Wells Fargo Unit Sale Hailed As Opportunity Purchase by Private Announced Feb

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Money Management Wells Fargo unit sale hailed as opportunity Purchase by private announced Feb. 23 it was selling its played a central role HELP WANTED: Nicolaas Invesco Ltd. acquiring Oppen- money management business with in deciding on the Marais said the money heimerFunds for $5.7 billion or equity firms a good sign $603 billion in assets under man- firm’s new owners management unit needs Franklin Resources Inc.’s $4.5 bil- agement in a $2.1 billion deal to pri- throughout the six- investment to thrive. lion acquisition of Legg Mason Inc. for future of manager vate equity firms GTCR LLC and month process, he “This signals that there’s proba- By SOPHIE BAKER and Reverence Capital Partners. The said in an interview. The important thing, bly some challenges in the busi- JAMES COMTOIS split between the two firms was not Mr. Marais also high- Mr. Marais said, was ness,” said Dan Erichson, vice pres- disclosed. The deal followed months lighted how being sep- that the sale “was not ident of the New York-based Wells Fargo Asset Management’s of speculation over whether the arated from Wells Far- imposed on us.” investment bank Park Sutton Advi- new private equity owners may be unit would be sold and to whom, go will benefit the firm. The one surprise in sors LLC. He was also surprised just what the business needs to with Goldman Sachs Group Inc. “Either we are central the news of the sale was that the transaction wasn’t a strate- help it achieve scale and compete and J.P. Morgan Chase & Co. previ- to your value proposi- the relatively low price gic acquisition. “I think the price in the $1 trillion AUM club, indus- ously named as potential suitors. tion, or ... you should compared to similar that was paid here and that it went try players say. The sale came as no surprise to cut us loose ... because we will need M&A deals, such as Morgan Stanley to private equity indicates that flow Parent company Wells Fargo & Co. WFAM CEO Nicolaas Marais, who investment, we’ll need time.” buying Eaton Vance for $7 billion, SEE WELLS FARGO ON PAGE 27

SPECIAL REPORT COVID-19: ONE YEAR IN Vaccines keeping risk on table — for now

Short-term outlook bright, EARLY ADOPTER: Bob Jacksha said the New but longer-term effects Mexico pension fund already had ‘decent could throw water on party exposure’ to the pharmaceutical By DOUGLAS APPELL industry before the pandemic. A year into the coronavirus crisis, there’s NO JOKE: Eli Kasargod-Staub thinks investors are broad consensus among asset owners that vac- Luis Sánchez Saturno/The Mexican New starting to take climate change risk seriously. cination programs will give risk assets a further lease on life this year but less agreement about Investing the pandemic’s longer-term effects on portfolio construction. MORE ON THE The short-term pic- Proxy season action CORONAVIRUS ture appears bright. CRISIS Continued momentum on vaccines nOutsourced trading on climate change should help the a side effect for managers. Page 3 global economy rebound strongly mid- will be hard to avoid nConnectivity can’t year as households be found on those in the U.S. and Eu- Zoom calls. Page 14 By HAZEL BRADFORD rope emerge from nLogistics becomes lockdown, predicted It will be hard for corporate directors to a shining star for Rupert Watson, not take climate change personally this proxy investors. Page 14 London-based head season, as institutional investors and regula- nPrivate equity of asset allocation tors ramp up pressure for them to take going big into life with Mercer Invest- meaningful action — or get out of the way. sciences. Page 16 ments. “Everybody I Investors falling head over heels Investors are armed with a new metric for know wants to go measuring a company’s progress on climate and do stuff, whether it’s go on holiday, go to change and a more collaborative approach for a bar, catch up with friends, see relatives. And for the pharmaceutical industry holding corporate directors and senior man- with the massive buildup in savings over the agement directly responsible through proxy past year, “people have the cash to do it,” Mr. By ARLEEN JACOBIUS have invested $9 billion in 297 biotechnology voting. And they are getting critical backup Watson said. and pharmaceutical companies worldwide as from regulators like the Securities and Ex- That’s not to say the horizon lacks clouds The pandemic has heightened investor of Feb. 26, according to PitchBook Data. change Commission, where climate risk is — such as a potential sustained uptick in in- interest in the pharmaceuticals industry, Venture capital firms invested a record starting to feature prominently in both corpo- flationary pressures — but for now they re- spurring more capital commitments to spe- $47 billion in 2,014 biotechnology and rate reporting and enforcement priorities. main distant. cialized private equity and biomedical pharmaceutical transactions in 2020 glob- “Investors are really starting to wake up to “We’re a little worried about valuations but property funds while managers have gone ally compared with $28 billion invested in the systemic nature of these risks. The way to the recovery and (monetary and fiscal) poli- wild boosting investment in what they view 1,790 companies a year earlier, PitchBook protect their portfolios is to hold boards ac- cy support will dominate this year and as a as a growing sector. Data shows. countable. You are seeing leading investors SEE REBOUND ON PAGE 14 So far this year, venture capital firms alone SEE PHARMA ON PAGE 14 SEE CLIMATE ON PAGE 23 Tradewatch has data for Q4 SOUND BITE For fourth-quarter broker rankings from State OLIVER WYMAN’S ADAM SCHNEIDER: Street’s Elkins/McSherry ‘You can’t just willy-nilly change a unit and trading analytics from Virtu Financial, point contract.’ Page 2 your mouse to PIonline. com/tradewatch. 2 | March 8, 2021 Pensions & Investments

IN THIS ISSUE Investing

VOLUME 49, NUMBER 5 Defined contribution The end of LIBOR to be anything but simple Morningstar researchers typically, but not always, had a relatively easy A host of headaches predicted rates,” said Adam Schneider, a currencies, including the U.S. New York-based partner in dollar, British pound sterling time determining the gender of plan in phasing out benchmark for Oliver Wyman’s digital and and euro. New LIBOR-based administrators. Page 25 fixed income, derivatives deals banking practices in the contracts will cease at the Money management Americas. end of 2021, but in Novem- “There’s an enormous ber, the Intercontinental Ex- Melbourne’s Channel Capital teamed up By BRIAN CROCE amount of work just to under- change Inc. announced that with ex-Mellon CEO Des Mac Intyre to set stand what’s going on and the ICE Benchmark Admin- up New York-based investment manager No one ever said replacing LIBOR, the then once you know what you istration, which administers incubator Eolas. Page 6 predominant derivatives and fixed-income have to do, there’s a tremen- LIBOR, would explore ceas- Thasunda Brown Duckett was named valuation benchmark supporting hun- dous amount of work which ing the most utilized U.S. dol- president and CEO of TIAA-CREF, effective dreds of trillions of dollars in contracts, would start when the actual lar LIBOR tenors in June May 1. Page 6 would be easy. LIBOR publication ends,” he TREAD LIGHTLY: Chris Killian 2023 instead of late 2021. On With millions of investments tied to the added. “You can’t just willy- said great care is being taken March 5, Britain’s Financial Pension funds London interbank offered rate, such as in- nilly change a contract.” to avoid creating ‘winners and Conduct Authority con- terest-rate swaps and long-duration fixed In the U.S., the Federal Re- losers’ in the transition. firmed the 2021 and 2023 Mark Machin resigned as CEO of Canada income, investors and their service provid- serve’s recommended alter- cessation dates for LIBOR, Pension Plan Investment Board after getting ers could have to renegotiate with counter- native reference rate is the Secured Over- although it retains the option for a synthet- the COVID-19 vaccination while on a trip to parties on a new benchmark, but coming to night Financing Rate, or SOFR. The ic calculation if needed. the UAE. Page 6 an agreement isn’t so simple, sources said. transition to SOFR is being led by the Alter- The extension to June 2023 would allow “I have read hundreds of these (con- native Reference Rate Committee, an in- more time for outstanding contracts to ma- Retirement plans tracts) and many are terrible because no dustry group established by the Fed. ture, thereby reducing the chance of poten- U.K. plan sponsors are one step closer one expected LIBOR to end and until re- LIBOR, which has been plagued by cas- tial disruptions, U.S. regulators said in a to being able to offer collective defined cently there weren’t even replacement es of bank manipulation, is set at different SEE LIBOR ON PAGE 24 contribution arrangements to their employees. Page 4 Defined Contribution Dow Inc. will freeze the benefit accruals of its U.S. pension plans at the end of 2023 and will contribute $1 billion to the pension Morningstar says women build better DC plans plans in the first quarter.Page 6 New laws in the U.K. and in the Study suggests plans with better practices Netherlands are paving the way to tackle growing longevity risks. Page 25 happen to be run by female administrators Matthew Gilson Matthew Washington By ROBERT STEYER A bill to help caregivers boost their retirement savings hasn’t gotten much buzz, but Taking notice that women are playing a bigger role in defined contribution plan administration, researchers at Morningstar Inc. it’s still managed to gather fans. Page 4 wanted to know if greater gender diversity in plan administration Departments led to better practices. The answer is a resounding “Yes,” according to a study that mea- At deadline ��24 Frontlines ��8 sured three characteristics of what the Chicago-based research Changes ahead ��27 Hirings ��18 Classified ��20 News roundup ��26 firm considers enlightened plan design. Corrections ��4 Other views ��11 “We find that the probability of a plan offering these services is Editorial ��10 RFPs ��20 higher if the plan administrator is female, and the differences are ESG roundup ��12 statistically significant,” said the Morningstar report. “In other words, female plan administrators run better plans than their male DC record-keeper counterparts.” The report, “Wonder Women: Why Defined Contribution Plans survey overdue Benefit from Female Plan Administrators,” was issued March 2. Pensions & Investments is accepting “The effect is incredibly strong,” said David Blanchett, head of late responses to the annual survey of retirement research, in an interview, referring to the link between defined contribution service providers. female DC administrators and higher quality plans as measured by Firms record keeping assets for U.S. the three factors — use of auto enrollment, offering of defaults institutional DC plans are eligible. (primarily target-date funds) and compliance with a series of Results will run April 5. ERISA best practices guidelines. To request a survey or obtain further Using Form 5500 data, Morningstar researchers tracked the in- information, please contact Anthony creasing percentage of female plan administrators over time and then matched those results with the growth of those three factors. Scuderi at [email protected] or The best practices component is defined by compliance with 212-210-0140, or visit pionline.com/ ERISA Section 404(c). Compliance “relieves plan sponsors and section/surveys. ‘INCREDIBLY STRONG’: David Blanchett said Morningstar used Form 5500 other fiduciaries from liability from losses resulting from partici- data to show women were more likely to be leaders of outstanding DC plans. pants’ direction of their investments,” | SEE GENDER ON PAGE 25 Entire contents ©2021 Crain Communications Inc. All rights reserved. Pensions & Investments (ISSN 1050-4974) is published biweekly by Crain Communications Inc., 150 N. Michigan Ave., Chi- cago, Ill. 60601-7593. Periodicals postage paid at Chicago, Ill. and Money Management at additional mailing offices. Postmaster: Send address changes to Pensions & Investments, Circulation Dept., 1155 Gratiot Avenue, Detroit, Mich. 48207-2912. $16 per issue; $350 per year in the U.S.; $375 per year in Canada; all other countries $475. ‘‘Canadian Deadline nears for P&I’s survey of money managers Post International Publications Mail Product (Canadian Distribution) Sales Agreement No. 0293539’’ GST #136760444. Printed in U.S.A. Pensions & Investments is calling on money managers to data, will be released as part of a special report in the May 31 participate in its annual survey of the largest managers. issue. All of the data, as well as past years, will be in P&I’s CRAIN COMMUNICATIONS INC The data gathered for calendar year 2020 will shine a light on Research Center at pionline.com/researchcenter. Keith E. Crain, Chairman how various strategies and asset classes came out of a roller- To request a survey or obtain further information, please Mary Kay Crain, Vice Chairman KC Crain, CEO coaster year dominated by the coronavirus pandemic, market contact Anthony Scuderi at [email protected] or 212-210- Chris Crain, Senior Executive Vice President plummet and subsequent strong rebound. 0140, or visit pionline.com/section/surveys. Lexie Crain Armstrong, Secretary Worldwide institutional assets under management grew 14.4% Survey data will also be used to help populate the autumn Bob Recchia, Chief Financial Officer in 2019, and despite a cratering of markets in the first quarter of megamanagers special report of the 500 largest global manag- G.D. Crain Jr., Founder (1885-1973) ers, completed in conjunction with Willis Towers Watson PLC’s Mrs. G.D. Crain Jr., Chairman (1911-1996) 2020, that level of growth could be matched again as accommo- dative fiscal and monetary policies in response to the pandemic Thinking Ahead Institute. Published every other Monday by Crain Communications Inc. Boston: 101 Federal St., Suite 1615A, 02110; Chicago: 150 N. Michigan Ave., 19th Floor, kept investment gains flowing. This year’s survey has a few new questions. P&I is asking what 60601; London: 11 Ironmonger Lane, EC2V 8EY; El Segundo, Calif.: 400 Continental Blvd., 6th Responses to P&I’s annual money manager survey are due percentage of the total workforce, senior management and 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. March 19. All firms managing U.S. institutional, tax-exempt investment staff are women or minorities. Address all subscription correspondence to Pensions & Investments, 1155 Gratiot Ave., Detroit, assets are eligible. Pure alternative managers are encouraged to Other new questions concern how much AUM is managed Mich. 48207-2912 or email [email protected]. participate to further expand our datasets for the benefit of our globally in cryptocurrency and assets managed for registered Member of Business Publications Audit of Circulation www.pionline.com readers. The data, and various stories by P&I staff based on the investment advisers. n Pensions & Investments March 8, 2021 | 3

Alternatives Private credit managers supersizing their loans Firms flush with capital of total transaction volume over the Capital Partners VI; Blackstone past few years. Group Inc.’s direct lending fund, becoming major players According to Preqin, 43.4% of the the $6.1 billion GSO European Se- for corporate lending $82.4 billion in aggregate transac- nior Debt Fund II; Ares Manage- tions in 2020 were loans of $1 bil- ment Corp.’s $3.5 billion Ares Spe- lion or more, compared with 32.2% cial Opportunities Fund; and KKR By ARLEEN JACOBIUS of the $102.2 billion in combined & Co. Inc.’s $2.8 billion KKR Dislo- Morris/Bloomberg Paul David deal value in 2017. cation Fund. The heftiest alternative invest- Executives at the biggest alter- Apollo Global Management Inc. ment managers have amassed native investment firms view mak- in February closed its $2.34 billion enough capital in their credit busi- ing mega loans that only a year ago Apollo Accord Fund IV, which in- nesses to make big loans for the would have been provided by banks vests in dislocated credit, just nine some of the largest corporations. as an outsized investment opportu- months after it held a final close for In 2020, the largest credit man- nity. These executives expect these the $1.75 billion Apollo Accord agers accounted for a big swath of loan originations will not only pro- Fund III B, an earlier dislocated the capital raised worldwide, ac- pel further growth, but will serve as credit offering. cording to a February Preqin re- a source of excess return. During Apollo Global Manage- port. The 10 largest private credit A number of alternative investment Inc.’s Feb 3 earnings call, funds accounted for 39% of the total ment firms raised billions for their Marc Rowan, co-founder and se- capital raised in 2020, up from 31% credit strategies in the last 12 nior managing director, attributed a in 2019. And mega loans have been months, including Clearlake Capi- portion of the $88 billion the firm accounting for a greater percentage tal Group’s $7 billion Clearlake SEE CREDIT ON PAGE 21 NOT OVERNIGHT: James Zelter said the shift in lending has been accelerating.

Money Management Trading Victor Powell Mellody Hobson of Ariel Outsourced trading becoming side effect hits her stride as co-CEO of virus for managers She has plan to use private equity unit to help establish racial economic parity By SOPHIE BAKER

By CHRISTINE WILLIAMSON Some money managers and hedge funds are looking to outsource their trading desks as the coronavirus pandemic con- Mellody Hobson has a strategic plan for Ariel Invest- tinues to shine a spotlight on costs, business continuity plans ments LLC, the latest manifestation of which is a bold and the unexpected success of a decentralized workforce. new spin on private equity that seeks to address racial Outsourced trading has two main functions for buy-side in- economic inequality. vestors, sources said. “First, it allows them to reduce fixed costs Ms. Hobson was appointed to the newly created role of by converting head count to a scalable resource that can be co-CEO in July 2019, a job she shares with John W. Rogers dialed up or down” — something that came into its own during Jr., who is also chairman and CIO. Ms. Hobson retained the pandemic, said Chris Jenkins, managing director at TORA her position as president of the Chicago-based active Trading Services Ltd., who splits his time between Jersey, value equity manager, which managed $15 billion as of Hong Kong and San Francisco. Jan. 31 for institutional and retail investors. Firms can also increase their capabilities, such as trading BUILDING UP: Mellody In a Feb. 19 interview with Pensions & In- new asset classes or strategies, or expand into new geogra- Hobson used several vestments from her home in California where phies and across time zones. ‘pillars’ to establish her she is working remotely, Ms. Hobson said the TORA’s outsourced trading division saw revenues increase strategic plan. “pillars” of the strategic plan she built after 87% in 2020, and the firm had to hire additional traders to keep becoming co-CEO are human capital and up with demand. talent, brand, product and technology. Other providers reported upticks in interest and business, It’s in the product sleeve that Ms. Hobson has taken the including Northern Trust Capital Markets, which brought on SEE HOBSON ON PAGE 22 its three largest clients during the pandemic, according to Gary Paulin, global head | SEE OUTSOURCED ON PAGE 21

Is it time for DC plans to embrace private equity? Private equity has been the best long-term investment asset owners have made in the last 25 years, but defined contribution plan participants have largely been locked out of the asset class. Time will tell whether DC plan sponsors are able to overcome the legal, accounting and structural challenges to add private equity to their plans.

Outperformer: Private equity has significantly Bright future: Although Returns up, risk down: Moving Success story: The Washington State outperformed public stocks over long periods of lower interest rates have half of equity allocations into private Investment Board oversees a DC investment time, net of fees. Over the 25-year period ended decreased expected returns for all equity would increase expected returns option that incorporates private alternatives. Sept. 30, private equity returned about 13.5% asset classes, private equity’s by about 50 basis points for a typical Over the past 10 years, the strategy annually, while U.S. equities returned almost 9%. superior returns are expected to 2025 target-date fund, and expected exceeded its benchmark by more than 1 Private equity fared even better when compared continue. A survey of managers drawdowns would be lower. The risk- percentage point and surpassed a 50% S&P with non-U.S. public equities. and consultants points to 300 reward trade-off would be even better 500 and 50% U.S. Treasury index. basis points of outperformance for participants with more equity WSIB allocation* and returns Performance net of fees persisting into the future. exposure. Cambridge U.S. Private MSCI Russell Russell Public equity: 33.0% Fixed income: 21.2% Other: 0.4% Equity index World 3000 2000 Private equity vs. U.S. equity Expected Expected 20% return drawdown 12.60% Private equity 18% Large-cap U.S. equity 2025 5.30% 2025 target-date 16% 4.67% target-date with 50% of Private equity: 23.1% Real estate: 16.8% 14% 9.60% 9.87% current equity in PE Tangible assets: 5.4%

12% 2025 2025 One Three Five 10 target-date target-date year years years years 10% 7.06% current with 50% of equity in PE Total Allocation 8% Portfolio 12.43% 9.70% 10.86% 9.54% 6% Benchmark 14.44% 8.90% 10.34% 7.97% 4% S&P Balanced 2% -19.51% Equity and Bond 14.61% 10.45% 10.00% 9.39% 0% index — Moderate One year Three years Five years 10 years 25 years 2012 2020 -21.96% *Does not equal 100% due to rounding. Sources: Cambridge Associates; Horizon Actuarial Services; Washington State Department of Retirement Systems; Bloomberg LP; P&I Compiled and designed by Aaron M. Cunningham and Gregg A. Runburg 4 | March 8, 2021 Pensions & Investments

Retirement Plans Collective DC plans a new part of U.K. retirement matrix New approach shares Feb. 11, collective DC plans, where ment benefits from TAKING A LOOK: Simon creasing if they die younger than employees share investment and participants in the Eagle said utility and expected. An actuary works out the investment, longevity longevity risk, can be established pooled plans that die industrial companies are distribution of these benefits by plan sponsors for the first time younger to subsidize especially interested in among plan participants. Actuaries risks to boost benefits in the U.K. payments for those the new law. and lawyers are also needed to set Under these new arrangements, that live longer. Un- up the plans, consultants said. By PAULINA PIELICHATA retirement income is secured by like in traditional DC nual income for life, “We’re seeing interest in opening the pooling of plan participants’ as- plans, where partici- they are cheaper for CDC schemes from a number of or- Collective defined contribution sets and investments, in contrast to pants can outlive their employers as they ganizations which want to provide plans could soon see a widespread DB funds where the sponsoring savings, the bigger don’t provide a guar- collective retirement income at a rollout in the U.K. as employers employer bears all the risk. At the pool of assets in CDC antee to participants fixed cost, via the new CDC legisla- move away from defined benefit same time, the employer contribu- plans can help to as to how much they tion,” said Simon Eagle, senior di- plans but still seek secure retire- tion is fixed. spread the costs and will receive each year. rector at Willis Towers Watson PLC ment outcomes for employees, con- Sources said the law opens up an risks over a longer period of time. Under CDC plans, the amount paid in London, adding that the firm has sultants said. avenue for single-employer DB While CDC plans are similar to out adjusts for as long as partici- been commissioned by clients to Following the final enactment of plan sponsors to set up a new ar- an insured DC annuity or DB fund pants live, with benefits reducing if work on potential CDC designs. the Pension Schemes Act 2021 on rangement that uses unpaid retire- in that they pay out benefits as an- people are living longer and in- SEE COLLECTIVE ON PAGE 24

Washington

POSITION YOUR FIRM AS A THOUGHT LEADER Contribution catch-up for 2021 P&I Conference caregivers Sponsorship Opportunities gaining favor By MARGARIDA CORREIA Even though a bill to help care- A unique multi-channel marketing opportunity givers boost their retirement savings hasn’t gotten much buzz amid Content Development & Distribution | Virtual & Live Events | Video, Social & Digital Assets the flurry of legislative proposals in Congress, it has still managed to gain fans among plan sponsors and service providers to the retirement Distinguished and powerful asset owners trust Pensions & Investments to deliver the valuable information they need plan industry. to do their jobs. P&I Conferences combine the power of print, digital and live/virtual conferences to provide the The legislation would allow thought leadership that institutional investors require to be successful in these dynamic and often volatile conditions. caregivers who return to the workforce the opportunity to make catch-up contributions to their re- P&I Conference sponsors get the benefit of a complete 6+ month, turnkey campaign. This program provides the opportunity tirement accounts even if they to influence your best prospects on all the platforms where they search for solutions. Sponsorship is exclusive with a limited haven’t yet hit 50, the age at which number of opportunities for each topic. Attendance is inclusive of only highly qualified institutional investors. individuals are allowed by law to make such contributions. The bipartisan bill was introduced June 2019 in the 116th Con- gress by U.S. Rep. Jackie Walorski, R-Ind., and former Rep. Harley 2021 CONFERENCE CALENDAR Rouda, D-Calif., and is part of Pres- ident Joe Biden’s Plan for Older Americans, which he promoted during his election campaign. ESG Investing Private Markets Retirement Emerging Markets While the bill has yet to be rein- Virtual Conference Virtual Conference Income Conference troduced in the 117th Congress, some in the industry believe that it Series Series Conference has a reasonable chance of inclusion in two broad-based bipartisan May 2021 June 2021 September 2021 September 2021 retirement-related bills that many refer to as SECURE Act 2.0. The two bills are the Retirement Security and Savings Act, which was introduced in the Senate by Sen. Rob Managing Pension Canadian Pension The Evolution of Fixed Income & Portman, R-Ohio, and Sen. Ben Risk & Liabilities Risk Strategies OCIO Conference Credit Conference Cardin, D-Maryland, in May 2019, Conference Conference and the Securing a Strong Retire- ment Act, which was introduced in the House by Rep. Richard Neal, D- October 2021 October 2021 November 2021 November 2021 Mass., and Rep. Kevin Brady, R-Tex- as, in October 2020. The so-called SEE CAREGIVERS ON PAGE 23

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■ Barings LLC managed 10% of its assets for wealth management investors. An incorrect percentage was in the page 1 story “More firms feeling the draw of retail market opportunities” in the Feb. 22 issue. 7GL[EF6IXMVIQIRX 4PER7IVZMGIW-RG

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Retirement Plans Dow contributing $1 billion to DB plans before freeze Paola Chiefalo Company also will hike Supplemental Benefit, effective the plan freezes, will reduce the U.S. Dec. 31, 2023. plans’ projected benefit obligations DC contribution match In conjunction with that change, by $350 million to $375 million. beginning Jan. 1, 2022, Dow will As of Dec. 31, global pension plan as part of major shift match U.S. employee contributions assets totaled $26.4 billion, while to its qualified 401(k) plan, the Dow projected benefit obligations to- By ROB KOZLOWSKI Chemical Co. Employees’ Savings taled $35.3 billion, for a funding ra- Plan; and a non-qualified deferred tio of 74.8%, down from 76.3% a year Dow Inc., Midland, Mich., will compensation plan, the Dow Chem- earlier, according to the Feb. 5 10-K freeze the benefit accruals of its ical Co. Elective Deferral Plan Post filing. Assets and PBO were not U.S. pension plans at the end of 2004, up to 5% of their eligible com- separated by region. 2023, increase its matching contri- pensation when they contribute 6%, The discount rate for the global bution in its defined contribution spokeswoman Ashley Mendoza pension plans was 2.2% as of Dec. plans and will contribute $1 billion said. Also, beginning Jan. 1, 2024, 31, down from 2.81% a year earlier. to the pension plans before the end Dow will make an automatic non- For U.S. plans only, the discount of the first quarter. elective contribution to the DC plans rate was 2.71%, down from 3.41%. The chemical company an- of 4% of eligible compensation. The 10-K filing did not break out nounced its plans in an 8-K filing Currently, the matching contri- the non-U.S. plan discount rate. with the SEC on March 4. bution is 4% for most employees Also as of Dec. 31, the actual al- First, Dow will freeze benefit ac- when they contribute 6% of eligible FROST COMING: Dow will freeze benefit accruals to its U.S. DB plans at the end of 2023. location of the global pension plans cruals for participants in qualified compensation, Ms. Mendoza said. was 34.2% fixed income, 19.6% in- and non-qualified pension plans, As of Dec. 31, 2019, the Dow will be affected by the pension plan nally said in its Feb. 5 10-K filing ternational equities, 14.8% domestic including the Dow Employees’ Chemical Co. Employees’ Savings freeze, according to the 8-K filing. that it had expected to contribute equities, 11.9% private markets, Pension Plan, the Union Carbide Plan had $10.9 billion in assets, ac- In addition, Dow plans to make a $300 million to its global pension 7.3% real estate, 5.1% hedge funds, Employees’ Pension Plan and the cording to the company’s most re- voluntary contribution of $1 billion plans in 2021. 4.9% cash and cash equivalents, Dow Chemical Co. Executives’ cent 11-K filing. to its U.S. pension plans in the first Dow said in the new 8-K filing 1.8% other investments and 0.4% Supplemental Retirement Plan- About 14,400 active employees quarter. The company had origi- that the contribution, along with derivatives. n

Money Management Money Management TIAA-CREF chooses Chase banking exec Channel Capital teams up to lead firm as new president and CEO with former Mellon CEO to By CHRISTINE WILLIAMSON passion for financial inclusion and empowerment,” he added. launch U.S. incubator firm Thasunda Brown Duckett was Ms. Duckett has been a “champi- named president and CEO of TIAA- on for change,” the release said, not- CREF, effective May 1, a news re- ing that she was involved in initia- By DOUGLAS APPELL them win institutional clients. lease said Feb. 25. tives that promoted racial and “We actually think it’s a pretty Ms. Duckett currently is the CEO gender equality and inclusion while Channel Capital, a Melbourne- good time to launch a business like of Chase Consumer Banking, a divi- at J.P. Morgan Chase. based incubator and platform pro- this,” said Mr. Holding, noting that sion of J.P. Morgan Chase & Co. She “Thasunda is the right person to vider for startup money manage- “disruptive situations can create will succeed Roger W. Ferguson Jr., lead TIAA at a time when its work ment firms, is teaming up with opportunity.” who is delaying his planned retire- has never been more important and former Mellon Investments Chair- Mr. Mac Intyre concurred. Teams ment date of March 31 until Ms. when the challenges of fostering fi- man and CEO Desmond “Des” Mac working remotely have effectively Duckett has joined the firm. He will nancial stability and inclusion have Intyre to launch Eolas Capital, a become disconnected from their remain an adviser to TIAA, the news never been greater,” Mr. Ferguson New York-based investment man- companies and as a result “more release said. said in the release. ager incubator. open to liftouts or going and fulfill- Ms. Duckett “brings invaluable Thasunda Brown Duckett Also in the release Ms. Duckett The move effectively means that ing their own ambitions,” he said. experience leading and growing said:, “I am extraordinarily grateful Channel Capital — which works Mr. Holding likewise cited the large, complex businesses, setting and executing for the opportunity to lead a company that has with eight money man- breadth and depth of strategy, improving client experience and attracting helped millions of people retire with ‘enough’ to live agement “partners” in Mr. Mac Intyre’s indus- and developing talent,” said Ronald L. Thompson, in dignity and excited about the opportunity to help Australia with com- try ties as a mitigating chairman of the TIAA board of trustees, in the news TIAA chart its next 100 years.” bined assets of A$16 factor in a pandemic- release. TIAA had $1.3 trillion in assets under manage- billion ($12.6 billion) — constrained environ- “Equally important, she is deeply mission orient- ment as of Dec. 31 by its Nuveen affiliates and TIAA “is going global,” said ment. “Having someone ed, with values that reflect those of TIAA, including a investment management teams. n Mr. Mac Intyre, who with Des’ network and stepped down from experience in the most Mellon in February. fertile boutique incuba- Pension Funds In a market with a lot tion space in the world” of providers of patient is a plus, he said. capital, Eolas will look TAKING A LONG STEP: Eolas, like Channel, CPPIB leader resigns after UAE vaccine trip to differentiate itself by Desmond ‘Des’ Mac will forge revenue offering a full suite of Intyre is helping the sharing agreements CEO runs afoul of Canada aging director and cellence and we offer business partnership Australian firm establish with the boutiques global head of credit him our sincere best services, including a presence in New York. they partner with, as quarantine rules after investments. Details on wishes for the future,” strategy, finance, opera- opposed to taking eq- personal visit to Mideast a replacement were not the statement said. tions, technology and front-to-back uity stakes. immediately available. A spokeswoman office marketing and sales, Mr. Mac Mr. Mac Intyre, while declining to Mr. Graham’s ap- could not immediately Intyre said. give exact numbers for his and By SOPHIE BAKER pointment as CEO is be reached for com- Other firms, like Victory Capital, Channel’s respective stakes in Eo- permanent, CPPIB said ment. offer a suite of services to some- las, said the equity breakdown is Mark Machin resigned as CEO of in an email. Although leaving what more established firms but “pretty much even but the majority Canada Pension Plan Investment Mr. Machin was ap- Canada is not illegal, “we’re looking for the smaller jewel is with Channel” with another por- Board, Toronto, following his deci- pointed president and Prime Minister Justin ... more of an incubation phase, a tion reserved for Eolas staff. sion to be vaccinated against COV- CEO in June 2016. He Mark Machin Trudeau and his minis- team liftout, a management buy- Mr. Mac Intyre said by and large ID-19 while on a personal trip to joined in March 2012. ters have repeatedly out,” he said. Eolas will look to partner with the United Arab Emirates. “Mr. Machin has provided out- warned residents not to do it and In separate interviews, Mr. Mac startups offering “specialist, differ- Mr. Machin resigned after dis- standing leadership to the organi- have imposed strict rules to dis- Intyre and Glen Holding, manag- entiated” capabilities in segments cussions with the fund board, a zation as a senior executive and courage trips, including hotel quar- ing director of Channel Capital, of the market such as alternatives, statement said Feb 26. then CEO. His significant accom- antines for those who return from pushed back on the notion that credit, private equity, microcap or The Canada Pension Plan had plishments will help to strengthen international locations. pandemic-related hurdles to per- emerging markets equities — C$475.7 billion ($372.1 billion) in Canadians’ retirement income se- Canadian airlines have can- forming due diligence could make “something that a manager or an assets as of Dec. 31. curity for many decades to come. celed all flights to several popular the current moment a difficult one investment consultant or a client Effective immediately, John Gra- The board wishes to thank Mr. destinations. n to launch a business focused on will say, well, they can fit into my ham was named CEO of the man- Machin for his global perspective, setting up new investment man- portfolio, they add something dif- ager. Mr. Graham was senior man- leadership and commitment to ex- Bloomberg contributed to this story. agement boutiques and helping ferent, they’re a diversifier.” n (0(5*,1*0$5.(76 ([SDQGLQJ,QYHVWRUVo9LHZ

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DISTINGUISHED CAREER Finance museum honors TIAA’s Roger Ferguson Roger W. Ferguson Jr. was awarded the Whitehead Award for Distinguished Public Service and Financial Leadership

by the Museum of American Finance. Mr. Juliana Thomas Ferguson, the soon-to-be-retired president and CEO of TIAA-CREF, received the award, which “honors leaders whose contributions in the public and private arenas strengthen society and the advancement of the financial JUDICIAL SCOLDING industry,” during a virtual gala on Feb. 22, said a news release from the New ERISA attorneys York-based museum. David J. Cowen, president and CEO of the museum, said in a statement that Mr. are taken to task Ferguson “demonstrated leadership as vice chairman of the Federal Reserve by federal judge when he was the only governor in Washington, D.C., on 9/11 and took action There comes a time when a judge’s exasperation to keep the (U.S.) financial system with attorneys makes its way into a written opinion. functioning in the wake of the terrorist RECOGNITION: Roger W. Ferguson Jr. said promoting financial literacy is a passion of his. Take, for example, U.S. District Judge Kenneth D. attacks.” Bell, Statesville, N.C., who is presiding over an In his acceptance remarks, Mr. Fergu- Mr. Ferguson will retire from TIAA … and being recognized like this is ERISA complaint against Lowe’s Cos. Inc. and Aon son said “it is an honor to be recognized around May 1 after his successor, Tha- indeed an honor.” Hewitt Investment Consulting by a participant in by an organization charged with preserv- sunda Brown Duckett, joins the firm. He TIAA had $1.3 trillion in assets as of the Lowe’s 401(k) plan. ing such a significant part of American will serve as an adviser to the firm. Dec. 31, managed by its Nuveen affiliates history and also with promoting financial He added that he has “started to and TIAA’s investment teams. As attorneys fought over the calling and exclud- literacy, a passion of mine.” reflect on my great fortune in my career — CHRISTINE WILLIAMSON ing of witnesses for an upcoming trial, Mr. Bell excoriated them an eight-page ruling on Feb. 22. “Lowe’s cannot seriously or credibly contend that SHARING KNOWLEDGE disclosing almost three dozen potential witnesses shortly before the clock struck midnight on the last LGPS Central execs to mentor U.K. students day of the discovery period was timely (or) ‘substantially justified,’” he wrote. Two senior executives of LGPS Central Ltd. will be Adding that this disclosure of witnesses — many making career opportunities within the U.K. retirement of which have been withdrawn — was “untimely,” and investment management industry more accessible to students from less advantaged backgrounds. the judge remarked: “The court notes that Lowe’s is Michael Glenwood The £45 billion ($63 billion) U.K. pool of local a frequent litigant in this court and trusts that this government pension schemes has joined the U.K. conduct will not be repeated in future litigation.” charity upReach’s latest program, Investment Plaintiff Benjamin Reetz — or at least his Industry Springboard, which connects firms in the attorneys — also didn’t escape Mr. Bell’s displea- investment industry with students raised in less sure. “‘Gotcha’ is not and cannot be a guiding privileged families. principle for the application of the Federal Rules of LGPS Central will take on up to six students to Civil Procedure,” Mr. Bell wrote, noting that defense start in September, and they will be mentored by CIO and plaintiffs’ lawyers were still quarreling over Gordon Ross and Ian Brown, head of private markets. three witnesses. The pension pool is looking for mentees who are living in economically disadvantaged regions in the “An unreasonable and uncompromising U.K., people whose family members did not go to insistence on the strictest application of the rules university or those who grew up in foster homes, a with the clear effect of thwarting the search for a spokeswoman said. true decision on the merits is no less gamesman- Messrs. Ross and Brown will help mentees write ship than the original sin,” Mr. Bell wrote as he resumes, complete job applications and polish criticized the plaintiff’s “strident position.” interview skills in an effort to help them prepare for His ruling on the witnesses was a mixture of graduate programs at the pool or at other organiza- agreeing in part, denying in part and deferring in tions in the industry. Mentees, depending on their part the various claims — while also leaving clear age, could receive mentoring for more than a year. instructions. Students who will soon receive their degree will be given training to apply for the graduate programs. “With all due respect and great humility, the court “This is a chance to make a real difference to those does not need the witnesses from either party to who may not have had the same opportunities that provide the court with a primer on the applicable others around them have been fortunate enough to ERISA law or legal standards, notwithstanding enjoy,” Mr. Ross said in a news release. ERISA’s acknowledged ‘complexity,’” he concluded. — PAULINA PIELICHATA — ROBERT STEYER

Nikko Hellstern NEW SCHOLARSHIP PROGRAM “Parametric strives to attract, develop and retain individuals with diverse backgrounds and perspec- Parametric creates quantitative tives,” said Thomas Lee, CIO, equities and derivatives at Para- metric, in an email. “We seek to be fellowships for diverse students a leader in driving and supporting a diverse culture. The Parametric Quant specialist Parametric Computational Finance and Risk fellowship programs at the Portfolio Associates LLC launched Management master’s program University of Washington and the a new scholarship program that and the University of Minnesota’s University of Minnesota are part of will help to cover tuition and living (Minneapolis) Minnesota Center that overall effort. Specifically, the expenses for four graduate for Financial and Actuarial fellowships create a talented, students who want to study Mathematics program, said a news INCLUSIVE: Parametric is partnering with the University of Washington, left, and diverse candidate pool for quanti- quantitative finance. release from the Seattle-based University of Minnesota on the quantitative graduate fellowships. tative investment positions. This The Parametric Diversity money manager. effort benefits not only Parametric Fellowship for Quantitative The fellowship has a “particular diversity, equity and inclusion, an announcement on its website. but the industry as a whole.” Investment Talent will be awarded focus on students with demon- which may include community Applicants are being sought now Parametric managed $355.4 to two students each for the strated financial need who have service or participation in a related by each university for the 2021- billion as of Dec. 31. University of Washington (Seattle) evidenced a commitment to student organization,” UW said in 2022 academic year. — CHRISTINE WILLIAMSON INTERESTED IN SUSTAINABLE INVESTING?

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EDITORIAL SALES & MARKETING Nikki Pirrello Chief operating officer Julie Parten Head of sales Lauren DeRiggi Digital specialist/account Rallying to meet the ongoing COVID-19 challenge executive REGIONAL SALES MANAGERS ur special report starting on Page 1 of this issue takes work from home seems likely to continue in some form even in a Rich Kiesel West stock of an important milestone for Pensions & Invest- post-pandemic world. The question isn’t an academic one — strong Paul Kissane Midwest ments and our readers: Roughly one year ago, lock- workplace cultures built on both formal and casual in-person interac- Anna Koules New York downs sparked by the COVID-19 pandemic changed life tions are credited with achieving strong returns. Steve Middleton EMEA +44-(0)77-1012-8464 as we all know it. As Franklin Templeton Investments’ Subash Pillai told P&I reporter Hideo Nakayama Asia (Tokyo) +81-3-3479-6131; [email protected] Retirement plans came through the market turmoil of 2020 in Douglas Appell, he’s acutely aware of the challenges of a virtual O Eduardo de Alcantara Machado Sao Paulo, remarkably good shape by following the asset allocation plans they workplace facing younger colleagues because “they don’t just learn Brazil +55-11-3167-0821; [email protected] had in place and adapting to market conditions. New investment from instruction and direct feedback. They learn from observation,” CONFERENCES/MARKETING opportunities, particularly in logistics and pharmaceuticals, have something he called a key to his professional development early in Kimberly Jackson Director of conference sales since emerged. And employees have taken to virtual tools to keep his 30-year career in the industry. Diane Pastore Director of conference programming communication flowing and work proceeding apace. Institutional investors and the money managers and consultants Joshua Scott Director of conference programming But the continuum of uncertainty launched by the pandemic is that work for them are responding to the challenges raised by the Kathleen Stevens Investor relations director ongoing. There is a growing divergence between the markets and the pandemic with a variety of workplace tactics and investment strate- Gerry O’Hara Investor relations manager Michelle DeMarco Director of relationship real economy, with central banks, politicians and policymakers having gies as detailed in our report. marketing unprecedented influence and creating ongoing challenges for A year from now, it’s not too much to hope that we will have Assel Chanlatte Conference marketing manager investors across the spectrum of assets. emerged with a better understanding of how best to preserve our Mirjam Guldemond Conference manager, The challenge, too, of preserving a workplace’s unique culture has unique cultures, mentor the up-and-comers, and make our workforces WorldPensionSummit +31-6-2333-2464 Kristal Santos Client services project manager emerged as a question weighing heavily on everyone’s minds, as and portfolios stronger. n Ashley Perrucci Associate manager, client partnerships Rachel Lopez Conference administrative assistant OTHER VIEWS DAVID S. BLITZSTEIN and the consolidation of the administration CUSTOM CONTENT/CLIENT SOLUTIONS and regulation of all federal retirement Greg Crawford Director of content solutions systems into one entity. Corina Lewis Client solutions senior program Fast forward to 2021, in which we confront manager Without a national retirement policy, a retirement system that is failing much of the David Joseph Research analyst population and portends economic and social Tetyana Saucedo Digital campaign manager tragedy. According to a recent report from the Deanna Speziale Senior marketing associate Center for Retirement Research at Boston U.S. faces a future of pension crises College, 51% of American households, as of SUBSCRIPTIONS/SITE LICENSES the third quarter of 2020, “will not have Elayne Glick Director, strategy & business, site license subscriptions enough retirement income to maintain their pre-retirement standard of living, even if they David Bomberger Director, enterprise licensing he last time Congress thought David S. Blitzstein is holistically about U.S. retirement work to age 65 and annuitize all their finan- Ed Gorman Director, EMEA/international site president of Blitzstein licensing +44-(0)20-3823-9891 policy was 40 years ago in 1981. The cial assets, including the receipts from a ill-timed President’s Commission on Consulting LLC and is a reverse mortgage on their homes.” RFP/RECRUITMENT Pension Policy established under former special assistant The U.S. Government Accountability Office Erin Smith Sales manager executive order by President Carter in 1979 for multiemployer plans set off alarm bells in a 2017 report to Con- T REPRINTS issued its report in early 1981, only to be for the UFCW Interna- gress, “The Nation’s Retirement System: A discarded by the incoming Reagan adminis- tional Union, based in Comprehensive Re-evaluation is Needed to Laura Picariello Sales manager tration and forgotten by future presidents Bethesda, Md. Better Promote Future Retirement Security.” ADVERTISING PRODUCTION and Congresses. GAO highlighted the fact that, “over the past Robert T. Hedrick Media services manager Perhaps it is time to revisit that forgotten 40 years, the nation has sought to address the 312-649-7836; [email protected] report. The commission called for mandatory or through a clearinghouse managed by the issues facing the U.S. retirement system in a Subscription information - single copy employer contributions at a minimum of 3% of Social Security Administration; enactment of piecemeal fashion ... and that it had been sales: 877-812-1586 payroll for every employee over age 25 and a Public Employee Retirement Income nearly 40 years since a federal commission TO CONTACT A P&I STAFFER 1,000 hours of employment (the so-called Security Act for state and local government has conducted a comprehensive evaluation of Unless otherwise noted above, email us at minimum universal pension system or MUPS) plans modeled on ERISA; legislation to the nation’s approach to financing retirement.” [email protected] or find phone numbers at pionline.com/staff. to be administered in employer pension plans strengthen and universalize Social Security; SEE BLITZSTEIN ON NEXT PAGE Pensions & Investments March 8, 2021 | 11 OPINION

The historic decentralization of pension ing capital formation and invest- MORE INDUSTRY ment in the U.S. economy. Histori- VIEWPOINTS Blitzstein regulation between Department of Labor, cally low interest rates, driven by extraordinary monetary policy, ■ Sameer Shalaby: Why should CONTINUED FROM OPPOSITE PAGE Department of Treasury, the PBGC and the have damaged the U.S. pension investors care about treasury Mini pension crises are already Social Security Administration has distorted system and requires special management? brewing in various sectors of the assistance from the central bank national goals of pension security. As a ■ Lawrence A. Cunningham: Gary U.S. economy. Several million and Treasury. Pension systems can Gensler should keep Jay Clayton’s workers and retirees are at risk in result, tax policy has taken primacy over play a major role in supporting pragmatic proxy adviser rules. multiemployer pension plans retirement policy. future economic growth and where plan insolvency is projected productivity. The Biden-Harris ■ My-Linh Ngo: Pension funds and in the next 20 years. To make administration, along with the role of the debt market in the matters worse, the Pension Bene t of new committees on retirement Pension crises can quickly morph Congress, should prioritize ght against climate change. Guaranty Corp. multiemployer income security — one in the into social unrest as witnessed in retirement policy in their efforts See pionline.com/industry-voices insurance program that was House and one in the Senate. France and Chile over the past to “build back better.” Reorganiz- legislated to protect these Promoting retirement wealth two years. The U.S. Treasury ing pension policy through To submit an Other Views commentary, email Editor participants is projected to and security should also be Department and the Federal consolidating regulatory and Amy B. Resnick at [email protected], or Managing Editor Kevin Olsen at [email protected]. collapse in 2026. At the same time, factored into policies aimed at Reserve need to focus on the role congressional governance is a a number of state and local addressing income inequality. of the pension system in enhanc- good starting point.  pension plans are in a death spiral that is presenting an unmanage- able budgetary dilemma for legislators and taxpayers. Seven states have unfunded liabilities greater than $50 billion, with Illinois exceeding $180 billion and California exceeding $300 billion MARKETING OPPORTUNITIES in unfunded obligations. Looming on the horizon, the Social Security trust funds will be depleted in 2035 which could result in 21% bene t cuts unless Congress acts. The U.S. retirement system 2021 Sponsored received a mediocre grade of C-plus when measured by the prestigious Mercer CFA Institute Global Pension index. The index has been benchmarking international retirement systems for 12 Roundtable Calendar years based on measures of adequacy, sustainability and integrity. The U.S. ranks 18th out of 39 retirement systems re- An excellent way to highlight your ﬁrm’s investment expertise. viewed. Within the subindexes, the U.S. ranks 10th for sustainability Sponsor one of the upcoming Roundtables in Pensions & Investments. (the ability of the system to continue for decades ahead), but only 25th for adequacy (whether the system provides adequate levels of post-work income), and 31st for integrity (whether the Investing in China | Publishing: May 17 system operates in the best Over the past year, China has often been in the headlines and not always for the best of reasons. But institutional interests of participants). It is hard investors able to cut through the din of all the noise still found plenty of opportunity. This roundtable will help to reconcile the performance of investors focus on the key economic and social issues that continue to drive change – and investment opportunity – the largest and one of the most in China, while putting all the other issues in their proper perspective. innovative economies in the world with what seems to be a third-rate retirement system. The failure of U.S. national retirement policy is a result of a Private Markets | Publishing: July 12 leadership void and regulatory The search for uncorrelated return never really ends but in today’s world of low interest rates, high volatility and fragmentation. Unlike many a healthy dose of uncertainty, it’s become more critical for institutional investors seeking to meet return targets, rst-world governments, the U.S. improve funded status or have an income stream. This roundtable discussion will break down the private market lacks a dedicated pension depart- asset class into its components and provide insight into which areas are most appealing. ment and cabinet executive for retirement policy. Congress’ multicommittee jurisdictions over pension issues reinforces policy confusion. The historic decentral- Target-Date Funds | Publishing: September 20 ization of pension regulation Target-date funds are always a hot topic of discussion among deﬁned contribution plan sponsors and their partners. between Department of Labor, Are they delivering as promised? Are plan participants using them correctly? Can they be used eectively in retire- Department of Treasury, the PBGC ment income solutions? Meantime, target-date funds remain the most popular QDIA. This roundtable will provide an and the Social Security Adminis- update on all things target date: from new innovations to the latest in glidepath development. tration has distorted national goals of pension security. As a result, tax policy has taken primacy over retirement policy. The members of the 1979-81 President’s Commis- sion on Pension Policy clearly recognized this problem when they recommended consolidation For more information on this multi-platform sponsorship opportunity, of all pension regulation into one contact Julie Parten at 952.495.0422 or [email protected]. department, as well as the creation

Subscribe to P&I Daily. www.pionline.com 12 | March 8, 2021 Pensions & Investments ESG ROUNDUP

After strong 2020, ESG investment expected to keep growing ESG-themed investments saw close clear plans for transitioning to U.K. managers to push strong performance and an influx a low-carbon economy. of flows in 2020 and are expected to While 47 of the asset managers CEO PAY CLIMBS; SO DOES OPPOSITION diversity, climate change be a key driver of organic asset publish their voting policies; only CEO pay continued to increase in 2021, but so did shareholder U.K. public companies will see growth for money managers in 32 of those policies incorporate en- opposition to excessive compensation, according to a report issued increased scrutiny in 2021 from 2021, said a report by Moody’s In- vironmental and social topics, Feb. 25 by As You Sow. U.K. money managers when it vestors Service. SquareWell found. The seventh annual 100 Most Overpaid CEOs report from the comes to ethnic minority represen- According to Moody’s, inflows tation on boards and climate- investor advocacy group focuses on how shareholders hold compa- into ESG strategies grew 140% in Corporate diversity bill change response, the U.K. Invest- 2020 from the year before. ESG- nies accountable for excessive compensation, with more companies ment Association said Feb. 24. themed investments saw $80.5 bil- introduced in Senate receiving less support for CEO pay packages. “Shares held by U.S. Shareholders expect companies lion in global net inflows in the Legislation requiring public public pension funds and European financial managers have made to improve ethnic diversity on their third quarter, up 14% from the pre- companies to disclose information their opposition to excessive U.S. CEO pay clear,” said the report, boards in this year’s annual general vious quarter. Sustainable fund about the diversity of their corpo- citing data from Insightia that showed financial managers control- meeting season as well as consider AUM reached a record high of $1.23 rate boards and senior manage- ling more than $2 trillion increased opposition to CEO pay by more executive pay, gender representa- trillion as of Sept. 30. ment was introduced Feb. 23 in the than 10%. tion and the impact of climate In the U.S., sustainable equity Senate by Sen. Bob Menendez, D- change on the long-term value of “We’ve been pleased to see increased opposition to excessive funds saw $3.8 billion in net in- N.J., the highest ranking Latino in their businesses. flows in the third quarter, while Congress. CEO pay from many funds,” said the report’s author, Landis Weaver, The IA’s corporate governance U.S. equity funds saw net outflows The proposed Improving Corpo- As you Sow’s executive compensation program manager. research service, Institutional Vot- of $118.5 billion during the same rate Governance Through Diversity This year’s report also “discovered that dual-class stock and ing Information Service, for the first period. Act of 2020 would revise Securities insider ownership can sometimes mask the true extent of sharehold- time in 2021 will issue an “amber “The experience of 2020 will help and Exchange Commission rules er opposition. And perhaps not surprisingly, some companies that are top” to any FTSE 350 companies remove investors’ worry that ESG on diversity disclosure to require most insulated from the will of all shareholders have some of the that do not disclose either the eth- investing means giving up returns, that companies disclose racial, gen- most overpaid CEOs,” Ms. Weaver said. nic diversity of their board or a which has been a widespread bar- der, ethnic makeup and veteran credible action plan to achieve it. For pension funds and other asset owners, some of the increased rier to growth in ESG products,” status of their boards and senior IVIS produces reports on com- opposition stemmed from internal changes. The report cites the said Stephen Tu, a vice president management. panies in relation to compliance and senior credit officer at Moody’s, The legislation has strong sup- example of the $120.5 billion New York State Teachers’ Retirement with corporate governance best in a news release. port, including from the U.S. Cham- System, Albany, changing its policy to include D grades as well as F’s practices. Red and amber “tops” In addition, the clean energy sec- ber of Commerce. received by companies under the Glass Lewis grading system. That show the most severe issues. tor outperformed in the U.S. equi- “Diversity has become increas- increased its rate of opposition to CEO pay at S&P 500 companies to Investment managers also want ties market last year. Last year, the ingly important for good corporate 32.3% in 2020 from 11.3% in 2019. to see companies report on climate- Nasdaq Clean Edge Green Energy governance,” Tom Quaadman, ex- Many financial managers, particularly the largest U.S. firms, related risks in a consistent, clear index, which tracks the perfor- ecutive vice president of its Center continued to vote in favor of many pay packages of excessively paid and comparable manner. In 2021, mance of clean energy technology for Capital Markets Competitive- companies that do not address all CEOs, the report found, with a 6.2% median level of opposition to firms, was the top-performing U.S. ness, said in a separate statement. four pillars of disclosure standards equity sector, with a cumulative re- The proposed legislation would of- CEO pay at S&P 500 companies over the previous proxy year. by the Task Force for Climate-relat- turn of 185%, 136 percentage points fer a model “to organically boost di- In 2020, proxy advisory firm ISS reported that the median vote ed Financial Disclosures will receive above the second-highest returning versity on boards through disclo- support level decreased to 95%, the lowest level recorded since for the first time an “amber top.” sector, consumer discretionary. sure, rather than the 2011 when mandatory say-on-pay votes began. “The U.K.’s boardrooms need to For 2021, Moody’s forecasts that counterproductive quota-driven reflect the diversity of modern-day ESG investment strategies will pro- strategies that some have attempt- Britain,” said Andrew Ninian, di- vide significant growth for tradi- ed,” he said. British Columbia IMC set and exchange-traded funds, while rector for stewardship and corpo- tional asset managers. The report Companion legislation is expect- 1.6% of the portfolio was invested in rate governance at the IA, in a said that not only has the sector ed to be introduced in the House by for sustainability bonds companies that rely on coal for news release. seen positive inflows in recent Rep. Gregory Meeks, D-N.Y. British Columbia Investment more than 5% of their operations, “With three-quarters of FTSE years, but “investors and asset man- Management Corp., Victoria, an- Hanna Kaskela, director of respon- 100 companies failing to report the agers now have a keener focus on New York Common expands nounced plans to allocate C$5 bil- sible investment, said in an email. ethnic makeup of their boards in ESG investment themes, ESG data lion ($4 billion) to sustainability As part of its climate goals, Varma last year’s AGM season, investors and the incorporation of ESG con- board diversity mandate bonds over the next five years. intends to exit all investments in are now calling on companies to siderations in investment analysis New York State Common Retire- The management company for thermal coal by 2025 and exclude take decisive action to meet the and product construction.” ment Fund, Albany, will expand its public pension and other provincial all oil exploration by 2030. Parker Review targets. Those who insistence on corporate board di- assets also plans to reduce the car- Separately, Varma said it invests fail to do so this year will find them- Asset managers facing versity for all companies in the S&P bon exposure of its global public 12.4% of its portfolio in companies selves increasingly under investors’ 500 in which it invests, Thomas Di- equities portfolio by 30% from its that benefit from actions aimed at spotlight.” more scrutiny on ESG Napoli, the state comptroller and 2019 levels by 2025. mitigating climate change. The U.K. Parker Review set a tar- How the 50 largest asset manag- sole trustee of the $247.7 billion These moves are part of an ini- get in 2017 of having at least one ers approach ESG and corporate fund, said Feb. 25. tiative to make its public markets TPT Retirement taps into director from an ethnic minority governance and the pressure on “Companies succeed when their portfolio more carbon neutral and background by 2021. them to do more is the subject of a workforces reflect the diversity of environmentally conscious over the low-carbon strategies forthcoming report by SquareWell America and when they develop a next five years, BCIMC spokesman U.K. multiemployer plan TPT U.K.’s Trinity College to trim Partners in London. corporate culture that embraces Ben O’Hara-Byrne confirmed. Retirement Solutions, London, Demands on asset managers to equity and inclusion,” Mr. DiNapoli “These targets balance ambition switched £510 million ($714 mil- its fossil-fuel exposure consider ESG issues and be more said in a news release. “Many com- with feasibility and provide a clearly lion) in passive market-cap equity Trinity College, Cambridge, Eng- transparent “has created a chain of panies are taking meaningful steps defined pathway for BCI to seize on funds into low-carbon transition land, will divest £14 million ($20 scrutiny, with ultimate accountabil- towards achieving diversity, equity climate-related investment oppor- strategies, a spokeswoman said. million) in fossil-fuel investments ity falling on the shoulders of asset and inclusion, but it’s clear more is tunities and reduce the climate tran- The assets will be run in Legal & from its public equity portfolio by managers,” the report said. needed.” sition risk of our public markets General Investment Management’s the end of 2021, a spokesman said The annual study covers 50 of Last year, the pension fund with- portfolio,” said Daniel Garant, exec- low-carbon transition index equity Feb. 22. the largest asset managers with a held support from 227 incumbent utive vice president and global head strategies. LGIM was also the pas- The endowment is excluding combined $60 trillion, and found directors at 55 companies that did of public markets, in a news release. sive market-cap equity manager for from its portfolio companies that that 20 of them use at least four not include “underrepresented ra- BCIMC managed C$171.3 billion the assets. derive significant revenues from ESG research and ratings provid- cial minorities,” the news release in assets as of March 31, 2020, of The allocation to the LGIM Low the extraction, supply or distribu- ers, and 30 have developed their said. This year, it will increase the which 65.9%, or $112.8 billion, is in Carbon Transition Index Equity tion of fossil fuels, as part of efforts own internal ESG ratings. scope of its shareholder proposals public markets. Fund range is the first made by to reduce its carbon emissions to More than half, 27, support the “seeking increased board diversity TPT to dedicated low-carbon strat- zero by 2050, according to a news Sustainability Accounting Stan- and disclosure of workforce diver- Varma phases out most egies. Cliff Speed, CIO of TPT Re- release. dards Board reporting framework. sity,” the news release said. tirement Solutions, said March 2 in Trinity College, which is a con- On climate change, most of the Also, it will “expand its votes carbon-intensive investing a news release that the investment stituent college at the University of 50 support the Task Force on Cli- against board members at compa- Varma Mutual Pension Insur- in this fund range will enable the Cambridge, will also divest £700,000 mate-related Financial Disclosures nies whose boards do not include ance Co., Helsinki, has largely plan to reduce the carbon exposure in private equity exposures that reporting framework, and 36 are underrepresented racial minorities, phased out investments in fossil fu- of its equity portfolio and align it represent 5% of its overall fossil- members of Climate Action 100+. companies that fail to disclose their els, coal mining and oil exploration with its climate change policy. It fuel exposure over the next five to Only nine of the managers are part workforces’ racial or ethnic diversi- from its €50.2 billion ($61.2 billion) will also help the plan to meet reg- 10 years. of the Net Zero Asset Managers Ini- ty, and companies that refuse to portfolio. ulatory requirements. The total £15 million in planned tiative that supports the goal of net- embed diversity in their search for As of Dec. 31, shares of oil explo- The allocation applies to the divestments represents 1% of Trin- zero greenhouse gas emissions by new board directors,” the news re- ration companies accounted for plan’s £11.2 billion in defined ben- ity College’s £1.5 billion in endow- 2050 and calls for companies to dis- lease said. 0.5% of Varma’s equity investments efit assets. ment assets. ESG Investing Virtual Series May 17-20

The upcoming agenda for P&I’s ESG Investing Virtual Series will include thought leaders from all facets of the investment industry. Hear directly from your asset owner peers on how they are implementing, expanding and evolving their ESG practice in today’s world. Speakers will be on hand from leading institutions to answer your questions on everything from individual strategies to total portfolio integration of an ESG mandate. During sessions on May 19, attendees will have the opportunity to hear the best criteria for evaluating ESG partners. Share some of your top criteria anonymously and inﬂuence both the panel discussion and interactive session to follow. Go to www.pionline.com/2021ESGSurvey and complete the survey. Attendees will receive the top ﬁve criteria, as decided by the interactive session groups, after the event.

Don’t forget the ﬁrst 100 asset owners to register will be receiving a copy of Judy Samuelson’s book, The Six New Rules of Business: Creating Real Value in a Changing World, which she will be discussing in conversation on May 18.

2021 ESG INVESTING VIRTUAL SERIES SPEAKERS INCLUDE:

Nicholas Abel Joseph Boateng Wesley Carroccio Trish Halper Geeta Kapadia Jason Malinowski CalSTRS Casey Family Programs Verger Wespath Beneﬁts and Investments Yale New Haven Health Seattle City Employees’ Retirement System

Sandy Matheson Juan Martinez Alyssa Rieder Judy Samuelson Anne Simpson Eric Vaang Maine PERS The Knight Foundation CommonSpirit Health Aspen Institute CalPERS The John D. and Catherine T. MacArthur Foundation

COMPLIMENTARY REGISTRATION AT PIONLINE.COM/ESG2021*

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Questions? For more details please contact Elayne Glick at (212) 210-0247 or [email protected].

*Only asset owners and a limited number of consultants are invited to attend. All registration requests are subject to veriﬁcation. P&I reserves the right to refuse any registrations not meeting our qualiﬁcations. The agenda for the ESG Investing 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.

21pi0029.pdf RunDate: 03/08/21 Color: 4/C 14 | March 8, 2021 Pensions & Investments Special Report COVID-19: ONE YEAR IN

Pandemic progress Ben Asen comes with a price on cultural issues Asset owners, managers craving the connectivity that cannot be found by joining a Zoom meeting

By DOUGLAS APPELL With eight new hires at the Massachusetts Pension Reserves Investment Management Last year’s triumph for asset owners and board over the past year and the challenges money managers — overcoming the corona- of effectively mentoring them in a remote en- virus threat to their business models with the vironment, “I’m particularly worried about help of videoconferencing apps — has come the culture of our rm” now, said Michael G. with its own set of challenges for those orga- Trotsky, executive director and CIO of the $80 nizations’ human elements. billion Boston-based fund. The pandemic-enforced shift to a work- “I don’t know how we’re going to evolve,” from-home environment last year has been a Mr. Trotsky said. “I want to be in-person and I roaring success, industry executives say. hope to be in-person for most of the staff as But that success has introduced cultural soon as possible but post-COVID, I’m not mine elds that will need to be defused. sure what it’s going to look like.” COVID-19 taught the industry that it can It’s more than an academic question, in- work very effectively in a virtual environ- vestors say. ment, but how to mentor and develop young “It’s a really important topic for us because professionals in that environment while I do think that that’s our comparative advan- building and maintaining a rm’s culture will tage” — worth many basis points per annum be major concerns going forward, said Erik L. to returns, said Sue Brake, CIO of the Future Knutzen, New York-based managing director Fund, the Melbourne-based sovereign wealth and chief investment of cer of multiasset fund overseeing A$170.9 billion ($130.9 bil- class with Neuberger Berman Group LLC. lion) as of Dec. 31. If there’s a danger, “it’s that our reservoir of The Future Fund’s strong workplace cul- cultural connectivity may be getting low, and ture “is not only nice to have. It’s helping us MISSING PIECES: Erik L. Knutzen believes working virtually isn’t good for maintaining the culture of a rm. you can only refresh that so much via Zoom,” achieve our mandate in a very tangible way,” Mr. Knutzen said. she said. asset owners and investment consultants largely written, leaving the thornier issues Similar concerns appear to be haunting Industry veterans say the chapter of the overcame potentially crippling obstacles to posed by a remote-working environment to asset owners now. coronavirus story where money managers, their businesses and made it look easy is now be hammered out.

Amanda Gibbs Logistics becomes shining star of investing during virus crisis

By ARLEEN JACOBIUS duced 1.83% in the 12 months ended supply chain was disrupted, she said. Dec. 31, the latest NCREIF Property What’s more, the race to develop Logistics is standing out as a resil- Index shows. Of ce returned 1.57%, and distribute vaccines caused prices ient investment during a global pan- retail was down -7.48% and hotels for logistics assets to increase during demic, an important attribute for were -25.56% . the pandemic, Ms. Bacon said. many institutional investors as they “Most of the investors I deal with “I would expect things in that sec- re-evaluate their real asset and real already had this type of investment … tor are fairly valued, if not at a pre- estate portfolios. and so they are glad they have it and mium,” Ms. Bacon said. Logistics straddles both infrastruc- want more of it,” Ms. Bacon said. Real estate investors are also look- ture and real estate, and in real estate Any investor that didn’t have any ing re-evaluate other parts of their it is known as the industrial sector. exposure to logistics is very inter- real asset portfolios and exposure to Along with digital infrastructure ested in adding it to their portfolios, such traditional property types as of- and renewable infrastructure, many she said. ce, retail and hospitality in light of investors were interested in logistics A year or two ago, some infrastruc- uncertainty surrounding tenant occu- before the start of the pandemic, ture managers began investing in lo- pancy, rent collection and cash ow in said Lisa Bacon, San Diego-based gistics, including containers, ship- those real estate sector, said Christy principal, private markets consul- ping, trucking facilities and cold-chain Loop, Atlanta-based director, invest- tant and infrastructure program lead facilities needed to transport items ments and portfolio manager at Willis for Meketa Investment Group. Dur- that need to be kept chilled. Towers Watson PLC. ing the COVID-19 crisis, logistics Managers considered those types Due to this uncertainty, there is has been among the top-performing of assets a better value than tradition- less transparency around future re- asset segments. al infrastructure such as roads and turn expectations, she said. Industrial was the highest return- airports, Ms. Bacon said. Managers Given the uncertainty, some of Wil- ing sector of any of the main real es- that made substantial investments in lis Towers Watson clients are looking tate sectors with 11.78% in 2020, far the space did well pre-COVID and to reduce exposure to certain core HARD LOOK: Christy Loop said uncertainty over tenant occupancy, rent more than the second best perform- during COVID they proved resilient property types. Industrial is one of collection and cash ow has investors re-evaluating some property portfolios. ing segment, apartments that pro- despite a dip in demand when the the four core property types, but the Pensions & Investments March 8, 2021 | 15

Coming into the second quarter of 2020, a what? You can close on Zoom … you can do glue that makes the medium … an efficient “No one taught me per se but I learned a money manager’s aim was simply to “do what 90% of the legwork on Zoom and then maybe medium through which to make decisions” — lot by watching,” or listening when he was at you were meant to do” day to day — respond- it’s only one face to face whereas before it for example having members on each side of a his desk and two more senior people started ing to markets, writing reports, communicat- might have been four,” he said. group call “virtually get together personally.” talking, Mr. Pillai said. ing with clients, and by the third quarter, the Meanwhile, although a number of industry Chris Trevillyan, director of investment He said over the past year he has taken to bulk of the industry was doing that really veterans say the inability to conduct opera- strategy at Melbourne-based investment inviting colleagues who’ve been at the firm well, said Subash Pillai, Singapore-based tional due diligence on new managers will consultant Frontier Advisors LLC, said his only one or two years to join Zoom calls even managing director and head of client invest- leave asset owners focusing allocations on firm’s leadership has worked to boost contact if they can’t be expected to add much to the ment solutions for Asia-Pacific with Franklin managers they already work with or know and connections among colleagues — every- conversation. “You want them to learn from Templeton Investments. well, some insist that institutional investors thing from regular catch-ups with small the conversation that they’re part of,” he said. Now “the focus becomes well, what are we are growing more comfortable with virtual groups of people from different teams to trying to do? This is a different environment, due diligence. multiple firmwide meetings. Focused on cultural issues what do we need to do differently?” Mr. Pillai “We’re already seeing” asset owners will- It’s definitely a challenge and “something Future Fund’s Ms. Brake said she’s very fo- said. “From the fourth quarter and into this ing to consider strategies run by portfolio that we are worried about, but it’s more think- cused on those cultural issues as well, in quarter, that’s where we’re starting to see the managers they’ve never met before, noted ing about how we can do it better” in the fu- keeping with the fund’s long-standing “one real thinking going on.” Matt Gaden, Sydney-based head of Australia ture, Mr. Trevillyan said. team, one portfolio” approach of judging each for Janus Henderson Inves- “It may just be organizing potential investment vis-à-vis the full range Few expect pre-COVID return tors. “We’re on the cusp of two certain events on certain of assets in the portfolio. Industry veterans say the benefits of vir- global searches with large days where everyone does “You’ve gone from a whole lot of people tual client service and due diligence, together pension schemes where … come together, does all their bumping into each other in an organic and with the better work-life balance offered by the process and the decision brainstorming and all their natural setting to these many short Zoom or flexible remote-working arrangements, have will have been 100% made vir- interaction ... and then goes Teams meetings that just don’t have the same been so pronounced that few expect life to tually,” he said. away and does individual value attached to them,” Ms. Brake said. return to pre-COVID norms even after vac- He declined to identify the work for other periods,” he She said the culture she inherited when cination programs now underway succeed in pension funds. Mr. Trevillyan said. she was promoted to CIO last year is “re- offering protection globally. Still, many observers con- Industry veterans say markably resilient.” Even so Ms. Brake ex- Asia — and in particular China, where cede there’s room to bolster they’re aware that there’s pressed concern that the current remote en- some companies have already brought em- the industry’s fledgling reli- considerable value for organi- vironment could chip away at that resilience. ployees back to their offices, and where meet- ance on technology to better zations simply from having “We are doing a piece of work about this. ings and even some conferences have re- connect the world going for- their employees working in We call it ‘joined-up-edness,’ because it’s so sumed — will offer the first clues as to what a ward. the same office and that those important to us,” said Ms. Brake. “How do we post-pandemic world could look like, said benefits will be harder to not only stop (that cultural) bank balance Aaron Costello, Beijing-based regional head ‘Personal chemistry’ ‘I like a world come by in an environment from eroding but get really good at it because for Asia with investment consultant Cam- Videoconferencing apps without a where — for example — the this environment is here to stay in some hy- bridge Associates LLC. give institutional investors typical employee could be brid form,” she said. “Clearly the ability to have videoconfer- scope to search out and vet pandemic … but working two or three days a Mr. Pillai said if you fast-forward “our ences and some level of remote working is opportunities that would have I’d like a better week from home. world now five years,” will that cohort of pro- here to stay,” Mr. Costello said. The only ques- been too remote to consider Franklin Templeton’s Mr. fessionals aged 22 to 27 “find a way for their tion is “how much,” he said. otherwise but doing so suc- world after that, Pillai said he’s acutely aware own innovation to come out? And how good For Tim Campbell, CIO and co-founder of cessfully will depend greatly and a better of the challenges facing will we be as an organization to harness their Singapore-based hedge fund Longlead Capi- on “personal chemistry,” said workplace after younger colleagues because thinking? Those are the things that we would tal Partners, the answer — when it comes to Gordon L. Clark, professorial “they don’t just learn from in- need to think about in that new world.” due diligence-related travel — is that only fellow at Oxford University that, so … here’s struction and direct feedback. “As a student of this (industry), I don’t like 20% to 30% of pre-COVID levels are likely to and co-director of the univer- hoping we can They learn from observation,” that I’ve found the last year fascinating but I resume after herd immunity is achieved. sity’s Smith School of Enter- something he called a key to have,” Mr. Pillai said. “I like a world without a “Travel globally is 100% being rethought,” prise and the Environment. build that.’ his professional development pandemic … but I’d like a better world after Mr. Campbell said. “In the past, salespeople The answer, he said, could FRANKLIN TEMPLETON’S early in his 30-year career in that, and a better workplace after that, so … had to hop on a plane to close a deal. Guess entail “investing in the social SUBASH PILLAI the industry. here’s hoping we can build that.” n increased attention to the logistics/ ta Fe, which oversees $32.2 billion where it will be a less attractive of months of the pandemic, Mr. Ber- ment in global industrial real estate. industrial space has piqued a lot of endowments, said Paul Chapman, investment. ry said. That’s leading some compa- “We’re concerned that the logis- investor interest, Ms. Loop said. director of real estate and real re- “Catalysts may include supply nies, especially pharmaceuticals tics assets in the U.S. are getting While valuations could increase turn strategies. outstripping demand, deceleration and aerospace, to onshore some quite pricey and we are starting to due to a somewhat limited supply of “The pandemic created some of rental rates, (and) continued manufacturing. see increased vacancies,” he said. industrial assets, currently the sec- short-term impacts, which we are flood of investor capital pushing “The U.S. is probably close to satu- tor has strong tailwinds — including not really in a position to exploit yields even lower, where significant ‘Near shoring’ ration.” robust rent growth, she said. since we invest through closed-end rental growth would need to be un- Other U.S. companies are moving In the U.S., J.P. Morgan Asset Willis Towers Watson executives funds where our general partner derwritten to generate even slightly manufacturing and sourcing of raw Management executives are focus- view light industrial warehouses controls the investment decisions,” attractive returns,” Ms. Loop said. materials closer to home, so-called ing recently on truck terminals, near urban centers as attractive in- Mr. Chapman said in an email. “Of Some managers see opportunity “near shoring” to avoid supply chain which he said are the next evolu- vestments because there is a great- course, many of those general part- in what they call “urban logistics,” disruptions in the future, he said. tion of logistics. There is less com- er supply/demand imbalance, Ms. ners are actively seeking to increase which are facilities that sit in close For example, these companies are petition for these properties be- Loop said. There is not a lot of spare their funds’ exposure to industrial.” proximity to populous locations. moving even more manufacturing to cause it is challenging to find land to build new warehouses close However, officials at the New For Chris Urwin, London-based Mexico to take advantage of lower locations for storage yards for to urban centers, she explained. Mexico State Investment Council “do director of research, real assets at labor cost in an adjacent country. trucks, he said. Cold storage is also of interest, have some concern that investors Aviva Investors, his firm views lo- Logistics assets in El Paso, Texas, “To me, the real opportunity is given that home delivery of grocer- are responding to the strength of the gistics “as the most attractive real have benefited from the flow of outside the U.S.” Mr. Pil said. ies has greatly accelerated during industrial market, in part caused by estate sector on a risk-adjusted ba- goods from Mexico to Houston or Europe is behind the U.S. in the the pandemic, she said. While dis- the pandemic but also part of a long- sis over the medium to long term, Los Angeles, Mr. Berry said. build-out and penetration of e-com- ruption of supply chains continue term secular trend, by overinvesting which is being driven by both cycli- Barings executives are also look- merce and investment in the logis- to be a concern, companies have in the industrial sector.” cal and structural factors.” ing at the “last mile” alternative ports tics business in general, as is parts of responded by stocking excess in- Once the pandemic ends, con- The COVID-19 pandemic has or airports where goods first enter the Asia-Pacific region, he said. ventory to accommodate just-in- sumers may shift some of their caused a significant shift toward e- the U.S., and investing in emerging More recently, JPMAM started ac- time delivery, which is making and shopping back to physical retail commerce, Mr. Urwin said. “As a re- industrial markets. These include quiring assets in Singapore, Austra- delivering goods when they are or- and thus dampen demand for in- sult, the level of offshoring and out- distribution warehouses around air- lia and New Zealand where there dered. That adds to warehouse de- dustrial, Mr. Chapman said. sourcing that existed before the ports in Cincinnati and ports in Sa- are fewer global real estate and in- mand, Ms. Loop said. “If too much capital is chasing pandemic has fallen away, met by a vannah, Ga., and Memphis. frastructure managers investing in industrial and if consumer demand simultaneous rise in demand for Anton Pil, New York-based global the sector and where prices are Locked out shifts back towards bricks-and- urban logistics assets,” he said. head of alternatives at J.P. Morgan more attractive, Mr. Pil said. Many investors access industrial mortar retail, we could see indus- Chris Berry, El Segundo, Calif.- Asset Management, said that while Overseas, JPMAM is investing in through commingled funds and so trial rent growth moderate substan- based managing director in the real the pandemic most likely accelerat- the construction of new facilities. can’t make tactical shifts to take ad- tially,” he added. estate business of Barings LLC, said ed investor interest in logistics, the In Europe, there is a lot of de- vantage of pandemic-related So far, Willis Towers Watson ex- that everything in the pandemic put logistics market is evolving. Logis- mand for modern facilities because trends. ecutives haven’t determined if or a focus on logistics. tics is farther along in the U.S. than older buildings are not as adaptable That is the case at the New Mex- when the logistics/industrial sec- The supply chain was disrupted in Europe and Asia. JPMAM has for modern day logistics require- ico State Investment Council, San- tor in real estate will reach a point or cut off entirely in the first couple $8.5 billion assets under manage- ments, he said. n 16 | March 8, 2021 COVID-19: ONE YEAR IN Pensions & Investments

details, explaining, “it’s really hard in these markets because we’re a big player and Rebound they’re not always liquid.” Ms. Brake said the moment in time calls for CONTINUED FROM PAGE 1 doing more rather than less in tweaking port- result ... we are overweight equities for our folios. At a time of such dramatic change, “in- clients,” said Mr. Watson, who oversees tacti- crementalism is our enemy,” she said, adding, cal allocation calls for Mercer’s outsourced “the worst thing we can do is keep cranking CIO clients in Europe. For example, if a cli- the handle on a model” that was perfected for ent’s strategic asset allocation calls for 50% in a different environment. equities, “we’re now in practice actually at “You’ve got to work harder to nd expo- 54% equities,” he said. sures that are diversi ed for the kind of world Longer term, a number of market veter- that we now live in because bonds were one ans predict considerable changes to come in of the things that paid us to insure our portfo- positioning portfolios, with the pandemic lio and that’s over,” Ms. Brake said. and the policy response it elicited ushering Neuberger’s Mr. Knutzen said his team is in a new, more complicated environment for working with clients as well to nd higher asset owners. levels of reliable income than sovereign Whether it’s the end of the “great modera- bonds offer at present, looking at high-yield tion in bonds,” the cresting of globalization or bonds, bank loans, emerging market debt, the embrace by governments of activist eco- CLOs, catastrophe bonds, private credit and nomic policies, institutional investors are liv- others. The goal is to allow clients to “capture ing through a “turning point to a new para- as much of (their) return as possible from in- digm,” a multidecade change when it comes come and be less concerned about capital ap- to portfolio construction, said Sue Brake, preciation,” he said. chief investment of cer of the A$170.9 billion Future Fund, Melbourne. Remaining hesitant Erik L. Knutzen, New York-based manag- SWITCH IT AROUND: Sue Brake said investing has changed and investors must do more portfolio tweaking. Other asset owners, while conceding that ing director and CIO of multiasset class with U.S. equity valuations appear high and sover- Neuberger Berman Group LLC, agreed, say- how endowments invest and what they invest nary policy response to the pandemic last eign bonds no longer offer signi cant yields, ing, “We’re in a new economic cycle — (not) in will change, Ms. Steer noted, adding that year more appear to be sensing that “the beta said they remain hesitant to make signi cant just an extension of the old economic cycle “for most investment committees, this is a no- ride on large cap and lower rates is no longer asset allocation changes in response to as- with a severe dip — and a new investment win right now and there is real stress here — the easy trade,” he said. sumptions about big asset classes topping or regime as well.” That new regime will be and probably not well understood by the After a decade or more where investors bottoming out. “characterized in our view by headwinds to larger boards and nance committees.” could consistently outperform high-pro le “Philosophically, I don’t believe in making economic growth, headwinds to interest endowments like Harvard and Yale by park- those kinds of predictions,” said Michael G. rates and a big question mark about in a- Restructuring ing 60% of their portfolios in large-cap U.S. Trotsky, executive director and CIO of the $80 tion,” he said. After a period where asset owners were equities and 40% in U.S. Treasuries, market billion Massachusetts Pension Reserves In- Some observers noted that the pandemic caught up responding to pandemic-related players predicted the post-pandemic envi- vestment Management Board, Boston. “We has affected more than nancial markets. challenges, a wave of portfolio restructuring ronment will force investors to kick a more make gradual changes. If you’re making big The bigger issue is that the coronavirus is could be in the of ng this year, some industry diverse set of tires — with a wider dispersion changes in any given year, you’re being tacti- raising questions about the “business mod- veterans said. of results. cal” and just as likely to prove unlucky as els” of segments of the institutional universe, Pent-up demand for portfolio structure re- Decadeslong super cycles for stocks and lucky, he said. such as universities, foundations and health- views could fuel “a large increase in manager bonds are giving way to a world with a far Still, acknowledging that the ood of s- care organizations, said Cynthia Steer, invest- search activity” over the coming year, predict- greater array of “drivers,” calling for a more cal and monetary stimulus being deployed ment committee chairwoman of Washington- ed David J. Holmgren, CIO with Hartford granular approach to investing, Ms. Brake around the world now has chipped away at based ICMA-RC’s $39.6 billion in retirement Healthcare, Hartford, Conn. Asset owners said. bonds’ diversifying bene ts, Mr. Trotsky said assets under management. had been putting off those reviews while The Future Fund has added a number of PRIM’s investment committee is on the If, for example, four-year in-person enroll- “ ghting the Fed” remained a no-win propo- new asset classes over the past seven or eight lookout for other diversifying assets and ment stops being the norm for universities, sition, but in the wake of the Fed’s extraordi- months, she noted while declining to offer could take “another hard look at hedge

LPs ... (that) want their investments to make an impact on the world and those LPs will Private equity Pharma focus on a pharma fund given the work that is being done” to bring an end to the pan- CONTINUED FROM PAGE 1 demic, he added. managers turn “I do think there is greater investor aware- What’s more, newer managers that invest ness of the sector,” said Adam Bragar, New in the biopharmaceutical and pharmaceutical Simon Dawson/Bloomberg York-based head of the U.S. private equity sector these days take a different approach. attention to life practice of Willis Towers Watson PLC. “We’re These rms are focused on companies that starting to see more pharma-focused funds have potential products that are later in the coming to market and we’re starting to see an FDA testing process, Mr. Bragar said. sciences sector uptick in LP demand for those types of funds “In my opinion, there’s a large opportunity as opposed to making broader-based invest- set in a sense that there are a lot diseases out ments in the health-care sector.” there that need ways to treat them better or to While much of the investment in biophar- Investors have seen this movie before. develop a cure,” he said. maceuticals is coming from venture capital Medical devices and pharmaceuticals were At the same time, it can be a risky business managers, private equity rms are quickly quite the rage among venture capital inves- because if a medication fails to gain FDA ap- building up their life sciences portfolios, tors in the early 2000s, Mr. Bragar said. But a proval it makes “that investment that you which invest in pharmaceuticals and number of those funds ended up underper- made virtually worthless unless you are able companies and properties supporting forming because they invested in companies to repurpose it,” Mr. Bragar said. “It’s an op- pharmaceutical development and distribu- that were going through pre-phase-one or portunity set but it’s a risky opportunity set.” phase-one clinical trials, which are the earli- Companies with the highest likelihood of tion. est stages of the process to get Food and Drug getting FDA approval will get the most nan- Blackstone Group Inc. is building an entire Administration approval. cial attention, he said. ecosystem around life sciences across its It takes a long time and a lot of money to business, said Jonathan Gray, president and get FDA approval and some venture capital Staying away chief operating of cer, during the rm’s Jan. rms invested a little too early in these drug Some investors say that they are staying 27 earnings call. and device companies, he said. After that pe- away from making purely tactical invest- riod, there were fewer pharmaceutical in- ments as a result of the pandemic. “For the past several years, we’ve been vestment options in the market “because “We have not made any changes due to the GOING FURTHER: Jonathan Gray said orienting the rm toward faster growing areas, more of the established players had funds pandemic, but we already had decent expo- Blackstone’s investment in trial drugs is such as life sciences and those connected to with soft performance,” Mr. Bragar said. sure” to health care and pharmaceuticals, something the rm has never done before. the digital economy,” Mr. Gray said And there had not been a pandemic on a said Bob Jacksha, CIO of the $14.2 billion global scale, he added. New Mexico Educational Retirement Board, “The market wasn’t focused on a pandem- Santa Fe. ic. Outside of Asia, the focus on a pandemic “We did like those categories (health care, “The societal bene t of pharma/health Va.-based partner and co-CIO of private was not high,” Mr. Bragar said. There were a pharmaceuticals and logistics) before and care have never been a decision point for us markets at Mercer. number of interesting companies working on now they do have a brighter outlook,” he said to invest, but it is a tertiary bene t or point of The average time for a drug trial was sped vaccines or treatments for a possible pan- in an email in response to questions. pride,” Mr. Jacksha said. up to a degree that had never been done be- demic, ”but nobody cared” prior to this coro- But New Mexico Educational Retirement The government involvement under Op- fore, he said. navirus spread, he said. Board of cials are not investing in health eration Warp Speed in the development of a “It will be a model for how to address fu- “In my view, a positive consequence of the care and pharmaceuticals as part of an im- COVID-19 vaccine will have a lasting impact ture pandemics,” Mr. Young said. “It will have pandemic is that there are more and more pact investment strategy, he said. on the industry, said Brad Young, Richmond, a ripple effect on pharma and biotech and Pensions & Investments COVID-19: ONE YEAR IN March 8, 2021 | 17

funds” this year. tech, said Mr Van Vleet, adding that the next Aware Super, a Melbourne-based super- 18 months are “not a time to be underweight annuation fund overseeing roughly A$140 risk assets.” billion in retirement assets, likewise hasn’t “You need to be fully invested in this envi- Private equity shifted allocations signi cantly over the past ronment because the weight of money (in year, said David Goodman, economist on the play now) means that this thing is not going managers end fund’s investment strategy team. to suddenly stop,” the Future Fund’s Ms. Despite heightened economic uncertain- Brake agreed. ties now, some things remain the same. “We At the same time, the Future Fund team 2020 strong, still ... believe that equities underpin our believes the new environment will be more portfolio and drive returns ... and we still fun- fragile — subject to sharp bouts of volatility. damentally believe that xed income pro- “In an environment where markets are report shows vides diversity to our portfolio,” even if its ef- more fragile (different from volatile or uncer- fectiveness as a hedge isn’t as great as it used tain), you want to have a war chest … to have By ARLEEN JACOBIUS to be, Mr. Goodman said. the exibility to be able to move the portfolio He noted that a year ago, in the depths of around as that fragility gives you opportuni- After a slump in transactions caused the pandemic sell-off, even holders of nega- ties,” Ms. Brake said. by the COVID-19 pandemic, the largest tive-yielding German sovereign bonds en- As of Dec. 31, the Future Fund reported private equity managers “sprinted to the joyed diversi cation bene ts as yields be- having 19.8% of its portfolio, or A$33.8 billion, nish” in the second half of 2020, making came more negative. in cash, as a means of maintaining that exi- fewer but larger deals, according to the As of Jan. 31, Aware Super’s largest offer- bility, she said. latest global private equity report by Bain ing — its balanced growth default option — Mercer’s Mr. Watson likewise noted that & Co. released March 1. had a 37.1% combined allocation to Austra- one of the things the pandemic has done is Private equity rms closed a total of lian and overseas equities and a 15.6% TO THE RESCUE: Richard L. Tomlinson kept risky remind people that some things can’t be fore- $592 billion in deal value in 2020, up 8% allocation to sovereign bonds, with alterna- assets, believing policymakers would intervene. cast — with the resulting need to better di- from 2019 and 7% higher than the ve- tives, credit and cash accounting for the re- versify portfolios and be in a position to exe- year average of $555 billion, the report mainder. xed income from its portfolio “a long time cute quickly if need be. said. The number of deals was down 24% As of June 30, 2019, the most recent scal ago,” leaving it with an endowment-like port- If a consensus view now calls for both eco- in 2020 from a year earlier, it said. year close before the coronavirus emerged, folio that carries a lot of equity risk, he said. nomic growth as well as in ationary pres- “The reason total deal value rose in that option’s allocations to equities and sov- For the coming year to 18 months, most in- sures to jump over the coming 12 to 18 2020 while volume slipped was a 24% in- ereign bonds stood at 37% and 20%, respec- vestors expect a market environment that months, the outlook over the medium term is crease in average deal size to $776 million,” tively. will continue to favor equity allocations, in far murkier — with many observers expect- the report noted. “That re ects the ongo- Meanwhile, Richard L. Tomlinson, CIO of anticipation of progress in vaccination pro- ing a return to the low-growth environment ing concentration of the PE (private equi- the Local Pension Partnership, a London- grams that will end lockdowns around the of “secular stagnation.” ty) industry — bigger funds have to do big- based manager of £19.7 billion ($27.6 billion) world and ignite a rebound in global con- For the short term, it’s very clear that “we’re ger deals to move the needle for investors.” in retirement assets, said his team made sumption. going to get higher levels of in ation” amid a “This drop in deal numbers was dra- changes on the margin to its portfolio expo- burst of activity as pent-up demand gets un- matic, but it is likely to be temporary,” the sures last year but no big strategic or tactical Supercharged innovation leashed, said Aware’s Mr. Goodman. But report said. “Due diligence activity asset allocation changes. “COVID has led to an interesting combi- whether or not scal policy continues to be around the world was as strong as it’s During the worst months of the pandemic nation of excess investment capital and su- deployed suf ciently to maintain higher lev- ever been in early 2021, suggesting that crisis, Mr. Tomlinson said he added modest percharged ntech, health-tech and biotech els of growth following that spurt will be many of the deals postponed amid the allocations to equity and credit, having innovation,” noted Charles Van Vleet, assis- “THE question” for markets and for the glob- pandemic chaos will eventually get done. learned a painful lesson in 2008 not to take tant treasurer and CIO of Providence, R.I.- al economy’s recovery over the medium term, That should provide a structural scaffold risk off the table at a time when the threat of based Textron Inc.’s $7.6 billion de ned he added. under 2021 activity.” systemic risk for global markets effectively bene t plan. Neuberger’s base case is “we don’t get sus- Meanwhile, the percentage of debt guarantees that economic policymakers will Though some of that excess capital may be tained re ation beyond a 12-to-18 month used in buyout transactions accelerated do whatever it takes to right the ship. nding its way into GameStop and bitcoin, horizon but that’s what’s going to be the big- in 2020, with nearly 80% of transactions LPP’s nominal return target of 4% to 5% — it’s also moving into some truly disruptive gest driver of differentiation among inves- leveraged at more than six times earn- 4 percentage points or so above short-term companies in segments that include genetic tors over this coming two to three years,” Mr. ings before interest, taxes, depreciation rates — effectively expelled high-quality research, remote medical services and n- Knutzen said.  and amortization. More than two-thirds of all U.S. buyout deals had purchase prices of more than 11 times cash ow. “These continue to be among the best- based company offering temperature-con- “Investors need to be highly selective,” he This debt pushed up asset prices in performing sectors of the market and were trolled supply chain solutions for the life said. 2020 to an average of 11.4 times EBITDA the largest drivers of appreciation in our sciences industry. The capital infusion For example, the pandemic’s rst impact in the U.S. and a record 12.6 times EBIT- funds,” he said. nanced Cryoport’s acquisition of MVE on biopharmaceuticals was on the supply DA in Europe as of Dec. 31, the report chain, where shortages of active pharmaceu- noted. Prices for about 70% of U.S. buy- Blackstone launched its life sciences Biological Solutions, which manufactures tical ingredients grew substantially, slowing outs were more than 11 times EBITDA. business investing in the sector in the fourth vacuum-insulated products and cryogenic the pace of manufacturing, he said. Special purpose acquisition compa- quarter of 2018 when it acquired global life freezer systems. “Shortages and slowdowns during the nies, many sponsored by private equity sciences private equity manager Clarus. In addition, Blackstone recapitalized an pandemic are accelerating repatriation of and hedge funds, raised more than $40 Mr. Gray said during the Blackstone earlier real estate fund, Blackstone Real supply chain processes in both North Ameri- billion in 2020 to merge with one or more earnings call that the mission of the $4.6 Estate Partners VIII, selling a portfolio of life ca and Europe,” Mr. Ribon said. companies, adding “to the pile of capital chasing buyout deals,” the report said. In billion private equity fund Blackstone Life science properties to a new continuation ‘Negatively pressured’ 2020, 248 SPACs raised a total of $83 bil- Sciences V “is to invest primarily in Phase 3 vehicle, Blackstone BioMed Life Science Companies that focus on traditional vac- lion, up from 19 SPACs raising less than trial drugs, something that we would not do Real Estate LP, which is a perpetual open‐ cines and their manufacturers have “been $20 billion in 2019. in our private equity business, have never end core-plus fund with a four‐year initial negatively pressured by the pandemic” and Sponsors of SPACs receive 20% of the done before.” lockup period. will continue to suffer, he said. equity “for a token capital contribution,” the Blackstone also invested in the sector “The genesis for this transaction was a Prior to the pandemic, it was expected that report said. Initial investors in SPACs were with an investment in November in Precision number of our investors in the BREP VIII next-generation vaccines based on nucleic dominated by hedge funds that use SPACs acids like DNA and RNA would replace tradi- as a source of free warrants and rights, the Medicine Group, a company that runs drug fund wanted to continue to own this,” Mr. tional vaccine technology over a ve- to 10- Bain report said. Initial public offering in- trials and helps to turn new pharmaceutical Gray said. year period, Mr. Ribon said. vestors receive stock plus partial warrants discoveries into commercial products. More than 70% of the capital in Black- “But the exigencies of crisis have meant to buy more shares. These investors have Blackstone invested alongside Precision stone’s life science real estate fund came that these much more ef cient and effective the option of getting their initial invest- Medicine’s existing investors Berkshire from the existing investors, he added. next-generation technologies are taking ment back, while keeping the warrants. Partners, TPG Growth, Oak HC/FT and Vida So far, the new fund has raised $8.4 market share much more rapidly — indeed, According to research by Stanford Law Ventures, which also participated in the billion, and Mr. Gray said that he expects the they are the basis of today’s COVID-19 vac- School professor Michael Klausner and cines,” Mr. Ribon said. NYU School of Law professor Michael transaction. fund to raise additional capital. Other subsectors of the pharmaceutical Ohlrogge, hedge funds redeem or sell In August, Blackstone’s tactical opportu- “There is a potential for this to grow to be sector have bene ted from the pandemic, he their IPO stock before the SPAC mergers nities business made a $275 million … quite large,” he said. said. For example, outsourcers, called con- are completed an average of 97% of the investment in Cryoport Inc., a Nashville- — ARLEEN JACOBIUS tract research organizations that do clinical time, but they retained and traded the trials and provide other services for the phar- warrants, leading to returns greater than maceutical industry, were positively impacted 11% in the deals studied, the report said. by the COVID-19 crisis. Other shareholders did not fare as well. smaller startups that will be looking to ad- care specialist private equity rm ArchiMed, “The pandemic slowed down many clini- Between January 2019 and June 2020, dress how to manage the process better and Lyon, France. cal trials because of social distancing con- Messrs. Ohlrogge and Klausner’s research what to do with the data.” While the pandemic has increased institu- straints, leaving an acute need for remote shows that SPACs lost 12% of their value “LPs are feeling very positive about it,” he tional investor interest in health care gener- trials of biopharma products,” Mr. Ribon within six months of the merger, while the added. ally and in biopharma in particular, “some said. ”The FDA has even issued directives Nasdaq rose roughly 30% in the same pe- But not all pharmaceutical investments subsectors have been negatively impacted to encourage remote clinical trials and to riod, Bain’s report said. will be successful, said Denis Ribon, New and will continue to suffer over the longer provide guidance for how they should The full report is on Bain’s website.  York-based chairman and founder of health- term,” Mr. Ribon said. work.”  18 | March 8, 2021 Pensions & Investments HIRINGS

ACCESS, a U.K. pool of local Malaysia’s Employees Provident the $27.8 billion fund reported. authority pension funds, selected Fund hired BlackRock, HarbourVest Pension fund officials committed up Minerva Analytics as its first ESG Partners and Partners Group to CALSTRS COMMITS NEARLY $6 BILLION to $40 million to Exeter Europe adviser, a spokesman confirmed. manage $200 million each in global CalSTRS committed a total of $1.8 billion to real estate and $3.9 Logistics Value Fund IV, a real estate Minerva Analytics will review and Shariah-compliant private equity billion to private equity including co-investments in the six months fund. The board also committed up to revise the pool’s responsible invest- separately managed accounts, the ended Dec. 31. $15 million to Clearhaven Fund I ment guidelines to ensure they capture Kuala Lumpur-based fund said Feb. The $282.5 billion California State Teachers’ Retirement System, managed by Clearhaven Partners, a the most up-to-date ESG, stewardship 26. West Sacramento, committed an additional $650 million to an office lower-middle-market technology- and climate change practices across The three private equity managers joint venture with Beacon Capital Management known as BCal II JV. It focused private equity firm. all asset classes. will make direct investments on behalf also committed an additional $250 million to Fairfield AHF. ACCESS’ 11 member funds have a of the EPF as well as pursuing Louisiana State Employees’ combined £31 billion ($43.4 billion). co-investment opportunities. CalSTRS also committed $300 million to a residential developer Retirement System, Baton Rouge, The 941.8 billion ringgit ($233 Hearthstone for a real estate debt joint venture, Cal Hearthstone committed $100 million to ArrowMark Ann Arbor (Mich.) Employees’ billion) EPF will become “the first Debt JV, and $250 million to a real estate debt joint venture with Global Opportunity Fund III. Retirement System hired Artisan institutional investor to establish a 3650 REIT. CIO Robert W. Beale said the $12.4 Partners to manage $27 million in Shariah-compliant PE direct/co-invest- CalSTRS committed $125 million to Waterton Residential Property billion fund approved the private equity active international value equities. ment fund,” Alizakri Alias, the Venture XIV, a U.S. value-added multifamily property fund; and commitment managed by ArrowMark Funding came from an existing Malaysian retirement fund’s outgoing another $100 million to CrossHarbor Strategic Debt Fund, an Partners at its Feb. 25 meeting. passive international equity portfolio chief EPF officer, said in the news open-end fund. managed by Northern Trust Asset release. Massachusetts Pension CalSTRS also committed $44 million to Blackstone Biomedical Life Management, leaving it with about $18 Reserves Investment Manage- Science Real Estate, a perpetual capital real estate core-plus fund. million for the $583 million fund. Fairfax County Educational ment Board, Boston, committed a Employees’ Supplementary In private equity, CalSTRS committed $300 million each to GI total of $450 million to three alterna- Baltimore City Fire & Police Retirement System, Springfield, Partners VI, a North American buyout fund; and KKR Asian Fund IV; tives funds, confirmed Elizabeth Employees’ Retirement System Va., disclosed two new commitments and $250 million each to the TAO 2020 vintage year fund, an Herlihy, spokeswoman for the $86.9 committed up to $15 million to Grain totaling $61 million. evergreen opportunistic credit fund managed by Sixth Street Partners; billion pension fund. Communications Opportunity Fund III, The $3 billion pension fund’s Apollo Hybrid Value Fund II, a fund investing in private credit and It committed up to $200 million to Amy Baskerville, spokeswoman for the alternatives consultant, Meketa private equity; and AlpInvest Co-Investment Fund (Onshore) VIII, a Thomas H. Lee Equity Fund IX, a private $3.1 billion plan, said. Investment Group, global buyout fund, as well as $100 million to AlpInvest SSMA, equity and credit fund managed by HAVE SOME NEWS? disclosed the targeting co-investments of $25 million or less. Thomas H. Lee Partners that focuses Border to Coast commitments at the on business and finance, health care, CalSTRS also committed $200 million each to Resolute Fund V, a Pensions Partner- Please submit news of pension fund’s remote and media and information services. middle-market North American buyout managed by The Jordan Co.; ship, Leeds, England, changes to David Schepp, board meeting on Jan. The board also committed up to news editor, at dschepp@ committed more than 22, a video of the and TCV XI, a growth equity fund managed by Technology Crossover $150 million to Berkshire Multifamily pionline.com £500 million ($700 meeting shows. Ventures. Debt Fund III, a real estate debt fund; million) to five The pension fund The pension fund committed $150 million to Fortress Credit and up to $100 million to JMI Equity infrastructure funds and an infrastruc- committed $43 million to Carlyle Opportunities Fund V Expansion; $100 million to Riverwood Capital Fund X, a growth equity fund focusing ture project, confirmed a spokesman Property Investors, an open-end Partners III, a North America middle-market buyout fund managed; on software companies. for the pool of U.K. local authority core-plus real estate fund; $15 million $72 million to GGV Capital VIII, a global venture capital fund; $30 mil- pension funds. to J.P. Morgan Infrastructure Invest- lion to GGV Discovery, an early stage global venture capital fund; and Merced County (Calif.) The new infrastructure commitments Fund, an open-end infrastruc- $18 million to GGV Capital VIII Plus, a sidecar fund to GGV Capital Employees’ Retirement Asso- ments are part of the pool’s £3 billion ture fund; and $3 million to Grain ciation committed $8 million to VIII. private markets program. The pool’s Communications Opportunity Fund III, Genstar Capital Partners X. CalSTRS also made a $50 million commitment to North American member funds have about £46 billion a communications infrastructure fund The $1.1 billion pension fund’s in total assets. managed by Grain Management. venture capital fund OrbiMed Private Investments VIII. board approved the commitment to the It committed $150 million each to Numerous private equity co-investments during the period included middle-market buyout fund at its Feb. ISQ Global Infrastructure Fund III, Japan’s Government Pension a $150 million co-investment with Blackstone in the North American 25 meeting, said Kristen Santos, which is focused on core-plus/ Investment Fund hired CBRE Global financial information technology sector and a series of ones with retirement plan administrator. value-added investments across Investment Partners to manage a core Summit Partners and Hg Capital. middle-market and large-cap compa- fund-of-funds global real estate Minnesota State Board of nies and is managed by I Squared mandate. Investment, St. Paul, committed Capital, and Stonepeak Infrastructure An announcement on the Tokyo- Opportunity Fund III, a North American Solutions I, a distressed debt fund $1.55 billion to seven private market Fund IV, also a core-plus and value- based ¥177.7 trillion ($1.69 trillion) communications infrastructure fund; managed by Goldman Sachs Group, funds during a board meeting Feb. 24. added strategy. pension fund’s website Feb. 26 said Insight Partners Opportunities Fund I, and an additional investment of $50 The $82.1 billion combined pension The local authority pool also CBRE will be tasked with pursuing fund which will invest in growth-stage million in Aeolus Property Catastrophe plan committed $1.25 billion to private committed $125 million to BlackRock investments and co-investments, software, software-enabled services Keystone PF Fund, bringing the total equity: $300 million each to Adams Global Renewable Power Fund III, including joint ventures and club deals. and internet businesses in the U.S.; invested in the hedge fund as of Jan. Street Global Secondary Fund 7, which invests in a mix of greenfield and The size of the allocation was not and Mill Point Capital Partners II, a 31 to $101 million. Hellman & Friedman Capital Partners brownfield assets globally; €110 disclosed. buyout fund that will target lower-mid- Two new commitments also were X and KKR Americas Fund XIII; and million ($133 million) to Infranode II, a dle-market companies in North made to co-investment funds: $15 $150 million to THL Fund IX Co-Invest- fund focused on brownfield utilities, Illinois Teachers’ Retirement America in sectors including industrial, million to Blackstone COF IV Co-Invest- ment Partners, managed by Thomas H. renewables and transport assets; and System, Springfield, invested or business services and information ment Fund, which invests alongside Lee Partners. It also committed an $100 million to Patria Infrastructure committed a total of $1.3 billion to technology services. private credit fund Blackstone Capital additional $200 million to PPC Fund IV run by Latin American nine investment strategies, news from TRS also committed $36 million to Opportunities Fund I, and $10 million Enterprises’ Public Pension Capital specialist infrastructure manager virtual investment committee and full Scale Venture Partners Fund VII, a to Bregal Sagemount II Co-Invest B, fund, which focuses on investments in Patria Investments. board meetings Feb. 25 & 26 showed. venture capital manager fund. which invests alongside Bregal middle-market companies in sectors Also, the pool committed £40 The largest commitment from the In real assets, TRS committed $100 Sagemount II-B, a growth equity fund. including industrial, business and million to Project Ceres, a heat and $57.6 billion pension fund was $400 million to Brookfield Infrastructure financial services, and health care. power plant in Lincolnshire, England. million to private equity specialist Fund IV Renewable Power Sidecar-B Iowa Municipal Fire & Police The board previously committed $200 The commitment marks the pool’s first Adams Street Partners, with the Fund. TRS committed up to $250 Retirement System, West Des million to the fund. co-investment and was made allocation split evenly between million in June to Brookfield Infrastruc- Moines, committed $65 million to two In private credit, $200 million was alongside Greencoat Capital. separately managed accounts that will ture Fund IV-B. alternatives funds and made a committed to Brookfield Real Estate invest in strategies managed by other From the global income portfolio, follow-on commitment of $30 million Finance Fund VI, a U.S. mezzanine Boston Retirement System private equity managers based in the pension plan committed an to a private equity fund of funds, debt fund; and $100 million to committed $45 million to two diverse Europe and the Asia-Pacific region. additional $50 million to Northern confirmed Dan Cassady, executive Lubert-Adler Recovery Capital & manager private markets fund of Greg Turk, TRS director of invest- Shipping Fund IV; it committed $75 director of the $3 billion pension plan. Enhancement Strategy, which will seek funds, confirmed John Kelly, investments, told trustees during the Feb. million to the fund in 2019. The fund The board committed $35 million to opportunistic U.s. real estate. ment analyst for the $5.3 billion 25 investment committee meeting that provides private equity and mezzanine Industry Ventures Partnership Holdings The Minnesota State Board of retirement system. TRS’ relationship with Adams Street is financing debt to the shipping and V, a venture capital fund of funds, and Investment managed a total $114.4 It committed $25 million to the GCM a strategic partnership that will be “a energy sectors. $30 million to Bain Capital Credit billion as of Dec. 31. Grosvenor Advance Fund and $20 big enhancement in how we go about Global Direct Lending 2020, a direct Also, the board hired Albourne million to the Barings Emerging trying to access best-of-breed (private Indiana Public Retirement lending fund. It also voted to make a Partners as the board’s first private Generation Fund. equity) managers outside the U.S. We System, Indianapolis, hired Pacific follow-on commitment of $30 million markets investment consultant. The wanted a partner with proven alpha Investment Management Co. to run to the Siguler Guff Hawkeye Opportuni- board oversees $20.1 billion in private Delaware Public Employees’ generation in Europe and Asia.” about $313 million in active emerging ties Fund, a separate account private equity, private credit, real estate and Retirement System, Dover, Also in private equity, the pension markets debt for its $34.8 billion equity fund of funds. The retirement natural resources. committed up to $40 million to committed $100 million to Charles- defined benefit plan, the system system had $520 million in the fund Lightstone Ventures III. bank Capital Partners — $60 million to disclosed in an investment report. as of Dec. 31. New Hampshire Retirement The $12.6 billion pension fund’s Charlesbank Equity Fund X and $40 PIMCO replaces Stone Harbor System, Concord, committed $50 investment committee approved the million to Charlesbank Equity Overage Investment Partners. Los Angeles Fire & Police million to Crescent Direct Lending commitment to the venture capital Fund X, a U.S. middle-market fund. The investment report also Pensions committed a total of up to Levered Fund III. fund at its Dec. 15 meeting, according The plan also committed $50 disclosed a commitment of $100 $55 million to two alternative The $10.3 billion pension fund to board meeting minutes. million each to Grain Co;mmunications million to Wall Street Strategic investment funds in closed session, made the commitment Feb. 19. Pensions & Investments March 8, 2021 | 19 HIRINGS

New Mexico Educational Oklahoma Teachers’ Retire- DB SL High Yield Beta Fund from BNY three funds, a transaction report according to Andy Cook, an investment Retirement Board, Santa Fe, ment System, Oklahoma City, Mellon. showed. analyst with the Vermont State committed $70 million to AE Industrial committed $160 million to alternative The $34.5 billion system also The $35.7 billion pension plan Treasurer’s Office. Partners Extended Value Fund, said funds-of-funds manager Franklin Park, committed up to $125 million to committed $100 million to Comvest At its meeting Feb. 23, it committed Bob Jacksha, CIO of the $14.2 billion Executive Director Tom Spencer said. Hellman & Friedman Capital Partners Credit Partners V, a direct lending fund $80 million to HIPEP IX Fund, a limited fund. The private equity fund focuses It committed $125 million to X, a large-cap buyout fund. that will seek to provide financing partnership investing in private equity on aerospace and related industries. Franklin Park Co-Investment Fund V, solutions to middle-market companies assets in Europe and Asia-Pacific The board also made a total of $35 making it the $20.6 billion pension Santa Barbara County (Calif.) in the U.S managed by HarbourVest Partners. million in follow-on commitments: $15 fund’s first investment in a private Employees’ Retirement System It also committed $50 million to The committee also approved a million to SV Health Growth Fund VII, a equity co-investment fund, Mr. Spencer committed $20 million to First Eagle Shamrock Capital Growth Fund V, a commitment of up to $75 million to specialist health-care fund, and $10 said. Direct Lending Fund V. U.S. buyout fund, and $20 million to Ares Pathfinder, a private credit fund. million each to B Capital Opportunities The remaining $35 million was The $3.6 billion fund’s board TCG Crossover Fund I, managed by Fund I, a venture capital fund, and committed to funds managed by approved the commitment to the direct TCG Capital. West Virginia Investment Tenex Capital Partners III, a private outside general partners. lending fund at its meeting Feb. 25, Management Board, Charleston, equity fund. The board previously said Lauren Thompson, assistant CEO. Vermont Pension Investment committed up to $30 million to committed $35 million, $30 million Pennsylvania State Employ- Committee, Montpelier, committed Novacap TMT VI, a buyout fund. and $50 million to three funds, ees’ Retirement System, Texas County & District up to $155 million to two alternative The board oversees the investment respectively. Harrisburg, committed up to $500 Retirement System, Austin, funds on behalf of the $5.3 billion management of $16 billion in defined million over time to the BNYM Mellon committed a total of $170 million to Vermont State Retirement Systems, benefit plan assets. New Mexico State Investment Council, Santa Fe, committed up to $105 million to three alternative investment funds, spokesman Charles Wollmann said in an email. It committed up to $60 million to Berkshire Multifamily Debt Fund III and $40 million to Berkshire Bridge Loan Investors II, both managed by Berkshire Residential Investments. Separately, the council committed We’ll help you get up to $5 million to Scout Ventures III as part of its New Mexico venture capital portfolio. This is the council’s first investment with the early-stage venture capital firm. qualiﬁed candidates New York State Common Retirement Fund, Albany, committed $300 million to EQT Infrastructure V, according to a transaction report on in the door. the website of state Comptroller Thomas DiNapoli, and sole trustee of the $247.7 billion pension fund. Your next career candidate is reading Pensions & Investments. In fact, we reach the largest pool North Dakota State Invest- ment Board, Bismarck, approved a of institutional investment industry leaders while they are making important business decisions. commitment of $200 million to GCM Grosvenor Customized Infrastructure And we oer them the most robust array of executive and c-suite career opportunities in the Strategies III, said David J. Hunter, investment community. executive director and CIO of the North Dakota Retirement & Investment Office. The board, which oversees a total of $18.5 billion in assets, previously Have a position you need to ﬁll? committed $105 million to GCM Grosvenor Customized Infrastructure Contact Erin Smith at 212.210.0719 or [email protected] Strategies II.

Ohio Police & Fire Pension Fund, Columbus, committed up to $60 million to Cortland Enhanced Search job opportunities Value Fund V. The $17.2 billion pension fund’s Go to www.pionline.com/careers board approved the commitment to the value-added real estate fund at its meeting Feb. 24.

Ohio Public Employees Retirement System, Columbus, hired NEPC as its sole investment consultant, said spokesman Michael Pramik. The $111.8 billion retirement system, which includes $98.4 billion in defined benefit plan assets, issued an RFP in August due to the impending expiration of the contracts of general investment consultant NEPC and alternatives consultant Aon Invest- ments USA. The board elected to seek a single general investment consultant at the time.

Ohio School Employees Retirement System, Columbus, committed $100 million to Carlyle Property Investors. CAREERS The $16.5 billion pension fund’s board approved the commitment to the EXCLUSIVE ACCESS TO TOP TALENT open-end core-plus real estate fund managed by Carlyle Group at its Feb. 18 meeting. 20 | March 08, 2021 Pensions & Investments

RFPs

REQUEST FOR PROPOSALS Investment Consultant SPTSF for Ohio Public Safety Officers The San Bernardino County Employees’ Retirement Association (SBCERA), a $12 The Ohio Police & Fire Pension Fund (OP&F) is seeking proposals for actuarial ser- billion public pension fund, is requesting vices from qualified firms with in-depth knowledge and technical expertise in deter- proposals from qualified firms interested mining appropriate funding and budgeting needs for the state of Ohio’s newly created in providing comprehensive pension fund State Post-Traumatic Stress Fund (SPTSF) for Ohio’s public safety officers. investment consulting advice and services on a full service retainer basis. To obtain a OP&F has been charged under House Bill 308 with submitting recommendations to copy of the RFP and additional information, the Ohio legislature on the proper administration of the SPTSF, including to commis- visit www.SBCERA.org/RFP. The deadline sion an actuarial study that will be used to estimate funding requirements, benefit for submission of proposals is April 16, 2021. calculations, contribution determination and administrative costs for the state of Ohio.

The Request for Proposal will be released on or about February 24, 2021. RFP responses must be returned to OP&F ofﬁces by March 22, 2021 by 4 p.m. (EDT).

To obtain a copy of the RFP once released, visit www.op-f.org or contact: Emerging Markets Equity Mandate

Janeane N. Mayesky, CPSM, C.P.M., A.P.P., CM The San Bernardino County Employ- Procurement Manager ees’ Retirement Association (SB- Ohio Police & Fire Pension Fund CERA), a $12 billion public pension 140 East Town Street - Columbus, Ohio 43215 fund, is requesting proposals from [email protected] qualified firms interested in providing investment management services for Proposals must be received on or before the due date and time to be considered for an Emerging Markets Equity Mandate. evaluation. To obtain a copy of the RFP and additional information, visit www.SBCERA. org/RFP or alternatively, www.NEPC. com. The RFP will be available on the REQUEST FOR PROPOSALS respective websites beginning Monday, FOR FINANCIAL AUDITING SERVICES March 8, 2021. The deadline for submission of proposals is March 26, 2021. The Fire and Police Employees’ Retirement System of the City of Baltimore is requesting proposals for financial auditing services. See the System’s website at www.bcfpers.org for the RFP.

The due date for submitting proposals is March 26, 2021. Inquiries are to be made to:

Fire and Police Employees’ Retirement System Emerging Markets Debt Mandate 7 E. Redwood Street, 18th Floor Baltimore, Maryland 21202 The San Bernardino County Employ- Phone: 410-497-7929 option 3 ees’ Retirement Association (SB- Email: [email protected] CERA), a $12 billion public pension fund, is requesting proposals from qualified firms interested in providing investment management services for an Emerging Markets Debt Mandate. Independent Investment Consulting Services To obtain a copy of the RFP and addi- The New York State Deferred Compensation Board is seeking proposals from registered finan- tional information, visit www.SBCERA. cial advisers to provide Independent Investment Consulting Services to the New York State org/RFP or alternatively, www.NEPC. Deferred Compensation Plan, a plan meeting the requirements of Section 457 of the Internal com. The RFP will be available on the Revenue Code. Deadline for receipt of proposals is April 16, 2021. Additional information respective websites beginning Monday, about this RFP may be obtained from the Board’s web site: http://www.deferredcompboard. March 8, 2021. The deadline for sub- ny.gov beginning March 3, 2021. MWBE firms are encouraged to reply. mission of proposals is March 26, 2021.

Reach a targeted audience of executive investment professionals. Find the quality talent you seek for your team at P & I Careers - the premier destination for the industry’s most influential investors. Your company’s best investment strategy.

Place your ad today. Contact Erin Smith at (212) 210-0719 or [email protected]

P020_PI_20210308.indd 28 3/4/21 4:51 PM Pensions & Investments March 8, 2021 | 21

$4 billion financing for Hertz Glob- to make larger loans. During its Jan. which is attractive to some inves- al Holdings Inc. by Apollo insur- 27 earnings call, Jonathan Gray, Megadeals on tors, Mr. Nesbitt said. Credit ance company affiliate Athene USA president and chief operating offi- Private debt managers are not Corp., to allow the car rental com- cer, noted that Blackstone’s credit the rise lacking in capital. Between 2010 CONTINUED FROM PAGE 3 pany to refresh its fleet. business had grown to $618.6 bil- Private credit deals of $1 and 2020, private credit funds invested in 2020 to the growth of lion as of Dec. 31, up 8% from a year billion-plus as a percentage of raised at least $100 billion annually, Apollo’s private credit origination Credit growth expected earlier, making it one of the largest all such deals. Preqin data shows. In 2020, private business as it expanded into mak- Apollo executives expect most of in the world. credit managers raised a combined ing mega loans for large-cap corpo- its growth to come from its credit “Our scale allows us to provide 43.0% 43.4% $117.7 billion in 200 funds, down rations. Apollo has by far the larg- business, not private equity, Mr. bigger and more comprehensive from the record $132.1 billion est credit business among the Rowan said. capital solutions to borrowers,” Mr. raised by 223 funds in 2019. publicly traded alternative invest- “In the private equity business, Gray said. “And the opportunity is Christopher G. Wright, managing ment managers, with $328.6 billion we are large (but) that will not be a enormous with subinvestment- 32.2% director and head of private markets as of Dec. 31 — 126% more than the source of massive growth. The grade financing markets in the U.S. at private credit manager Crescent next manager on the credit busi- credit business is large ... but in the alone totaling nearly $3 trillion.” 26.9% Capital Group, said the pandemic ness list, Ares Management, with context of the markets that we par- For their part, institutional in- pushed more capital into private $145.5 billion as of Dec. 31. ticipate in, we’re just beginning. We vestors plan to continue investing credit. “COVID caused institutional “If we had sat here a year ago have an amazing opportunity in in private credit. Some 47% of in- investors to face two simultaneous and we described for you the litany credit, particularly with respect to vestors surveyed by Preqin at the and profound phenomena,” he said. of transactions from origination,” he said. end of 2020 expect to commit more (Abu Dhabi National Apollo sometimes capital to private debt over the next Earnings potential Oil Co.) to Expedia to syndicates its loans, 12 months, with another 40% main- Investors like private credit be- Albertsons ... you would meaning it takes co-in- taining current investment levels. cause of the potential for earning have said those were vestments from institu- About 14% of investors plan to returns over bonds in a low-inter- going to come out of the tional limited partners reduce their private debt alloca- 2017 2018 2019 2020 est-rate environment as well as to auspices of the banks, to make even larger tions in the next 12 months, indicat- Source: Preqin take advantage of accelerated de- that was their regime, loans, noted Scott ing they were most concerned by mand by companies for private that’s their opportuni- Kleinman, Apollo co- asset valuations and competition loans from managers, he said. ty,” said James Zelter, president, during the for transactions, Preqin reported. Kuczwanski, manager of external At Ares Management, business co-president and CIO same call. None of the investors mentioned affairs for the Florida board. for private credit was brisk in 2020. of Apollo’s credit busi- ATTRACTIVE: Christopher Apollo is focusing on the growing size of transactions as The low-interest-rate environ- Executives reviewed more than ness. “So the theme that G. Wright said investors building its loan origi- a concern. ment is pushing investors and their 2,400 transactions for direct lend- we’ve talked about for like the return potential nation capability and At least one of Apollo’s investors, investment consultants to search ing transactions in the U.S. and Eu- several years, the evo- of private credit. hired about 300 people Florida State Board of Administra- for asset classes that will help them rope, Michael Arougheti, Ares CEO lution of intellectual in 2020, many of them tion, which oversees a total of $216.9 achieve their 7% expected rates of and president, said in an email. capital from ‘The Street’ to the buy to originate loans, Mr. Zelter said. billion, is likewise unfazed by the return, said Stephen Nesbitt, Mari- During the year, Ares committed side, the search for yield, the regu- In July, Apollo formed a partner- increased deal size or expansion of na del Rey, Calif.-based CEO of al- more than $20 billion to nearly 200 latory environment, our footprint ... ship to originate loans of about $1 Apollo’s limited partner base. ternative investment consultant companies, he said. we just see those accelerating.” billion each for corporations, Florida SBA has a total of $204.1 Cliffwater LLC. “Part of this activity was a result In the fourth quarter, Apollo pro- amounting to approximately $12 million invested with Apollo as of Private credit is expected to pro- of the growing trend of larger, often vided $9.3 billion in financings to billion in financings over the three Dec. 31, with the last commitment of duce returns greater than fixed in- public companies turning to private investment-grade companies. years, noted Apollo spokeswoman $200 million to Apollo Accord Fund come, he said. Long-term returns market providers like Ares for more These transactions, some of which Joanna Rose. The new partnership, IV, a private debt fund managed by for private credit have been 9% net. flexible financing solutions,” Mr. had institutional co-investors, in- Apollo Strategic Origination Part- Apollo Global Management, made Mr. Nesbitt estimates that when all Arougheti said. cluded a $5 billion deal with AD- ners, is anchored by the $232 billion less than six months ago. the numbers are in for 2020, net re- For example, Ares led the largest- NOC, leveraging the rental income Abu Dhabi wealth fund, Mubadala “We do not see a change in our turns will be 5% to 6.5%. ever unitranche financing transac- streams of some of the oil compa- Investment Co., and permanent relationship with Apollo, and will Aside from returns, capital com- tion, a £1.9 billion ($2.6 billion) loan ny’s properties that are under a 24- capital vehicles managed by Apollo. give consideration to the products mitted to private credit can be in- for insurance broker and under- year master lease agreement, and a Blackstone Group also is aiming they offer in the future,” said John vested quicker than private equity, writer Ardonagh Group Ltd. n

the Asia-Pacific region; Europe, the such as Korea, China and New Zea- spring 2019. The trading desk was ert as senior vice president, director Middle East and Africa; and North land emerged from COVID lock- doing “a very good job,” but ques- of multiasset, in 2019. “He wanted to Outsourced America, with assets of between downs and restrictions more quick- tions around transaction cost anal- start doing some more sophisticated $10 billion and $500 billion. ly, and so presented good ysis — analyzing whether a trade security types we didn’t have exper- CONTINUED FROM PAGE 3 Northern Trust, which has 65 investment opportunities,” Mr. was executed at the best possible tise in, option strategies, in markets of integrated trading solutions in outsourced trading clients, agreed Dearman said. price — came up a lot. “The idea of we haven’t traded in before. (It London; and Meraki Global Advi- there is an important distinction for Sources also pointed out that a reducing that expense was also a would have meant) training some- sors LLC, based in Park City, Utah. firms that choose to outsource and more obvious impact of COVID-19 big driver for us. But first and fore- one up or hiring for the capability,” Liquidnet Holdings Inc., a buy- those that keep it in-house. has been the adoption — and ac- most, any move had to be good for Mr. Gomez said. Moving to Northern side trading and liquidity platform, “The question for (those consider- ceptance — of remote working. One our clients,” Mr. Gomez said. Trust’s platform gave them access to focuses on direct relationships with ing it) is do they get value from the strand of this has been to increase Through conversations with con- different capabilities and also to a its buy-side members but also activity of dealing? If you don’t … or attention to disaster recovery plans. sultants and providers, it became 24-hour trading desk. counts outsourced traders as cli- you can’t discern or evidence value, it “We think COVID has made clear that an outsourced trader could ents, with “a growing business from is by definition a cost, and there may some of the hedge fund give Westwood execu- No challenges them,” said Mark Pumfrey, London- be cheaper and better ways to ex- managers and asset al- tives “the type of TCA While consultants ask questions based global head of equities. pense that cost,” Mr. Paulin said. locators ask tough reporting and the access about the decision, “none challenge “There is a lot of regulation you The provider has seen a “notable questions around to liquidity that … we’re the concept — they see it as coming have as a hedge fund or small asset uptick” in outsourcing, although (business continuity just not going to get at and seem to see us as early adopters.” manager, and you may (decide to) things were already accelerating. planning) — what if our size. As we dug into For years, he had discussed his hand over responsibility (for trad- one manager or trader it, I couldn’t find a prac- concerns with Shaun Neumann — ing) to someone else.” Driving demand (gets) COVID?” said tical reason why we former head of trading and now di- However, Mr. Pumfrey and other The COVID-19 pandemic has Michael Ashby, manag- would not look at this rector of operations with oversight sources highlighted that outsourc- driven demand in part because of ing director in New really seriously, outside of the outsourced trading arrange- ing trading will not be a panacea for the greater amount of trading activ- York at Meraki. Em- the fact that our portfo- ment — that “buy-side trading all firms, whether they want to cut ity that’s taken place, said Andrew ploying an outsourced DECIDING: Gary Paulin lio managers were going desks are collapsing. With algo- costs or reduce regulatory burdens Dearman, executive director at trader instead of having said value is the metric to be concerned about rithms etc. … I hate to say it, but it’s or not. The key is whether trading business and technology consul- one in-house also that firms should how this would work. becoming commoditized,” Mr. Go- gives a manager an “edge” in its in- tancy The Capital Markets Co. “gives some safety for consider on trading. Pre-COVID, the idea of mez said. vestment process, he said. (U.K.), known as Capco, in New them and backup.” not having traders out- Mr. Gomez said he’s “giddy” While efficiency and cost may be York. “The volatility through last Another impact of remote work- side their office to be able to touch about how well the changes have drivers for outsourcing, “if the func- year made trading more expensive ing is it has given comfort to portfo- them (was unthinkable).” gone — and the firm is saving “not tion (of trading in-house) improves for funds, with access to liquidity lio managers that they do not need Executives investigated further, an insignificant amount of dollars.” the ability of the organization to becoming harder at certain points. to be in the same room as their completed due diligence and con- However, Northern Trust’s Mr. capture alpha and lower market Those funds whose systems and in- traders to make things work. cluded that, while outsourced trad- Paulin said there are still “standard impact then its value will far out- ventory may not be able to cope Fabian Gomez, chief operating ing is big with hedge funds and pushbacks on outsourcing” despite weigh the cost of the trading desk. with the higher levels of volatility officer at Dallas-based Westwood small managers, why wouldn’t a success stories, including that out- This is why outsourced trading is are turning more to outsourced Holdings Group Inc., was preparing firm like it do this? sourcing trading means losing staff, still such a small part of the mar- trading providers that provide ac- his institutional team to move to an “The hard part is this is a real big but in some cases it can also mean ket,” Mr. Pumfrey said. cess to highly reliable platforms outsourced trading arrangement change for any fund. For any buy- new roles are created. Data are scarce, but 17% of 300 and a greater liquidity pool and can with Northern Trust as the pan- side firm, the middle of their invest- Westwood, for example, moved its heads of investment operations at meet those funds’ best execution demic hit last March. ment floor is a trading desk. It’s a former head of trading into the new, money management firms sur- requirements,” Mr. Dearman said. The firm, which has $13 billion in cultural change for a firm,” Mr. Go- director of oversight role, while an- veyed by WBR Insights and North- It also increases access for those assets under management, out- mez said. other trader took a position at North- ern Trust in the first quarter of 2020 looking to specialize in different sources all trading except for its Another draw for moving to the ern Trust itself in Chicago, “which said they had already outsourced markets. “The pandemic has only wealth management division. outsourced trading route came also gave our investment team … a trading. Respondents were from accelerated this trend as countries It started looking at the option in when Westwood hired Adrian Helf- lot more comfort,” Mr. Gomez said. n 22 | March 8, 2021 Pensions & Investments

private equity and to test her idea lot” of new clients. UPCOMING WEBINARS | REGISTER TODAY for Project Black with a wide range The addition of Ariel Alterna- Hobson of industry sources. tives, given that it’s “purpose-driven Ms. Hobson said she sent emails private equity rather than tradition- CONTINUED FROM PAGE 3 to many people in the private equi- al extractive private equity,” is yet biggest step — the Feb. 17 launch of ty industry asking if they would talk one more reason both institutional Ariel Alternatives LLC. to her about the industry and her and retail investors are drawn to Ms. Hobson said she started speci c plan. She said “everyone Ariel, said Michael S. Falk, partner working on the concept of an Ariel responded” and those sources rec- at Focus Consulting Group Inc., private equity strategy last year. ommended other people she should Long Grove, Ill., in an interview. “As you might imagine, private contact. Emerging Markets: Expanding equity is completely new for Ariel. “From my research, I realized ‘A rare characteristic’ But so many times, our clients have (that) African Americans in private “Ariel has a rare characteristic Investors’ View said that because the long-term na- equity are really rst generation. In among money managers — celeb- ture of our (stock) ownership, active money management, rity. The leaders — John and Mell- Live, Wednesday, March 10 • 2:00 p.m. - 3:00 p.m. ET ‘you’re like a public-private equity (Blacks) are second generation and ody — have a level of celebrity and Assets were fleeing emerging markets in the early part of 2020 as manager because you own a stock I’m an example of that. In corporate are well known outside the invest- COVID-19 took hold, oil prices tumbled and economic growth stalled. for 20 years.’ We think private equi- America, African Americans are ment management business. When But flows recovered quickly when institutional investors reassessed their ty is a natural outgrowth of what we third generation,” she said. you combine that with the rm’s approach to the asset class. Where are we today, with a coronavirus do,” she said. She broadened her circle of focus on diversity both inside and vaccine, major fiscal stimulus and nascent economic recoveries taking The new private equity rm’s money management contacts, outside of the rm ... and now its hold? Join us for this important webinar that will reset – or set – expec- rst investment strategy is Project shared her idea about a twist on the private equity strategy, it’s a very at- tations around this important asset class. Topics our panel will discuss Black Management Co. LLC, “an in- typical private equity model and tractive package. The rm has a include: novative effort (that) will invest in “asked people not to tell me why my wonderful pedigree,” Mr. Falk said. middle-market companies that may idea is good, but in- But he warned that • How EM economies are emerging from the pandemic or may not currently be minority- stead to tell me how like many value man- • Strategic and tactical opportunities owned, transforming these entities naive I am, what I ‘Our clients agers, Ariel’s invest- • EM debt into certi ed minority-owned busi- don’t understand, have said . . . ment teams “have to • EM equities ness enterprises of scale and forg- and tell me every- “you’re like a be aligned about val- • Overcoming investors’ home market bias ing a new class of Black and Latinx thing that I haven’t ue investing and entrepreneurs,” an Ariel news rethought of that’s public-private make sure that their Register Now: lease said. wrong. And you know, equity de nition of value The initiative will help these most people I talked equity investment pionline.com/EmergingMarketsWebinar companies grow so they can com- to said this is a really manager still is valid in a pete to gain the business of Fortune good idea.” because you changing global mar- Sponsored by: 500 companies, she said. Ms. Hobson’s pas- own a stock ket.” Ms. Hobson and Leslie A. Brun, sion to form an Ariel As for Ms. Hob- former founder, chairman and CEO private equity com- for 20 years.” son’s rst pillar — of private equity rm Hamilton pany was another We think human capital and Lane Inc., Bala Cynwyd, Pa., are co- initiative among talent — she noted founders of Ariel Alternatives. Mr. many over the years private equity that Ariel hired a new 2021: A Fixed Income Odyssey Brun will serve as the rm’s chair- that Mr. Rogers sup- is a natural chief talent of cer, Live, Wednesday, March 17 • 2:00 p.m. - 3:00 p.m. ET man and CEO. ported, she said, add- outgrowth of Marlo J. Gaal, from J.P. Morgan Chase, New York, ing that her appoint- Groupon Inc., adding Given the dynamics at play in 2021, can your fixed income portfolio committed up to $200 million to co- ment as co-CEO was what we do.’ that “she is a super- actually work harder? Join us as we explore key investment themes invest alongside Project Black for more about allowing ARIEL’S MELLODY star.” in today’s fixed income landscape, how institutional investors are ap- future transactions as part of the Mr. Rogers to focus HOBSON “I told (Marlo) that proaching fixed income and the practical opportunities that exist across bank’s campaign to advance racial on investment man- I’m not looking for public and private markets. Gain greater insight into: equality, an Ariel news release said. agement — “because employees, I’m look- this is the only thing he truly loves” ing for partners. We are constantly • Where can investors expect growth in the global economy? ‘A heavy lift’ — than about succession or other talking about the talent, the culture, • How will the new administration impact monetary policy? While many details remain to be issues. the people variable and making • What kind of inflationary environment can we expect? hammered out for Project Black, sure that we’re maximizing oppor- which Ms. Hobson acknowledged in Increased ownership tunities,” Ms. Hobson said, adding Replay available: pionline.com/Webinar-Invesco the interview “is a heavy lift,” the In line with her promotion, Ms. that “great people are reaching out development and planning of Ari- Hobson increased her ownership to us about jobs and (there are) so Sponsored by: el’s move into private equity with a stake in Ariel to 39.5% by buying many awesome opportunities to de ned purpose clearly was a jour- 14% of Mr. Rogers’ stake, making add to our team.” ney of discovery for her. her the rm’s largest shareholder. Ariel currently has 107 employ- On a fact- nding mission last Mr. Rogers owned 34.1% following ees based in Chicago, New York, summer, Ms. Hobson said she set the promotion in July 2019. Washington and Sydney; 72% have out to learn more about private eq- “John had never sold one share diverse backgrounds and 64% are uity, to meet every black person in prior to me taking on the new role. women or minority employees in This was a big deal to people and senior- or executive-level positions. they were curious about the fact After a deep dive into the way that I was going to be the one mak- that Ariel describes and presents ing decisions for the rm and that itself in various formats, Ms. Hob- he would be focused on investment. son said she is excited about a new Technology is the New Oil: Reprints And that’s really how it works. He branding campaign that will be oversees the investment portfolios rolled out in a few months. The Changing Nature of Emerging Markets and the research. I run everything “Words matter. So (is) making else,” Ms. Hobson said. sure that we are telling the Ariel A variety of macro and fundamental factors are converging in emerg-  2-color, 4-color She added: “I also think my new story about our 30-year history, ing markets, signaling a period of resurgence. We believe structural role made it clear to people that I concisely, clearly, crisply, and in a changes, a supportive investment environment, and dynamic geopoliti- am not leaving the rm because we way that distinguishes us from our cal influences make EM particularly attractive right now. Please join us  Glossy, matte kept getting a lot of questions and peers,” Ms. Hobson said, stressing for an interactive webinar highlighting EM’s changing nature and the comments like ‘where’s Mellody go- that the rm’s iconic turtle will re- added value of active management. Now may prove to be an inflec-  500-1,000,000 ing?’ ... I kept telling people, I’m not main part of marketing, advertising tion point, especially for portfolios focused on capturing this dynamic going anywhere. I know this sounds and other communications. change. Our panel of experts will discuss critical factors shaping EM really crazy, but I knew from the Ariel has made progress on the investments, including:  One-sided, two- start that I would work at Ariel for fourth strategic pillar — technology my career.” — through a rebuild of its infra- • How the nature of emerging markets has changed from resource Before joining Ariel as a full- structure and revamping Ariel’s focused to more knowledge-intensive industries sided booklet time employee in August 1991 website, Ms. Hobson said. • Importance of quality and sustainable growth in China, India, and straight out of Princeton University, “We feel really good about the other markets Ms. Hobson was a college intern at technology changes so far because • Benefits of dierentiated exposure, including small and mid-cap Ariel. they will increase ef ciency and re- stocks It’s your choice. In an interview in January, Mr. quire fewer people if your technol- • Why now might be an opportune time to reevaluate your approach Rogers praised Ms. Hobson’s new ogy is protected in the right way,” to emerging markets Contact Laura Picariello initiatives, noting that “she is doing Ms. Hobson said. amazing things.” Despite the dif culties of the Replay available: pionline.com/WasatchWebinar (732) 723-0569 The rm’s assets under manage- past year caused by the COVID-19 Sponsored by: [email protected] ment rose 15.4% to $15 billion in outbreak, Ms. Hobson said she is the year ended Dec. 31 from a com- “very energized. I want to slingshot bination of good returns and net out of this pandemic. I’m working For a full list of webinars, go to pionline.com/webinars in ows. Mr Rogers said in the in- so hard and so is the entire Ariel terview that Ariel had attracted “a team.”  Pensions & Investments March 8, 2021 | 23

John R. Boehm are able to meet more detailed ex- U.S. collaboration agreement with pectations set by the Global Inves- Canada to improve reporting and Climate tor Coalition on Climate Change to disclosure of climate risks. They help investors assess a company’s also welcomed the naming of a spe- CONTINUED FROM PAGE 1 business plan in a range of climate cial adviser for climate and ESG at adopt proxy voting policies that scenarios, under a five-part frame- the Securities and Exchange Com- make (it) abundantly clear that fail- work for climate risk management mission. ure to eliminate material contribu- and disclosure. In the new role, returning SEC tions to climate change is a thing of official Satyam Khanna will advise the past. That is really the founda- Net-zero benchmark acting chairwoman Allison Herren tion of what we can achieve this In mid-March, Climate Action Lee on how climate risk fits into a year,” said Eli Kasargod-Staub, co- 100+ will unveil a net-zero green- regulatory framework. “That might founder and executive director of house gas emissions benchmark to actually provide tailwind,” Mr. Nzi- shareholder advocacy organization help investors assess how compa- ma said. Majority Action in Washington. nies are preparing for climate risk SEC examiners will now focus Simiso Nzima, investment direc- and a net-zero transition, including more on climate and ESG-related tor and head of corporate gover- not just commitments but actual risks to make sure that proxy voting nance for the $449.1 billion Califor- capital expenditures and lobbying policies and practices and compa- nia Public Employees’ Retirement activity. nies’ continuity plans serve inves- System, Sacramento, agreed that “The benchmark provides a way tors’ best interests “in light of inten- “for anything to be effective you of engaging with the company to sifying physical risks associated have to hold someone accountable,” get them to either clarify further or with climate change,” Ms. Lee said. and said it is a long-standing CalP- push them if they are falling be- In late February, Ms. Lee also di- ERS practice to vote against unco- hind,” Mr. Nzima said. “Once it is rected the division of corporation operative directors on all sorts of out, it’s going to be clear, and differ- finance“to enhance its focus” on ESG issues. ent investors can use that.” how public companies disclose cli- “We take it seriously that when Finding power in numbers, Illi- mate-related issues, a bold move we engage companies and there are nois Treasurer Michael Frerichs IN CHARGE: Michael Frerichs is one of the leaders of the proxy voting policy effort. that sends “a clear message that the not responses, we have no qualms” and Vermont Treasurer Beth Pearce SEC is serious about updating guid- in voting against directors, he said. are leading an effort that includes el companies, Mr. Frerichs said. ing climate risk from companies. ance to meet investor demands for “We are excited to hear that other CalPERS and Connecticut to get “There is no company that will not “We are also calling on our asset consistent, comparable and reliable investors are going to have policies more public institutional investors be affected” by the net-zero emis- managers, including BlackRock and climate-related disclosures,” said that allow them to do that.” to create proxy voting policies sions transition, including real es- Vanguard, to use their proxy to put Doug Davison, a partner at Linklat- CalPERS is a founding member aimed at directors of companies tate firms with shoreline properties their money where their mouth is” ers LLP in Washington and counsel of Climate Action 100+, an organi- failing to make progress, including and insurance companies dealing when it comes to pushing for to former SEC Chairman Arthur zation of more than 500 investor disclosing their exposure to climate with all kinds of climate-related change at companies, Mr. Frerichs Levitt. members with a collective $54 tril- risk or setting emissions targets risks. said. Investors should also find an ally lion in assets that flags key share- aligned to limiting global warming “We have reached a time where That has already happened in in the person tapped for permanent holder votes related to three key to 1.5 degrees Celsius, a key goal of boards need to act. We as a fiducia- Vermont, where “we put our man- SEC chairman. Gary Gensler, who expectations for companies: that the Paris Agreement. ry and shareholder need to act. Cli- agers on the hook with respect to presided over the Commodity Fu- they implement a strong gover- “We have a core of states and mate risk is an investment risk. It’s climate change,” Ms. Pearce said. tures Trading Commission during nance framework clearly articulat- large cities that are committed to a systemic risk for the entire econo- “If more investors hold boards the global financial crisis, said at his ing the board’s accountability and this. It’s all about partnership,” said my, but the transition also presents accountable, we will see change. We March 2 confirmation hearing that oversight of climate change risks Ms. Pearce, whose office oversees enormous opportunities for inno- just need more investors to hold he supports more climate risk dis- and opportunities; that they take the Vermont Pension Investment vative companies and forward- boards accountable,” Mr. Nzima of closure, and pledged to have the action to reduce greenhouse gas Committee, Montpelier, and the in- thinking investors,” Mr. Frerichs CalPERS said. SEC undertake economic analysis emissions across their value chain; vestment management of the $5.3 said. and seek public feedback on how to and they provide enhanced corpo- billion Vermont State Retirement Illinois and other institutional Encouraging news advance it. rate disclosure that follows the Task Systems. “We are not looking for investors are also turning up the Investors are encouraged by re- “There are tens of trillions of in- Force on Climate-related Financial marketing, we are looking for tan- pressure on managers to use their cent actions in Washington, includ- vestor dollars that are going to be Disclosure recommendations. gible results,” she said. own proxy power this year to see ing the Biden White House rejoin- looking for more information about Even better is when companies The focus goes beyond fossil-fu- more tangible progress on managing the Paris Agreement, and a new climate risk,” he said. n

Alex Wong/Getty Images Joy Napier-Joyce, an attorney at ciation for money managers and Jackson Lewis PC in Baltimore, also other financial services firms, is an Caregivers said plan sponsors want to encour- advocate. IRI supported the bill age retirement savings, even though when it was first introduced and CONTINUED FROM PAGE 4 not all of them are aware of the bill continues to support it, said Paul “Portman-Cardin” and “Neal- given the recent enactment of two Richman, IRI’s chief government Brady” legislative proposals have new retirement laws — namely the and political affairs officer in Wash- yet to be reintroduced in Congress. CARES Act and SECURE Act — ington. “As many hardworking Ameri- that have required their full atten- “It’s still a top agenda priority,” cans have learned during the coro- tion. Mr. Richman said. navirus crisis, taking time away “I think employers generally are from the workforce to care for a eager to flip the switch and institute Nagging question loved one can make it harder to changes to the plan that will be em- The big question is whether and save enough for retirement,” Ms. ployee-friendly but they don’t want how fast the bill will move. Because Walorski said in an email. “I’m to create something that creates an Mr. Rouda, the California Democrat hopeful Congress will take biparti- administrative headache,” she said. who co-sponsored the bill with Ms. san action soon to help these family Indeed, the likelihood of greater Walorski, did not win re-election, caregivers set aside the retirement administrative duties that is certain the bill now needs another Demo- savings they need once they return to come from keeping track of care- cratic supporter, a temporary hic- to work.” givers’ catch-up contributions is a cup that can easily be resolved, NO DIVISION: Jackie Walorski is hoping to see bipartisan support for the measure. concern for plan sponsors but not some industry observers said. Lower age limit one that is impossible to overcome, Once that support is in place and The proposed bill — called the unemployment periods. same as it is for regular catch-up Ms. Dudley said. the measure is reintroduced in the Expanding Access to Retirement To qualify, caregivers must not contributions. “We can work with policymakers 117th Congress, the bill could gain Savings for Caregivers Act — would have earned income while provid- The American Benefits Council, a to make that a smooth experience,” momentum and make its way into allow individuals who took time ing care to dependents living with national trade group that lobbies for she said, adding that plan sponsors the Portman-Cardin and Neal-Brady away from the workforce to care for them. The bill also requires that employer-sponsored benefit plans, will need guidance on “all kinds of legislative packages, they note. a family member to start making caregiving be for an uninterrupted supports the bill. “Let a thousand little stuff,” such as where to put the “I think it will come up as part of catch-up contributions earlier than period of at least one year and be- flowers bloom,” said Lynn Dudley, money if the caregiver doesn’t des- the discussion,” Ms. Dudley said, they otherwise would once they re- gin after the caregiver attains age senior vice president of global re- ignate an investment and how it adding that the bill has “a good turn to work. For example, someone 18. tirement and compensation policy should be reported on the Form chance” of being included in the taking seven years to care for their In addition, the bill requires at the American Benefits Council in 5500. “bipartisan bicameral comprehen- children would be able to start caregivers to submit a declaration Washington. “There is no reason “You just have to walk through sive legislation” underway. making catch-up contributions at of their qualified unemployment why we shouldn’t look for every so- every step of the way,” she said. Of all the bills out there, Ms. age 43 instead of having to wait to periods to the Internal Revenue lution to bring everyone into the re- Still, plan sponsors think it’s a Dudley sees the caregivers’ bill as age 50, said Kent Mason, a partner Service under penalty of perjury, tirement system so that they can good idea. Even if “somebody’s got one that “fits well” with what the at Davis & Harman LLP in Wash- Mr. Mason said. have a dignified retirement.” to track it, somebody’s got to set it broad legislative measures are ington. The legislation applies to 401(k) Ms. Dudley says the council up and somebody’s got to pay for it,” looking to achieve. “The normal catch-up kicks in plans and other defined contribu- views the bill favorably because it sponsors would still support this “The idea of giving caregivers an earlier,” Mr. Mason said, explaining tion plans as well as individual re- allows more people to save and bill, Ms. Dudley said. opportunity to participate is abso- that the bill reduces the age 50 trig- tirement accounts. The cap on supports the organization’s goal of Service providers, too, support lutely universal,” she said. “People ger by one year for each full year of catch-up contributions to 401(k) “improving the financial security of the legislation, and the Investment support that just like they support a caregiver’s aggregate qualified accounts is $6,500 annually, the everyone.” Retirement Institute, a trade asso- removing student loan barriers.” n 24 | March 8, 2021 Pensions & Investments AT DEADLINE meet the retirement income pay- Royal Mail model ments. Royal Mail Group Ltd. is looking Collective Robin Ellison, head of strategic to start its CDC plan, known as the Management, recently released development for pensions at law Collective Pension Plan, in the sec- CalSTRS adding alts CONTINUED FROM PAGE 4 board meeting minutes show. firm Pinsent Masons LLP in Lon- ond half of the next financial year. CalSTRS’ investment commit- The strategy was terminated Mr. Eagle noted that the interest don, said that CDC plans are need- Its launch will depend on further tee revised its policy to add for performance issues. comes mainly from employers in ed in the U.K. because pure DC details being worked out with the alternative investments to its the utilities or industrial sectors plans have not been delivering on government, including how the The redeemed funds will be sustainable investment and that feel that annual retirement in- their expectations in fluctuating plan will be accepting contributions reallocated to index funds until a stewardship strategies portfolio come is the best retirement ar- markets, because there is little in- and when it may be granted autho- new emerging markets equities and set a 5% combined maximum rangement for their employees but vestment and mortality risk shar- rization from The Pensions Regula- manager is found. for the the $282.5 billion pension for which DB is or would be too ex- ing, and because benefits offered tor, the postal service company said fund’s public and private sustain- pensive. in a news release on its website on Other consultants added that a Feb. 11. able portfolio. La. fund allots $520M CDC plan could be a midway option Royal Mail rejected a pure DC The $23.5 billion Louisiana The California State Teachers’ between DB and DC by allowing model to replace its £10 billion de- Retirement System plans to Teachers’ Retirement System corporations to remove the uncer- fined benefit plan because of high commit $1 billion to $2 billion to rehired Mondrian Investment tainty of future deficit recovery pricing in the insurance market for the private sustainable portfolio Partners to run up to $325 million programs and varying contribu- annuities, opting instead for a plan over the next couple of years, in active international small-cap tions, while providing reliable life- design with an annual lifelong re- according to agenda materials equities, said Dana T. Brown, long income in retirement to par- tirement income and with variable from an investment committee director of public markets. ticipants at a predictable cost. In benefit increases at a fixed cost, ac- meeting March 4. The capital will Separately, the fund committed traditional DC plans, individuals cording to WTW, which advised the can only rely on his or her own sav- plan trustees. be committed across private up to $75 million to distressed ings to last a lifetime. Royal Mail’s workforce currently equity, real estate, infrastructure debt fund Castlelake Income CDC arrangements are most has the choice to accrue DC income and innovative strategies. Opportunities II; up to $50 million likely to be adopted by large em- or cash balance benefits, but these CalSTRS officials plan to each to private equity fund Hellman ployers with large workforces that EXTRA EXPENSE: Matthew Arends said employees will move to the new commit $200 million to $500 & Friedman Capital Partners X and will be stable over the course of the collective DC plans could be costly for CDC plan when it launches and million each year to affordable middle-market buyout fund Genstar next 20 years, according to consul- small employers, though interest is high. more than 140,000 people will go housing with its real estate team, Capital Partners X; and up to $20 tants. immediately into this new plan. $150 million annually to low- million to growth equity fund Insight That’s because plan sponsors are are lower than those available un- The U.K. Department for Work carbon solutions with its private Venture Partners Fund X Follow-on going to need scale to activate the der CDC for the same contributions. and Pensions has made clear it equity team and $250 million to Fund. benefits of CDC because the model Other consultants added that wants to work with other employers requires large assets to keep costs sponsors of defined benefit plans considering a CDC model that does $500 million each year to As of Jan. 31, the actual low, said Steven Taylor, partner at are interested in the CDC model not look like the one proposed by allocation to alternative assets low-carbon solutions with its consultant Lane Clark and Peacock because studies show that market Royal Mail, LCP’s Mr. Taylor said. innovative strategies team. and real estate was 35.6%. LLP. downturns would not result in se- The fund had $7.5 billion in its David Pitt-Watson, executive fel- vere cuts to benefits compared to Multiemployer CDC plans public markets sustainable Plan sets pace low at the London Business School DB funds. Still, CDC could be expensive to investment and stewardship Los Angeles Fire & Police in London said: “Most people want A study published in September set up for small employers, said to offer best value for money for by Willis Towers Watson PLC Matthew Arends, partner and head strategies portfolio as of June 30. Pensions plans to commit $700 employees and, in every study com- showed that CDC income can on of U.K. retirement policy at Aon million to $950 million to private paring (CDC) with individual sav- average be 70% higher compared to PLC in London, who added that his S.C. commits $355M equity in 2021, the $27.8 billion ings or annuities, on average, you that provided by an annuity pur- firm has been receiving questions South Carolina Retirement pension plan’s private equity get a better retirement income if chased by a DC plan participant at from small employers about op- System Investment Commission strategic plan update shows. you use CDC.” retirement, and 40% higher than tions to join a multiemployer CDC committed up to $355 million to LAFPP committed $734.2 Mr. Eagle said that insured an- the benefit in a typical DB plan. plan. Mr. Arends added that small five private equity funds and a million to private equity in 2020. nuities are very expensive because Mr. Eagle said that the DB bene- employers are interested in wheth- private debt fund for the $35.6 The plan had about $3 billion in under insurance regulations the in- fit is lower because a defined ben- er they can access or set up indus- surance company must invest in efit fund is typically invested in as- billion South Carolina Retirement private equity as of Sept. 30, trywide plans or when CDC can be very low-returning assets to sup- sets with lower expected returns to part of master trusts’ fund choices. Systems’ investment portfolio, representing 12.1% of the total port the annuity, while CDC can reduce volatility in the DB funding The new law actively permits the according to board documents. plan. Los Angeles Fire & Police target higher asset returns to help level. government to open up CDC ar- The board disclosed the Pensions’ target private equity commitments at its March 4 allocation is 14%. meeting, including a $100 million contracts could be a lot of work for opinion about that, you’re a fidu- to Aberdeen Standard U.S. Private Exams looks at climate the market at large, for pension ciary and to date we see a lot of in- Equity IX, a private equity fund of LIBOR funds and other institutional inves- stitutions that are skating around The SEC’s exam priorities in tors it is “basically a non-event,” be- this issue.” funds managed by Aberdeen 2021 will focus on climate-related CONTINUED FROM PAGE 2 Standard Investments. cause the difficulty in switching Other sources do not expect risks and conflicts of interests for December statement. over to a new rate will likely be out- there to be “winners” and “losers” It also committed $100 million brokers and investment advisers, But the majority of contracts ex- sourced, said Eric Bernstein, presi- after outstanding contracts are to KKR Asian Fund IV, an Asian- among other areas, according to tend beyond mid-2023. dent of asset management solu- amended. focused buyout fund targeting the Securities and Exchange Some of those outstanding con- tions at Broadridge Financial The overarching goal of the Al- middle-market and large-cap Commission’s Division of tracts do not have sufficient “fall- Solutions Inc., Lake Success, N.Y. ternative Reference Rate Commit- companies managed by KKR & Co.; Examinations. back” language in the event of LI- “The benefit of the buy side right tee and the International Swaps $50 million to Mill Point Capital The division, formerly the Office BOR’s cessation, which means in now is it tends to outsource a lot of and Derivatives Association is to try some cases the contract would use the mid- and back-office to fund and avoid that as much as possible, Partners II, a buyout fund that of Compliance Inspections and the last available rate, meaning that administrators and third parties, so Mr. Killian said. “Instead of going targets control investments in Examinations, will concentrate on lower middle-market companies in a floating-rate instrument could it becomes someone else’s prob- from LIBOR just to SOFR, you’re compliance with Regulation Best become a fixed-rate instrument, lem,” Mr. Bernstein said. “But that’s going to SOFR plus some kind of North America in the industrial, Interest, Form CRS and whether said Chris Killian, New York-based just passing the problem to some- spread to make up the difference. business services and information- registered investment advisers managing director of securitization one else; it’s still a problem.” Winners and losers lead to unhap- technology services sectors; up to have fulfilled their fiduciary duties and corporate credit at the Securi- At this stage of the transition, py people, so I think that’s trying to $50 million to buyout fund Peak of care and loyalty, it said in a ties Industry and Financial Markets pension funds should be asking be avoided here.” Rock Capital Credit Fund III; and March 3 report. Association. “And because of regu- their managers pointed questions, The International Swaps and $30 million to Hillhouse Capital The division will also focus lations and the way transactions like on the status of fallbacks in se- Derivatives Association on March 5 are typically structured there gen- curities owned and whether there’s finalized its automatic fallback Group’s Focused Growth Fund V more closely on climate-related that focuses on investment erally isn’t somebody who can or an active program using rate de- spread for outstanding derivatives risks. While it will continue to would be comfortable just unilater- rivatives, and, if so, what are they contracts. The announcement is opportunities in southeast Asia. review business continuity and Moreover, the RSIC committed ally changing the rate to a different doing about transitioning, said useful for counterparties in the de- disaster recovery plans of firms, it index,” he added. George Bollenbacher, president rivatives space that choose to ad- $25 million to GoldenTree will shift its focus to whether such and owner of GM Bollenbacher & here to the protocol, but there are Structured Products Fund VII, plans, particularly those of Prepare in advance Co. Ltd., a consulting firm based in still hurdles for the market at large, which board documents indicate systemically important regis- Josh Smith, CEO and co-founder New York. Mr. Schneider said. “The derivatives is a private debt fund managed by trants, are accounting for the of Solovis Inc., a multiasset-class Mr. Schneider is urging all mar- have a path out, but it’s still optional GoldenTree Asset Management. growing physical and other portfolio management, analytics ket participants, no matter their LI- and the other contracts” — like and reporting software-maker, BOR exposure, to not only be oper- loans and bonds — “are in an equal- relevant risks associated with based in Irving, Texas, is telling cli- ationally ready, “but to really have ly sized mess,” than they were pre- Lazard terminated climate change, the division said. ents to prepare for the transition an opinion of how much they will viously. The $3.4 billion San Antonio In fiscal year 2020, which well in advance. But he is still ex- gain or lose on LIBOR transition. In addition to the Fed’s SOFR, (Texas) Fire & Police Pension Fund ended Sept. 30, the division pecting a number of calls “from peo- We have found substantial value central banks around the world terminated a $49 million small- completed 2,952 examinations., ple saying, ‘my rates fell and all this gained and lost in the fallbacks. We have established their own replace- cap emerging markets equities a 4.4% decrease from the stuff happened overnight’ and we’re have found substantial value gained ment rates, including the Bank of strategy run by Lazard Asset previous fiscal year. going to have to jump in and help.” or lost after moving to new non-LI- England’s sterling overnight index While renegotiating outstanding BOR products. You need to have an average, or SONIA; the European Pensions & Investments March 8, 2021 | 25 U.K. receives its inspiration from Netherlands, Gender though each country taking a different path CONTINUED FROM PAGE 2 the report explained. Growing pressure to reform capital buffer for industrywide Compliance is voluntary and “is retirement systems because of plans, Mr. Vos said. The buffer is assumed to be a ‘signal’ for quality increasing longevity risks has used to offset benefit cuts in times overall plan governance,” the report spurred the launch of new of market stress. said. Plans that signify compliance collective defined contribution Conversely, the U.K. plans are “are assumed likely to have better plans in the U.K. and the Nether- not replicas of the existing or new plan governance procedures than lands. Dutch model, according to U.K. those without.” Under the Pension Schemes Act consultants. The best practices include, among other things, offering a NO CONFUSION: Julie Varga said 2021, U.K. plan sponsors will be Matthew Arends, Aon PLC’s broad range of investments and umambiguous factors were behind the allowed to launch CDC plans head of U.K. retirement policy, said providing adequate information to decision to use Form 5500 data. — where participants share plan sponsors are not going to be participants about investment op- longevity and investment risk — converting DB benefits into a CDC tions. To assess the impact of plan for the first time. income in the U.K. model under quality linked to female adminis- The U.K.’s efforts to bring CDC the new law, but are planning to Unambiguous factors trators, Morningstar also looked at arrangements into the domestic launch new CDC plans. Morningstar chose the Form the auto enrollment, default invest- retirement market was influenced In the U.K., plan sponsors’ 5500 data because “we wanted to ments and Section 404(c) data from by the experience of other responsibility is to provide find factors that were unambigu- 2009 through 2017. Researchers NO WORRIES: Martijn Vos believes the countries, including the Nether- contributions and income for life to ous,” said Julie Varga, vice presi- chose this period because 2009 was Dutch and U.K. plans will make dent, investment and product spe- the first time auto enrollment and lands, where CDC plans also are participants, while in the Dutch retirement easier for participants. cialist, in an interview. Ms. Varga defaults had been included in the model, there are further obliga- getting an upgrade. and Mr. Blanchett said they were Form 5500. The Section 404(c) in- Under a new pension agree- simpler for individuals, compared tions on the employer. “Future unaware of other research tying formation had been listed in previ- ment, the entire Dutch market with pure DC plans. (U.K.) CDC schemes will retain gender diversity among DC plan ous Form 5500 filings. must shift from defined benefit Not only can CDC plans protect those two features even if the administrators to DC plan quality. Morningstar found that the per- and existing collective defined plan participants from the risk of details of the benefits are Administrators checked boxes in centage of all plans offering auto contribution plans to either new running out of savings but they different,” he said. the Form 5500 to signify that their enrollment rose to 31.4% from CDC plans or pure DC plans by also reduce the complexity of Mr. Vos said that in the plans offered defaults, employed 11.5% during this period. The per- 2026. decisions at retirement — some- Netherlands the intention is to auto enrollment and complied with centage of plans using defaults — Section 404(c). Because the Form primarily target-date funds — rose Martijn Vos, chief operating thing participants can struggle transfer existing defined benefit 5500 only requires a plan adminis- to 89.2% from 58.1%. The Section officer at consultant Ortec Finance with. rights to the new collective DC trator’s name, Morningstar had to 404(c) compliance percentage rose plans, while in the U.K., pension Ltd., said that both the new U.K. The Dutch CDC model has some establish the probability that the to 95.3% from 87.3%. CDC plans and the new Dutch key differences from its U.K. rights stay in the existing plan. administrator was male or female. “There is clear evidence that the plans will make retirement savings counterpart, however, namely a — PAULINA PIELICHATA Morningstar also was unable to as- probability of offering the respec- sess administrators’ ethnicity from tive service initially (2009) or add- this document, Ms. Varga said. ing (2017) is lower if the plan ad- Women are playing a bigger role ministrator is male,” the report said. rangements to multiemployer plans fit as cash, annuities or via an in- Mail plan launch. in DC plan administration, accord- Ms. Varga, who said the research with secondary regulation through vestment drawdown option. Still, LCP’s Mr. Taylor said that ing to Form 5500 data. In 2000, an took six months, added that Morn- the DWP rather than requiring new “We have had employers inter- the DWP has yet to clarify if plan average 32% of DC plan administra- ingstar welcomes comments about legislation. ested in understanding CDC bene- sponsors that wish to enroll plan tors were women. By 2009, it was the report, noting that her firm Currently, multiemployer DC fit structures and what it might participants from different employ- 42%. In 2017, the last year for which might look at other variables in the plans, known as master trusts, run mean for them, motivated by seeing ers into one CDC plan could use research was conducted, it was 49%. future to expand its research. n DC assets in individual retirement developments of the Royal Mail Royal Mail’s plan design, or wheth- accounts with target retirement scheme and the passage of the act,” er they need to wait for more de- dates. At retirement, plan partici- Mr. Arends said, predicting that in- tailed regulations expected later pants choose to receive their bene- terest will grow closer to the Royal this year. n Morningstar turns detective

that is based on LIBOR. missing the stuffing. And we’re in a to find gender from 5500s weird loop. The stuffing in this case ‘As soon as practicable’ is derivative trades in SOFR and Poring over Form 5500s to 5500s between 2000 through Tom Wipf, ARRC chairman and from that they’ll build the term rate. determine the gender of defined 2017, Morningstar estimated an vice chairman of institutional secu- But SOFR isn’t being used for lend- contribution plan administrators, administrator’s gender by rities at Morgan Stanley in New ing at this point so there are few Morningstar Inc. researchers assigning a probability score. The York, has repeatedly told market derivative trades. It’s circular.” usually had a relatively easy time higher the score, the greater participants to stop using LIBOR When looking at interest-rate distinguishing male vs. female. likelihood the administrator is “as soon as practicable,” including swaps, Mr. Bollenbacher said the There was a strong probability male; the lower the score, the during a SIFMA-hosted webinar in overwhelming activity is still LI- that names like Jeffrey and greater likelihood the administra- December. BOR-linked. More than $97 trillion Thomas are male and names like tor is female. That sentiment was echoed by of new U.S. dollar-LIBOR swaps Cynthia and Angela are female, Thus, male probability scores Nathaniel Wuerffel, a senior vice were created in 2020 compared to president in the markets group of only $1.1 trillion of SOFR swaps according a Morningstar report, include 99.77% for Jeffrey, ‘NON-EVENT’: Eric Bernstein doesn’t the Federal Reserve Bank of New over the same period, he said, citing “Wonder Women: Why Defined 99.65% for Thomas and 99.56% think pension funds will worry much York, during the SIFMA webinar: ISDA data. Contribution Plans Benefit From for Michael. (Luckily for Morning- because the problem will be outsourced. “Moving quickly will also avoid Though hurdles remain, Richard Female Plan Administrators.” But star’s researchers, the actress making the problem worse, with an Sandor, chairman and CEO of the what about Dana? Or Lee? Or Michael Learned, best known for Central Bank’s euro short-term estimated $200 trillion in gross ex- American Financial Exchange LLC, Kelly? Or Leslie? That required her role as Olivia Walton in the TV rate, or ESTER; the Swiss National posure to U.S. dollar LIBOR, there’s Chicago, believes the transition will some detective work. series "The Waltons," isn’t a Bank’s average rate overnight, or already an enormous number of go smoothly for the most part. AFX, Researchers checked “a defined contribution plan SARON; and the Bank of Japan’s contracts that need to transition an electronic trading venue for re- dataset that includes information administrator.) Tokyo overnight average rate, or from LIBOR and it’s detrimental to gional, mid-sized and community about baby names from Social Female probability scores TONAR. add to that.” banks and non-bank financial in- A major issue in the transition is “If firms increasingly use SOFR stitutions to lend and borrow short- Security applications for the year include 0.22% for Angela, 0.26% that LIBOR is based on an average when writing new contracts, that term funds, has launched Ameribor, 1965,” said the Morningstar for Donna and 0.2% for Susan. of bank lending rate estimates, will build demand for SOFR deriva- an index based on transactions be- report linking the quality of plan (However, none of the administra- while the replacement rates are tives,” Mr. Wuerffel added. “In turn, tween the banks that belong to the administration to the gender of tors was the model for the 1969 based on actual overnight money this should enable more SOFR- AFX, as an alternative to LIBOR. the administrator. Johnny Cash song, “A Boy Named market transactions — making it linked issuance in cash markets, a “In the grand scheme of things, Why 1965? Even though a Form Sue.”) impossible to have an apples-to- virtuous cycle.” I’m a believer in the U.S. banking 5500 doesn’t cite an administra- Having decided that a probabil- apples transition to any other rate, The problem for a lot of market sector’s ability (to) modify their tor’s age, Morningstar chose ity score of 95% or higher sources said. participants, though, is the fact that agreements to this change,” Mr. 1965 because “it results in an identifies a male and a probability In January, New York Gov. An- there is currently no SOFR term Sandor said. “They’ve dealt with far average assumed age over the score of 5% or lower identifies a drew Cuomo proposed legislation rate, although the ARRC is working harder problems, like Y2K, and the to provide for a statutory replace- on one. banks are going to go through with period of approximately 50,” the female, the researchers were left ment benchmark rate for outstand- Oliver Wyman’s Mr. Schneider it and we’re going to look at this the report said. “Name/gender with 5.66% of names that were ing LIBOR-linked contacts that likened the situation to Build-A- same way as Y2K: it’s going to come combinations are relatively static classified as “undefined.” They contain no fallback provisions or Bear: “If you don’t have enough and go and all of a sudden every- over time.” were excluded from the report. contain fallback provisions that re- stuffing, you don’t get a bear. So body’s going to say, ‘That wasn’t so By checking names in the Form — ROBERT STEYER sult in a benchmark replacement we’re not missing the idea, we’re bad,’” he said. n 26 | March 8, 2021 Pensions & Investments NEWS ROUNDUP

Tentative settlement reached in IBM stock-drop court case After five years and two trips to Fidelity registers increase promote Natixis’s mutual fund the U.S. Supreme Court, the stock- business and maximize profits at drop case against fiduciaries of an of $17.9% in AUA in 2020 LIMRA: BUYOUT SALES HIT $13.7 BILLION the expense of the plan and its par- IBM 401(k) plan has been tenta- Fidelity Investments reported U.S. corporate pension plan buyout sales totaled $13.7 billion in ticipants,” said the complaint filed tively settled. $9.8 trillion in assets under admin- the fourth quarter, a LIMRA Secure Retirement Institute sales survey Feb. 18 in a U.S. District Court in Attorneys for IBM fiduciaries istration as of Dec. 31, of which $3.8 found. Boston, seeking class-action status. and for plan participants reported trillion were discretionary man- The amount for the quarter was 21% higher than the same period “We believe the lawsuit is entire- the agreement in a Feb. 22 letter to aged assets, the company said in its ly without merit, and Natixis will in 2019, which saw $11.3 billion in buyout volume. U.S. District Judge William H. Pau- annual report March 2. defend itself vigorously against the ley III. The company’s AUA rose 17.9% For the year, buyout sales totaled $25 billion, down 10.7% from claims,” Natixis spokesman Ted No terms were announced. The from Dec. 31, 2019, while its assets $28 billion in 2019. Meyer said in an email. “Our retire- joint letter said preliminary terms under management climbed 19% in “After a quick start to the year, pension risk transfer sales slowed ment savings plan offers employees will be submitted to the court March the same period. in the second and third quarters as employers addressed the impact a diverse lineup of investment op- 8 in the case of Jander et al. vs. Re- Fidelity’s revenue totaled $21 bil- of COVID-19 on their businesses,” said Mark Paracer, assistant tions, which are rigorously retirement Plans Committee of IBM lion for the year, up 0.1% from 2019. research director of the Secure Retirement Institute, in a news viewed to ensure reasonable fees et al. Fidelity’s operating income was release announcing the survey results. “This disruption was tempo- and solid investment returns.” The initial complaint, filed in $7.2 billion, an increase of 4.6% rary and sales picked up by year-end. Low interest rates, market The lawsuit alleges that Natixis 2015, said plan fiduciaries should from 2019. Both revenue and oper- funds account for 58% of plan assets. volatility and rising administration costs continue to challenge have taken corrective action be- ating income were company re- Arguing that Natixis plan fees are cause 401(k) plan investors in com- cords. defined benefit plan sponsors and drive them towards derisking higher than those of comparable- pany stock were harmed when the Fidelity’s total discretionary and opportunities like pension risk transfer. We expect this trend to sized 401(k) plans, the lawsuit said stock fell following IBM’s disclo- non-discretionary net inflows for continue in 2021.” the “excessive fees are entirely due sure, asset write-down and subse- the year were $276 billion, vs. $315 Notable buyout transactions in the fourth quarter included General to its concentration of proprietary quent sale of a money-losing mi- billion in inflows recorded in 2019. Electric Co., Boston, which purchased a group annuity contract from funds, which, on average, cost seven croelectronics unit. The figure includes $144 billion in Athene Annuity & Life Co. to transfer $1.7 billion in pension liabili- times more than the plan’s non-pro- IBM ended up petitioning the discretionary net inflows — which ties; and Kellogg Co., Battle Creek, Mich., which transferred $470 prietary options and accounted for U.S. Supreme Court for review. In consists of Fidelity-managed mu- 90% of the plan’s expenses.” million in pension liabilities through the purchase of a contract from January 2020, the justices vacated tual funds, other managed products The 401(k) Savings and Retire- an undisclosed insurer. and remanded the case back to the and managed accounts. ment Plan, Sponsored by Natixis appeals court with instructions to Fidelity’s mutual funds outper- LIMRA also said there were two buy-in contracts totaling $1.6 Investment Managers, LP, Boston, address issues that hadn’t been formed 72%, 76%, and 77% of their billion in the fourth quarter, a new high mark for U.S. buy-in sales. had assets of $438 million as of Dec. part of the lower court dismissals. industry peers for the trailing one-, LIMRA surveyed the 19 financial services companies that provide 31, 2019. The appeals court in June 2020 three- and five-year periods, re- all the group annuity contracts for U.S. corporate pension plans. issued a unanimous, unsigned spectively, ended Dec. 31, the report Australia’s Aware Super, opinion reaffirming its original pro- said. VISSF enter merger talks plaintiff ruling. This compares with 73%, 77%, BentallGreenOak acquires Vanguard decided to terminate “To the extent that the argu- and 77% for the same periods in the manager after conducting a re- Aware Super, one of Australia’s ments were previously considered, 2019. secondary real estate unit view of its global fund lineup, largest industry funds with about we will not revisit them,” the judges In a letter to shareholders, Fidel- BentallGreenOak is acquiring spokeswoman Jessica Emery said A$140 billion ($110.2 billion) in re- wrote. “To the extent that they were ity Chairwoman and CEO Abigail P. The Carlyle Group’s real estate sec- in an email. tirement assets, entered into merg- not properly raised, they have been Johnson said that although 2020 ondary market business, Metropol- er talks with one of the country’s forfeited, and we decline to enter- was challenging, the firm experi- itan Real Estate Equity, a news re- Ares, AMP eye joint venture smaller funds — the A$850 million tain them.” enced “increased levels of financial lease said. Victorian Independent Schools Su- In September, IBM fiduciaries performance, assets under admin- Terms of the deal are not being to focus on private markets perannuation Fund. again petitioned the Supreme istration, and customer accounts disclosed. The transaction is ex- Ares Management Corp. and The two super funds signed a Court, but the justices in November across each of the company’s major pected to close in the first half of AMP Ltd. have agreed to pursue a memorandum of understanding to declined to review the case. lines of business,” due in part to 2021. A$2.25 billion ($1.8 billion) joint explore the benefits of a potential The high court response put the “significant growth across (Fideli- BentallGreenOak is a real estate venture for AMP’s private markets merger, a joint news release said complaint back in Mr. Pauley’s court ty’s) workplace benefits and institu- money manager and asset manager business. March 2. Due diligence has com- with the instructions that had been tional businesses ... spurred by a with roughly $53 billion in assets Los Angeles-based Ares will pay menced and the process should fin- issued by the appeals court, stating strong overall stock market for the under management as of Dec. 31. A$1.35 billion for 60% of the busi- ish “in the coming weeks.” that the plaintiffs had provided suf- year.” The firm does not currently offer a ness, and Sydney-based AMP will A merger would keep Aware Su- ficient information under ERISA Looking ahead, Ms. Johnson secondary markets strategy, said retain the remainder, a news re- per at the forefront of industry con- and a previous U.S. Supreme Court wrote that Fidelity plans to further Rahim Ladha, BentallGreenOak lease said. solidation trends in Australia, com- ruling to allow the case to go to trial. invest in digital technologies, in- spokesman, in an email. “We expect it would strengthen ing less than a year after the cluding artificial intelligence, ma- Metropolitan Real Estate had the business and significantly ac- Sydney-based fund absorbed A$4 Bob Doll, Nuveen chief chine learning and virtual assis- about $2.4 billion in primary, sec- celerate our strategy to grow pri- billion WA Super, Perth, in Decem- tants. ondary and co-investment AUM as vate markets, while derisking our ber and A$24 billion VicSuper, Mel- equity strategist, to retire of Dec. 31 international expansion plans, and bourne, in July. Robert C. Doll, senior portfolio Goldman’s head of asset When the deal closes, the entire bringing forward the value in AMP manager and chief equity strategist Metropolitan leadership team will Capital for our shareholders,” said Asset management still at Nuveen, is set to retire from the management to depart continue in their current roles, Mr. AMP Chairwoman Debra Hazelton firm this month. Eric Lane, co-head of Goldman Ladha said. Metropolitan has a total and AMP CEO Francesco De Fer- domain of white males Mr. Doll, who is based in Prince- Sachs Group’s asset management of about 30 executives, including its rari in the news release. Although the investment man- ton, N.J., joined Nuveen in 2012 and business, is quitting the firm to join investment team. AMP’s private markets joint ven- agement industry is working to- currently manages $2.5 billion in Tiger Global Management. ture business includes infrastruc- ward increasing diversity in their U.S. large-cap equity and equity Over the coming weeks, Mr. Lane Jackson Square Partners ture equity, infrastructure debt and organizations, the sector is still very long/short and equity market-neu- will work with Julian Salisbury, the real estate. The joint venture is ex- far from racial and gender parity. tral hedge funds, as well as separate division’s other co-head, to ensure out as Vanguard subadviser pected to raise A$500 million of Results from the Investment accounts, according to an internal a smooth transition, according to a Vanguard Group terminated debt to reduce each firm’s equity Company Institute/McLagan U.S. memo March 3 to Nuveen employ- memo from CEO David M. Solo- Jackson Square Partners as subad- investment in the venture. Asset Management Diversity and ees. mon. viser to the Vanguard U.S. Growth Under the expected transaction, Inclusion Survey show that as of Nuveen will not replace Mr. Doll Mr. Lane is leaving to join Tiger Fund and Vanguard Variable Insur- the implied value of AMP’s private Nov. 1, women represent 41.8% of as chief equity strategist, spokes- Global Management as president ance Funds. markets business is up to A$3.15 the asset management industry’s woman Jessica Greaney said in an and chief operating officer, accord- Jackson subadvised on roughly billion, the news release said. workforce while minorities make email. ing to an internal memo from that 13% of the U.S. Growth Fund’s $45.5 up 30.5%. “Bob has had an incredible 42 firm seen by Bloomberg. billion in assets. The portion of Natixis 401(k) participant At the senior leadership level, years as a leading equities investor The firm’s current COO and chief funds that Jackson Square had sub- 83.7% of executives are white and and thought leader whose insights financial officer, Anil Crasto, told advised has been equally appor- charges self-dealing in suit 74.6% are male. helped thousands of investors navi- the firm of his intent to retire in tioned to existing subadvisers Jen- A participant in a 401(k) plan run “The numbers don’t lie,” said gate through multiple market cy- 2021. nison Associates, Wellington by Natixis Investment Managers Mellody Hobson, president and co- cles and construct portfolios to Before Mr. Lane was announced Management Co. and Baillie Gif- sued the company and plan fiducia- CEO of Ariel Investments and a meet their long-term goals and he in September as the co-head of ford Overseas Ltd. ries, alleging ERISA violations in- member of ICI’s board of governors, brought that expertise to our port- Goldman Sachs’ newly combined Wellington Management will cluding “unlawful self-dealing” in in a news release. “The data tell a folio management and client en- asset management and merchant serve as the sole subadviser to the the management of the plan. truth we’ve long known — we must gagements,” Nuveen said in the in- banking divisions, he was global co- $1.2 billion Variable Insurance “Defendants have managed the ensure more women and minorities ternal memo. head of Goldman Sachs’ consumer Funds. Jackson and Wellington each plan in a manner that benefits are working in all levels of asset Nuveen and its affiliates man- and investment management divi- previously subadvised on 50% of Natixis at participants’ expense, us- management by creating opportu- aged $1.2 trillion as of Dec. 31. sion. the funds. ing the plan as an opportunity to nities for advancement.” Pensions & Investments March 8, 2021 | 27 CHANGES AHEAD firm will probably need.” “Perhaps it’s a good thing for Sources agreed that the deal the asset management business Wells Fargo was mutually beneficial for both to not be part of a bank. This al- Compenswiss, Geneva, is seeking managers to run up to $621 million for the bank and the money manage- lows them to be more nimble,” CONTINUED FROM PAGE 1 core-plus real estate in the U.S., Europe and Asia-Pacific regions, a spokesman ment business. For Wells Fargo, it Park Sutton Advisors’ Mr. Erich- confirmed. The social security fund, which has 37 billion Swiss francs ($41.3 activity wasn’t great.” can now focus on its core compe- son said. “There are a lot of regu- billion) in assets, did not specify the number of managers that will be hired. Steven M. Levitt, managing di- tencies, such as its wealth man- lations around banks, so there are Managers can submit proposals for multiple contracts, the spokesman said. rector and founder of Park Sutton agement and retail brokerage probably fewer hoops to go Compenswiss will invest between $100 million and $200 million in U.S. core-plus Advisors, was also struck by the businesses; while WFAM gains through now. Less bureaucracy, real estate, between €50 million and €100 million ($121 million) in core-plus low price, but said “it speaks to more autonomy, has new owners less oversight, less banking regu- multisector European real estate funds, and between $50 million and $300 challenges facing the long-only willing to invest more resources lation.” million for Asia-Pacific multisector core-plus real estate. The RFP is available upon asset managers, including large into the business — not to men- Mr. Stern agreed that “there request via Compenswiss’ website. Proposals for each of the searches are due by ones in this environment where tion provide more competitive are certain constraints from March 11. assets are flowing to passive and compensation for its executives banks around compensation that people are looking for differenti- — and isn’t constrained by bank- has been damaging to businesses Pennsylvania State Employees’ Retirement System, Harrisburg, is seeking ated strategies that deliver al- ing regulations. like this, so being independent active long credit fixed-income managers to run more than $1 billion. PennSERS pha.” and having private equity back- intends to allocate to this strategy over 18 months and may select more than one Sources noted that WFAM has ‘Expected and good deal’ ers interested in promoting portfolio. Callan, investment consultant to the $34.5 billion pension fund, is not achieved the scale of its peers “It’s an expected and good growth and investing in the busi- assisting with the search. The RFP is available on Callan’s website. Proposals are and market leaders, with many in deal,” said Jeffrey MacLean, CEO ness will ultimately be a good due March 19. the $1 trillion AUM club. And an of investment consulting firm thing.” analyst note by Moody’s Investors Verus Advisory Inc. “Wells Fargo The only sticking point for Plymouth (Mass.) Retirement System is looking to allocate between $28 Service Inc. also noted that 33% of has had its set of challenges the some, however, is the type of million and $35 million to a core fixed-income strategy. The board may select more WFAM’s $603 billion in AUM is last couple of years. Board mem- owner. than one manager. DiMeo Schneider & Associates, investment consultant to the invested in money market funds, bers were changed, senior mem- $213 million defined benefit plan, is assisting with the search. The RFP is which “typically earn lower fees. bers were changed, and its cur- Viewed with caution available on DiMeo Schneider’s website. Proposals are due 4 p.m. EDT on March ... This business may be chal- rent CEO is looking to cut costs “Generally speaking, Fitch 23. lenged in the year ahead as long- and refocus the bank on core op- views private equity acquisitions term interest rates have begun to erations.” on non-bank financial institu- Bristol, Conn., is searching for an investment rise,” the note said. Money market Mr. MacLean added that while tions with caution given the po- HAVE SOME NEWS? consultant for its $734 million pension plans. The fund net inflows were $67 billion WFAM is a large asset for the tential for increased leverage and Please submit news board hired Hooker & Holcombe Investment Advisors in 2020, the note said, while other capital extraction,” Nathan Flan- of changes to David to assist with the search. The RFP is available on the assets recorded net outflows of $3 ders, managing director, financial Schepp, news editor, at city’s website. Registration is required. Proposals are billion. The remainder of the institutions at Fitch Ratings in dschepp@pionline. due by 4 p.m. EDT on March 25. firm’s AUM was not split out by New York, said in an email. “Pri- com asset class. vate equity ownership can also San Bernardino County, Calif., is searching for a But transaction details aside, introduce longer-term strategic record keeper for its 457, 401(a) and 401(k) plans. The county issued an RFP due the deal was welcomed by indus- and ownership uncertainty, given to the impending expiration of current record keeper Voya Financial’s contract, said try players and touted as an op- the finite investment horizon of Alexander “Sandy” Meier, the county’s employee benefits manager. The firm is portunity for San Francisco- private equity funds.” eligible to rebid, Mr. Meier said. The RFP is posted on the county’s procurement based WFAM to increase its However, it is not unusual for website. Proposals are due at 5 p.m. PDT on March 26. offerings to clients — something private equity funds to acquire highlighted by the buyers them- money managers — Reverence LGPS Central Ltd., Wolverhampton, England, is searching for active money selves. itself along with TA Associates managers to run its upcoming targeted return fund. The fund will have about £700 GTCR and Reverence Capital Management LP acquired Rus- million ($980 million) in assets, a posting on the pension pool’s website said. said they intend to invest sub- sell Investments in 2016 from LGPS Central runs the pooled assets of eight local authority pension funds with a stantially in the money manager’s TROUBLE ON THE HORIZON? Dan London Stock Exchange Group combined £45 billion in assets. The pool expects the fund to be made up of six to technology and distribution Erichson said the low price is a signal PLC in a $1.2 billion deal. Funds 12 different investment strategies which, in aggregate, have a correlation of below channels. And Milton Berlinski, that there might be problems ahead. run by Reverence hold minority 0.5 to global equity markets. It wants the fund to invest in underlying assets that Reverence Capital’s co-founder stakes in the firm. have a high degree of liquidity and wants it to be unconstrained in terms of and managing partner, has said bank, it’s “not in their core wheel- There are also potential scale geography. The procurement process will happen in three stages and be managed that not only do they plan to build house, so in spinning it off to benefits that come with private electronically by LGPS Central’s targeted return team. Managers must register with WFAM’s AUM to $1 trillion over GTCR and Reverence, they can equity owners, Mr. Flanders add- the pool’s procurement website to access information and apply. Pool executives the next five years, but they also rebolster their own balance sheet ed. The acquisition aligns with want to launch the sub-fund toward the end of the year, the spokesman said. The plan to allocate significant capital to core banking operations.” GTCR and Reverence’s invest- selection process is expected to take around six months. Proposals are due by to build up its investment prod- Plus, the transaction allows the ment strategies and track records, March 29. ucts. The private equity firms also bank “to eliminate any potential “while the size of the transaction confirmed they are open to the conflicts with owning an asset appears manageable relative to Fonds de Reserve pour les Retraites, Paris, is looking for managers to run up idea of doing more acquisitions to management firm and a broker- the size of the funds and the oth- to €4 billion ($4.8 billion) in passive equities strategies aligned with the Paris reach that AUM target. age wealth management firm,” er equity investors,” Mr. Flanders Agreement. The fund wants up to four managers to replicate equity indexes and The real challenge, however, is Mr. MacLean said. said. run assets with a responsible approach, a notice on FRR’s website said. Managers how the manager’s new owners “It’s really in line with Wells’ Clients don’t seem to be wor- will minimize relative risk and preserve the characteristics of the indexes used, plan to build up its AUM and overall and strategic priority of ried either. A spokesman for the while investing in a way that meets the requirements of the Paris Agreement — make the company — a tradition- identifying businesses that ... £16 billion ($22.4 billion) Nation- limiting the rise in global temperature to well below 2 degrees Celsius. Managers al long-only manager that spe- were maybe not at scale by in- al Employment Savings Trust, are expected to integrate a gradual reduction of the portfolio’s carbon footprint; an cializes in fixed income — com- dustry standards,” added Bain London, which hired WFAM to overweighting of “green” investments; the measurement of physical and transition petitive in a field where most Rumohr, Chicago-based senior run about £500 million in global risks; a higher environmental, social and governance rating than the benchmark; institutional investors want alter- director for North America banks corporate fixed-income in 2019, and FRR’s exclusion policy. Proposals are due by April 9. Further information is natives, ETFs and ESG products. at Fitch Ratings Inc. “It really said the sale does not change its available on FRR’s dedicated procurement platform. “The business will probably didn’t come as a surprise that this mandate nor its relationship with need to adapt and change be- was a business ... they were look- the firm. San Bernardino County (Calif.) Employees’ Retirement Association is cause it’s a traditionally focused ing to unload in some way, shape Under the new owners, Mr. searching for an investment consultant. The search is being conducted because business, providing mainly long- or form.” Marais said WFAM’s ambitions SBCERA’s contract with its current consultant, NEPC, is set to expire in December, only equities and fixed income,” Wells will retain a 9.9% stake in are “to be that well-respected confirmed Olivia Applegate, spokeswoman for the $12 billion pension fund. The said Jonathan Stern, a New York- WFAM — shifting the bank from firm by clients in the solutions RFP is available on SBCERA’s website. Proposals are due by 4 p.m. PDT on April based partner with investment owner to important client, Mr. space. If we take care of ... clients, 16. bank Berkshire Global Advisors. Marais said. clients will take care of us. That’s “They don’t have much in the way And though spinning off the the cycle, not the other way For a comprehensive database of search and hiring activity, visit P&IQ at PIonline.com/ of alternatives or private markets asset management business round. You invest in your busi- piq. capabilities that a $600 billion helps the bank, it also benefits ness, you take care of them, they soon-to-be independently run WFAM. will take care of you,” he added. n

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