billion Among plans that removed in- ERISA claims in 2021 have slowed from an adviser inform our deci- In the case of Ortiz et al. vs. for the second quarter, more than vestment options in 2020, Vanguard a little bit after the feverish pace in sions?” The result, Mr. Fannin said, American Airlines Inc. et al., double HFR’s first-quarter Group was the most-affected man- 2020, but plan sponsors are still is that a number of sponsors have originally filed in February 2016, estimate of $6.1 billion. ager. Twenty-four plans removed a very much aware of the litigious en- moved to an outsourced chief in- participants in its Super Saver The HFRI Fund Weighted total of 70 Vanguard-managed in- vironment. Investment fees are vestment officer-type of arrange- vestment options. According to the very much in the crosshairs of what ment in which they can outsource 401(k) plan criticized one of its Composite index returned 4% in previous year’s 11-K filings, those committees are looking at.” some of the selection and oversight investment options. The com- the quarter ended June 30, funds had at least $3.6 billion in Jessica Ludwig, managing part- of investment options. plaint said the American Airlines trailing the first quarter’s index plan assets as of Dec. 31, 2019. Not ner, associate director of institu- Mr. Bremen said while half the Credit Union Demand Deposit return of 5.8%. all funds’ assets were disclosed. tional consulting at Fiducient Advi- plan sponsors might characterize fund was the only investment The vast majority of Fidelity In- sors, Chicago, said the strength of 2020 as “business as usual,” the oth- option that qualified as an Peirce has ESG concerns vestments-managed options added investment returns in 2020 gave er half may have said they were and Vanguard Group-managed op- even smaller plans greater leverage busier than usual with items like income-producing, low-risk, liquid SEC Commissioner Hester M. tions removed were passive invest- in demanding fee savings. CARES Act provisions regarding fund, but produced poor returns. Peirce expressed concern that an Plaintiffs argued that the plan ments, just as they had been in She noted the exceptional equity hardship withdrawals or loans, es- ESG disclosure rule-making could 2019. markets in 2020 may have pushed pecially if the company was in an should have removed it and added bring about myriad complexities In 2019, plan sponsors turned many smaller plans’ asset sizes high industry particularly hit hard by the a stable value fund. and consequences, including most frequently to Fidelity Invest- enough that they qualified for the pandemic and forced to furlough or But on Aug. 5, 2020, U.S. playing a role in undermining ments, adding 52 individual invest- investment minimums required for lay off employees. District Judge John McBryde in Fort financial and economic stability. ment options out of the total of 199 investing in collective investment Investment options lineups may Worth, Texas, rejected the case, “The growing global concentra- added, while plans removed 61 trusts and lower-cost share classes. not have been a priority for that writing that the “exact nature” of tion of capital in certain sectors Vanguard-managed options out of “I think even active managers first half in 2020, Mr. Bremen said. the plaintiffs’ claims were not clear, or issuers deemed to be green and failed to show “that the credit could destabilize the financial union’s investing of amounts was 50% reduction in greenhouse gas Border to Coast Pensions Part- system,” Ms. Peirce said in a July emissions by 2030 and net-zero nership, Leeds, England, one of the improper or a violation of any duty 20 speech at a virtual event Climate emissions by 2050 or sooner. U.K.’s largest public-sector pension owed to them or the plan.” hosted by the Brookings Institu- “You are going to see more and pools with £55 billion in assets, re- CONTINUED FROM PAGE 2 tion. “Lots of money will be more of this,” said Matt Christensen, cently reported that all investment Blackstone strikes deal mandated to chase green National Employment Savings Paris-based global head of sustain- funds in its responsible investing A strategic partnership led by investment opportunities. As with Trust, Scottish Widows Master able and impact investing at Allianz portfolio of £24.7 billion are materi- Blackstone’s general partnership past regulatory efforts to drive Trust and Health Employees Su- Global Investors, with $703 billion ally below their respective bench- perannuation Trust Australia. in assets under management. marks for carbon intensity. The re- stakes business and RidgeLake investment toward particular The chairmen recognize what is When the U.K. pension funds sults followed steps that included Partners has acquired a passive sectors, current efforts to green at stake for pension funds, and what make this sort of commitment, “they selling off several big carbon emit- minority interest in midmarket the financial system could they can do, said Jessica Fries, exec- are putting asset managers on no- ters, introducing carbon screens for private equity firm Sentinel Capital precipitate future financial utive chairwoman of the Accounting tice. That’s a very powerful message equity and fixed-income funds, and Partners, a news release said. instability.” for Sustainability Project, in a state- to the asset management industry a monitoring framework for exter- Blackstone will provide The SEC is currently working on ment. “Pension schemes are highly and potentially anticipating the nal managers. The pool is owned by Sentinel’s portfolio companies a rule-making for climate risk exposed to the risks of an unsus- regulatory direction in the U.K.,” 11 local government pension funds. access to its group purchasing disclosure and received thou- tainable future, but also powerfully Mr. Christensen said. programs and other services, sands of comments on the issue positioned to influence a sustain- “It’s bold because it’s a group of as- October start for some able outcome,” Ms. Fries said. set owners based in one market. We U.K. retirement plans with at including sustainability, cyberse- during a comment period that would expect that U.K.-based pen- least £5 billion in assets will have to curity, and environmental, social ended in June. RPMI Railpen joins in sion funds will bring this topic up assess and report on their portfoli- and governance. Blackstone is Chairman Gary Gensler, during RPMI Railpen, London, which with their asset managers as part of a os’ risks from climate change as making the investment through its his confirmation hearing in March manages £32 billion in assets on future expectation. I see this initia- early as October under regulations Blackstone Strategic Capital before the Senate Banking behalf of railway pension funds, got tive as part of the trend we are seeing being considered by Parliament. Holdings II fund. Committee, said he supports on the bandwagon the following around climate announcements in Plans smaller than £5 billion would RidgeLake will offer additional more climate risk disclosure. week, announcing plans to deliver a light of the upcoming COP26 in start in 2024. net-zero portfolio by 2050, with a Glasgow,” Mr. Christensen added. Part of the Pension Schemes Act Pensions & Investments July 26, 2021 | 29

2020 hiring and termination winners and losers Dollars are in millions for transactions for which mandate size was disclosed.

Managers ranked by hiring volume Managers ranked by termination volume Asset classes with the largest volume Total Number Total Number hiring of termination of MOST HIRED ASSET CLASSES Rank Manager volume mandates Rank Manager volume mandates Target date $6,987 1 Vanguard $4,456 27 1 Vanguard $6,826 59 Passive U.S. large-cap equity $2,593 2 State Street Global Advisors $2,105 10 2 T. Rowe Price $4,196 16

3 Fidelity Investments $1,964 103 3 J.P. Morgan Asset Mgmt. $1,705 9 Active U.S. large-cap growth equity $1,102

4 BlackRock $1,700 16 4 BlackRock $1,277 23 Passive U.S. equity $1,038

5 J.P. Morgan Asset Mgmt. $1,580 10 5 Sterling Capital Mgmt. $887 3 Active U.S. smidcap equity $758 6 T. Rowe Price $1,550 16 6 Transamerica Asset Mgmt. $820 1 Active U.S. midcap equity $661 7 MFS Investment Mgmt. $1,139 14 7 Fidelity Investments $682 9 Passive U.S. bonds $529 8 PGIM Fixed Income $439 5 8 PIMCO $419 5

9 Capital Group $308 15 9 Dodge & Cox $391 5 Active U.S. core-plus bonds $526

10 Dodge & Cox $253 2 10 Wellington Mgmt. $316 1 Active U.S. small-cap growth equity $359

11 Invesco $201 4 11 Capital Group $255 15 Active U.S. midcap value equity $313 12 Atlanta Capital Mgmt. $145 1 12 The Hartford $217 4

13 Brown Advisory $135 1 13 Prudential Financial $202 7 MOST TERMINATED ASSET CLASSES

14 Columbia Threadneedle Invest. $120 1 14 BMO Global Asset Mgmt. $188 5 $417 Asset allocation 15 Fidelity Inst’l Asset Mgmt. $108 1 15 Goldman Sachs $182 5 $425 Active U.S. small-cap value equity 16 Wasatch Global Investors $98 1 16 Harris Associate $152 6 $657 Active U.S. large-cap value equity 17 Metropolitan West Asset Mgmt. $90 2 17 Dimensional Fund Advisors $132 7 $662 Money market 18 Loomis, Sayles $73 3 18 Northern Trust Asset Mgmt. $127 6

19 RBC Global Asset Mgmt. $68 1 19 Invesco $114 12 $958 Active U.S. equity 20 PIMCO $65 5 20 Putnam Investments $102 4 $992 Active U.S. midcap growth equity

21 John Hancock Invest. Mgmt. $60 4 21 MassMutual $98 2 $1,010 Active U.S. large-cap growth equity 22 Victory Capital Mgmt. $49 3 22 Wells Fargo Asset Mgmt. $98 5 $2,497 Passive U.S. large-cap equity 23 Brown Brothers Harriman $48 1 23 Federated Hermes $91 1 $3,409 In ation-protected securities 24 Acadian Asset Mgmt. $42 1 24 PRIMECAP Mgmt. $72 2

25 Axiom Investors $39 1 25 Matrix Trust $64 1 $5,037 Target date

Source: Pensions & Investments analysis of 11-K filings

In 2021, however, “you might now plans’ lineups, company spokes- fund managed by T. Rowe Price As- uity funds managed by T. Rowe oring by plan sponsors to under- have time to revisit some of those woman Amy Konrath said in an sociates Inc., neither of which was Price, which had $427 million and stand the trends in those areas and things that you didn’t get to in 2020.” email. The plan’s employee benefit previously an option in either plan. $318 million, respectively, in assets what it means to 401(k) plans and plan committee worked with Tru- The funds had $688 million and in the plan as of Dec. 31, 2019. whether they should and how and Big merger, big changes ist’s investment consultant in se- $659 million, respectively, in assets Company spokesman Sie Soheili if they should address those within The largest overhaul of invest- lecting those investment options in the plan as of Dec. 31. did not reply to requests for further their 401(k) lineups.” ment options seen in the analysis of “most appropriate for Truist,” Ms. Another significant change was information. Greg Ungerman, senior vice 11-K filings was the result of the Konrath said. made by Capital One Financial president and defined contribution merger of the SunTrust Banks Inc. The newly merged plan, which Corp., McLean, Va. Other trends to ponder practice leader for consultant Cal- 401(k) Plan into the Truist Finan- had $9.7 billion in assets as of Dec. That company added the State For the remainder of this year, lan LLC, San Francisco, said, “At the cial 401(k) Savings Plan, effective 31, according to its 11-K filing, was Street S&P 500 Index trust, a pas- consultants do not anticipate any margin there are discussions on July 31, 2020. responsible for some of the biggest sive domestic large-cap equity CIT real changes in fund lineup priori- ESG and retirement income solu- Truist Financial Corp., Charlotte, individual manager wins of the managed by State Street Global Ad- ties, although they see plans ex- tions, but not a lot of actually imple- N.C., one of the nation’s largest year, which included the additions visors, which had $1.4 billion in as- ploring further education on items mentation.” commercial banks, was launched in of the MFS Growth Fund, an active sets in the $7.8 billion 401(k) plan like ESG investing. “It’s more either education or 2019 after the completion of the domestic large-cap growth equity as of Dec. 31, and removed the T. “We’re having a lot of discussion ‘wait and see’ specific to ESG,” Mr. merger of BB&T and SunTrust fund managed by MFS Investment Rowe Price Institutional Large Cap with clients around environmental, Ungerman said. “A lot of that is banks in December 2019. Management Inc. and the T. Rowe Growth Fund and T. Rowe Price In- social and governance factors,” Mr. wrapped in waiting for the Depart- The merger of the 401(k) plans Price Institutional Mid Cap Fund, stitutional Large Cap Value Fund, Fannin said, “and also diversity eq- ment of Labor to provide guid- resulted in a re-evaluation of both an active domestic midcap equity both active domestic large-cap eq- uity and inclusion so there’s a clam- ance.” n

2021, the new regula- ance for plan trustees, as the decarbonization of the real regulated financial institutions and tainability should include new tions to be implement- the regulations await fi- economy,” said alliance member financial stability.” measurements that show how vul- ed by the U.K. Depart- nal approval from Parlia- Charles Emond, president and CEO The next day, the G-20 Climate nerable or how resilient every asset ment for Work and ment. of the C$365.5 billion ($293.6 billion) Summit saw eight of the world’s is to climate change, she said. Pensions will require Asset owners are also Caisse de Depot et Placement du largest insurance companies Not to be outdone by their asset trustees to identify and pushing regulators in Quebec, Montreal, in comments on launch their own net-zero insur- owner counterpart, the Net Zero As- evaluate climate risks Europe, the U.K. and the paper. CDPQ had 10% of its over- ance alliance, with commitments to set Managers Initiative, whose 129 and opportunities that elsewhere to take up car- all portfolio in low-carbon assets as transition underwriting portfolios signatories manage more than $43 might affect investment bon pricing through a of Dec. 31 and has reduced its car- to net-zero greenhouse gas emis- trillion in assets, also called on gov- strategies over the mix of emissions trading bon intensity by 38% since 2017, well sions by 2050 and to decarbonize ernments to act on climate change. short, medium and long ON NOTICE: Matt and carbon taxes. That above a previous 25% goal. their investment portfolios by 2025. Just six months after it was terms, and to annually Christensen said U.K. was the call in a July dis- The policymakers and financial launched to commit to achieving disclose the carbon funds’ net-zero push cussion paper from the Carbon pricing regulators also heard from ESG ad- net-zero emissions with clients, the emissions of their port- sends a powerful U.N.-supported Net-Ze- The prospect of carbon pricing is vocates such as Linda-Eling Lee, group now claims to represent folios. They must also message to managers. ro Asset Owner Alliance, being raised more frequently as New York-based managing director nearly half of the entire asset man- conduct scenario anal- whose more than 40 COP26 approaches. and global head of ESG research for agement sector. That prompted ysis, calculate climate metrics, set members representing $6.6 trillion In early July, G-20 finance minis- MSCI Inc., whose indexes bench- Stephanie Pfeifer, CEO of the Insti- climate targets and review perfor- in assets under management have ters and central bank governors mark more than $14.5 trillion. tutional Investors Group on Cli- mance against them. already set science-aligned emis- meeting in Venice, Italy, raised the “As we look forward to what mate Change, to call the growth in The regulations — which would sion reduction targets for 2025. idea of carbon pricing as a potential COP26 could achieve, we urge poli- signatories “a fundamental tipping make the U.K. the first among lead- Using a carbon price corridor as a tool for lowering greenhouse gas cymakers and financial regulators point across the investment sector ing industrial nations to have re- benchmark for strategic decisions emissions that countries can use to of the G-20, and the rest of the and a significant boost in efforts to tirement fund trustees address the consistent with a low-carbon econo- coordinate tactics for dealing with world, to introduce mandatory cli- tackle climate change and decar- financial risks of climate change, my “will provide the global environ- climate change, which they said in a mate-related disclosures and agree bonize the global economy.” according to the DWP — came clos- ment necessary for companies to communique poses “increasing on international standards of dis- By the time people show up in er to reality July 21, when the regu- make sound investment decisions physical and transition risks to closure,” she told them. A market Glasgow, there will be plenty to talk lator published final statutory guid- and for investors to support them in macroeconomic outcomes and to infrastructure that supports sus- about. n 30 | July 26, 2021 Pensions & Investments

Simon Dawson/Bloomberg The same trends are in Europe, question mark but that there are in- with London, particularly central vestments to be made in other unfa- Real estate London, at the low end and busi- vored property sectors. For Black- ness parks in the suburbs seeing stone Group Inc., offices have not CONTINUED FROM PAGE 3 between 50% and 60% of workers been a focus in recent years, said changed since the leases were returning to the office, he said. Jonathan Gray, president and chief struck, the report said. “Don’t get too caught up in the operating officer, during the alter- Real estate managers and inves- return-to-work” because it is a mul- native investment manager’s July 22 tors’ mass re-sorting of their real tiyear, multistage process, Mr. Gor- second-quarter earnings call. Tradi- estate portfolios was informed by don said. “Those statistics are effer- tional U.S. office space represents the transaction activity, albeit lower vescent, here today but will change 4% of its real estate portfolio. than average, and valuations during in six months,” he added. Especially in coastal cities such the pandemic so far. Much of the Although rent is continuing to be as New York, return to work has transactions and price increases in paid around the world, LaSalle ex- been a slower process, Mr. Gray 2020 and the first quarter of 2021 pects tenants to make big decisions said. “Tenants are cautious because have been in favored sectors such about their office needs when those they don’t know their space needs,” as industrial and suburban apart- leases expire, Mr. Gordon said. he said. Even so, companies are ments as well as niche sectors in- One small indicator that he calls concluding that they need their em- cluding single-family homes for the “canary in the coal mine” is that ployees to be together in an office, rent, medical offices, self-storage sublet office space has increased to even with some flexibility, Mr. Gray and life sciences, LaSalle’s report record levels in San Francisco and said. Office will be “challenging in showed. Meanwhile, less popular New York. the near term” until the pandemic property types of retail and office “A lot of tenants are doing any- is under control, but the office mar- haven’t fared as well. thing they can to cut losses and ket will recover, he said. For example, office transactions SHORT-TERM WOES: Jonathan Gray said the office sector will recover after the pandemic. sublet office space,” Mr. Gordon However, although Blackstone worldwide fell sharply in the sec- said. ”They are getting a good idea has cut down to 7% what had been ond and third quarters of 2020 rel- the U.S., especially at restaurants enormous differences between cit- that their workforce is not coming “a very large” exposure to hotels ative to average quarterly volume and other service-oriented retail ies and regions, Mr. Gordon said. back, at least not in San Francisco and leisure properties in its real es- in 2017 to 2019. While transaction stores as a result of the fiscal stimu- In the first half of 2021, the per- and New York.” tate portfolio, firm executives now volume rose in the fourth quarter lus and vaccination campaign, the centage of employees who returned People in the U.S. have more mo- want more of it, Mr. Gray said. of 2020 and first quarter of 2021, it report said. In Europe, led by the to work in an office in Tokyo and bility than in other countries in the “We will see recovery in existing was still 80% of average transaction U.K., there was a 9.2% increase in Shanghai was in the mid-90% lev- world, he said. assets,” he said. What’s more, Black- volume before the pandemic, the sales volume in April compared els, he said. However, in the U.S. Some people are not going to re- stone has been acquiring assets. In report said. with April 2020, it said. that percentage ranged between turn to big cities such as San Fran- February, its real estate and private Office transaction volume in the 40% in cities such as Dallas to 10% cisco and New York, but instead are equity businesses jointly invested in U.S. alone fell 40% at the end of Fashion malls in New York, Mr. Gordon said. opting for the cities in the U.S. that U.K. company Bourne Leisure Hold- 2020 from the year before. While fashion-dominated shop- LaSalle expects volatility in of- have had the strongest inflows of ings Ltd., which owns resorts, hotels But these macro trends ignore ping malls have fared poorly in the fice vacancy rates across the Asia people such as Phoenix; Jackson- and sells vacation homes. In March, some real estate gems among the pandemic around the world, they Pacific region due to changes in of- ville, Fla.; Tampa, Fla.; and Austin, a joint venture between Blackstone’s least favored sectors, Mr. Gordon have performed slightly better in fice policies, including limits on Texas, Mr. Gordon said. real estate business and Starwood said. China and Canada. In China, the percentage of workers in offices Indeed, the report noted there is Capital Group acquired hotel opera- “We all know shopping centers growth was driven by people’s in- under Japan’s COVID-19 state of a mismatch of inventory, located in tor Extended Stay America Inc. and had a very tough pandemic and ability to travel overseas, resulting emergency, the report said. Even so, the largest gateway cities, and its paired-share real estate invest- they are lagging in their ability to in strong demand for domestic LaSalle favors core and non-core tenant demand, located in the sec- ment trust, ESH Hospitality Inc., for drive rent growth, to drive value fashion retail, the report said. Gro- office investments in Tokyo as well ondary markets, with higher quality about $6 billion. growth,” Mr. Gordon said. cery-centered shopping centers as Osaka because while vacancy of life or lower housing costs. “We do think people will return Even so, there are some shop- where there is a balance between rates in the two cities have in- to travel” starting with individuals ping centers that are good value, he discretionary and non-discretion- creased, they have the highest of- Office uncertainty and leisure travel first, followed by said. There was a 28% year-over- ary goods have fared well. fice occupancy in the Asia-Pacific LaSalle is not alone in its think- business and group travel, Mr. year jump in retail sales in May in In office properties, there are region, the report said. ing that office property is a big Gray said. n

investment options, investment consolidation into larger master sourcing the responsibility for se- or investment performance.” performance, administration, costs trusts is expected to continue. “We lecting and monitoring the master Mr. La Thangue said 27% of the Master trust and the effectiveness of participant expect this to continue as employ- trust. In the U.K., a review of a mas- surveyed DC plan sponsors tended engagement. “We are getting a lot of ers review the value for money re- ter trust provider is conducted by to change providers because they CONTINUED FROM PAGE 2 work as an independent consultant quirements now mandatory for the sponsoring company when wanted better support for plan par- performance was the trigger for the doing that assessment,” he added. schemes with less than £100 mil- deemed suitable. ticipants, 19% wanted a cheaper of- change. He declined to name the Sources also said that companies lion invested and the further plans Ms. Burrows added that provid- fering and about 18% sought better plan sponsor or the master trusts. are increasingly building review to introduce the same measures for ing an offering that is going to de- investment performance. A survey of FTSE 350 companies frameworks into their contracts to schemes with assets under man- liver value to plan participants is Barnett Waddingham’s Mr. Fu- conducted by Willis Towers Watson have an option to change heir pro- agement of £5 billion and below,” one of the biggest costs for plan tcher also said the U.K. DC market PLC published July 12 showed that viders when assets of their plans he said. sponsors. has become more competitive be- 12% of employers that already use a increase in size. “Sponsors and trust- WTW advises clients cause some master trusts have master trust are considering a re- Jenny Davidson, independent ees need to recognize that ended up with been going through a transition, view of their provider in the next trustee at BESTrustees in Esher, the key strengths of multiple plans due to such as Aegon Master Trust, which two years. England, who also serves as a trust- larger master trusts for mergers and want to agreed to acquire BlackRock’s re- ee on the boards of a few sin- strong governance and bring all DC arrange- cord-keeping business in 2016. Started in 2012 gle-employer DC plans, said most real scale that will fu- ments together. With “Now they are coming back very Master trusts appeared in the companies that are outsourcing to ture-proof good out- assets and plan partici- competitive,” he added. Mr. Futcher U.K. to assist employers with DC master trusts for the first time are comes for their mem- pants consolidated, said that some providers are offer- arrangements following the launch setting up key performance indica- bers,” he added. such clients are consid- ing to cover transaction costs or are of an automatic enrollment pro- tors and governance committees Ms. Davidson added ering if a better offer- offering free advisory sessions for gram in 2012 by the government, that will allow them to review the that the government’s ing is available to them, plan participants. which aimed to get more workers service on investments and charges. ongoing push to get NEGOTIATING: Gemma she said. WTW’s Ms. Burrows added that covered and bolster their overall “If you can build in a formal re- trustees to review how Burrows expects firms to master trust providers are also retirement savings. view of the charges into your con- plans are run will also get better terms as they Changing providers showing much more ESG commit- As of Dec. 31, there were 38 mas- tract that would be a favorable influence companies to add more workers. Trends in a wider DC ment. “For plan sponsors, that is ter trusts in the U.K. with a com- thing,” she said, adding that as switch providers away market show that very important at the moment. Plan bined £52.8 billion in assets, ac- plans increase in size, they want to from smaller master trusts, which changing master trust providers sponsors are linking their corpo- cording to data by The Pensions be able to review fees. might not be sustainable if they fail will become a standard practice for rate policy and the pension (one),” Regulator. Ms. Davidson added that the gov- to attract enough assets to secure much of the same reasons that she said. Mr. Futcher said employers that ernment’s push to get trustees and better pricing. would push an employer to a mas- In one master trust provider’s outsourced to master trusts years plan sponsors to review their in- Gemma Burrows, director at Wil- ter trust, said Hal La Thangue, asso- view, the opportunity is there to ago take comfort in that their pro- vestments will lead companies to lis Towers Watson’s retirement ciate director of global insights at snag more business. vider looks after plan participants. switch providers. “Some of the larg- business in London, added that as Broadridge Financial Solutions Inc., “We have started to see employers “But that doesn’t mean that it’s the er companies have put in a gover- companies add new workers or Lake Success, N.Y. looking at moving from one master most competitive offering on the nance framework in place … (to) grow by acquisitions, they might be A 2020 survey of 200 plan execu- trust to another in the last few market,” he said. The first employ- keep monitoring their master trust able to get better terms with a new tives conducted by Broadridge months,’’ said Tony Pugh, head of DC ers that outsourced to master trusts to make sure that it is offering good master trust provider. showed that about 25% of plan solutions for Europe, the Middle East a few years ago can now see there value for members,” she said. “Plan sponsors are quite keen to sponsors in the U.K. DC market and Africa at The Aon MasterTrust. is a better proposition elsewhere, maintain some oversight of master changed their provider in the most “One of them is in the process of he added. More consolidation expected trusts and that means benchmark- recent 12 months. Mr. La Thangue moving to the Aon MasterTrust.” He Mr. Futcher said his firm already Dave Lunt, head of business de- ing the performance of their master said that “it’s quite expensive to declined to name the plan sponsor. conducts an annual governance re- velopment at B&CE, the provider trusts against their peers. That will switch providers and it requires re- The master trust has £1.3 billion view of master trust providers be- of the £14 billion DC multiemploy- certainly be coming up,” she said, sources and it has to be created by in assets and another £300 million cause companies want to examine er plan The People’s Pension, said noting that companies are not out- some sort of deficiency such as cost in the process of onboarding. n Pensions & Investments July 26, 2021 | 31 CHANGES AHEAD Investors are looking for ways to BlackRock added coverage of al- better track and manage their pri- ternatives and multiasset-class Mercatus vate market investments, said strategies to the Aladdin platform Chicago Laborers’ Annuity & Benefit Fund is searching for up to two Haresh Patel, Mercatus’ CEO, in the through its May 2019 acquisition of CONTINUED FROM PAGE 3 private credit managers to run a total of $20 million. The $1.3 billion State Street release. investment software provider pension fund is seeking managers to run a “commingled fund for a private markets front- and middle-office “Investors in both public and pri- eFront SA, Paris, to provide a total debt or direct lending portfolio mandate,” according to an RFP posted on data capabilities with the bank’s vate markets are realizing the risk portfolio view. the pension fund’s website. Proposals are due at 3 p.m. CDT July 30. middle- and back-office services to and inefficiencies created across “You can’t assume that State create a single front-to-back-office their bespoke front-, middle- and Street’s new offering won’t increase Denver Water is seeking an investment consultant for its $445 million platform, said Spiros Giannaros, back-office solutions,” Mr. Patel competitiveness to some extent for employees’ retirement plan. The RFP is available on the BidNet Direct president and CEO of Charles River said, adding that Mercatus employ- BlackRock, but the firm is position- procurement website. Registration is required. Proposals are due 2 p.m. Development, in a joint interview ees are “excited to join forces with ing Aladdin as a stand-alone tech- MDT July 30. with Paul Fleming, executive vice State Street and Charles River De- nology company (rather than an president and global head of State velopment to achieve a new one-of- asset-service provider). However, El Paso (Texas) Employees Retirement Trust is searching for an Street’s alternatives segment. fice vision.” there is a lot of confidence in Alad- investment consultant. The $977 million pension fund launched the search Mr. Giannaros noted that the ad- Mercatus has assets under ad- din by users because BlackRock de- for due diligence purposes, according to an RFP available on the pension dition of Mercatus “is an extension ministration of $1 trillion for its veloped the system for its own use fund’s website. Proposals are due Aug. 2. of what we are doing to include pri- global private markets client base. and that’s definitely a competitive vate market investments. Mercatus Regarding the competitive land- edge,” said Catherine A. Seifert, vice Cape Girardeau, Mo., is searching for plugs the gap.” scape for full-portfolio asset ser- president and equity analyst at HAVE SOME NEWS? record keepers for its $12 million 457 plan. The alpha program also gives us- vices, “We are positioning ourselves CFRA Research Inc., New York, in Please submit news The city issued an RFP for firms to provide ers the option to see their whole to capture more business from al- an interview. of changes to David administration, compliance services, portfolio exposure to managers in- ternative investors and managers. “I think we may see more proac- Schepp, news editor, at investment services and record-keeping vesting in public and private mar- Private market strategies are com- tive, more aggressive marketing of dschepp@pionline. services for the plan, said Lori Meyer, the kets. plex and often very customized, Charles River Development’s en- com city’s human resources/risk manager, in an State Street had $42.6 trillion in email. The RFP is available on the city’s assets under custody and/or admin- procurement website. Proposals are due at 5 p.m. CDT Aug. 6. istration and $3.9 trillion in assets under management as of June 30. Saskatchewan Pension Plan, Kindersley, is searching for an investment consultant. The C$668 million ($537 million) defined contribution plan is Early mover seeking an investment consultant to prepare written quarterly reports on the State Street is an early mover performance of the plan’s investment managers, and ongoing monitoring among asset servicers to offer and administrative support, according to an RFP. The Saskatchewan Pension whole-portfolio front-to-back port- Plan is a voluntary supplementary DC plan for individuals in the province who folio management, sources said. have little or no access to an employer-sponsored retirement plan. The RFP “State Street is really turning is available on the Sasktenders public procurement website. Registration is into a data company,” said a source required. Proposals are due at 2 p.m. CST Aug. 9. familiar with State Street who asked not to be named. “The acqui- Chicago Municipal Employees’ Annuity & Benefit Fund is sition of Mercatus will bridge the searching for up to two managers to run a total of $190 million in problems custodial banks have had multiasset credit portfolios. The $4 billion pension fund is seeking with private market investments opportunistic asset classes “including but not limited to high yield, bank and will provide the bridge be- loan, structured credit, securitized credit, emerging markets debt, et tween the front-office trading sys- cetera, in a diversified manner,” according to an RFP on the fund’s website. tem and the back-office custody Proposals are due at 3 p.m. CDT Aug. 20. services. Having the data in the front end provides a frictionless Los Angeles County Deferred Compensation and Thrift Plan is environment.” searching for investment consultant for the $15.9 billion 457 and $4.2 “State Street is early in the race KEEP AN EYE ON: Haresh Patel said investors want a better way to track their investments. billion 401(k) plans, said James Hsu, finance analyst in an email. The RFP to add private market investments is on the websites of Los Angeles County and Los Angeles County to its front-to-back platform. All of and higher service fees will reflect hanced asset-servicing capabili- treasurer and tax collector. Proposals are due by 5 p.m. PDT Aug. 25. the other custodians are in a great that complexity,” Mr. Fleming said ties,” Ms. Seifert said, stressing that rush to do this,” the source said. in the interview. the “asset-servicing niche is very New York State Deferred Compensation Program, Albany, is The value proposition of the In the quarter ended June 30, small, very closed and requires a lot searching for international equity managers. The $32.5 billion 457 plan Mercatus acquisition for State State Street’s servicing fees were up of scale. It’s unlikely that many oth- has issued an RFP for international equity managers to manage a $682 Street lies in “the strong trend we’re 7% (without currency impacts), the er companies will attempt to set up million white-label investment option and $179 million passively managed seeing from investors ranging from bank’s earnings statement showed. these kinds of products.” option because the current managers’ contracts are expiring. The RFP is institutions to retail and wealth Charles River Development had One of the anonymous sources available on the website of Callan, the plan’s investment consultant, which management firms for a full-port- new bookings of $19 million for as- with whom Pensions & Investments is assisting with the search. Proposals are due Aug. 25. folio view of their investments,” set-servicing assignments in the spoke said the State Street Alpha said another industry source, who second quarter and recurring reve- platform is “tangential to Aladdin Colorado Springs, Colo., is seeking an outsourced CIO for the city’s requested anonymity, in an inter- nue of $230 million, up 11% com- but they aren’t going to bump heads $13 million Cemetery Endowment Fund. The RFP is on the city’s website. view. “State Street will be able to pared with the prior quarter. when it comes to competition. Alad- Proposals are due 1 p.m. EDT Aug. 26. provide data management effi- din really is an analytics data pro- ciently for all investments. The More competitive vider, not a front-to-back platform. Connecticut Retirement Plans & Trust Funds, Hartford, launched a Mercatus addition validates the Messrs. Giannaros and Fleming The beauty of Aladdin is analytics, search for core fixed-income managers to run $5.5 billion on behalf of the path forward toward true multias- stressed during the joint interview while State Street’s beauty is in the $43 billion state pension fund. The search is being conducted because an set portfolio management.” that the addition of Mercatus’ pri- data it collects.” RFP for this asset class has not been issued since 1997, said spokeswom- State Street is well aware of the vate markets expertise will help Logan Koffler, a BlackRock an Michelle Woods-Matthews. More than one manager may be selected. tribulations asset owners suffer State Street be more competitive spokesman, declined to comment The RFP is available on the state treasurer office’s website. Proposals are when it comes to front-to-back among asset servicers. about the potential competitive due 5 p.m. EDT Aug. 27. management of their private mar- Some industry sources said impact of State Street’s asset-ser- ket investments. State Street’s biggest rival for data vicing offering on the firm’s Alad- Metropolitan Transportation Authority, New York, is searching for an “Investors in private markets management is BlackRock Inc. be- din business. investment consultant for its 401(k) and 457 plans. The plans have a have historically struggled with in- cause of Aladdin, its popular BlackRock managed $9.5 trillion combined $7.5 billion in assets. The RFP is available on Conductiv. efficient and manual processes be- risk-management and operating as of June 30. The firm’s technology Registration is required. Proposals are due at 4 p.m. EDT Aug. 31. cause existing solutions are too system, but noted that it’s very un- services revenue totaled $316 mil- fragmented and rigid to meet their likely that State Street will be a lion, including fees from Aladdin For a comprehensive database of search and hiring activity, visit P&IQ at changing investment require- significant threat to the dominance clients, in the second quarter 2021, PIonline.com/piq. ments,” Mr. Giannaros said in the of the New York-based firm’s data according to BlackRock’s most re- news release. analytics offering. cent earnings report. n

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