Questions Swirl Around Calpers Resignation Emory Ensign Abrupt Departure of Largest Public Pension Plan

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Pension Funds Questions swirl around CalPERS resignation Emory Ensign Abrupt departure of largest public pension plan. of two private equity rms — Car- SUDDENLY The day after Mr. Meng’s depar- lyle Group Inc. and The Blackstone HE’S GONE: CIO Meng comes after ture, the $403.8 billion California Group Inc. — as well as Ares Man- Yu ‘Ben’ Public Employees’ Retirement Sys- agement Corp.’s business develop- Meng left a disclosure complaint tem, Sacramento, scheduled an ment company, Ares Capital Corp. the fund a emergency, closed-session board It is unclear when Mr. Meng led day after a By ARLEEN JACOBIUS meeting for Aug. 17 to discuss “per- the disclosure report, which shows complaint formance, employment and per- he held $10,001 to $100,000 in each was led The abrupt Aug. 5 resignation of sonnel items.” of the three entities. A commission over his CalPERS CIO Yu “Ben” Meng leaves The meeting comes in the wake spokesman said he could not pro- nancial behind an ambitious plan to in- of a complaint against Mr. Meng vide information about the com- disclosure. clude embedded leverage in its as- led on Aug. 4 with the California plaint. CalPERS has invested with set allocation that he had champi- Fair Political Practices Commission, all three rms in the past. Since Mr. oned to achieve a 7% expected rate and Mr. Meng’s disclosure in an an- Meng became CalPERS CIO in Jan- of return — and questions about nual report led with CalPERS that uary 2019, CalPERS com- ethics and oversight at the country’s he personally invested in the stock SEE MENG ON PAGE 24

SPECIAL REPORT ESG INVESTING SPECIAL REPORT ESG

Maud Bernos INVESTING COVID-19 pushes social Industry sounds issues to ESG forefront off against DOL Racial justice calls add MORE ON ESG proposal on ESG to concern for workers n EU offering better ways to engage during deadly pandemic companies. Page 3 By BRIAN CROCE n North American funds catching up By HAZEL BRADFORD on climate change. Page 12 A Department of Labor proposal that would n ESG adoption linked to acceptance likely curb environmental, social and gover- One of the many upheavals as duciary duty. Page 13 nance investments in ERISA plans has drawn caused by the COVID-19 crisis has sharp criticism from the retirement community. been some reordering of environ- sues has spurred a closer look at cor- In a 30-day comment period that concluded mental, social and governance pri- porate practices. “The pandemic has July 30, stakeholders roundly admonished the orities for institutional investors. taught us that if businesses are to Labor Department’s proposal to add regulato- While climate change and other defend against future shocks, protect ry text that makes JUST AS VITAL: Naim environmental issues “were almost workers and ultimately support long- clear that ERISA re- Abou-Jaoude thinks the synonymous with ESG, the pan- term growth, the social element with- quires plan ducia- social aspect must rank demic forced us to shift, and forced in ESG should be considered just as ries in both private as high as the environ- owners of capital to think about the critical as environmental and gover- de ned bene t and ment or governance. other letters in ESG,” said Nathan nance factors,” said Naim Abou- de ned contribution S. Shetty, Chicago-based head of Jaoude, London-based CEO of sus- plans to select in- multiasset portfolio management for tainable investing manager Candriam vestments “based on Nuveen LLC, the money management Investors Group and chairman of nancial consider- arm of TIAA-CREF. New York Life Investment Manage- ations relevant to The global health crisis plus re- ment International. the risk-adjusted newed attention on racial justice is- SEE COVID-19 ON PAGE 14 economic value of a particular investment or investment Money Management course of action,” as HURTING: Aeisha stated in a Labor Mastagni said the DOL Department fact rule will create hardships Manager assets roaring back but revenue restrained sheet. for plan duciaries. More than 1,500 By DANIELLE WALKER Pensions & Investments that re- Second-quarter asset growth gains of $22.1 billion, the rm re- comment letters were led from asset owners, ported by Aug. 5, all saw an in- ranged from 2% reported at ported in its earnings release. asset managers, trade associations, record Publicly traded money man- crease in AUM over the rst Washington-based Carlyle Group While AUM rebounded in the keepers, lawmakers and others, many of whom agers saw their assets under quarter. By comparison, in the Inc., which had $221.3 billion in second quarter, 10 rms had took issue with the Labor Department’s initia- management rebound in the rst quarter, only two managers AUM, to 26.7% reported at Mil- positive revenue growth and 12 tive, which was unveiled June 23. It’s unclear if second quarter, even as revenues in a universe of 25 rms — Fed- waukee-based Artisan Partners managers reported a decline in the comments could prompt the Labor De- were slower to recuperate from erated Hermes Inc., Pittsburgh, Asset Management Inc., which revenue. partment to take another look at the rule or COVID-19-related drawdowns and Morgan Stanley Investment had $120.6 billion as of June 30. “If AUM continues to bounce when a nal rule might be issued. felt in the rst quarter. Management, New York — re- Most of Artisan’s $25.4 billion back, the bene t of that will be Broadly, stakeholders said the Labor De- Of the 22 publicly traded ported positive asset growth over growth in the quarter was per- visible (via revenues) in the third partment did not suf ciently justify its reason- money managers tracked by the previous quarter. formance-driven, with market SEE ASSETS ON PAGE 24 SEE PROPOSAL ON PAGE 23 SOUND BITE Hub International top executive dies SCHRODERS’ KEVIN MURPHY: ‘Markets David Reich, a top executive defy easy stories — simple stories that of the retirement and private people tell themselves are just that. wealth business at Hub Fairy tales.’ Page 3 International, died of a heart attack while biking. Page 16 2 | August 10, 2020 Pensions & Investments

IN THIS ISSUE Pension Funds

VOLUME 48, NUMBER 16 In memoriam State court relaxes ‘California rule’ standard David Reich, national president of change public pension plans to the retirement and private wealth But plaintiffs say ruling eliminate bene ts from existing

business of insurance brokerage rm Tim Engle won’t cut rising pension employees if the employees were Hub International, died from a heart provided comparable advantages. attack. Page 16 costs or revenue decline In the latest case — involving the $7.4 billion Alameda County Em- Money management By ARLEEN JACOBIUS ployees’ Retirement Association, TIAA-CREF’s voluntary separation Oakland; the $8.9 billion Contra program resulted in a 10% reduction A California Supreme Court case Costa Employees’ Retirement Asso- of its workforce, higher than the 5% has relaxed a standard called the ciation, Concord; and $896 million to 7% acceptance rate expected by “California rule” also used by about Merced County Employees’ Retire- management. Page 16 a dozen other states to determine ment Association — California’s the degree to which public employ- highest court added a postscript to Pension funds ee pension plans for existing em- the rule. For the Virginia Retirement System, ployees can be changed, giving em- In its July 30 opinion, the court the COVID-19 pandemic has led to a ployers and states a little more ruled against plaintiffs’ argument faster transition into private markets. wiggle room to close loopholes. that the state’s pension reform leg- However, plaintiffs attorneys be- islation, a law designed to elimi- Page 6 lieve the new standard still will pre- nate so-called pension spiking — Richard Ingram resigned as executive vent modi cations to address rising which is including extra pay director of Illinois Teachers’ pension costs or revenue drops. At- elements such as voluntary on-call Retirement System, after being torneys for the pension plan defen- duty and cashing out unused leave placed on administrative leave for dants, meanwhile, say the court up- time to compute pension bene ts performance issues. Page 24 held public retirement systems’ without offsetting advantages — California pension plans are authority to correct retirement sys- violated the contract clause of the evaluating the effect of a decision on tem errors and improve retirement constitution. Public employee system operations. unions argued that employees have the so-called California rule. Page 26 Created by a series of California a right to the bene ts that existed Regulation Supreme Court cases over 65 years, when they were hired. BOTH WAYS: David E. Mastagni said the ruling allows xes against abuses the so-called California rule pro- The state supreme court disagreed. Allianz Global Investors has received that hurt some while upholding a requirement to offset detrimental changes. vided that state agencies can SEE CALIFORNIA ON PAGE 26 a request for information from the Securities and Exchange Commission regarding its structured alpha funds. Investing Page 16 Departments Investors leaving money market safe havens At deadline ...... 24 ESG roundup ...... 16 Changes ahead ...... 27 Frontlines ...... 8 As market volatility subsides, money managers are waiving fees yielding xed-income invest- Corrections ...... 4 Hirings...... 18 on their money market funds to ments. Editorial ...... 10 Other views ...... 10 many now feeling better about maintain investors’ yields above Matthew Maleri, partner at Ro- moving to riskier investments zero. caton Investment Advisors LLC in Real estate manager The largest institutional money Norwalk, Conn., said that in part survey in progress market funds in the U.S. are offer- the Federal Reserve’s monetary By PAULINA PIELICHATA ing a seven-day yield in the 0.24% policy response to the COVID-19 Responses to Pensions & to 0.35% range, according to data crisis could result in encouraging Investments’ annual survey of As market volatility has eased, institutional provider Crane Data LLC. investors to move out on the risk real estate investment managers investors are moving away from the safety of Assets invested in the U.S. curve. “With short-term interest are due Aug. 28. Firms managing U.S. money market funds and moving back to money market funds were 6.9% rates expected to stay near zero private real estate assets or REIT more return-seeking investments. higher at the end of June than as RETURNING: Matthew for several years, further outows securities for U.S. institutional, Data from Morningstar Inc. show that in- of March 31. Institutional inves- Maleri said low interest from money market funds would tax-exempt clients are eligible. vestors are taking initial steps away from tors had been parking cash in rates are encouraging not be unexpected,” Mr. Maleri Results will run Oct. 5. money market funds, with assets in U.S.-do- money market funds at the height the shift back into risk. said. To request a survey or obtain miciled funds dropping to $4.6 trillion at end of the pandemic in March and Investors said they are watch- further information, please contact of June from $4.75 trillion at the end of May. April. They were banking on these funds for ing whether negative rates on money market The trend is nascent. Money market bal- their liquid nature combined with a safe-hav- funds could emerge later this year and wheth- Anthony Scuderi at ascuderi@ ances remain higher than they were before en status. er any shift in rates would alter their cash pionline.com or 212-210-0140, or the coronavirus pandemic took hold in the Sources said now some investors could be management preferences. visit www.pionline.com/section/ U.S. in mid-March. But industry sources said concerned about the possibility of negative Interest rate cuts by the Fed have reduced surveys. the decline shows that asset owners are grow- rates in the U.S. and in the U.K. later this year the yield on short-duration assets, said Steve ing more comfortable with risk. Meanwhile, with some investors rotating into higher- SEE MONEY MARKET ON PAGE 26 Entire contents ©2020 Crain Communications Inc. All rights reserved. Pensions & Investments (ISSN 1050- 4974) is published biweekly by Crain Communications Regulation Inc., 150 N. Michigan Ave., Chicago, Ill. 60601-7593. Periodicals postage paid at Chicago, Ill. and at additional mailing offices. Postmaster: Send address changes to Pensions & Investments, Circulation Dept., 1155 Gratiot Avenue, Detroit, Mich. 48207-2912. $16 per issue; $350 CAT begins without a hitch, but security worries persist per year in the U.S.; $375 per year in Canada; all other countries $475. ‘‘Canadian Post International Publications By BRIAN CROCE “Our concern is really when the data leaves Mail Product (Canadian Distribution) Sales Agreement No. 0293539’’ GST #136760444. Printed in U.S.A. (the) CAT and goes out to all of these ex- The SEC’s consolidated audit trail passed changes,” said Ellen Greene, New York-based two major milestones this summer without managing director of equity and options mar- CRAIN COMMUNICATIONS INC any major hiccups, but concerns about cyber- ket structure at SIFMA. “We have concerns Keith E. Crain, Chairman security persist from many industry members. about the security — the more instances of Mary Kay Crain, Vice Chairman KC Crain, President Broker-dealers were required to begin sub- data being downloaded, the more risk there Chris Crain, Senior Executive Vice President mitting data to the CAT, a comprehensive da- is.” Lexie Crain Armstrong, Secretary tabase, on trades they execute on behalf of Ms. Greene said the data could be exploited Bob Recchia, Chief Financial Officer clients — including institutional investors — by foreign actors or even insiders at the ex- G.D. Crain Jr., Founder (1885-1973) on June 22 for equities trades and July 20 for changes. “Given the richness of the data, the Mrs. G.D. Crain Jr., Chairman (1911-1996) options trades. insight into how both exchange competitors Initial reporting has gone smoothly, as are doing as well as broker-dealers that have Published every other Monday by Crain Communications Inc. Boston: 101 Federal St., Suite 1615A, 02110; Chicago: 150 N. Michigan Ave., many rms took advantage of an extended their own (alternative trading systems), we re- 19th Floor, 60601; London: 11 Ironmonger Lane, EC2V 8EY; El Segundo, Calif.: testing period and started reporting in ad- ally do think that limiting access is critical to 400 Continental Blvd., 6th Floor, 90245-5074; New York: 685 Third Ave., 10017; vance of the respective deadlines to work out that,” she said. San Francisco: 71 Stevenson St., Suite 400, 94105; Washington D.C.: 601 13th St. NW, Suite 800 South, 20005. any kinks, sources said. Broker-dealer report- Moreover, with many people working from Address all subscription correspondence to Pensions & Investments, 1155 Gratiot ing went live April 13 before the deadlines, LOCKDOWN: Ellen Greene believes limiting access home during the pandemic, additional secu- Ave., Detroit, Mich. 48207-2912 or email [email protected]. when the CAT opened. to ‘the richness’ of CAT data should be a priority. rity risks have percolated, Ms. Greene added. Member of Business Publications Audit of Circulation Still, organizations like the Securities In- “I think there are other concerns that come to www.pionline.com dustry and Financial Markets Association ed” by one of the 24 self-regulatory organiza- the surface about how that data is used; does have raised concerns about securing CAT tions, or SROs, made up of exchanges and se- it remain in a corporate system, is it taken out data, particularly when it is “bulk download- curities associations. SEE CAT ON PAGE 21 Pensions & Investments August 10, 2020 | 3

Investing UPGRADE: Stephanie Mooij believes the classification of business activities TALF funds aren’t will make comparisons among companies easier making any magic and more accurate. this time around Tighter spreads mean curitized credit manager research for investment consultant Willis investors likely won’t Towers Watson PLC, in an email. However, by the time the rst see double-digit returns TALF loan was issued in late June, Ms. Lee said “spreads in new issue By CHRISTINE WILLIAMSON AAA ABS tightened by more than 70% from levels seen at the end of After raising billions of dollars in March,” noting that AAA prime the hope of bumper returns in a auto ABS bonds traded at 60 basis low-yield environment, TALF 2.0 points over the 2-year U.S. dollar fund managers may strike out when swap rate at the end of June com- SPECIAL REPORT ESG INVESTING it comes to achieving the kind of pared to 260 basis points at the end double-digit returns of between of March. 20% to 40% produced by circa 2008 New issuances of securitized as- TALF funds. sets have been few and were “over- EU offering better ways to engage companies TALF fund managers said they subscribed, which has led to tighter are holding off on investing be- spreads and lower expected re- New standards will give investors comes to reaching their sustainability objectives. But cause credit spreads tightened dra- turns,” Ms. Lee said, adding “as a series of upcoming European regulatory amend- matically for the asset-backed se- such, capital deployment (by TALF more options to gauge investments ments is set to help change that by giving them more curities money managers put up as managers) has been slow so far.” transformational tools, such as disclosure require- collateral to receive loans under the The problem with tightening By PAULINA PIELICHATA ments and bond standards, to deepen their portfolio Federal Reserve Bank’s Term As- spreads in securitized credit assets analysis. Investors said their investment choices also set-Backed Securities Loan Facility, for TALF managers is the loss of European investors are set to get better tools to could change because portfolio decisions will be- which was announced in March potential upside returns as asset engage with companies whose debt and equity they come better informed by broader engagement work. and went live in mid-June. prices rise and yield falls, said own, thanks to the European Union’s enhanced stan- Among these regulatory initiatives, to be available Many TALF funds were raised in Christopher D. Long, founder, dards and requirements for evaluating ESG invest- to investors before the end of this year, the European relatively quick order during the chairman and CEO of credit man- ments. Commission is enhancing: early part of the second quarter, ager Palmer Square Capital Man- Investors said that most of them have been more ■ Classi cation, or taxonomy, of business activities said Alice Lee, London-based di- agement LLC, Mission Woods, Kan. reactive than proactive about engaging when it SEE EURO ESG ON PAGE 27 rector, investments and head of se- SEE TALF ON PAGE 23

Investing Investors wonder if value can recover amid tech stock boom By SOPHIE BAKER navirus-induced depths of March, ever going to work?’ The standard the expense of value. However, value continued to underperform. argument is that it’s not just value that’s starting to play on investors’ Institutional investors and mon- Returns looked better than previ- underperforming growth, but spe- minds. ey managers are looking to add ous months, at 12.85% for the three ci cally that a number of tech “I think people are worried a lit- value stocks back into portfolios to months through June 30, but global stocks are shooting the lights out,” tle about growth exposure,” said bring more balance and counter stocks gained 19.54% and growth said Koray Yesildag, principal, asset Laurence Bensa , deputy head, overweights to growth exposures. stocks gained 25.64%. allocation specialist at Aon PLC in emerging markets equities and se- Market participants had expect- “We’re getting a lot of questions London. nior portfolio manager at RBC ed value to follow history — outper- from our clients and interested par- Exponential returns by growth Global Asset Management (U.K.) STUDYING: Ian Butler is looking for signs forming in a recovery. But in the ties, quite naturally saying, ‘If it stocks have left portfolios over- Ltd., based in London. The rm’s of dif culties in technology stocks. recent bounce back from the coro- does not work in this situation, is it weight to the investment style at SEE VALUE ON PAGE 22

A ve-trick pony U.S. equities, and arguably the economy as a whole, have never been more dependent on so few companies. This year’s pandemic-driven downturn has only strengthened the ve largest U.S. companies: Apple, Microsoft, Amazon, Alphabet and Facebook. The cohort’s combined market cap reached $6.4 trillion and has collectively outperformed the broad markets by more than 20 percentage points.

The great divide: The largest stocks Haves vs. have nots: The $28 Heavy lifting: The S&P 500 weight- Why diversify? The ve stocks’ are outperforming their smaller peers by trillion valuation of the S&P 500 is at an ing of the ve stocks rose more than 5 collective volatility more closely historic margins. The S&P 100 has bested all-time high, with virtually all upward percentage points this year, and the dis- matches that of the index so far in its 500 counterpart by more than 5.5 per- movement driven by the largest holdings. parity between the average return and the 2020 than it did in the three years centage points on a year-over-year basis at index has never been higher. Amazon.com prior. The median 90-day volatility for Impact of top 5 holdings points during 2020, while the cap-weighted led the group, up 72.5% through late the top ve is 3.5 percentage points Market cap, Market cap, all Weight of top index has beat the equal-weight index by top 5 stocks other stocks 5 stocks July, with Alphabet fth, up 10%. lower than the broad index so far this more than 13 percentage points. (trillions; left (trillions; left (right axis) year, compared with 12 points higher Outperformance of top 5 stocks axis) axis) from 2017 through 2019. Spread in year-over-year returns $30.0 24% 37 21.7 (percentage points) 34 $27.5 22% 90-day annualized volatility 14 65% $25.0 20% 31 12 S&P 500 vs. S&P 100 Weight of top 5 in index: 11.1% 60% $22.5 18% 28 10 12.3 55% S&P 500 cap-weighted vs. 46.2 24 8 equal-weighted $20.0 16% 50% 45% 6 $17.5 14% 20 15.5 49.7 12.4 40% 4 16 13.6 $15.0 12% 35% Median: 23.2 2 $12.5 10% 12 10.9 30% 0 25% $10.0 8% 8 11.0 10.8 10.9 -2 20% 11.4 $7.5 6% 4 15% -4 12.0 11.1 $5.0 4% 0 10% -6 5% $2.5 2% -4 -8 0% -10 $0 0% -8 Top 5 S&P 500 index Top 5 S&P 500 index 202020192018201720162015201420132012 20202019201820172016201520142013201220112010 202020192018201720162015201420132012201120102009 2017 - 2019 2020 Source: Bloomberg LP, S&P Global Inc. Compiled and designed by Charles McGrath and Gregg A. Runburg 4 | August 10, 2020 Pensions & Investments

Retirement Plans More participants seeking nancial counseling help Advisers seeing greater cial Advisors LLC. In June, the rm held a record 190 “client days” help- demand for advice amid ing participants enrolled in speci c institutional clients’ retirement virus-related volatility plans, up from the average 120 client days it typically holds a month. By MARGARIDA CORREIA The record client days in June translated into 1,900 to 2,000 virtual Since the outbreak of COVID-19, one-on-one and phone counseling nancial counselors to retirement sessions with participants, accord- plan participants have been working to Phyllis Klein, CAPTRUST’s ing in overdrive. Raleigh, N.C.-based senior director Just look at CAPTRUST Finan- of retirement services. “We are seeing a larger demand from plan sponsor clients,” Ms. Klein said, referring to plan sponsors’ increased need for participant advice services. “There’s more de- sire for meetings that can be held via the phone and virtually via vid- eoconference call.” Francis Investment Counsel LLC also saw a similar spike in activity with phone and web-based advice sessions more than doubling through the rst half of the year from the rst half in 2019, said Kel- li Send, senior vice president of participant services in Brook eld, Wis. “We have seen a large uptick in education and nancial coaching demand from current nancial wellness clients,” Ms. Send said. With high levels of uncertainty in the market, plan sponsors are leaning on their nancial wellness providers to help participants navigate the nancial decisions they need to make during an especially murky and turbulent time. “The COVID experience has un- The Eddy Awards recognize outstanding eorts of both plan sponsors and derscored that much of the Ameri- service providers to educate participants about how to invest their deﬁned can population is not prepared for the kind of unexpected nancial contribution plan assets wisely for retirement. shock that occurred this year,” said Amy Reynolds, a Richmond, Va.- ENTER IN THE FOLLOWING CATEGORIES: based partner in Mercer LLC’s wealth management business. • Ongoing Investment Education “Recognizing that, we’ve seen a • Special Projects | Covid-19 Communications number of organizations start to think about how they can help their • Conversions/403(b) Consolidations employees to deal with that.” As demand for participant advice • Plan Transitions services has escalated, so too have the issues of delivering them in a • Pre-Retirement Readiness socially distanced environment. • Financial Wellness Many plan sponsors were forced to shift to web-based communications almost overnight as most employees started working from home en Plan sponsors, service providers and retirement plan advisors are all masse, a challenge that not all plan encouraged to enter. sponsors were able to meet. SEE EDUCATION ON PAGE 21

For full details and access to the online entry system go to: CORRECTIONS & CLARIFICATIONS CALL FOR ENTRIES CALL FOR www.pionline.com/EddyEnter ■ Connecticut Retirement Plans & Trust Funds will expand Deadline for submissions: Oct. 9 the target allocation range for its $1.3 billion emerging managers program to between 5% and 8% of total assets from 2% to 5%. Also, Connecticut Treasurer Shawn T. Wooden said the rollout of the new emerging manager program will happen later this year, once he presents the policy initiative to the investment advisory council. If you hahave questions about the Eddy Awards, contact Ashley Perrucci at [email protected]. Incorrect information was in the page 1 story “Institutions want manager diversity” in the July 27 issue. WHEN YOU KNOW YOU WHAT KNOW YOU WHAT OWN YOU GET

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Pension Funds Virus hastens Virginia’s move into private markets Equity market decrease sense, Virginia investment of cials have been selling to stay in balance Virginia started on its private are maintaining the same risk pro- with the benchmark weights. “In markets transition more than eight saves transaction costs le, but “with the market declining effect, we have been selling the ac- years ago, when it had no more so fast, we kind of jumped a year,” tual portfolio high," Mr. Schmitz than 8% exposure each to real es- for already planned shift said Ronald D. Schmitz, chief in- said. tate and private equity. An initial vestment of cer. Today, Virginia’s new long-term study calling for 15% real assets and By HAZEL BRADFORD “Our plan was to decrease public targets are 34% public equity; 15% 12% private equity landed at 14% equity exposure in two steps. The xed income; 14% each credit strat- today, to allow for the PIP and For the $82 billion Virginia Re- market decline in March and early egies, real assets and private equity; MAPS allocations to be proportion- tirement System, Richmond, the April brought us to our target early. 6% multiasset public strategies, or al to the fund’s allocations to public COVID-19 pandemic hit home by ... The market kind of did for us MAPS; and 3% private investment and private assets. picking up the pace of a planned what we were going to try to do, and partnerships, or PIPs. “We are not doing anything multiyear transition into private saved us the transaction cost,” Mr. The scal year 2020 and 2021 drastic. I am more comfortable be- markets from public ones. Schmitz said. targets were 40% and 37% equities, ing in private markets,” said Mr. Already convinced that private Selling on the rebound allowed respectively, and 34% long term, Schmitz, the former CIO of the NOT DRASTIC: Ronald D. Schmitz said markets are more advantageous them to naturally reallocate to the with the balance going to MAPS, $76.8 billion Oregon Public Em- he’s comfortable with private markets. than public ones in a risk/return new long-term targets, and they PIP and private equity. ployees Retirement Fund, Salem, and the Illinois State Board of In- vestment, Chicago, which oversees $19 billion in de ned bene t plan assets. While PIP is performing well, MAPS is still unseasoned, Mr. Schmitz said. “We are being fairly cautious on the multiasset portfolio Retirement Income Virtual Series implementation. We still think of it as a toe in the water thing, and we September 15-17 are getting a ton of information. Both the public and private por- tions are strategic relationships, REGISTER TODAY for Retirement Income Virtual Series that will provide a platform to discuss and which involved a lot of data ow debate how to provide plan participants with the tools and strategies designed to achieve the most and data exchange from the man- stable and consistent income stream possible given the retiree’s overall wealth and anticipated agers.” During the COVID-19 pandemic, Social Security income. Specifically, how can retirement savings be optimally invested and that exchange has been an adjust- allocated pre and post-retirement and what factors should be considered when annuitizing. ment. “In the short term, it is harder for managers to work with us. We Full agenda is now available online at www.pionline.com/RI2020. placed the hurdle a little higher,” Mr. Schmitz said. “In spirit, our process is the same. Pre-COVID, man- SPEAKERS INCLUDE: ager meetings were normally done in person. Now with COVID, manager meetings are electronic. Ev- eryone is adjusting to communicating this new way.” Still he said, “our manager activity has been pretty robust.” As their credit strategies portfolio moves to all private, most of that has been with existing managers. “We do our Peggy Flynn Mark A. Kopp Gay Lynn Bath Laura Mittelstaedt due diligence; we just have to do it a American Water Company Ford Motor Company University of Oregon The Boeing Company little differently. You kind of miss out of a little bit of the culture,” he said, but there are also gains. “We end up having six sets of eyes vs. two being on-site. You give up a little, you gain a little. I wouldn’t say it’s perfect, but it’s far better than any of us expected.” While telework is working out so far, traveling to check out assets like real estate is another matter. Beth Pattillo Hugh Penney Sandy Rich Debra Roberts “At some point, we are going to Leidos Yale University NYC Board of Education Maryland Supplemental have to hit the road,” Mr. Schmitz Retirement System Retirement Plans said. Virtual conferences with the board and investment advisory committee members is proving to be a plus. “It’s much easier to have a phone call. We might do more im- promptu meetings like that,” he said. VRS of cials had already experi- enced a physical shutdown when Richmond city streets were closed Donna Sweeney Angela Williams for an international bike race in 2015, “so it really wasn’t much of a State University of New York Raytheon Technologies Corporation stretch when COVID came along,” spokeswoman Jeanne L. Chenault said. “It really happened overnight, COMPLIMENTARY REGISTRATION AT PIONLINE.COM/RI2020* but we were all prepared.” Mr. Schmitz said he expects the SPONSORS: post-COVID-19 market recovery to look similar to the post-2008 recession, with some parts of the economy doing well and some losing. Questions? For more details please contact Elayne Glick at (212) 210-0247 or [email protected]. With anticipated ripple effects from *Only asset owners, endowments, foundations and a limited number of investment consultants are invited to attend. increased bankruptcies and de- All registration requests are subject to verification. P&I reserves the right to refuse any registrations not meeting our qualifications. The agenda for the Retirement Income pressed state tax revenues, “I am a 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. little more cautious than I was coming out of the (2008 nancial) crisis,” Mr. Schmitz said. n Your default option doesn’t have to be cookie-cutter. Now you can customize with TIAA RetirePlus Series.® Create custom default options with lifetime income.

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19pi0164.pdf RunDate:8/10/20 FULL PAGE Color: 4/C 8 | August 10, 2020 Pensions & Investments FRONTLINES

UPDATED TEMPLATES GOING ALL IN ON DIGITAL NVCA, ILPA hoping CFA Institute eyes computer-based exams All CFA Institute examinations will move to to standardize terms computer-based testing starting next year, with the coronavirus pandemic accelerating in model agreements a planned move by the association.

The association of investment profession- Daniel Hertzberg/iSpot Two alternative investment industry organizations — the als had already announced a move to National Venture Capital Association and the Institutional computer-based testing for Level I examina- Limited Partners Association — released new, updated and tions. The nal paper-based tests will take enhanced model agreements to standardize negotiation place in December, a news release said. terms, reducing cost. The transition had been planned as part of On July 22, the ILPA released a template for a deal-by- deal waterfall model limited partnership agreement, which a broader effort to deliver examinations via distributes carried interest faster than when carried interest computers in secure test centers, vs. the is calculated based on the performance of the entire fund. current paper-based tests taking place in In the whole-of-fund model, carried interest distribution is large spaces. The change allows the CFA Insti- likely to be delayed, and managers are concerned that their tute to provide smaller exam settings, more investment professionals will be less motivated if they have to dates for examinations and easier scheduling wait years to receive their share of the pro ts, said Bob Perez, across more locations. The move also reects Seattle-based principal at law rm Foster Garvey PC. that the investment profession now operates It helps new managers hire and retain talent by distrib- uting carried interest sooner, said Chris Hayes, ILPA’s senior in a digital world, the news release said. policy counsel. The CFA Institute will work with Prometric, The NVCA on July 28 released a new enhanced version a technology-enabled testing and assess- experience for our candidates. It goes without saying that of its term sheet, which summarizes a deal’s main points in ment rm, to administer the exams. The CFA Institute will we will uphold the rigor of the passing standard to earn the a venture capital agreement. The NVCA partnered with collaborate with the British Council, a U.K. international CFA charter.” Aumni, a venture capital-backed investment analytics organization for cultural relations and educational opportuni- The Level I computer-based exam will be offered four company, to provide more than 150 hyperlinks to data ties, for exams in India and Africa. times per year starting next year. Previously, Level I was showing how often terms in executed venture capital nancing contracts are used. “While the last paper-based test marks the end of an era offered twice per year, in June and December, a spokes- Venture capital rms and company owners can use the for CFA Institute, technological advances in computer-based woman said. Levels II and III will now be offered twice per model term sheet as a starting point for negotiation and see testing enable us to meet the growing global testing year, rather than just the once in June. what “peers are doing and decide for themselves,” said Jeff demands of candidates and will improve their experience Registration for all 2021 examinations opens Aug. 20. Farrah, Arlington, Va.-based general counsel of the NVCA. with a wider selection of test venues and more exible In March, the CFA Institute said it was postponing the The NVCA also released updated versions of its nine scheduling options,” said Margaret Franklin, president and administration of its global CFA Program Exam originally model agreements, which now are used as a negotiation CEO of the CFA Institute, in the release. “We are working scheduled for June, due to the coronavirus pandemic. starting point in more than 90% of venture capital manager and business owner agreements, Mr. Farrah said. diligently to ensure a seamless transition and superior exam — SOPHIE BAKER — ARLEEN JACOBIUS

STAYING NIMBLE SEC creates special team for market events

The Securities and Exchange ing examinations of SEC-registered market events that could have a Commission launched a special investment advisers, investment systemic impact or that place Michael Brochstein/SOPA Images Michael Brochstein/SOPA team within its exam of ce to deal companies, broker-dealers, investor assets at risk, such as with market events and emerg- self-regulatory organizations and exchange outages, liquidity events ing risks, the agency said July 28. transfer agents, among others, the and cybersecurity or operational The event and emerging risks SEC said. OCIE uses a risk-based resiliency concerns, the SEC said. examination team, or EERT, will approach to most effectively “As recent events have demon- work within the of ce of compli- allocate its resources to ful ll its strated once again, market and ance inspections and examinations mission of promoting compliance operational risks can emerge and work with nancial rms on with U.S. securities laws, preventing suddenly,” SEC Chairman Jay emerging threats and current fraud, monitoring risk, and Clayton said in a statement. “We market events. The new team is informing policy. Working collab- should be working to increase our also designed to mobilize when oratively with the OCIE exam staff ability to react, including bringing SEC regional of ces are dealing in the regional of ces, the new team our various resources to bear to with critical matters. will focus on OCIE exam priorities these situations.” READY: Jay Clayton said recent events show market risks ‘can emerge suddenly.’ OCIE is responsible for conduct- and help respond to signi cant — HAZEL BRADFORD

Daniel Hertzberg/iSpot STRENGTH IN NUMBERS On July 1, First State Super merged with VicSu- per, a A$25 billion, Mel- Australia’s First State, WA supers bourne-based super fund, to cement its position as the to merge by the end of November industry’s second-biggest superannuation fund, Ms. First State Super, Sydney, and WA Super, to maintain competitive fees for the services Stewart said. The biggest is Perth, will merge by Nov. 30, creating a we provide,” said Fabian Ross, CEO of WA AustralianSuper, Mel- superannuation fund overseeing almost Super, in a news release July 30. bourne, with about A$180 A$130 billion ($92 billion) in retirement Larger superannuation funds have the billion in assets. assets. size and scale to maintain the low fees and That scale has allowed First State Super, which has A$125 billion diverse range of investment options that First State to “invest in ways in retirement assets and WA Super, with A$4 ultimately spell better long-term outcomes that others can’t” and billion, announced in early March that they for participants, Mr. Ross said. “deliver a positive return” were exploring a merger. Deanne Stewart, First State Super’s CEO, for its more than 1 million Executives for both funds stressed the said in the same news release that the participants, despite the bene ts that additional scale would bring volatility and economic downturn super current challenging market participants in keeping fees as low as funds have faced this year demonstrate conditions, she added. possible while offering a broad range of “why we believe that size and scale Earlier this month, First investment options. matters.” State Super announced it WA Super’s relatively small size has made The merger in November would be First will change its name to it “increasingly challenging for us to State Super’s second over a ve-month forefront of the industry’s broader consoli- Aware Super in mid-September. implement regulatory changes and continue stretch — putting the super fund at the dation trend of recent years. — DOUGLAS APPELL 20pi0152.pdf RunDate: 08/10/20 Full Page Color: 4/C 10 | August 10, 2020 Pensions & Investments OPINION

Christopher J. Battaglia VP/Group publisher

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

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

ART Gregg A. Runburg Art director Roger Schillerstrom Editorial cartoonist

DATA/RESEARCH Aaron M. Cunningham Director of research and analytics Charles McGrath Data editor Anthony Scuderi Directory manager EDITORIAL Valerie Ge Research analyst SALES & MARKETING Nikki Pirrello Associate group publisher, conferences and marketing services As Vanguard makes technology shift, will others follow? Julie Parten Head of sales

REGIONAL SALES MANAGERS ecord keepers have raced to consolidate in recent years, them in comparable positions within Infosys. Rich Kiesel West driven by the need to grow pro ts in an industry faced It’s no secret that Vanguard has struggled in recent years with Paul Kissane Midwest with thin margins but growing demands for sophisticated technical dif culties, including glitches in online connectivity and plan Anna Koules New York data analysis, robust cybersecurity , and, of course, lower participants receiving incorrect account information. Steve Middleton EMEA +44-(0)77-1012-8464 fees from plan sponsor clients. The partnership could provide a much-needed technology boost for Hideo Nakayama Asia (Tokyo) +81-3-3479-6131; [email protected] These demands show no signs of abating. Vanguard, while keeping all-important client service and investment R Eduardo de Alcantara Machado Sao Paulo, Vanguard Group Inc. is the rst to chart a new path in its industry, management operations in-house. Brazil +55-11-3167-0821; [email protected] and it will be interesting to see if other record keepers follow. The Success depends on the smoothness of the rollout, whether Patricia Ghazvini Sales assistant

nation’s fourth-largest record keeper, with more than $560 billion in Infosys can deliver on its promised technology upgrades and whether CONFERENCES/MARKETING assets under administration, Vanguard plans to transfer software plan sponsors maintain con dence in the strength of Infosys’ Kimberly Jackson Director of conference sales platforms, administration and associated processes of its record-keep- cybersecurity protocols. Diane Pastore Director of conference programming ing business to India-based technology rm Infosys. Other industries have shed operations to better focus on core Joshua Scott Director of conference programming The deal is expected to help Vanguard achieve two long-term strengths. Will Vanguard’s experiment set off a new trend among Kathleen Stevens Investor relations director objectives: drive down costs and ramp up technological capabilities us- record keepers? Will the move attract other technology rms to the Gerry O’Hara Investor relations manager ing Infosys’ cloud-based platform. record-keeping business? Michelle DeMarco Director, relationship marketing Assel Chanlatte Conference marketing manager In addition to assuming day-to-day operations of the record-keeping If the shift proves to add an advantage, expect other record Mirjam Guldemond Conference manager, business, Infosys will lift out 1,300 Vanguard employees and place keepers to follow to stay competitive. It’s a trend worth watching. n WorldPensionSummit +31-6-2333-2464 Kristal Santos Client services project manager Ashley Perrucci Associate manager, client partnerships OTHER VIEWS ALISON BORLAND Rachel Lopez Conference administrative assistant CUSTOM CONTENT/CLIENT SOLUTIONS Greg Crawford Director of content solutions Corina Lewis Client solutions senior program The time has come to embrace automatic portability manager David Joseph Research analyst Tetyana Saucedo Digital campaign manager ince the birth of the 401(k) plan in duce leakage from practices are essentially converted into a Deanna Speziale Senior marketing associate 1980, several innovations have retirement plans by “recycling” operation. transformed and improved its creating a networked The bene ts of auto portability are twofold: SUBSCRIPTIONS/SITE LICENSES effectiveness. Automatic enroll- system of record For the worker, the new default reduces cash Elayne Glick Director, strategy & business, site ment, on average, improves plan keepers, with a outs (no longer the easiest choice), avoids license subscriptions Sparticipation by 25%. Target-date funds, central clearing- redundant or excessive fees and maximizes David Bomberger Director, enterprise licensing investment advice and managed accounts house, to move small retained savings, thereby improving retire- Ed Gorman Director, EMEA/international site dramatically improve the asset allocation and balances from plan ment outcomes. For the plan sponsor, the licensing +44-(0)20-3823-9891 risk pro le of savers. Technology innovations to plan with the result is a process that removes terminated RFP/RECRUITMENT make it easy to access balances and transact worker. With auto accounts (missing workers, uncashed checks) Erin Smith Sales manager from anywhere, at any time. portability, the small and incubates new hire accounts. REPRINTS The portability of accounts from job to job, Alison Borland is balances that leave Auto portability is the brainchild of however, remains in the dark ages of paper executive vice the plan to be Retirement Clearinghouse, with whom Laura Picariello Sales manager checks and manual processing. The dif culty president of wealth invested in money Alight is partnering on the launch of a ADVERTISING PRODUCTION of plan-to-plan transfers is a major obstacle solutions and strategy market funds and nationwide program that encourages record Robert T. Hedrick Media services manager for workers trying to reach their personal at Alight Solutions, eroded by safe-har- keepers and their plan sponsor clients to 312-649-7836; [email protected] savings goals, and it’s also contributing to a based in San Fran- bor IRA fees are help x problematic distribution practices. Subscription information - single copy nationwide retirement savings shortfall, cisco. instead rolled According to the Employee Bene t Research sales: 877-812-1586 especially among minority and low-income forward and Institute, more than 5 million Americans TO CONTACT A P&I STAFFER workers. defaulted to a quali ed default investment leave jobs annually with de ned contribu- Unless otherwise noted above, email us at Enter automatic portability which, like alternative (typically a target-date fund) in tion plan account balances of less than [email protected] or find phone numbers at pionline.com/staff. most great ideas, is a simple concept — re- the new plan. The mandatory distribution SEE BORLAND ON NEXT PAGE Pensions & Investments August 10, 2020 | 11 OPINION

OTHER VIEWS OLUSOLA LAWSON MORE INDUSTRY VIEWPOINTS ■■EG Fisher: Treasury bond issuance How the coronavirus is affecting infrastructure in Africa creates sea of volatility and opportunity. ■■William Dolan: Stock buyback he novel coronavirus tious optimism that the COVID-19 crisis Europe and U.S. markets, where abuses can be curbed without new pandemic has had a has been boosted by raged. In the past domestic ights account for 85% of laws. devastating global China, a key supplier, three years, an seat capacity, overseas ights impact on public health reopening and easing average of 68% of account for 55% of African airlines’ ■■Spiros Giannaros: Cloud and economies. The pressures on supply African infrastruc- market share. technology is key to productivity, Tworst global recession since World chains. ture transactions The most resilient African innovative solutions. War II and the effects of large- For large-scale have been into airports are in capital cities that ■■Olga Kosters: Private debt scale shutdowns of all non-essen- infrastructure, thermal power and are critical transport hubs, holding secondaries are resilient by design. tial businesses worldwide, cutting institutional investors’ renewable projects, strategic importance for sustain- off international and regional main area of focus the majority of which able economic growth. See pionline.com/industry-voices supply chains and halting all has been on the are contracted assets. During the virus outbreaks, To submit an Other Views commentary, email Editor non-essential travel, have also power sector, where Olusola Lawson is The projects also some airport investees have Amy B. Resnick at [email protected], or Managing rippled across Africa. The Interna- projects have invari- managing director and have hard currency- invoked economic equilibrium Editor Kevin Olsen at [email protected]. tional Monetary Fund is forecast- ably been deemed to co-head at African linked revenues, clauses built into their contracts to ing a 1.6% contraction in the be “essential services” Infrastructure Invest- given almost 60% of secure ‘holidays’ in concessionaire continent’s GDP, and the outlook by African government Managers, (a projects are nanced fees while COVID-19 restrictions is expected to worsen when ments, allowing them member of Old Mutual in U.S. dollars, which were at their height, thus protect- investors looking to diversify their revised later in the year. to remain operational Alternative Invest- offers protection to ing the business. portfolios beyond their traditional The continent has a less throughout the ments), based in Lagos, investors. Some sectors, like digital markets. We are likely to see well-resourced health-care sector lockdowns — a Nigeria. In projects where infrastructure, will come out of the greater engagement in countries and much lower scal capacity to position that has cash ows are in local pandemic stronger due to increas- traditionally less open to private- support businesses and people resulted in continued revenue currency, risk is often managed by es in data usage as people seek to sector investment with these negatively affected, but it is worth generation and has underlined the utilizing local currency debt remain connected remotely, countries easing regulations to noting that Africa’s mortality and resilient nature of these assets. facilities and applying lower making their operations more become more investor-friendly. contagion rates have so far been For infrastructure projects gearing — a small proportion of sustainable and more attractive We are seeing this trend develop signi cantly lower than initially under construction, most coun- debt to equity — as well as for future private investment. across sectors with a number of feared. COVID-19 spread later to tries have restricted the move- building in conservative currency Availability of public funding African sovereign wealth funds Africa, enabling many countries to ment of people rather than goods, devaluation assumptions. for infrastructure is under more looking to partner with the learn vital lessons from other allowing for instance, power and GDP-linked assets in Africa strain than it has been in the past private sector to build agriculture parts of the world. It is also renewable energy projects to have been the most exposed, and so a slowdown in new public- capacity in countries like Egypt, important to recognize there have continue on-site activity, with across the transportation sector, private partnership deals is to be Morocco and Nigeria and help been drastically different govern- South Africa as the exception, toll roads, ports and airports have expected. Private-sector invest- bolster domestic food security in ment interventions from each of even during the height of the been the most signi cantly ment is critical with the African line with their strategic invest- Africa’s 54 nations, some introduc- outbreaks. affected by the abrupt shutdown Development Bank estimating ment priorities. ing quick and draconian lock- Given the less developed of international travel and that pre-COVID-19, there was These are the types of trends downs, while others imposed supply chains, African projects subsequent local and regional already an annual infrastructure we expect to see across the board curfews or made minimal changes typically hold more equipment on restrictions. investment gap of around $62.5 in post-COVID Africa — acceler- to daily activity. site than in other parts of the African airlines operating in an billion. ated conversations around how We expect to see a marked world and have time buffers already fragile market, and with There is evidence to suggest a public-sector entities can partner economic slowdown through this factored into plans due to lower heavy reliance on intercontinental wider interest in emerging market with private nancing to deliver year and into 2021. In the context unpredictability of the operating traf c, will be hard hit. Unlike infrastructure from private critical infrastructure projects. n of lower oil prices, commodity environments. The impact on exporting countries such as project construction has been Nigeria and Angola will be more more nuanced. For example, severely impacted from a scal delays arising out of the limited perspective. However, ultimately movement of personnel with the rate of Africa’s economic specialist skills required in the recovery will depend on each construction and commissioning INVESTING IN country’s response. process. We do not expect to see a In Africa, strategically impor- V-shaped recovery but being later tant assets with strong defensive into lockdown and early out of it characteristics have continued to could mean African countries will display robust revenue and SAFER COMMUNITIES. begin to recover sooner — cau- returns for investors even while

That includes about $619 billion for minority workers. The Firearm Industry Borland The U.S. Department of Labor CONTINUED FROM PREVIOUS PAGE has also demonstrated support for auto portability through issuance Has Distributed Over $5,000, and more than half of of a prohibited transaction those workers have their money exemption to RCH and advisory 100 Million Free Gun leak out of the quali ed system opinion, which creates a safe within a year. When looking at harbor for plan sponsors accept- Locks To Create Safer demographics, this leakage is ing auto portability roll-ins. most damaging to Black and Further, auto portability has Communities. Hispanic workers and those in strong bipartisan support from the lowest income brackets. Congress. The data in support of auto However, industrywide change portability is compelling. Research requires more than just building a conducted by Alight found that a better mousetrap. Every once in a majority (56%) of plan sponsors while, an innovation arises that are interested in an automatic checks all the right boxes — rollover program that can help something that truly bene ts NSSFRealSolutions.org workers who are subject to workers, plan sponsors, service mandatory distribution, and we providers and, collectively, the expect that number to grow country. Automatic portability is quickly. Further, EBRI explored that next innovation and it’s time REAL the macro impact of auto portabil- for retirement industry leaders to SOLUTIONS ity and found that, when fully make it real. implemented, it would preserve Since every trend needs to start nearly $1.5 trillion in additional with somebody, Alight is all-in on retirement savings for U.S. auto portability, and we hope that workers over a 40-year period. you will be, too. n 12 | August 10, 2020 Pensions & Investments Special Report ESG INVESTING North American funds aggressive Credit on climate change

By HAZEL BRADFORD ing scenario analyses of how their particular portfolios would perform under various cli- With the clock ticking more loudly on the mate policies and transition scenarios. universal goal of net-zero greenhouse gas emissions by 2050, some North American Common measure pension funds are moving more aggressively One common measure of carbon footprints to tackle climate change. They are addressing is data from the Financial Stability Board’s climate change across their entire portfolios, Task Force on Climate-related Financial Dis- spurred in part by more data on the risks and closures, which developed voluntary, climate- opportunities, as well as the need to catch up related nancial risk disclosures for compa- with their overseas counterparts. nies to share with investors and other “We are now seeing a growing movement stakeholders. of investors that are going to set high-ambi- Many of the investors studied by Ceres tion targets for the whole portfolio, using also turn to ESG data providers such as MSCI good data across every asset class. There is a Inc., Sustainalytics and Bloomberg LP, which rising sense that (climate change) is not continue to roll out tools, including ones that something you can address in one sector,” measure risk intensity by industry or asset said Kirsten Snow Spalding, San Francisco- class such as real estate. based senior program di- For more quantitative rector of the Ceres Inves- analysis, investors such as tor Network on Climate the C$207.4 billion ($154.5 Risk and Sustainability, billion) Ontario Teachers’ which represents 175 as- Pension Plan, Toronto, set owners with a com- also use specialized data bined $30 trillion in assets. tools, Ceres found. “are doing really deep work,” Ceres’ Mr. Davis $403.8 billion California Public Employees’ “Almost every investor OTPP is working on a said. He cited the $194.3 billion New York Retirement System, Sacramento, and Cal- in our network is taking sector-speci c ESG matu- State Common Retirement Fund, Albany, STRS to consider and report on climate-re- steps toward addressing rity framework for assess- which through its Climate Action Plan is do- lated nancial risk to their portfolios, “it is climate change in their ing companies’ sustain- ing risk-related work and developing mini- not a choice anymore,” and reporting will be- portfolios. The direction of ability management mum standards for investing. come “more and more mandatory,” Mr. Hor- travel is toward science- practices. It is also collab- Other U.S. leaders include the $246 billion ster said. “We have plateaued with voluntary based targets,” Ms. Spald- orating with Wellington California State Teachers’ Retirement Sys- reporting.” ing said. Management Co. LLP and tem, West Sacramento, for which the board of MSCI’s Mr. Briand sees two sides of the de- Case studies developed Woods Hole Research directors has commissioned work on climate bate over the adequacy of current data. “If by Ceres and several glob- Center to dig deeper into and energy transition strategies, along with a you want to act, you have enough data to (anal investor networks high- climate change research low-carbon index strategy. alyze) the portfolio and reduce the risk. If you light the various ap- ‘We are now applicable to speci c in- rely only on the company, you will be suffer- proaches being taken to seeing a growing vestment strategies. Others stepping up, too ing. It’s a question of doing your homework. assess and manage the Investor demand is ex- Other pension funds are stepping up, too. The laggards are whining about disclosure; two fundamental risks of movement of pected to spur even more The $25.9 billion San Francisco City & Coun- the leaders are looking for solutions,” Mr. Bri- climate change: the physi- investors that are options. “I have witnessed ty Employees’ Retirement System plans to and said. cal risk from events such increased urgency from make its total portfolio net-zero carbon emis- The $22 billion OPTrust managing the On- as droughts, wild res, sea going to set high- investors to quantify their sions by 2050, and of cials at the $15 billion level rise, oods and climate risk exposures Maine Public Employees Retirement System, storms; and transition ambition targets when constructing and Augusta, are looking at climate risk in private risk, which can include for the whole analyzing portfolios,” said asset classes such as infrastructure and re- ESG snapshot: Investing gets passive government climate poli- Remy Briand, head of newables. Net ows in ESG funds, in billions, by type. cies such as carbon pric- portfolio, using ESG at MSCI in Geneva. Pension funds with smaller staffs rely on ing and taxes, and tech- good data across Convinced that the managers and investment consultants for $22 nology transition to market is not accurately climate change direction. Others actively $20 renewable energy and every asset pricing the risks and op- addressing climate change risks and oppor- more resource-ef cient portunities associated tunities, such as the $211 billion New York $18 Passive technologies. class.’ with the transition to a City Retirement Systems, which uses their $16 Active “An increasing number CERES INVESTOR NETWORK low-carbon economy, procurement process and annual reviews to of large asset owners in ON CLIMATE RISK AND Wespath Bene ts and In- set expectations for staff members and $14 North America and other vestments, the invest- managers. SUSTAINABILITY’S KIRSTEN $12 regions are digging deeply SNOW SPALDING ments division of the To meet its ambitious goal of 25% carbon into climate risk and op- Glenview, Ill.-based $24 reduction across the portfolio by 2025, the $10 portunities … in ways that billion General Board of C$340.1 billion Caisse de Depot et Placement are tangible,” said Chris Davis, Boston-based Pension and Health Bene ts of the United du Quebec, Montreal, assigned carbon bud- $8 senior director of the Ceres Investor Net- Methodist Church, turned to BlackRock Inc. gets to each asset class and made them the $6 work. While public equities are common tar- to customize an investment framework for performance target for the investment staff. gets, “a lot has been done in xed income and managing risks and opportunities. So far, The “next big step” in climate data will $4 real estate and investors are increasingly Wespath and subsidiaries have committed come from regulation, which is already driv- $2 moving into private asset classes,” he said. more than $1 billion to Wespath’s transitioning the European Union’s action plan for cli- The biggest trend is decarbonization, fol- ready strategies, and about 26% of their pas- mate change , said Maximilian Horster, man- $0 lowed by searches for opportunities to invest sively managed equity strategies now employ aging director and head of Institutional -$2 in climate solutions, Mr. Davis said. The ap- the framework. Shareholder Services Inc.’s ESG climate so- 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 proaches range from assessing the carbon While U.S. pension funds may be not be lutions unit in Frankfurt. With steps such as Source: Morningstar Inc. footprint of different asset classes to develop- the global leaders on climate change, several California’s landmark 2018 bill requiring the Pensions & Investments August 10, 2020 | 13

Carl Wien/i2i Art Greater adoption of ESG linked to acceptance as duciary duty Institutions behind push

to move practice into Toerge David mainstream of investing

By HAZEL BRADFORD

ESG investing is reaching an in ection point, as the risks and opportunities — and the responsibility to deal with them — gets harder for pension funds and other institutional asset owners to ignore. “They own the market and they are long- term investors, so they have to be more aware,” said Michael Jantzi, Toronto-based CEO of Sustainalytics, a global provider of ESG data and ratings. In North America, ESG investing “is a much more mainstream phenomenon than it used to be, and it’s largely driven by institutional investors. When we are talking to CIOs, increasingly in this part of the world, they say, ‘of course we look at it.’ That’s not radical to say anymore,” said Mr. Jantzi, who credits some of the change to growing acceptance of ESG investing as a duciary duty. The evolution means that ESG investment decisions are more fully integrated across portfolios and all asset classes. A tario Public Service Employees Union’s de- survey of 500 global institutional investors ned benet plan, falls into the second cate- in the second quarter of 2020 from Core- WESPATH’S MISSION: David Zellner said the sustainable economy framework is ‘embedded in our DNA.’ gory. “Our view is that we have to put a stake Data Pty. Ltd. found that 51% now fully in- in the ground and start somewhere,” said Ali- tegrate ESG into their investment ap- something different,” he said. Today, all in- billion ($16.4 billion) Ontario Public Service son Loat, Toronto-based managing director proach, compared with 36% just two vestment team members meet every Friday Employees Union Pension Plan, Toronto, for sustainable investing and innovation. OP- quarters earlier. Active ownership strate- to consider ESG decisions through a risk/ the growing role of ESG led to a reorganiza- Trust just completed a carbon footprint anal- gies to engage companies on ESG issues return lens. tion of the investment ofce to make sure it ysis across the entire fund and is now in dis- more than doubled to 41% from 19%. The Maryland is also working with its invest- is integrated into all investment decisions, cussion with data providers to help devise investors included pension funds, endow- ment consultant during asset allocation said Alison Loat, managing director for sus- bottom-up climate change risk metrics for ments and foundations, sovereign wealth practices to analyze how various stress tainable investing and innovation. In addi- physical risk and transition risk for all asset funds and banks. tests impact expected returns and portfolio tion to assessing the entire portfolio for cli- classes. With a sizable allocation to alterna- When it comes to integrating ESG into behavior. mate change risk, OPTrust in 2019 engaged tives such as private equity, for example, “we portfolios, ofcials at the $194.3 billion New The state of ESG investing today re- hundreds of companies on key ESG issues have direct ownership and higher in uence York State Common Retirement Fund, Al- minds Mr. Palmer of how bond investors in including gender diversity and board effec- than we would in public companies. For pub- bany, leave little to chance. the 1980s learned how to tiveness, and added to its green bond hold- lic companies, we are working closely with Their sustainable invest- model risk of call options ings with a $100 million investment in On- our managers, making sure our managers ments and climate solutions on mortgage-backed secu- tario government green bonds. align with us,” Ms. Loat said. n program has a $20 billion rities. “Initially there was a ESG “is very much a philosophical under- commitment to sustainable lot of difference of opinion, pinning of how we approach our invest- investments, with dedicated but eventually it became ments,” with an eye not just on the sustain- staff and minimum stan- standardized. This is way ability of the fund, “but also the world our ESG snapshot: Investing gets passive dards for portfolio compa- more complicated, but beneciaries retire in,” she said. Net ows in ESG funds, in billions, by type. nies. Investments have nine eventually we are going to It is a similar story for Wespath Benets sustainable themes split get there,” he said. and Investments, the investments division $22 equally among three cate- ESG considerations have of the Glenview, Ill.-based $24 billion Gen- gories: resources and envi- led to many changes in how eral Board of Pension and Health Benets $20 ronment; human rights and Illinois investment ofcials of the United Methodist Church. Wespath $18 Passive social inclusion; and eco- analyze investments, said built its sustainable economy framework nomic development, and Treasurer Michael W. Fre- several years ago because “it’s embedded in $16 Active fund managers’ core strate- ‘When we are richs. He was a key force our DNA,” said CIO David Zellner. Focused $14 gies are expected to ad- talking to CIOs, behind the rst state law on performance with the benet of impact, vance at least one of the this year requiring state its three components are invest, engage $12 nine themes. increasingly in government entities — in- and avoid. $10 this part of the cluding the Illinois State Jonathan Bailey, managing director and An ESG lens Board of Investment, Chi- head of ESG investing at Neuberger Berman $8 When Andrew C. Palmer world, they say, cago, overseeing $19 billion Group LLC, a New York-based global man- $6 joined the $54.8 billion “of course we in dened benet plan as- ager with $330 billion under management Maryland State Retirement sets — to integrate sustain- for institutional investors, 60% of which is $4 & Pension System, Balti- look at it.” ability factors into their in- ESG-intregrated, said that ESG topics “are $2 more, as chief investment That’s not vestment decision-making. resonating with clients because they can see ofcer in 2015, he started “Our hope is that we pro- it will help their performance. They are also $0 looking at all the asset radical to say vide an example. We need to trying to make they sure they understand -$2 classes through an ESG anymore.’ manage risk differently,” Mr. what it means to their beneciaries,” Mr. 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 lens. “We found we didn’t Frerichs said. Bailey said. Source: Morningstar Inc. tell anybody what was going SUSTAINALYTICS’ For the OPTrust manag- Standards that connect ESG measures to on (and) every group did MICHAEL JANTZI ing the assets of the C$22 SEE EVOLUTION ON PAGE 14 14 | August 10, 2020 ESG INVESTING Pensions & Investments

Evolution How investors integrate ESG SASB becomes go-to A survey of 500 global institutional investors undertaken in second- CONTINUED FROM PAGE 13 quarter 2020 revealed more than half now fully integrate ESG. performance and are industry-spe- 51% 2018 2019 source for investors ci c are also driving ESG integration, said Eivind Lorgen, New York- based CEO and president of 44% Nordea Asset Management in 40% 41% on ESG comparisons North America, a founding mem- 36% ber and chairman of the Sustain- By HAZEL BRADFORD and opportunities most likely to af- ability Accounting Standards fect a company’s nancial condi- Board’s investor advisory group. 29% Investors in U.S. companies are tion, operating performance or risk “Investors are increasingly inte- eager for more uniform ESG re- pro le, with a focus on the econom- 25% 24% grating ESG into their portfolio 22% porting from those companies ic, environmental and social im- management, and SASB is emerg- that allows for apples-to-apples pacts of a company, and its positive 19% 18% ing as the leading standard now,” comparisons of the information or negative contributions toward 15% he said. most relevant for their investment sustainable development. SASB’s 77 industry standards decisions. “From day one, they were de- will continue to evolve to meet in- The leading source for that in- signed to help enable ESG integra- vestor needs and respond to inves- formation in U.S. markets is proving tion into investment processes, in a tor feedback, which, for example, to be the Sustainability Accounting scalable, cost-effective way,” said prompted a “huge project” on hu- Screening* Best in Full ESG Active Thematic Impact Standards Board, which in late 2018 SASB CEO Janine Guillot in San class integration ownership investing investing man capital management, Mr. Lor- developed 77 industry standards Francisco. SASB was founded to *Positive and negative. Source: CoreData Research gen said. designed to evolve along with in- mimic the concept and process of vestors’ needs and to connect the accounting standards, an analogy Checking credentials managers won’t be pressured to materiality, and what is really driv- measures to performance. she likes “because accounting stan- Institutional investors are in- take a longer-term view,” he said. ing performance. The globally applicable industry- dards are never done,” she said. creasingly checking their asset That will happen, said Andrew Adam Blumenthal, founder and speci c standards identify the mini- SASB’s goal is to have 75% of S&P manager’s sustainability creden- Siwo, director of sustainable in- managing partner of private equity mal set of nancially material sus- Global 1200 companies using the tials. The CoreData survey found vestments and climate solutions at rm Blue Wolf Capital Partners LLC tainability topics and their associated standards within ve years. that 49% of global investors now the New York State Common Re- in New York, said that limited part- metrics for a typical company in an The prospect of uniform ESG re- take it into account — up from 39% tirement Fund. “When you are ners are “increasingly asking pri- industry. Along with a materiality porting advanced further in July just two quarters before. writing very sizable checks, I do vate equity managers to identify the map that graphically explains a rel- when SASB and the Global Report- Asset owners have a responsibil- think you have an opportunity to link between ESG and value cre- evant standard, SASB offers an en- ing Initiative joined forces to help ity to look beyond short-term re- ensure that the investment manag- ation,” particularly given the mas- gagement guide to help investors users of sustainability data under- sults while making sure their asset ers are aligned with your thinking,” sive social impacts of the pandemic discuss nancially material issues stand the similarities and differ- managers also get with the ESG he said. and related recession. “Investors with companies, and an implemen- ences in their respective standards, program, said Mr. Zellner of Wes- Mr. Siwo and others expect that should demand that GPs nd and tation guide for companies. which vary by purpose and ap- path. “Until asset owners take a the next phase of ESG investing execute on those opportunities,” Mr. The industry-speci c standards proach to materiality. GRI stan- longer-term view, our investment will bring a heightened focus on Blumenthal said.  identify sustainability-related risks dards focus on the economic, envi-

tives industry, there is a great deal investors are doing,” Ms. Loat said. of emphasis on workforce diversity COVID-19 data with respect to gender, ethnic- Better disclosure ity, age, how it relates to compensa- The COVID-19 crisis is also put- CONTINUED FROM PAGE 1 tion, and how it can be measured,” ting pressure on companies to im- To Illinois Treasurer Michael W. said Mr. Esposito, who expects to prove their disclosure of manage- Frerichs, the catalyst behind the see social data measured in more a ment practices that pose novel Illinois Sustainable Investing standardized way to drive progress. operational and reputational risks, Act requiring public funds to con- One recent indicator of the rise and on the Securities and Exchange sider sustainability factors in in- of “S” in ESG investing was a sig- Commission to require it. “Most investment decisions, “COVID is the ni cant spike in the issuance of so- stitutional investors nd current big game changer here. We engage cial bonds. According to AXA In- company nancial disclosures lim- a lot more on human capital issues,” vestment Managers, social bonds ited in their usefulness,” said Sen. he said. that accounted for just 5% of global Mark Warner, D-Va., a member of “This just reaf rms that the na- bonds issued at the end of 2019 the Senate Banking Committee and ture of companies has changed. now account for 30%, with much of a sponsor of bicameral legislation The vast majority of the Dow today that attributed to bonds related to that would require public compa- is built on brand or reputation, COVID-19. nies to disclose basic human capital and these are things that matter” According to S&P Global Inc., metrics such as workforce turnover to investors and others, Mr. Fre- the rapid growth in green bonds fa- rates, training, health and safety, richs said. vored by investors focused on cli- and compensation statistics. For the $54.8 billion Maryland mate change has recently ipped to Interviews with public pension State Retirement & Pension Sys- social bonds raising money for funds and money management tem, Baltimore, climate change and projects like affordable housing, ‘GAME CHANGER’: Illinois Treasurer Michael W. Frerichs said the coronavirus was a rms conducted by the Govern- diversity are two aspects of ESG health care and education. In 2020, major catalyst behind greater engagement with companies on human capital issues. ment Accountability Of ce at Mr. that deserve special attention, giv- social bond issuance totaled $11.6 Warner’s request found corporate en the system’s mission to support billion by May 31 and is on track to risk metrics and sustainability fac- make pretty drastic changes to per- disclosures incomplete or inconsis- public employees. “Getting diversi- eclipse 2019’s total of $16.7 billion, tors,” Ms. Walsh said. sonal behavior if we see something tent, with board accountability and ty right can make us better at what while green bond issuance has Still, said Andrew Siwo, director we can do. I think it has shown what workforce diversity the most re- we do,” said Chief Investment Of - dipped, down to $53.5 billion as of of sustainable investments and cli- is possible,” he said. ported topics, and human rights the cer Andrew C. Palmer. Efforts to get May 31, compared with $84.1 billion mate solutions at the $194.3 billion Alison Loat, managing director least reported. Frustrated with SEC there include evaluating their in- in the same period of 2019. New York State Common Retire- for sustainable investing and inno- inaction since a 2016 concept re- ternal hiring practices and asking To Anne Walsh, CIO for xed in- ment Fund, Albany: “I don’t think vation for OPTrust, which manages lease on ESG disclosure, Mr. War- more questions of external manag- come at Guggenheim Investments climate change is going to be taking assets of the C$22 billion ($16.4 bil- ner is now pushing the agency to ers — practices endorsed by many in New York, with $185 billion in a back seat. There’s no other planet lion) Ontario Public Service Em- form an ESG task force to improve other asset owners. xed-income assets under man- for us to run to.” ployees Union Pension Plan, To- disclosure of information relevant agement, the COVID-19 crisis high- As renewable energy costs come ronto, is also an optimist. “COVID to investors. One manager takes action lights ESG investing as classic risk down and advances are made, has underscored where we all knew The 2021 proxy season could be Apollo Global Management Inc. management. “Most people proba- “there will be more options for ad- we were vulnerable, and we can see quite revealing, said Ms. Loat of is one manager that has taken ac- bly would believe that in the time of dressing climate change,” Mr. Siwo some companies doing well,” she OPTrust. Along with the logistical tion. The spotlight on systemic ra- coronavirus, people would have ad- said. “We do see a lot of opportunity said. “Social issues have always component of holding annual cial injustice “has prompted Apollo, justed their behavior in a way that in this space, across all asset class- been one of the top priorities for us, shareholder meetings, there could our investors, and portfolio compa- ESG doesn’t matter, but it is really es. What COVID has done more as a labor organization. There have be more pressure on companies to nies to listen, think and act with a only continuing to accelerate. ESG broadly is … highlighted the risks been numerous examples over the show what they have done to im- much greater sense of urgency on is a way to think about risk. Through and opportunities,” he said. past three months of companies not prove diversity on boards and in meaningful initiatives for a more this COVID lens, that’s becoming a Adam Gillett, head of sustainable taking it seriously,” and engage- workforces, among other issues inclusive, diverse and equitable lot more clear to investors in terms investment at Willis Towers Watson ment with them “I anticipate will that gained attention in 2020. workplace,” said Robert Esposito, of managing those risks. As rates PLC in London, agrees. “COVID has accelerate,” she said. “You are seeing an acceleration ESG counsel at Apollo in New York, continue to drop, the search for not xed our climate crisis, the bio- “Overall, I feel that this might of requiring companies to disclose. in an email. “Both within portfolio yield becomes even more of a chal- diversity crisis, or other social is- provide an opportunity to acceler- It is such a fascinating time to be companies and across the alterna- lenge, and investors are embracing sues, but it has shown that we can ate some of the good work that ESG doing this,” she said.  Pensions & Investments ESG INVESTING August 10, 2020 | 15

closures to calculate carbon foot- Use of ESG 145 prints, along with other data sources like CDP, a non-pro t that Sustainable investing collaboration grows standards compiles carbon emissions data for Institutional asset owners committed to ESG issues are nding evermore opportunities to collaborate with skyrockets companies that self-report, and ranks them. like-minded investors through a growing roster of groups and coalitions, often focused on a single ESG topic like Growth in number of This month, the Institutional In- climate change. investor users of 92 vestors Group on Climate Change In the U.S., collaboration is not new for large pension funds like the $403.8 billion California Public Employ- SASB standards. 76 proposed a blueprint to help inves- ees’ Retirement System, Sacramento, and the $246 billion California State Teachers’ Retirement System, West tors maximize how they decarbon- Sacramento, that often join or even help to create coalitions. 59 ize their portfolios and boost in- 53 vestments in climate change “Pension funds are really powerful,” said Robert Furdak, ESG CIO for the Man Group in Boston. “Our voice is solutions. The draft Net Zero In- much stronger when it is backed up by that voice.” 36 vestment Framework is open for Some organizations committed to sustainable investing include: 27 feedback until Sept. 25. The rst phase covers listed equities, credit, ࿷ US SIF: The Forum for Sustainable and Respon- Climate change coalitions include: sovereign debt, real estate and stra- sible Investment, tracking ESG themes and assets H1 H2 H1 H2 H1 H2 H1 ࿷ Global Investor Coalition on Climate Change tegic asset allocation. under management across all asset classes that 2017 2018 2019 2020 Institutional Investors Group on Climate Change Many institutional investors are engage in sustainable investing strategies. ࿷ Represents licensees of SASB standards for also signatories to the United Na- commercial use, SASB Investor Advisory ࿷ Climate Action 100+ tions-supported Principles for Re- ࿷ Ceres, founded in response to the 1989 Exxon Group members, and SASB Alliance members, The Investor Agenda, working toward a net-zero with some overlap. Source: Sustainability sponsible Investment. Its latest re- Valdez oil spill to push companies to be better ࿷ Accounting Standards Board port, released in June, offers stewards. Today, the Ceres Investor Network has emissions economy. investors a framework for reaching more than 175 institutional investors with $29 ࿷ NetZero Alliance ronmental and social impacts of a UN sustainable development goals. trillion in assets. ࿷ Partnership for Carbon Accounting Financials company, and positive or negative The report covers positive and neg- The Principles for Responsible Investment, a contributions toward sustainable ative outcomes of pressing global ࿷ global coalition providing a framework for investors Other groups include: development. Users of GRI stan- issues like human rights abuses, dards identify the issues most im- climate change and social inequali- to align with the United Nations’ Sustainable ࿷ Investor Alliance for Human Rights Development Goals. portant to their stakeholders. ty, but urges investors to also con- ࿷ Human Capital Management Coalition The collaboration is timely, Ms. sider taking on societal and envi- ࿷ The Interfaith Center on Corporate Responsibil- ࿷ Midwest Investors Diversity Initiative Guillot said, because the pandemic ronmental issues on a systemic ity, promoting shareholder advocacy on ESG issues. Northeast Investors Diversity Initiative has shown how non- nancial infor- level as part of their investment ࿷ mation can have nancial implica- strategies, and to engage in more ࿷ Council of Institutional Investors ࿷ Thirty Percent Coalition, to increase diversity in tions for companies, and after COV- collaboration, in order to achieve CDP, a global environmental impact reporting ࿷ corporate boardrooms. ID-19, companies will increasingly the SDGs by 2030. platform. be expected to disclose performance A 2019 PRI letter to signatories Canadian Coalition for Good Governance As You Sow, shareholder advocacy and coalition ࿷ on a wider range of ESG topics. called the U.S. “a glaring outlier” of a ࿷ ࿷ Racial Justice Investing Investors focused on climate growing global consensus around building on environmental and social corporate change also use data from the Fi- sustainable nance, despite its responsibility. ࿷ Workforce Disclosure Initiative nancial Stability Board’s Task Force dominant role in the global nan- ࿷ Global Impact Investing Network ࿷ Intentional Endowments Network on Climate-related Financial Dis- cial industry.

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19pi0165.eps Rundate:08/10/20 size: 10.25 x 7 color:4/C 16 | August 10, 2020 Pensions & Investments

Regulation In Memoriam SEC seeking information on AllianzGI funds Hub International’s Request on rm’s structured from insurer Allianz Group, the parent com- curred in February, according to the court l- pany of AllianzGI. ing. The portfolio’s positions “left the funds David Reich, 50, alpha funds related to suit over According to the report, Allianz is review- dangerously exposed to even the slightest ing the complaint and expects other institu- increase in market volatility or decline in eq- heavy losses at Arkansas plan tional investors in the structured alpha funds uity price,” which the lawsuit says Allianz dies while biking might bring similar actions. economists and many others warned were By ROB KOZLOWSKI The company “intends to defend vigor- on the immediate horizon, the ling said. BY MARGARIDA CORREIA ously against the allegations therein, which Mr. Wallace responded in a July 21 email Allianz Global Investors has received a re- Allianz believes to be legally and factually that “the premise of the lawsuit is simply in- David Reich, national president of the quest for information from the Securities awed,” the report said. correct and without foundation, as the funds retirement and private wealth business of and Exchange Commission regarding its AllianzGI spokesman John Wallace rein the Structured Alpha portfolio did not di- insurance brokerage rm Hub Internation- structured alpha funds. ferred questions to the report. verge from their investment strategy. Our al, died from a heart attack, a Hub spokes- The request is related to the lawsuit led The lawsuit led July 20 by the Arkansas own analysis has revealed that the portfolio woman con rmed in an by the $15.3 billion Arkansas Teacher Retire- system in U.S. District Court in New York was at all times managed to its alpha targets email. He was 50. ment System, Little Rock, charging the man- claims negligence, breach of duciary duty and in accordance with its design. While the He died while riding a ager improperly invested the pension fund’s and breach of contract, alleging that Allianz- losses suffered in the portfolio are deeply bicycle July 26, the assets in three enhanced-return strategies. GI “abandoned the funds’ investment thesis” disappointing, there is no basis for legal lia- spokeswoman said. AllianzGI is “fully cooperating with the by repositioning the portfolios in late Febru- bility. AllianzGI intends to defend itself vig- Mr. Reich joined Hub SEC,” according to a half-year interim report ary and early March to recoup losses in- orously against these allegations.” n in 2017 to expand Hub’s retirement and wealth business, executing at Money Management least 15 acquisitions, including registered in- David Reich vestment adviser rms TIAA voluntary buyout more popular than expected Sheridan Road Financial and Global Re- tirement Partners. The acquisitions By CHRISTINE WILLIAMSON the company,” he said. “Offering the VSP al- “Stability for the investment teams really brought Hub’s assets under management lowed us to live our values by letting our emis the focus,” Mr. Ferguson said, adding that to $98 billion and boosted the number of TIAA-CREF’s voluntary separation pro- ployees make their own decisions about Nuveen is committed to making strategic advisers to 300 from 50, the company said gram resulted in a 10% reduction of its work- what is best for them.” hires where needed. in a statement. force, higher than the 5% to 7% acceptance The higher-than-expected rate of accep- Nuveen manages a total of $1 trillion for “All of us who were blessed to know rate expected by the company’s management tance of the VSP means that TIAA won’t lay institutional and retail clients. David will remember a man with bound- when the program was introduced in May. off any personnel in 2020 or 2021, Mr. Fergu- Most of the TIAA employees who accepted less energy and a love of life whose quick Plans to cut expenses rmwide, includ- son said. the buyout offer will remain with the com- wit was matched by his deep love for ing the reduction of the company’s head In fact, because of some voluntary staff pany until early November and will assist in friends and family,” the statement said. count, began earlier this year at the start of departures, TIAA will need to hire new work- transitioning their work to employees stay- “Our condolences go out to David’s family, COVID-19 pandemic. ers in positions such as relationship managing with the rm, spokesman Jessica Gre- and our thoughts and prayers are with TIAA extended the buyout to about 75% of ers and client service managers. aney said in an email. them. HUB is lucky to have had such a its 16,500 employees worldwide and the pro- Mr. Ferguson said he was pleased that “a A critical component of the newly down- strong leader and will focus on honoring cess “went quite well on a number of fronts,” very modest 4% to 5%” of the investment sized TIAA will be an aggressive, continued his memory.” said Roger W. Ferguson Jr, TIAA’s president personnel working at Nuveen, TIAA’s mon- build out of the rm’s digital capabilities as Mr. Reich is survived by his wife and and CEO. ey management arm, elected to take the more investors choose to engage with TIAA children. n “We achieved an appropriate resizing of buyout offer. virtually online, Mr. Ferguson said. n ESG ROUNDUP

ber, would require companies to Women account for 21% of in London more receptive to exi- disclose the racial, ethnic and gen- applicants to senior roles ble working requests. New Mexico fund creating der composition of their boards of directors and executive of cers, Just 21% of employees put for- Sustainable strategy oversight panel for trustees and to identify any veterans in ward for senior roles at U.K. nan- those positions. cial services rms were women, in ows jump 72% in Q2 It also requires companies to dis- nds a review of applications for Global net inows into sustain- New Mexico Public Employees The audit also cited several po- close any plans to promote racial, the year ended March 31. able strategies increased 72% in Retirement Association, Santa Fe, tential risk areas that give the per- ethnic and gender diversity among Law rm Pinsent Masons ana- the three months ended June 30 to will establish an oversight commit- ception that board members and these groups. lyzed hiring patterns at money $71.1 billion, driven by funds do- tee to monitor trustees for compli- PERA staff “have not shared strate- The SEC would have to estab- management rms, hedge funds, miciled in Europe, Morningstar ance with board policies and proce- gic goals and objectives” and added lish a diversity advisory group to private equity funds, insurers and data show. dures following a governance audit. that disagreements and negative report on strategies for increasing banks, covering 4,044 hires for A study of second-quarter ows John Melia, chairman of the comments about others in public diversity. which gender was speci ed. The for 3,432 global ESG open-end and board of the $14.3 billion pension meetings will make recruitment ef- review found that 833 of those tak- exchange-traded funds showed fund, will determine the details of forts for PERA staff more dif cult. NEST shifts $7 billion more ing up senior roles at nancial ser- that assets in sustainable strate- the oversight committee at a later The audit called for the estab- vices rms were women. Gender gies hit a record high of $1.06 tril- date, spokeswoman Christina Perea lishment of the oversight commit- into climate-aware strategy was not speci ed in 6.8% of appli- lion as of June 30, up 23% vs. the said in an email. tee and policy review to be com- National Employment Savings cations analyzed. previous quarter. The internal governance audit by pleted by the end of scal year Trust, London, will move an addi- “More and more nancial ser- European funds attracted the REDW presented to PERA’s board 2021. tional £5.5 billion ($7 billion) of its vices rms are taking steps to im- majority of global net inows in the July 30 said audio recordings of pri- default fund’s equity investments prove gender diversity at top lev- second quarter, at €54.6 billion or board meetings showed “several Business coalition eager into a climate-aware strategy. els, but the pace of change is still ($61.4 billion), double those regis- instances of board members having All of the fund’s developed mar- very slow,” said Elizabeth Budd, tered in the rst quarter. disagreements that resulted in ac- to pass board diversity bill kets equity investments are moving partner at Pinsent Masons, in the European money managers also cusations and negative commen- A coalition of business associa- from pooled funds to a segregated news release. “Given the attention converted 40 non-ESG strategies tary regarding other board mem- tions July 27 urged passage of legis- account run by UBS Asset Manage- that gender diversity has been giv- into sustainable funds in the sec- bers, staff and consultant lation aimed at increasing corpo- ment, a spokesman con rmed. en in recent years, I expect many ond quarter to meet upcoming reg- quali cations and competence rate board diversity. The £12 billion U.K. multiem- rms will be disappointed that this ulatory standards and investor de- which violates board policy.” In a letter sent to Senate Banking ployer de ned contribution plan is is not being reected in the num- mand. Repurposed strategies The audit also showed two in- Committee Chairman Mike Crapo, also strengthening its engagement ber of women put forward for se- accounted for 21% of all European stances of board meetings that lost R-Idaho, and ranking member efforts by putting a requirement on nior roles.” sustainable funds. quorums when members walked Sherrod Brown, D-Ohio, 17 organi- its portfolio companies to phase out The rm cited reasons for the “The rst half of the year saw a out to avoid binding board deci- zations including the Chamber of activities linked to thermal coal, oil low proportion of women being record number of new ESG fund sions. Commerce, the Real Estate Round- sands and arctic drilling by 2025 or promoted, including exible hours launches,” Hortense Bioy, director In one of those instances, the table and the National Association create a clear plan to phase them or home-working requests due to of sustainability research for EMEA board was unable to approve its s- of Investment Companies urged out by 2030. child-care needs. and Asia-Paci c said in a news re- cal year 2020 budget by the statu- passage of H.R. 5084, the “Improv- NEST will additionally increase However, Ms. Budd highlighted lease. “Investors have more options tory deadline, which the of ce of ing Corporate Governance through focus on investing in companies that the coronavirus pandemic, to choose from than ever before to the state auditor said was “unac- Diversity Act of 2019.” that are developing corporate strat- which has “upended working prac- build portfolios that meet their - ceptable and harms the fund’s The bill, passed by the House egies based on renewable energy tices, organizational and operation- nancial needs as well as their sus- membership.” with bipartisan support in Novem- and low-carbon technologies. al structures,” may make employers tainability preferences.” Verb / to integrate eective ESG solutions together Noun / DWS

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* Source: Morningstar 2/13/20, based on proxy voting 7/1/14-6/30/19 For institutional client and registered representative use only. Not for public viewing or distribution. ESG Disclaimer: Environmental, social responsibility and corporate governance (ESG) related strategies seek to provide U.S. investors with access to assets that meet responsible investment criteria without sacriﬁcing investment returns. Although we strive to incorporate an ESG criterion, as one of many other criteria, in our investment analysis, DWS Investment Management Americas Inc. (DIMA) is a ﬁduciary and will act in the best interests of the client and investment account. The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries, such as DWS Distributors, Inc., which o¡ers investment products, or DWS Investment Management Americas, Inc. and RREEF America L.L.C., which o¡er advisory services. © 2020 DWS Group GmbH & Co. KGaA. All rights reserved. ESG2011321 (8/20) I- 077529

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AP7, Stockholm, shifted an Dallas Police & Fire Pension Torchlight Investors at its May 20 meet- additional 500 million Swedish kronor System hired Longfellow Investment ing, according to a memo Linda P. Le, ($56.7 million) into a green equity Management to run $76 million in N.Y. COMMON FUND COMMITS $2.8 BILLION interim retirement plan manager, strategy run by Impax Asset Manage- active domestic core xed income. New York State Common Retirement Fund, Albany, announced new included in July 22 board meeting ment, a spokesman con rmed. The $1.9 billion pension fund’s commitments totaling $2.8 billion in a June transaction report materials. The new allocation brings the 470 board approved the hiring at its June posted on the website of Thomas DiNapoli, the state comptroller and billion Swedish kronor AP7’s total 11 meeting, said CIO Kent Custer in sole trustee of the $194.3 billion pension fund. Louisiana Teachers’ Retire- investments to the Impax strategy to an email. ment System, Baton Rouge, made Within private equity, the pension fund committed €500 million 1.4 billion Swedish kronor. two new commitments totaling up to ($592 million) to European buyout fund CVC Capital Partners VIII, Investments are aimed at compa- El Paso (Texas) Employees $100 million. nies that generate more than 20% of Retirement Trust hired BlackRock $300 million to KKR Asian Fund IV, a buyout fund, and $200 million The $20 billion pension fund revenues through the sale of products and Wellington Management to run to Ares Corporate Opportunities Fund VI, a global exible buyout committed up to $50 million each to or services in areas such as energy $45 million each in active domestic fund. distressed debt funds Castlelake V ef ciency, renewable energy, water, core-plus xed income. Within real estate, the pension fund committed £200 million Dislocated Opportunities and ICG waste or sustainable food and The $825 million pension fund’s ($262 million) to Pramerica Real Estate Capital VII, a European real Recovery Fund II, managed by agriculture. board approved the hirings, pending estate debt fund managed by PGIM Real Estate, and €200 million Intermediate Capital Group, said Dana contract negotiations, at its July 15 ($237 million) to Exeter Europe Industrial Core, a closed-end Brown, director of public markets. Baltimore City Fire & Police meeting, a webcast of the meeting industrial real estate fund. Employees’ Retirement System shows. Lubbock (Texas) Fire Pension Also within real estate, the pension fund committed $100 million made two new commitments totaling Funding comes from the earlier Fund committed $4 million to Varde to AEPEP III N Strategic Co-Invest, a European real estate co-invest- $40 million. termination of Franklin Templeton from Dislocation Fund. The $2.6 billion pension fund a $200 million global xed-income ment fund. The transaction report says it is a co-investment partner- The $202 million pension fund’s committed $20 million each to CVI portfolio. ship to be invested alongside Ares European Property Enhancement board approved the commitment to the Credit Value Fund V, a distressed/ Partners III at the pension fund’s discretion. The pension fund credit dislocation fund at its June 10 opportunistic debt fund managed by Florida State Board of committed €318 million to that fund in March. board meeting, recently released CarVal Investors, and Vista Credit Administration, Tallahassee, In opportunistic absolute-return strategies, the pension fund minutes show. Partners Fund III, a disclosed $2 billion in committed $300 million to Stellex Capital Partners II, a middle-mar- private credit/special HAVE SOME NEWS? manager hires and ket special situations buyout fund, and $100 million to Stellex II New York State Teachers’ situations fund commitments, said Retirement System, Albany, made Please submit news of Co-Investment NY, a co-investment vehicle formed to invest in managed by Vista Equity John Kuczwanski, opportunities alongside the former fund. six private equity commitments for a Partners, spokeswoman changes to David communications total of up to $856 million and four In real assets, it committed $250 million each to Stonepeak Amy Baskerville said in Schepp, news editor, at manager, in an email. private debt commitments totaling up an email. [email protected] Within its strategic Infrastructure Fund IV, a closed-end North American-focused infra- to $475 million. investments asset structure fund, and Stonepeak Global Renewables Fund, a closed-end Information about the commitments Border to Coast Pensions class, the board, which oversees a renewable energy generation fund. was contained in a document Partnership, Leeds, England, total of $210.3 billion, including the Within its credit asset class, the pension fund committed $200 presented to the pension system’s committed about £1.2 billion ($1.5 $166 billion Florida Retirement million to collateralized loan obligation fund Neuberger Berman Loan governing board at its quarterly billion) to infrastructure. System, committed $350 million to Advisors Holdings II. meeting July 29. To date, the £46 billion pool of local CVI Credit Value Fund A V, a dis- The private equity commitments authority pension funds has deployed tressed/opportunistic debt fund are: $300 million to Silver Lake about £675 million to eight infrastruc- managed by CarVal Investors. commitments totaling up to $125 Funding comes from the $169 Partners VI, which invests in large-cap ture funds. An additional £760 million The board also committed $200 million. million pension fund’s termination of technology companies; up to $200 will be deployed in different strategies million to LCM Credit Opportunities The $38.5 billion pension fund’s an active domestic large-cap value million to DCP Capital Partners II, by March 31. Fund IV and $50 million to LCM SOLO board at its meeting July 30 approved equity portfolio managed by Fiduciary which will make small- and midcap The most recent commitments were V, both private credit funds. commitments of up to $75 million to Management for performance reasons. buyout investments in China; up to £100 million to Infracapital Green eld Within real estate, the board hired Clearlake Flagship Plus Partners, a £100 million ($126 million) to Partners Fund II, a Europe-focused utili- Cohen & Steers to run $250 million private equity fund, and up to $25 Los Angeles City Employees’ Livingbridge 7, a lower-midmarket ties, transport, communications and and DWS Group to run $150 million in million each to EnCap Energy Transi- Retirement System hired Wasatch buyout fund; up to €100 million ($115 renewables fund, and €101 million real estate investment trust portfolios. tion Fund I, a clean energy fund, and Advisors for a $230 million active million) to Vitruvian Investment ($118 million) to the Macquarie GIG The board also made a follow-on H.I.G. Bayside Loan Opportunity Fund emerging market small-cap equities Partnership IV, which will invest in Renewable Fund II. commitment of $24 million to CBRE VI, a distressed debt fund. mandate, Rodney June, CIO of the $19 high-growth companies in sectors that The partnership fund committed Asia Value Partners V, a closed-end billion pension plan, said July 29. include nancial services, information $100 million each to AMP Global non-core real estate fund. The board Industriens Pension, Copenha- LACERS launched an RFP on June technology, health care and media; up Infrastructure Fund II, which invests in originally committed $75 million to the gen, Denmark, committed 1 billion 10, 2019, for a manager to run a to $100 million to JFL Equity Investors transport, energy, utilities, communica- CBRE fund in 2019. Danish kroner ($157 million) to Actis separately managed account. V, a buyout fund managed by J.F. tions and health care; iCON Infrastruc- Within private equity, the board Energy 5, a renewable energy fund that Lehman & Co. that seeks investments ture Partners V, a European transport, committed €200 million ($234 million) invests in companies that both Los Angeles Fire & Police in aerospace, defense, maritime, power and utilities fund; and Stone- to European buyout fund CVC Capital produce and distribute electricity in Pensions committed a total of up to government services and environmen- peak Global Renewables Fund, which Partners VIII; $200 million to Lexington emerging markets. $70 million to two alternative funds, tal services sectors; and up to $15 invests in the solar, wind, hydro and Co-Investment Partners V; $175 The 189 billion kroner pension fund information on the $23.3 billion million to Amulet Capital Overage energy storage sectors. The pool also million to buyout fund Silver Lake has already invested 10 billion kroner pension fund’s website shows. Fund I, which will make follow-on committed €90 million to Arcus Partners VI; $100 million each to in green strategies. Pension fund of cials committed up investments to companies in Amulet European Infrastructure Fund II, a buyout funds Francisco Partners VI and to $60 million to buyout fund Silver Capital Fund I, a small/middle-market transport, telecommunications and MBK Partners V; £60 million ($77 Kansas Public Employees Lake Partners VI, which will invest in buyout fund focused on health-care energy fund. million) to middle-market buyout fund Retirement System, Topeka, technology, media and entertainment companies. Livingbridge 7; and $75 million to SVB committed up to $50 million to AEW companies. In private debt, the pension fund Dallas-Fort Worth Internation- Capital Strategic Investors Fund X, a Partners Real Estate Fund IX. LAFPP also committed up to $10 committed up to $200 million to Blue al Airport Board Retirement venture capital fund of funds. The $19.9 billion pension fund’s million to venture capital fund Summit Torch Credit Opportunities Fund II, Trust rehired AndCo Consulting as Also, the board terminated board approved the commitment to the Partners Venture Capital Fund V-A. which will “focus predominantly on investment consultant for its $715 Hexavest from a $715 million active opportunistic real estate fund at its lending to companies that are million de ned bene t plan, $96 global equity portfolio for perfor- July 24 meeting, spokeswoman Los Angeles Water & Power undergoing operational, financial, million 457 plan and $20 million mance reasons, and assets were Kristen Basso con rmed. Employees’ Retirement Plan legal or regulatory transformations/ 401(a) plan. reallocated to existing strategies, Mr. committed $60 million to Torchlight hurdles,” the document said. It also The retirement/investment Kuczwanski said. Lexington (Mass.) Contribu- Debt Opportunity Fund VII. committed $100 million each to a committee also approved a commit- tory Retirement System hired The board of the $14.1 billion plan pair of funds managed by MGG ment of $5 million to New Mountain Illinois Municipal Retirement RhumbLine Advisers to run about $20 approved the commitment to the real Investment Group — MGG SF Partners VI, a buyout and growth fund. Fund, Oak Brook, made three new million in passive domestic equities. estate debt fund managed by Evergreen Fund is a direct lending

Here’sHeree’s what yoyou missed since Sept. 1, 2019. GET ACCESS TODAY. SEARCHES HIRES TERMINATIONS $26.7B $99.7B $24.1B Access to the P&I Searches and Hires Database is 214 Manager and 881 Managers and 121 Managers and only available with a P&I Daily Enterprise License. Contact Elayne Glick at [email protected] Service Provider searches Service Providers hired Service Providers terminated or 212.210-.0247 for details. Pensions & Investments August 10, 2020 | 19 HIRINGS

fund and MGG Special Opportunities spokeswoman con rmed. The The $29.1 billion pension fund University of Utah, Salt Lake Westfield (Mass.) Contribu- Fund is an overflow vehicle. The allocation is being made to the committed $100 million to Taconic City, hired HUB International as tory Retirement System made Evergreen commitment is a follow-on BlackRock Climate Transition World Market Dislocation Onshore Fund III. investment consultant for the Utah new private equity and real estate to one made in August 2018. Equity Fund. The Taconic fund will seek global System of Higher Education’s 401(a), commitments totaling $39 million. The pension fund also committed Scottish Widows’ default passive investment opportunities resulting 403(b) and 457 plans. The $240 million fund’s board up to $75 million to Peninsula Fund equity portfolio is £20 billion. from the impact of the COVID-19 The university issued an RFP in approved commitments of $10 million, VII, a mezzanine debt managed by BlackRock will score each company pandemic. December on behalf of the eight $8 million and $5 million, respectively, Peninsula Capital Partners. in which it invests on factors such as It also committed $100 to Atalaya universities in the system for a to private equity funds managed by clean technology, energy management, Asset Income Fund V, a direct lending consultant to provide ongoing Constitution Capital Partners, Pomona Northern Ireland Electricity water management and waste fund that focuses on three principal investment advice to the universities’ Capital and Hamilton Lane at its June Networks, Belfast, hired a Deloitte management. asset classes — nancial assets, real retirement plans, which have combined 23 meeting, recently released meeting subsidiary rm to provide pension Scottish Widows has £160 billion in estate and corporate, according to the assets of $6.7 billion. minutes show. advisory services. assets under management. rm’s website. The pension fund board at the Deloitte Total Reward and Bene ts Also, $50 million was committed to Wayne County Employees’ same meeting also approved will advise the company on the Texas County & District Accel-KKR Emerging Buyout Partners. Retirement System, Detroit, with commitments of $8 million each to management of its liabilities and its Retirement System, Austin, Accel-KKR is an existing manager for $1 billion in assets, hired Hardman real estate funds managed by AEW triennial funding valuations, according committed $250 million to three the system and focuses investment Johnston Global Advisors to run $24 Capital Management and TerraCap to a notice on European procurement managers a transaction report primarily in software and technology- million in active international devel- Management. The names of the funds website Tenders Electronic Daily. showed. enabled services businesses. oped market equities. were not identi ed. The Northern Ireland Electricity Pension Scheme has £1.1 billion ($1.4 billion) in assets.

Pennsylvania State Employ- ees’ Retirement System, Harrisburg, made two new commitments totaling up to $125 million. INVESTING IN The $29.3 billion pension fund committed up to $75 million to HPS Mezzanine Partners 2019, a global mezzanine debt fund, and up to $50 million to LLR Equity Partners VI, a SAFER COMMUNITIES. buyout fund, spokeswoman Pamela Hile con rmed in an email.

San Antonio Fire & Police Pension Fund committed $20 million to Varde Dislocation Fund. The $3.3 billion pension fund’s REAL investment committee approved the SOLUTIONS commitment to the credit dislocation fund managed at its June 17 meeting.

The $3.4 billion San Jose Police & Fire Department Retirement Plan and the $2 billion San Jose Federated City Employees’ Retirement System disclosed commitments totaling $24 million, con rmed Ron Kumar, investment operations supervisor. The police and re plan committed $10 million to Top Tier Venture Capital IX, a venture capital fund of funds. The police and re plan and the city employees system committed $9 million and $5 million, respectively, to Lime Rock New Energy I, a growth equity fund investing in energy companies with a positive environmental impact.

Santa Barbara County (Calif.) Employees’ Retirement System committed $20 million to Deerpath Capital V, said Lauren E. Thompson, assistant CEO, in an email. The $3.2 billion pension fund’s board approved the commitment to the lower-middle market, senior direct lending fund at its July 22 meeting, Ms. Thompson said.

Sarasota (Fla.) General Employees’ Pension Fund hired Lazard Asset Management to run up to $8 million in an open-end global infrastructure strategy. The $132 million pension fund conducted a shortlist search after creating a 5% target allocation to infrastructure.

Scottish Widows hired Black- The Firearm Industry Has Distributed Over 100 Million Rock to manage a new £2 billion ($2.6 billion) allocation to active equity with Free Gun Locks To Create Safer Communities. a sustainable approach, a spokeswoman said. In a move toward more sustainable portfolios, Scottish Widows is funding Learn more at NSSFRealSolutions.org its rst active equity allocation within its default pension investment approach from new contributions, the MEET THE ADVISORY BOARD

JUST ANNOUNCED

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P&I announces its DCW Fall Series will be hosted in a virtual format. The program will feature daily interactive sessions aimed at giving plan sponsors an opportunity to meet their peers face-to-face in a virtual Julio Canizal Reuben Escobedo setting. The program will cover a wide range of topics carefully chosen by City of San Diego Valero Energy Corporation P&I’s advisory board which reﬂect the most pressing issues plan sponsors are facing today in managing retirement savings.

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Wednesday, October 28 | 11:30AM - 12:20PM ET Impact of the CARES Act, the SECURE Act & Other Regulatory Updates Herbert Nishii Amy Resnick Plan sponsors will gain insights on regulatory changes that could aect County of LA Treasurer Pensions & Investments retirement plans in the coming year and what’s ahead for retirement and Tax Collector policy. With the Department being on the verge of issuing guidance on “pooled employer plans, ESG investing, and the care standard for rollover recommendations, and with the 2020 Election around the corner, 2021 will likely bring big changes.

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20pi0170.pdf RunDate:8/10/20 FULL PAGE Color: 4/C Pensions & Investments August 10, 2020 | 21

$1 trillion in U.S. equity value in the “We’re taking all this transac- shop for cybercriminals to access until mid-2022 and one of the up- Dow Jones Industrial Average in a tional data, putting it into a ware- the personal and nancial informa- coming milestones stakeholders CAT little more than 30 minutes. house and we’re letting a whole tion of every American investor and have an eye on is interrm linkage In March, the SEC exempted the bunch of people see it,” he said. no reduced amount of (personally validations for equities and options CONTINUED FROM PAGE 2 SROs from having to collect or re- “Right now, the New York Stock Ex- identiable information) is accept- trades, which have compliance dates of it?” she said. “It seems more than tain certain retail customer data, change can only see my activity as able when it comes to that risk.” of Oct. 26 and Jan. 4, respectively. ever at this time that it is so impor- including individual Social Security it pertains to the New York Stock An SEC spokeswoman declined “Interrm linkage is one of if not tant to keep it within this secure numbers or individual taxpayer Exchange, they don’t know what to comment on the lawsuit. the most difcult pieces and the environment.” identication numbers, dates of I’m doing on Nasdaq. Now they’re hard part is really getting started,” In a statement, CAT LLC — the birth and account numbers. Instead going to have the ability to see that. Further complexities said Shelly Bohlin, FINRA CAT group formed by U.S. exchanges to of including these most sensitive It just increases the risk.” During the week of July 20-24, president and chief operating of- establish a plan to implement and pieces of personally identiable in- In May, the American Securities the CAT received approximately 69 cer during a July 22 FINRA CAT manage the CAT — said the securi- formation, broker-dealers are re- billion records on the equities side, and CAT LLC webinar. ty of CAT data is of “critical impor- quired to report an account holder’s and approximately 7 billion records Ms. Greene said some rms are tance to the SROs, and that applies name, address and birth year. on the options side, a FINRA CAT concerned about correcting errors both to data in the CAT itself and SEC Chairman Jay Clayton also spokesman said in an email. The when multiple parties are involved. data the SROs download. With rein March asked SEC staff to pre- rejection rates — the percentage of “If a rm has a billion messages a spect to downloads of data, the CAT pare a recommendation on improv- order events, which include orders, day to CAT, even if they have a very plan requires that SROs have the ing data security requirements in modications, cancellations, routes low error rate like 1% or 0.5%, that ability to download CAT data. How- the national market system plan and executions, that contain errors could still leave upwards of 1 mil- ever, the SROs will not have the governing the CAT, including ex- and get rejected — were approxi- lion errors to correct,” she said. ability to conduct bulk downloads ploring any alternatives to bulk mately 0.6% for equities and 0.2% “And as rms look outward and of customer information, and any downloading data by each SRO that for options, well within the maxi- think, ‘Gosh we have errors with all information that the SROs do would better secure CAT data. mum acceptable rejection rate of of these different rms,’ I think download will be used solely for “While getting rid of Social Secu- 5%, he added. there’s a little initial concern about regulatory purposes.” rity numbers is critically important The exchanges selected the Fi- how the error correction will go.” Cybersecurity protocols will be to CAT, it’s also very important that nancial Industry Regulatory Au- Keith Jamaitis, New York-based the responsibility of each SRO once we achieve the goals of CAT, which ID, PLEASE: Manisha Kimmel believes thority as plan processor in Febru- managing director of Broadridge the data is downloaded. are to allow for a (CAT Customer it’s crucial to be able to see all activities ary 2019, which then created Professional Services, which re- ID) that crosses broker-dealers that of a customer across the marketplace. FINRA CAT to build the audit trail. ports its own data and data for Data focus will allow regulators to see activity Jim Nevotti, Chicago-based pres- third-party broker-dealers to the CAT’s cybersecurity has long of a customer across the market- Association led a legal challenge ident of Sterling Trading Tech, CAT, said CAT reporting will be- been a concern for stakeholders. place,” said Manisha Kimmel, who against the SEC to stop the collec- which is reporting CAT data for a come more complex once interrm When fully implemented, it will be oversees the CAT project for the tion of any individual’s personally number of large broker-dealers, linkages get started. a single database for all equity and SEC as senior policy adviser for information in the CAT. “Saving for said the initial compliance dates “There’s good interaction across options trades on U.S. exchanges. regulatory reporting, during a SIF- retirement is hard enough,” said went smoothly, though there were the industry of what’s expected and It’s intended to allow regulators MA webinar in June. Chris Iacovella, the Washington- some last-minute issues to x in how things work, but that doesn’t to track illegal or manipulative Jim Toes, president and CEO of based organization’s CEO, in a unique cases. “Any hiccups are make the additional systems com- trades and show a way to quickly the Security Traders Association, statement. “You shouldn’t have to around unique, one-off client cases ing into scope and additional com- determine what caused large, sud- New York, said that while requiring worry about having your right to where they’re doing something dif- plexities in data any easier, but I do den losses in trading value, such as less information to be stored in the privacy violated and your identity ferent than most of the other par- think the industry is prepared to the ash crash of May 6, 2010. That CAT is good, there’s still cause for stolen in the process. The SEC’s ticipants,” he said. continue on its successful road event resulted in the loss of nearly concern. CAT database will create a one-stop CAT is being rolled out in phases map,” he said. n

meet with the adviser through a groups and other social media — as part of the CARES Act. Fifty of vestment Counsel, for example, de- computer screen that allows for reported little trouble in shifting to the 1,191 participants in the $322 veloped a smartphone app for par- Education screen sharing and even the view- a complete web-based communica- million plan enrolled in the ses- ticipants whose employers signed ing of accounts online, Ms. Send tions environment. Milwaukee- sions with 29 ultimately pulling up for nancial counseling services. CONTINUED FROM PAGE 4 said. At the end of the meeting, em- based Mortgage Guaranty Insur- money out of their retirement ac- The app was used to “send out noti- Companies that struggled to piv- ployees “wipe down everything and ance Corp., for example, had no counts, Ms. Grabowski said. cations every single week” on ot to web-based delivery were those the next person comes in,” she said. problem. The company had long Overall, the company has seen a time-sensitive issues such as un- that have not engaged their em- provided its remote workforce with strong uptick in the number of par- employment fraud, Ms. Send said. ployees using technology, according Creative communication one-on-one counseling sessions via ticipants signing up for one-on-one The rm, also, produced a “Don’t to Ms. Send. Manufacturers and Even companies that reported a phone and WebEx, so it “was an nancial counseling sessions as Panic” video that it pushed out to all other companies that tend to com- smooth transition to a web-based easy transition” to provide all nan- well as group meetings on nancial participants via the phone app municate with employees via tradi- environment had to be creative in cial education — whether one-on- topics. Through the end of July, 200 when the market plummeted in tional channels — posters, yers communicating with hard-to-reach one or in group sessions — via We- employees had enrolled in individ- March and April. The video gave a and other paper communications employees. Sonepar USA, a distrib- bEx to the entire workforce, which ual and group educational meet- “history lesson about why it’s a bad coupled with on-site events — utor of electrical products, for ex- has been working remotely since ings, surpassing the last year’s 148 idea” to “sell your equity shares sometimes do not have email ad- ample, set up special events at its mid-March, said Brenda Grabows- enrollments. when they’re down,” Ms. Send said, dresses for their employees, she larger locations for its warehouse ki, the Milwaukee-based total re- explaining that it helped “talk peo- said. and other employees to wards manager in MGIC’s human Innovation and ingenuity ple out of the natural tendency to Such employers tend watch webcasts on - resources department. The pandemic has triggered a have fear during these times.” to balk at web-based - nancial topics, said An- The mortgage insurance compa- burst of innovation and ingenuity. Other providers made phone and nancial education, with nette Grabow, retire- ny worked with Francis Investment In addition to holding one-on-one one-on-one virtual meetings easy many opting to “wait ment programs Counsel to set up special phone and meetings over a computer screen, to schedule. CAPTRUST, for exam- and see” how the year manager for Sonepar WebEx counseling sessions on the service providers developed tools ple, developed an online scheduling plays out in terms of USA in Charleston, S.C. ramications of the new COVID-19 that allow plan sponsors to reach tool that allowed participants to possible looser rules “A lot of the operat- withdrawals it allowed participants more workers, rather than just schedule their meetings to occur ei- and guidelines regarding companies will of- to take from their 401(k) accounts those with computers. Francis In- ther online or by phone. n ing social interaction, fer a space at different she said. times during the day for Ms. Send estimates HELP: Kelli Send said people to come and that some 15% of the advice requests more watch them together,” REAL rm’s plan sponsor cli- than doubled in the rst Ms. Grabow said. SOLUTIONS ents have pushed their half of 2020. Ms. Grabow said that INVESTING IN SAFER nancial education into because the company the fall. Some employers prefer on- communicates with employees on- site education and advice, while line and in “a ton of different ways COMMUNITIES. others are concerned about remote internally, including email, in- communications, fearing issues tranets, video, internal TV monitors with technology and connectivity, and digital newsletters,” it had no Ms. Send said. difculty in continuing the nan- Still, some companies unaccus- cial education services it offers the The Firearm Industry Has tomed to reaching employers via 11,500 participants in its $722 mil- email and the internet decided to go lion 401(k) plan. Through Charles Distributed Over 100 Million with remote workarounds. Some Schwab Corp., the company offers employers with a high percentage one-on-one nancial coaching ses- Free Gun Locks To Create of factory, warehouse and other on- sions as well as monthly webcasts Safer Communities. site workers implemented on-site and panel discussions and “coffee virtual one-on-one counseling talks” on nancial topics through- whereby workers meet individually out the year, she said. with a remote nancial counselor Indeed, plan sponsors that en- in a conference room. gage with employees using multiple Learn more at NSSFRealSolutions.org Workers “le into the conference tech-based media channels — room at their scheduled time” and email, web, even private Facebook 22 | August 10, 2020 Pensions & Investments

UPCOMING WEBINARS | REGISTER TODAY Value Value stocks underperform Annual performance of value, growth and global markets. CONTINUED FROM PAGE 3 40% value assets under management were not available. 30% Growth and value exposures in equity portfolios were previously 20% more balanced, especially in the U.S., she said. “And value has been 10% ESG: Coronavirus Turns the so out of favor it has added concen- tration to growth.” 0% Spotlight Brighter But “this year has been the most interest I’ve seen for seven years in -10% Live, Wednesday, August 26 • 2:00 p.m. - 3:00 p.m. ET value, in that when the growth -20% The severe economic contraction, uneven socioeconomic impact and trend reverses it will be quite vio- MSCI World MSCI World MSCI World protests over racial injustice and economic inequality driven by the lent,” Ms. Bensa said. -30% Value index Growth index coronavirus pandemic has intensified the spotlight on ESG investing. J.P. 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The ar- • Integrating ESG into your investment process commercial of cer at analytics pro- gument largely focuses on the use • The importance of (and sources for) data Unusual environment vider Style Analytics Ltd. “You of price-to-book as the main mea- • Engagement Hugh Gimber, a global market couldn’t have designed a worldwide sure of a stock for value investing. • Balancing short-term and long-term risks and opportunities strategist also based in London for event to bene t one company bet- “It’s an area that requires further • The active/passive paradigm J.P. 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But ... up small competitors and really cre- While it’s easy to value a build- (clients) need to be cognizant now ate monopolies for themselves. ing, machinery or equipment, intel- that a lot of the story around the re- Combine that with the low-interest- lectual property and brand are in- How to Reliably Improve the Risk/ silience of online (stocks, for exam- rates environment and there’s good creasingly important parts of a ple,) is now factored into the price. Tracy Powell company’s worth, he said. “These Return Trade-O ... We’re starting to think about just things matter much more and are Institutional investors face a balancing act between two equally bringing a bit more balance back subject to very different accounting important needs: achieving robust long-term returns while avoiding into portfolios, ensuring we are not treatments.” the painful consequences of near-term drawdowns. The intense market overly overweight the winners. Free cash ow yields may be a volatility of the past few months highlights the diculty in maintaining Growth vs. value comes up on pret- better measure. “Our analysis this balance, as most traditional portfolio hedging strategies failed to ty much every client call I do at the shows that over the last 30 years, perform as expected. Join us as risk mitigation experts from Securian moment.” Clients “are not ready to the increasing impact of the intan- Asset Management describe their work leading to a reliable solution for say now is the right time to be ex- gibles on the balance sheet really this dilemma. They’ll discuss: plicitly overweight value, but cer- does make (price-to-book) less of a tainly (to be) balancing out expo- strong indicator for values than • How equity volatility levels exhibit a persistent and reliable rela- sures given how extreme moves cash-ow yields,” Style Analytics’ tionship with equity returns. have been,” Mr. Gimber said. Mr. Handzy said. • How a permanent strategic allocation to an equity stabilization And Schroders PLC’s value team A combination of metrics is a strategy that utilizes the persistent volatility/return relationship can is also seeing interest. “There are a better approach, sources said. improve investors’ long-term risk/return ratios – even if number of people knocking on the Schroders’ value team uses cash implemented right after a market sello. door, looking to gain exposure (to ows for investing rather than value) given how extreme the move price-to-book. Until early 2019, the Replay available: pionline.com/SecurianWebinar in growth has been,” said Kevin team outperformed the market, but Murphy, fund manager, equity val- in 2019 and 2020, performance has Sponsored by: ue, in London. NICE BONUS: Damian Handzy said tech been “poor and that has put a dent The MSCI World Value index an- stocks have been helped by a friendly into the long-term performance,” nual returns have underperformed regulatory environment. Mr. Murphy said. Schroders runs growth and global markets nine about £9 billion ($11.5 billion) in as- times since 2006. In 2019, value reason for these tech giants to con- sets across global value strategies. gained 22.74%, compared with tinue growing and increasing their 28.4% for the MSCI World index market share and stock prices.” Extreme dislocations Retirement Income: Coronavirus fails and 34.14% for the MSCI World But market participants are still And J.P. Morgan Asset Manage- Growth index. The most recent out- looking for the silver bullet that will ment has found “extreme disloca- to derail progress performance for value was in 2016, facilitate value’s comeback in its tions, almost historically unprece- Despite major disruptions triggered by the COVID-19 pandemic, defined with a 13.23% return vs. 8.15% for own right — although managers dented in the market,” with value contribution plan sponsors continue to forge ahead charting a path to world markets and 3.21% for warned that may be hard to nd. spreads wider today than at the provide plan participants with secure retirement income options. Our growth. “It won’t surprise you that people height of the tech bubble and pres- panelists will discuss the impact of the pandemic on DC plans, new And over the shorter term, per- are trying to nd a catalyst to make ent across sectors, Mr. Butler said. hurdles plan sponsors face, how legislation is changing the retirement formance was particularly poor, value return to greatness. While we The international equity group had income discussion. Specifically, our panel will discuss: with an annualized -10.61% return can devise a nice-sounding story … $2.2 billion in value equities across for the year through June 30, com- around what has happened and international, Europe and U.K. • Impact of the 2020 CARES Act on plan sponsors, participants pared with 3.4% for the world index why, the reality is when you try and strategies as of June 30. • Best practices in participant communications and 17.85% for growth. test whether that story holds true in JPMAM, which looks at a com- • The role of annuities – today and tomorrow the past, that doesn’t work,” Mr. posite value metric and uses price- Murphy said. to-book as a secondary check, has • Retirement tier - plusses and minuses Losing its luster Right now, money managers and Take the argument that higher also had a challenging period in • Evolving the glidepath to address multiple risks consultants think value is not only ination should bring value to the terms of performance, particularly • SECURE 2.0 performing poorly, but continued fore. “One market where there is over the past 12 to 18 months. gains by growth stocks are making signi cant deation is Japan ... But when value does make a Replay available: things look relatively worse. (where) value investing has comeback, investors need to be “At the moment, value seems to worked,” he said. ready. “A big proportion of returns pionline.com/RetirementIncomeWebinar be stuck in the middle of a historic “Markets defy easy stories — to value are often in the rst few tech revolution, and the ongoing simple stories that people tell weeks (of a rally). That’s when you Sponsored by: seismic effects of the GFC that are themselves are just that. Fairy tales. can make a big bang for your buck,” still reverberating through very low The market doesn’t listen to your Mr. Butler said. interest rates and at yield curves,” stories,” Mr. Murphy added. Schroders’ Mr. Murphy agreed: Aon’s Mr. Yesildag said. A hot topic in the investment in- “The elastic band can only stretch For a full list of webinars, go to pionline.com/webinars Growth stocks have dominated dustry right now is whether value so far, and when it snaps back it will the COVID-19 recovery, said Dami- should be rede ned in order to be huge.” n Pensions & Investments August 10, 2020 | 23

es that ESG factors can be pecuni- based managing director of retire- serve as QDIAs,” the United Na- that match their ESG values — but ary factors,” but only if the econom- ment policy for State Street Global tions-supported PRI said. ERISA duciaries cannot select in- Proposal ic risks or opportunities associated Advisors’ de ned contribution The Labor Department has also vestments based on non-pecuniary with them are material, according team, said in an interview the Labor received letters from Capitol Hill ESG factors when plan participants’ CONTINUED FROM PAGE 1 to the fact sheet. Department proposal missed the both questioning and welcoming its retirement savings are at stake,” the ing behind the proposal and said “Private employer-sponsored re- mark. “We weren’t surprised that proposal. National Association of Manufac- the proposal would create barriers tirement plans are not vehicles for they weren’t going to embrace ESG Thirteen Senate Democrats, in- turers said. for considering ESG risks; add to furthering social goals or policy ob- solutions in retirement plans, but I cluding Patty Murray of Washing- duciary confusion regarding if jectives that are not in the nancial think we were surprised at how ton, ranking member of the Senate Global response and when ESG factors may be con- interest of the plan,” Labor Secre- they went about it and the breadth Health, Education, Labor, and Pen- Stakeholders from across the sidered material; and lead to in- tary Eugene Scalia said in a news of what they did,” she said. sions Committee, said the proposal world, including Europe, Canada creased documentation costs. release after the proposal was un- rule would undermine the ability to and Australia, submitted comment Aron Szapiro, Morningstar Inc.’s veiled. “Rather, ERISA plans should Some questions consider rms’ records on race and letters in opposition to the propos- head of policy research based in be managed with unwavering focus In particular, Ms. Kahn and other diversity when making decisions. al. The Brunel Pension Partnership, Washington, said if the rule were to on a single, very important social stakeholders have called into ques- The senators said that while Bristol, England, which has about go into effect, plan sponsors would goal: providing for the retirement tion a provision in the proposal that people across the country are de- £30 billion ($36.3 billion) in assets, move away from any investments security of American workers.” eliminates the possibil- manding more tools to said in its comment letter that ESG that consider ESG factors just to The $246 billion California State ity that an ESG fund — ght for racial and eco- factors can be nancially material. avoid the liability and additional Teachers’ Retirement System, West themed or not — can be nomic equity, the Labor “If the proposal goes into effect, it costs, which would be to the detri- Sacramento, integrates ESG factors a quali ed default in- Department “is moving will undermine our ability to act in ment of retirement savers. into its investment decision-mak- vestment alternative or in the opposite direc- the long-term best interests of our “We think it’s really fundamen- ing because it thinks they are “ - even part of a QDIA. tion. ESG investing al- bene ciaries,” its letter, signed by tally out of step with ( duciaries) nancially material and, foremost, “That provision, per- lows retirement savers CEO Laura Chappell, said. using ESG factors as part of a pro- because we have an obligation to haps the most signi - to support long-term In Europe, ESG investing is more cess for investing,” Mr. Szapiro said. our plan participants as long-term cant of the changes in change by building a mainstream. European funds de- “It’s a rule that seems to be 15 years stewards of their capital,” Aeisha the proposed rule, system that rewards voted to sustainable investing at- behind the current thinking, at Mastagni, CalSTRS’ portfolio man- would appear to pre- and values inclusion tracted a record €120 billion ($135 least.” ager of sustainable investment and vent a plan duciary OVERSEAS HARM: Laura and diversity in corpo- billion) from investors last year, ac- ESG investing in the U.S. has stewardship strategies, said in a from offering an ESG- Chappell said the DOL rate culture from the cording to Morningstar. Also, Euro- grown in popularity. Data from comment letter. themed fund with the decision could hurt U.K. board to the workforce.” pean funds that incorporate ESG Morningstar show a nearly fourfold “If the proposal is nalized with name ESG even as a pension funds, too. But some lawmakers strategies held €668 billion in as- increase in 2019 over the previous these amendments, duciaries will small component of the applauded the Labor sets, up 58% from the prior year. year in ows into U.S. sustainable struggle to ful ll their obligations to QDIA,” the Council of Institutional Department’s efforts, including Many letters called on the Labor funds, at $21.4 billion, and record deliver optimal returns by integrat- Investors wrote in its comment let- nine House Republicans in a letter Department to extend the 30-day ows into ESG funds and into strat- ing all nancially material risk fac- ter. “We believe DOL has not ex- that also asked the department to comment period, which didn’t hap- egies based on ESG indexes in the tors which have been repeatedly plained why the ESG name alone amend the proposal to require any pen, or withdraw the rule entirely. rst quarter of $10.5 billion. proven to be pecuniary,” she said. disquali es an investment from the company seeking eligibility for State Street was part of the latter Though not governed by ERISA, QDIA, let alone as a small compo- American retirement fund invest- camp. Ms. Kahn said the Labor De- Other considerations CalSTRS said given the long-term nent of the QDIA.” ments meet U.S. transparency stan- partment should “go back to the The proposal would require - nature of its liabilities, it is “keenly The Principles for Responsible dards. The congressmen who drawing board,” adding that she duciaries to consider other avail- interested in the rules and regula- Investment voiced similar concerns signed the letter cited concerns thinks the department doesn’t unable investments to meet their pru- tions that govern the securities mar- with respect to QDIAs, writing in its over retirement funds investing in derstand how stakeholders look at dence and loyalty duties under ket.” Moreover, in 2018 it created an comment letter that the Labor De- Chinese companies. ESG today. “Most ESG factors are ERISA. It also outlines the require- eight-manager pool to execute spe- partment failed to clarify what in- Comment letters from business very ‘pecuniary,’ to use their word,” ments for selecting investment al- ci c strategies focused on ESG investment options are “ESG-themed trade groups mostly welcomed the she said. “If you have a company ternatives for 401(k) plans that os- vestments as opportunities arise. funds.” By not making that clari ca- proposal. that’s dumping hazardous waste or tensibly pursue one or more CalSTRS could eventually invest a tion and “prohibiting the inclusion “Individual companies are free has had issues in the past with how ESG-oriented objectives in their total of $1 billion to pool managers of investment options that integrate to pursue appropriate ESG agendas they’ve handled company accounts, investment mandates or that in- to diversify its $6 billion sustainable ESG as part of risk mitigation,” the for their businesses, their commu- that’s a very important factor to clude such parameters in the fund investment and stewardship strate- proposal may “actually make it dif- nities, and their shareholders, and look at and will have an impact on name. gies portfolio, it said last year. cult for plan sponsors to nd any individual investors and plan par- that company’s nancial perfor- The proposed rule “acknowledg- Melissa Kahn, Washington- well performing funds that can ticipants are free to select funds mance.” n

within the three years before loans invest in a TALF fund and instead The rm noted that its TALF fund as a closed-end private equity must be repaid in a very tough in- gave existing manager Paci c In- strategy that was launched in 2009 fund and only offered participation TALF vestment environment, observers vestment Management Co. LLC dis- had an annual internal rate of re- to the rm’s own xed-income mu- said. cretion in April “to buy direct TALF- turn of 21.5%. SLC Management tual funds and existing separate ac- CONTINUED FROM PAGE 3 “To plan sponsors, in this envi- eligible securities ... but only if the (U.S.) and its Canadian af liate count clients, said Rudy Pimentel, “In addition, as all-in yields ronment, TALF investments look opportunity presented itself” in a manage a total of $180 billion. vice president and head of xed- tighten below the TALF nancing pretty good in relation to their risk separately managed distressed sit- Voya Investment Management income product management. rates, it doesn’t make sense to buy tolerance given that TALF manag- uation account, said Scottie D. Bev- raised about $500 million for its Even with a limited number of more assets using the leverage pro- ers are buying AAA-rated xed in- ill, senior investment of cer for new TALF 2.0 fund through “ro- invited investors, Mr. Pimentel said vided by the TALF program,” Mr. come with good nancing terms. global xed income, in an email. bust” demand, said David S. Good- demand exceeded the fund’s $250 Long said. TALF is like a shiny object in a “This was a less expensive op- son, an Atlanta-based managing million cap “by a wide margin” so world lacking opportu- tion for TRS and there director and head of securitized in- capital commitments were set at ‘Brilliant’ nity for yield,” said were still too many un- vestments, in an email. $125 million and the remaining “It turned out that the Fed was Palmer Square’s Mr. knowns in April. As $125 million was set aside for the brilliant in that by just announcing Long. soon as the Fed an- ‘An impossibility’ rm’s mutual funds. the TALF program, it became a Mr. Long said de- nounced further (re- When it comes to investing these T. Rowe Price also has held off backstop for spread levels and led mand for Palmer lief) programs, includ- assets, the Voya team found that calling capital or making invest- the market to behave more normal- Square’s new TALF ing the purchase of “with spreads tightening so rapidly ments through the fund, Mr. Pi- ly as spreads narrowed from really fund “was very high” corporate bonds, ahead of the launch of the (TALF) mentel said, noting that “the speed wide spreads,” Mr. Long said. Palm- and the rm stopped spreads collapsed ... program, building a perfectly with which securitized credit mar- er Square Capital manages $12.1 accepting assets after outside of legacy sculpted model portfolio with as- ket spreads have recovered has billion, including a new TALF fund. the fund’s second close (CMBS),” Mr. Bevill sets across all the sectors became made use of the Fed’s TALF 2.0 fa- Sources estimated the universe and created a waiting LATER: Alice Lee said said. an impossibility,” Mr. Goodson said, cility — the leveraging of invest- of TALF managers likely will man- list. Mr. Long declined prospects for volatility in Market conditions adding that the tightening “effec- ments — less compelling.” age $2.5 billion to $4 billion in their to provide the size of the fourth quarter could have put some TALF tively reduced the size and scope of “Our team of analysts, traders funds, although most money man- the fund. be good for TALF funds. managers into an in- the opportunity set.” and portfolio managers stand ready agers contacted declined to com- In May and June, vestment holding pat- He said there are opportunities to deploy capital if and when op- ment on their TALF strategies. Pensions & Investments reported tern. to be found in careful security se- portunities arise between now and Among the institutionally orient- asset owners invested or committed Sun Life Capital Management lection, especially in commercial the end of the year when the Fed’s ed money managers that have a total of $972 million to TALF (U.S.) LLC, New York, launched its mortgage-backed securities be- TALF 2.0 facility stops accepting launched TALF funds but declined strategies. TALF fund on June 17 after capping cause CMBS is the one securitized loan requests,” he said. to comment are: AllianceBernstein Among the largest investments fundraising from institutional in- asset class that TALF limits assets T. Rowe Price manages $1.22 tril- LP., BlackRock Inc., Hildene Capital were commitments up to $250 mil- vestors at $550 million. Demand for to those purchased in secondary lion. Management LLC, Invesco Ltd., lion each by the $51.2 billion Teach- the fund was high and was two markets “so we are not contingent Willis Towers Watson’s Ms. Lee Loomis Sayles & Co. LP., MacKay ers’ Retirement System of the State times oversubscribed, the rm said. on new issuance, which has been said Fed’s extension of the TALF Shields LLC, Morgan Stanley In- of Illinois, Spring eld, and the $74.9 “Credit spreads have tightened very limited or non-existent in sec- loan window to Dec. 31 from Sept. vestment Management, TCW billion Massachusetts Pension Re- signi cantly since the Fed’s an- tors like ABS and (collateralized 30 gives “TALF funds a better Group Inc. and Varadero Capital LP. serves Investment Management nouncement of TALF in mid- loan obligations).” chance of ramping up their portfo- Demand for TALF investments Board, Boston. March. We are closely following Voya Investments manages a to- lios. We expect there to be a reason- from institutional investors has In May, MassPRIM committed to market dynamics but are currently tal of $230 billion. able chance of a bout of market been high, leaving managers with a a separately managed TALF ac- holding off investing capital until Given the potential for limited volatility in the fourth quarter, lot of money on hand or available count run by Loomis Sayles. anticipated returns meet our ex- capacity, Baltimore-based T. Rowe which could create an attractive en- through capital calls to put to work Illinois TRS chose not to directly pectations,” the statement said. Price Group Inc. set up its TALF try point.” n 24 | August 10, 2020 Pensions & Investments AT DEADLINE Meng Illinois Teachers executive commitments totaling $71 BlackRock stays remote CONTINUED FROM PAGE 1 million. director quits under cloud BlackRock’s 16,000 employees The pension fund committed mitted $328 million to Carlyle Eu- may continue to work remotely for Richard Ingram, executive contract,” conducted by King & €35 million ($41 million) to EQT rope Partners V and $1 billion to the remainder of the year Blackstone Core Equity Partners II, director of the $51.2 billion Spalding, a Chicago law rm. IX Euro Sleeve, a buyout fund wherever they are located, even a long-hold buyout fund managed Illinois Teachers’ Retirement Zachary Fardon, a managing as the rm reopens of ces around managed by EQT Partners, and by Blackstone Group. System, Spring eld, resigned Aug. partner at the law rm, led the the world in the midst of the $30 million to Stellex Capital To guard against con icts of in- 3, effective immediately. investigation, Mr. Urbanek said. COVID-19 pandemic. Partners II, a special situations terest, CalPERS requires the CIO to On July 31, the board of Mr. Fardon did not immediately “Given the uncertainty in many buyout fund managed by Stellex report all investments and posi- trustees unanimously voted to respond to a request for informa- tions in business entities. The CIO of our locations and to help you Capital Management, according to place Mr. Ingram on administration about the investigation. also must report income — includ- plan ahead, we will continue draft minutes of the pension tive leave “due to performance R. Stanley Rupnik, Illinois TRS’ ing gifts, loans and travel payments fund’s July 21 board meeting. providing all employees the option — from sources that would contract issues covered by his employ- chief investment of cer, was As of June 30, 2019, the of working from home for the rest with CalPERS or from sources in ment contract,” a news release named interim executive director of 2020. When your of ce is pension fund’s actual allocation which board-administered funds from the system said. and will handle day-to-day available for use, you can decide to private equity was 17%. may invest, or from intermediaries TRS spokesman David Urbanek operations of the fund, the news to work from the of ce, work from such as consultants or placement declined to comment on the release said. home or split your time between Fresno County axes AJO agents. The CIO also must report all circumstances of Mr. Ingram’s The board will implement a interest in California real estate. the two,” said an Aug. 3 employee The $4.5 billion Fresno County departure, but said in an email nationwide search for a new memo. The day after Mr. Meng’s resig- that “the board’s unanimous vote executive director, the release (Calif.) Employees’ Retirement nation was announced, California Where BlackRock reopens came after an investigation of said. Association terminated AJO from Controller and CalPERS board of ces based on local conditions issues relating to Mr. Ingram’s — CHRISTINE WILLIAMSON a $111 million active domestic member Betty T. Yee called for the and government guidelines, it will large-cap value equity portfolio. emergency board meeting. use a split-team model for the Jeffrey MacLean, CEO and “I take my duciary duty to safe- time being to “ensure social senior consultant of Verus guard CalPERS investments on be- Ms. Yee said. Ms. Frost joined CalPERS as CEO in distancing,” BlackRock of cials half of the members very seriously,” In the meantime, Dan Bienve- October 2016. Advisory, the pension fund’s said in the memo. BlackRock will Ms. Yee said in a written statement. nue, deputy chief investment of- In May 2018, the board gave the investment consultant, recom- increase of ce occupancy in “I am incredibly disappointed to cer, total portfolio, was named in- sole responsibility for hiring, ring mended the termination in a areas where COVID-19 conditions hear about the former CIO’s lapse terim CIO, according to a news and setting compensation for the memo to the board because of have improved or reduce in-per- in both judgment and adherence to release announcing Mr. Meng’s res- CIO to the CEO alone. Prior to then, the recent reduction of AJO’s standard con ict-of-interest poli- ignation. the board and CEO shared that re- son head count if pandemic staff, a loss of client assets under cies.” sponsibility. conditions worsen. management and underperfor- “I have called for an emergency Reporting lines Former CalPERS board member BlackRock managed $7.32 mance. board meeting to discuss this situa- At CalPERS, only the CEO — and former member of the Califor- trillion as of June 30. tion, review these policies, the Marcie Frost — reports to the board. nia State Personnel Board Richard Mr. MacLean shared a July 27 CEO’s oversight and implementa- During the tenure of Ms. Frost’s Costigan said he supported making Texas Teachers ponies up memo to Vincent Francom, tion of these policies, and any addi- predecessor, Anne Stausboll, the the CEO responsible for hiring, r- director of public markets at tional safeguards necessary to en- board agreed to have the CIO re- ing and setting the compensation Texas Teacher Retirement Verus, from AJO co-CEOs Ted Aron- sure this does not happen again,” port to the CEO and not the board. for the CIO because “as a civil ser- System committed a total of son and Gina Moore, saying the $470 million to three alternative rm is “reducing our footprint in Chris Hamilton investment strategies in July, a light of reduced clients and transaction report from the assets.” $148.1 billion system showed. Assets AJO will let go of 16 employees The largest commitment was over the next six months, of which CONTINUED FROM PAGE 1 $250 million from the system’s ve are part of the money’s $8.8 billion energy/natural quarter,” said Dean Ungar, vice manager’s 25-person investment resources/infrastructure portfolio president, senior credit ofcer at team. AJO’s assets under Moody’s Investors Service Inc., to BIS Brazos Infrastructure Fund, management fell to $12.1 billion New York. managed by existing infrastruc- as of June 30 from $18.7 billion “We’ve seen revenues under ture manager BlackRock. six months earlier, according to pressure. That’s not surprising be- From the system’s $23.7 billion cause at the end of the rst quarter, Mr. MacLean’s memo. private equity portfolio, a total of AUM was down a lot, more than $220 million in commitments was 10% because of the market disrup- split between two existing Judge rules for American tion (caused by) the coronavirus. managers with $200 million A U.S. District Court Judge in We knew that the AUM starting earmarked for Silver Lake Fort Worth, Texas, has ruled in point was going to be low,” he added. Partners VI and $20 million to favor of American Airlines Inc., In the rst quarter, aggregate as- Diamondleaf Co-Investment rejecting claims by participants in sets managed by publicly traded Partners, managed by Clearlake a 401(k) plan that the company’s money managers fell 10% to $24.31 Capital Group. duciaries violated their duties trillion amid the historic market under ERISA. sell-off caused by the COVID-19 SEC Commissioners OK’d U.S. District Judge John pandemic, P&I reported in May. The event marked the worst quarterly The Senate con rmed the McBryde’s granting of summary decline since the fourth quarter of BIG SURGE: Martin L. Flanagan noted strong ows into xed income in the quarter. nomination of Hester M. Peirce judgment closes a lawsuit that 2008, when total assets fell 11.5%. was led in February 2016. and Caroline Crenshaw to the in xed-income ETFs following agement Inc., a business valuation Securities and Exchange Commis- Participants criticized the Flight to safety their strong performance in that and nancial advisory services rm sion on Aug. 6, making a full American Airlines Credit Union In the second quarter, a major market stress earlier this year,” Mr. in Memphis, Tenn., said xed-in- commission with three Republi- Demand Deposit fund, one option area of asset growth for rms was Shedlin said during the call. come in ows at rms were “indica- cans and two Democrats. in the 401(k) plan. The credit xed income, as many investors Martin L. Flanagan, president tive of a ight to safety (by inves- Ms. Peirce, a Republican, has union was one of the defendants. took ight to safe haven assets. and CEO of Atlanta-based Invesco tors) after what happened in served on the commission since The plaintiffs said the defen- BlackRock Inc., New York, saw Ltd., similarly noted in an earnings March.” record quarterly net in ows of $57 statement that “long-term ows “We did see a fair amount of in- 2018 and was renominated in dants violated ERISA because the billion in its iShares xed-income into xed-income capabilities were ows into xed income from equi- June to a term that expires in credit union fund was the “only ETFs during the second quarter, strong” during the second quarter. ties (as investors) pulled money out June 2025. plan investment option that would Gary S. Shedlin, senior managing Fixed-income strategies were of stocks and put it into bonds. … Ms. Crenshaw, a Democrat, qualify as an income-producing, director and chief nancial ofcer, the only asset class to report sec- But risk aversion has waned a bit was nominated in June for a term low-risk, liquid fund,” the judge said during the rm’s earnings call. ond-quarter long-term net in ows, after the last few months as the expiring in June 2024. She is wrote in recounting the litigation In total, BlackRock had $100.2 at $6 billion. Invesco had $14.2 bil- markets have recovered. I think in- currently senior counsel at the history. billion of total net in ows in the lion in long-term net out ows in stitutions are more comfortable SEC and a captain in the Army “There is no evidence that plan second quarter, of which $60.3 bil- total, with $17.4 billion in net out- putting money back into stocks,” Mr. lion were derived from xed-inows from equity strategies, $800 Hamner said. JAG Corps. duciaries could not have rejected come products. million in net out ows from “bal- On the heels of unprecedented the rates set by the credit union In ows to its xed-income ETFs anced” strategies and $2 billion in market volatility and drawdowns in Houston fund bids $71M or that plaintiffs could not have specically were “driven by re- net out ows from alternatives, its March, some investors also notice- The $4.2 billion Houston made different investment newed investor appetite for xed earnings release said. ably increased allocations to gold Fire ghters’ Relief and Retire- choices if they thought the rates income and acceleration in long- Brooks K. Hamner, a vice presi- and gold-related strategies in the ment Fund made two new were too low,” he wrote. term secular growth trends and dent on the investment manage- second quarter, rms said in earn- even stronger investor condence ment team at Mercer Capital Man- ings calls. Pensions & Investments August 10, 2020 | 25

vant, that’s exactly how the struc- build a skilled investment ofce, president, in a written statement. ments. At the same time, the board ture is supposed to be.” and set CalPERS on a strong path “These are private personnel mat- changed its total plan benchmark Money Management Ms. Frost was searching for a to achieve our return target. But at ters and already have been ad- methodology to help it avoid the new CIO at the time and told the this time, it’s important for me to fo- dressed according to our internal denominator effect of a down mar- board she would invite board mem- cus on my health and on my family compliance protocols.” ket on alternative investments. bers to be part of the hiring process. and move on to the next chapter in CalPERS is moving forward and CalPERS board is expected to Grosvenor It was Ms. Frost’s decision to remy life.” is recruiting a new CIO, Mr. Jones consider an additional move — em- hire Mr. Meng, who at the time was CalPERS recently announced a said. bedding leverage in its asset alloca- deputy CIO at China’s State Admin- 4.7% preliminary net return for the tion — during its asset allocation set to go istration of Foreign Exchange, an scal year ended June 30 against its Greater use of leverage review, scheduled to start in 2021. administrative agency that manag- benchmark of 4.3%; a ve-year re- During Mr. Meng’s tenure, CalP- It is an open question whether es China’s foreign exchange return of 6.3% and a 10-year return of ERS shifted the investment ofce the next CIO will champion the public with serves. Before that, he had worked 8.5%. The pension fund has said its from asset class silos to an integrat- program Mr. Meng put into place. in CalPERS’ investment ofce in ve- and 10-year benchmarks Sources said that projects started roles including investment director would be available in September. by one CIO can fall by the wayside of asset allocation. under the next one. merger Ms. Frost also supported Mr. Under scrutiny CalPERS spokesman Wayne Da- Meng earlier this year, including The current controversy was vis noted that the investment strat- By CHRISTINE WILLAMSON sending CalPERS ofcials for an touched off when Mr. Meng dis- egy is CalPERS’ strategy and not Mr. in-person meeting with the staff of closed his personal investments, Meng’s. Alternative investment man- Rep. James E. Banks, R-Ind. Mr. which included shares in Carlyle, Indeed, in an interview in June, ager Grosvenor Capital Man- Banks wrote a Feb. 12 letter asking Blackstone and and Ares’ business Eric Baggesen, CalPERS managing agement is set to become a California Gov. Gavin Newsom to development company, in his dis- investment director, trust level publicly traded company investigate Mr. Meng for investing closure form led with CalPERS. portfolio management, said that through a merger with CF Fi- more pension fund capital in Chi- The California Fair Political Prac- staff rst started considering the nance Acquisition Corp., a spe- nese companies. tices Commission typically receives idea of including moderate leverage cial purpose acquisition com- In a subsequent letter to Mr. the statement, known as Form 700, in its asset allocation as a way of pany sponsored by Cantor Banks, Ms. Frost noted that CalP- from certain top ofcials at CalP- boosting returns in a low interest Fitzgerald. ERS ofcials rely on indexes and do ERS, with other staff, including Mr. A SAD DAY: Betty T. Yee said she was rate environment after the 2008 - About 30% of Grosvenor not select the companies the pen- Meng, ling with CalPERS, said Jay ‘incredibly disappointed to hear about nancial crisis. shares will be publicly traded sion fund invests in, and that Mr. Wierenga, communications direc- the former CIO’s lapse’ in judgment. Mr. Meng continues to have his and the rm’s management will Newsom does not hire the CalPERS tor for the California Fair Political supporters on the board. own the remainder of the eq- CIO. Practices Commission, in an email. ed structure. He also centralized the “He started out by conducting a uity shares of the combined CalPERS ofcials declined to Once a complaint is led, the use of leverage across the portfolio, comprehensive review of the port- company, “consistent with their comment beyond the news release commission’s enforcement division including leveraging the entire folio and built measures to protect historic ownership level of the announcing Mr. Meng’s departure rst reviews it to determine wheth- portfolio up to 20% in order to com- it in a market crisis, which did hap- rm,” according to a Grosvenor or to make Ms. Frost available for er or not to open an investigation, mit more capital to private equity pen,” California Treasurer Fiona Ma news release. an interview. Mr. Meng also could he said. The review process can and private credit. said of Mr. Meng in an email. “His The nancial terms of the not be reached for comment. take from a few days to a few weeks, CalPERS also increased the per- preparations helped CalPERS deal are not being disclosed, In the news release, Mr. Meng Mr. Wierenga said. centage of the plan invested in op- greatly in navigating through the Grosvenor spokesman Will said: “I deeply believe in the CalP- “CalPERS has known about portunistic strategies to 5% from COVID-19 crisis. ... Ben also set the Braun said. ERS mission of serving those who questions regarding Ben’s fair po- 3%, a bucket that is not part of its portfolio on a better path toward a After the transaction is com- serve California. I’m proud of the litical practices disclosure lings,” asset allocation, and skewed those 7% solution with better and more pleted, the SPAC will be re- work we did to change the portfolio, said Henry Jones, CalPERS board strategies toward credit invest- assets.” n named GCM Grosvenor Inc., and its Class A common shares will be traded on the Nasdaq State Street Corp. Chairman and exchange. The deal is “expected CEO Ronald P. O’Hanley said its to be completed as soon as pos- gold ETF, SPDR Gold Shares, re- Manager earnings for Q2 2020 sible,” the release said. corded its strongest ever level of Dollar values are in billions unless otherwise noted. As part of the transaction in ows at nearly $12 billion during agreement, the equity interest the second quarter. Change Change in Grosvenor that private equi- Assets Change from Q2 Revenue Change from Q2 Additionally, Invesco Vice Chair- Manager under mgmt. from Q1 2019 (millions) from Q1 2019 Net ows ty manager Hellman & Fried- man Loren Starr said during the man has held since October BlackRock $7,317.9 13.2% 6.9% $3,648 0.0% 0.0% $100.2 company’s July 28 earnings call that 2007 will be purchased as part while the rm had $400 million in State Street Global Adv. $3,054 13.6% 4.7% $425 -5.4% -3.6% $23 of a pre-existing option, the re- net out ows from its ETF lineup, lease said. J.P. Morgan $2,511 12.2% 15.3% $3,610 0.1% 1.4% $124 investor redemptions were offset in Current CFAC shareholders, part by net in ows into its Europe, Goldman Sachs $2,057 13.2% 23.9% $2,101 n/a -17.5% $6 including Cantor Fitzgerald Middle East and Africa physical and other investors, will own BNY Mellon $1,961 9.2% 6.4% $787 -8.7% -5.1% $9 gold ETF. the remaining outstanding Mr. Starr served as chief nan- Northern Trust $1,258 12.4% 6.6% $1,514 -5.1% 0.0% n/a shares of the combined rm. cial ofcer until Aug. 1, when Alli- T. Rowe Price $1,220 20.9% 8.4% $1,415.4 -3.2% 1.5% $14.7 Cantor Fitzgerald will invest son Dukes assumed the position. $30 million in the newly com- In the EMEA ex-U.K. region, In- Invesco $1,145.2 8.7% -4.4% $1,419 -11.3% -1.4% -$29.5 bined company and the institu- vesco’s business “returned to posi- Legg Mason $783.4 7.2% 0.4% $666.2 -7.4% -5.6% -$9.8 tional investors agreed to in- tive ows in the (second) quarter of vest a total of $195 million in a $1.8 billion from net out ows of Morgan Stanley $665 13.9% 33.8% $886 28.0% 5.6% $15.4 private investment in public $1.2 billion in Q1, and that was driv- Af liated Managers Group $638.4 6.4% -17.3% $471.1 -7.1% -20.4% -$18.2 equity transaction at $10 a en by strong ows into our gold ex- share, the release noted. change-traded fund,” Mr. Starr said Federated Hermes $628.8 3.8% 25.2% $360.7 0.4% 12.2% $3.4 The Cantor Fitzgerald and during the call. Franklin Resources $623 7.4% -12.9% $1,188.1 -11.2% -19.5% -$11.3 PIPE investments in addition The product, Invesco Physical to cash held by the existing Gold ETC, saw in ows of nearly $3 AllianceBernstein $600 10.7% 3.3% $871.5 -0.3% 1.6% -$3.3 SPAC vehicle will be used to billion in the rst half of the year, Blackstone $564.3 4.9% 3.5% $2,516.1 n/a 69.2% $11.9 pay $150 million in cash con- an Invesco spokeswoman said in an sideration to selling sharehold- email. Janus Henderson $336.7 14.4% -6.4% $518 -6.7% -3.3% -$8.2 ers, including Hellman & Fried- In ows into gold-related prod- KKR $221.8 7.1% 7.8% $1,331.9 n/a 12.9% $7.3 man, as well as to cover ucts were “really more of an in a- transaction expenses, to reduce Carlyle Group $221.3 2.0% -0.6% $371.8 4.5% -4.9% -$2 tion hedge after what happened in Grosvenor’s existing debt and March and the government’s re- Ares Management $158.4 6.6% 11.5% $602.8 n/a n/a $6.8 to fund the rm’s future growth, sponse with stimulus,” Mr. Hamner according to the release. Artisan Partners $120.6 26.7% 6.0% $203 0.1% 1.2% $3.3 said. There will be no changes to “Many investors are expecting Source: Company reports Grosvenor’s leadership, per- the government to monetize that sonnel, investment strategies debt. As a result of that fear, many or operations. investors are putting money in gold be (gold-related) mutual funds or of publicly traded money manager discussion.” “We believe that becoming a or gold-related products as a hedge ETFs.” earnings. Mr. Hamner said that in his ex- publicly traded company will to in ation,” Mr. Hamner added. Mr. Ungar from Moody’s further As for whether institutional in- perience, gold isn’t perceived to be benet our clients, our team added on gold, that “in periods of vestors’ environmental, social and as “dirty” as coal or other fossil fuels members and all of our stake- ‘Desperate search’ tremendous uncertainty, (it) tends governance investing goals are at from an ESG standpoint. “It’s not as holders,” said Michael J. Sacks, Catherine Seifert, a vice presi- to be a destination for investors.” odds with allocations to gold, due to environmentally unfriendly as a lot Grosvenor’s chairman and dent and equity analyst at CFRA “I think we can look at this as mining risks or environmental im- of commodities or certain corpora- CEO, in the release. Research, New York, said alloca- more of a cyclical phenomenon as pact, Mr. Ungar said for now, “what- tions. Most (institutions) would be Grosvenor manages $57 bil- tions to gold indicate “a desperate opposed to a long-term trend,” he ever is happening with gold is going comfortable with at least a small al- lion in alternative investment search for safe haven assets that noted, adding that in ows into gold to be more of a cyclical thing and location to gold, or gold-related strategies. n has lifted all vehicles, whether they products are not a signicant part probably separate from an ESG products,” Mr. Hamner said. n 26 | August 10, 2020 Pensions & Investments

represents the Contra Costa Coun- declined further comment. ty Deputy Sheriffs Association, in California pension funds The case was remanded to the California an email. trial court for the court to vacate the Steve M. Berliner, partner and judgments entered in each of the CONTINUED FROM PAGE 2 chairman of the retirement, health weighing impact of ruling three consolidated cases and to The California rule did not pre- and disability practice group at law conduct further proceedings con- vent the state Legislature from ex- rm Liebert Cassidy Whitmore, Pension plans around the state LACERA’s retirement plans. The sistent with the state Supreme cluding or limiting the inclusion “of who is not involved in the case, said are evaluating the impact of the pay items that were addressed by Court’s decision. additional types of compensation in he sees the decision “as slightly recent California Supreme Court the decision were never consid- Mike Fara, Alameda County pen- an effort to prevent perceived softening the California rule.” decision that relaxed the ered pensionable by the LACERA sion plan communications manag- abuses of the pension system,” the The exception to the rule that so-called California rule. board of retirement, Mr. Rice said. er, said the fund “respects the Cali- court said. any change to a vested retirement Industry sources said the The $16.2 billion Orange fornia Supreme Court’s decision, The California Legislature en- bene t needs to be accompanied by ruling gives employers and states County Employees’ Retirement and we’re pleased to have a resolu- acted pension reform laws in 2012 offsetting bene ts “only applies a little more wiggle room to close System, Santa Ana, did have tion so the public employees who “for the constitutionally permissi- with regard to those changes de- make up our membership can know loopholes. In its July 30 opinion, some pay items that were banned ble purpose of closing loopholes signed to eliminate loopholes that what to expect for the retirement as pension spiking by the pension and preventing abuse of the pen- distort the system and where pro- the court ruled against plaintiffs’ bene ts they’ve contributed their sion system,” the court said. “It viding the offsetting bene t under- argument that the state’s pension reform at issue in the case, pay towards and have earned would defeat this proper objective mines the purpose of the change,” reform legislation, a law designed according to a written statement. through their hard work.” to interpret the California Rule to Mr. Berliner said. to eliminate so-called pension “The OCERS board has not require county pension plans either What’s more, Mr. Berliner said he spiking, violated the contract taken any action to exclude the Unhappy yet pleased to maintain these loopholes for ex- does not think this decision will in- clause of the constitution. pay items in controversy, but Plaintiffs and their lawyers said isting employees or to provide com- crease efforts to rein in pension “We believe the court’s rather continue with the condi- they are unhappy about the impact parable new pension bene ts that costs. decision provides clarity and tional inclusion of such pay of the opinion on the workers in- would perpetuate the “Public employers guidance for LACERA and other items,” OCERS said. Pension fund volved but pleased that the court unwarranted advantag- have limited rights to upheld the California rule. public pension plans,” said of cials will provide updates es provided by these make changes,” he said. “I am disappointed for my clients regarding the impact of the latest loopholes.” “It would require the Steven P. Rice, chief counsel at in this appeal, but thankful that the state legislature and the $58 billion Los Angeles case to its participating employ- court upheld the ef cacy of the Cal- Second case governor to take an ex- County Employees Retirement ers and members as soon as ifornia rule,” Mr. Mastagni said. “In The case is the sec- pansive view of this de- Association, Pasadena. possible, it said. recounting and clarifying its prior ond to come before the cision and change the However, LACERA of cials do Robert Kinsler, OCERS jurisprudence, this decision in state’s highest court in- statutes to allow for not foresee the California spokesman, declined comment some ways strengthens the Califor- volving the California bene t reductions.” Supreme Court’s decision in the beyond the written statement. nia rule.” rule in the past 18 The California rule case having an impact on — ARLEEN JACOBIUS Mr. Talbot said his client, Contra months. On March 5, LEEWAY: Timothy K. stems from the idea Costa County Deputy Sheriffs As- 2019, the court ruled Talbot said the ruling that employees and sociation, plans to move forward on against the union rep- adds more exibility to their employers enter a separate 2015 lawsuit on the is- resenting some Califor- the California rule. into a contract when While many states have adopted ment systems they govern,” Ms. sue. The parties agreed to a sus- nia re ghters who they are hired and cut- the theory that public employees Dunning and Mr. Mixon said in an pend the case until a nal resolu- wanted to retain the option allow- ting bene ts would violate the con- have vested rights in their bene ts, emailed alert about the case. “The tion of the latest Supreme Court ing them to buy up to ve years of tract clause of the state’s constitu- they do not necessarily apply the express grant of authority and dis- case. additional service time, called air- tion. About 12 other states follow California rule in exactly the same cretion means that they may, and Other employee organizations time, to count toward earned retire- the California rule’s legal approach. way, Mr. Talbot said. must, correct errors and improve are also considering whether to le ment allowances. That option had “I do not know what impact this operations within the retirement their own cases to recoup contribu- existed before the pension reform Mixed opinions decision may have on other states system, after a careful balancing of tions made by or for the bene t of law passed. Legal experts are mixed as to that follow the California rule, but short and long-term interests of employees that were based on ac- In that case, the court found the how the decision will affect other presumably it will be considered their members and bene ciaries.” tuarial calculations that included option to purchase airtime was not states that follow the rule. when ruling on pension cases in Ms. Dunning, who worked on the the costs of bene ts they won’t be a protected pension right. However, David E. Mastagni, partner in law their jurisdictions,” he said. case, declined to comment beyond receiving. In a footnote, the Califor- it declined to rule on the continued rm Mastagni Holstedt, which rep- Ashley Dunning and Peter Mix- the alert. nia Supreme Court mentioned this application of the California rule. resents employee organizations on, both partners at Nossaman LLP, One of the pension systems in- argument by the plaintiffs but said The court sent the case back to and unions including the Alameda a law rm that led representation of volved in the case is waiting to see it wasn’t addressing whether em- the trial court. County Deputy Sheriffs’ Associa- the Merced County Employees’ Re- what happens in the trial court. The ployees might be entitled to a par- Lawyers agree that the latest de- tion, wrote in an email: “The court is tirement Association and board in Contra Costa Employees’ Retire- tial refund of their contributions. cision modi ed the California rule. saying that the Legislature can ad- the case, said that the decision also ment Association “does not antici- “We do not believe the pension The court’s decision “seems to dress perceived abuses, even if it af rmed retirement systems’ au- pate implementing any changes systems are entitled to a windfall of add a little more exibility to the results in a net detriment to some thority to improve their operations. until after the decision is thorough- contributions and that the contri- California rule than we argued ex- pensioners, while upholding the “The California Constitution ex- ly studied and the process contin- butions should be returned to the isted under the law prior to this de- California rule requirement that pressly affords public retirement ues, as ordered, at the trial court employees,” Mr. Talbot said in an cision,” said Timothy K. Talbot, a otherwise requires detrimental boards ‘plenary authority, consis- level, which may take several email. “The Supreme Court ac- principal at law rm Rains Lucia changes to be accompanied with tent with their duciary responsi- months,” according to a statement knowledged that such a remedy Stern St. Phalle & Silver PC who offsetting new advantages.” bilities,’ to administer the retire- on its website. Association of cials might be appropriate.” n

could mean negative returns or as of June 30 from $1.3 trillion as of losses if ination picks up. March 31 despite negative rates. Money market “There is a big debate whether negative rates could be accepted in ‘Script for sterling’ CONTINUED FROM PAGE 2 the U.S. The Fed would not move Jemma Clee, executive director Esack, spokesman for the $59.1 bil- into the negative territory unless it and lead international investment lion Pennsylvania Public School has to. But markets are expecting specialist, global liquidity at J.P. Employees’ Retirement System, there is a probability it could hap- Morgan Asset Management in Lon- Harrisburg. pen,” Mr. Datta said. don, said negative rates on money “There currently is no support Meanwhile, money market fund market funds introduced in Europe for negative interest rates on the managers are trying to keep inves- six years ago could be a “script for Fed’s Board of Governors,” Mr. Es- tors in their cash strategies. sterling.” Ms. Clee said her rm ack said. “Still, the potential for Dennis Gepp, managing director would consider fee waivers for ster- negative interest rates is an issue and CIO of cash at Federated ling if the rates in the U.K. turned that we are monitoring closely.” Hermes Inc. in London said: “I have negative. The European Money The pension fund has increased to admit I was surprised — given Market Fund Regulations in 2019 its exposure to Treasury bills as where we stand with COVID — and changed and instituted a frame- spreads on other strategies have the relatively long-term period of work that accounts for negative been tightening signi cantly given uncertainty … how quickly a num- rates on money market funds, Ms. the unprecedented accommoda- ber of markets saw cash ow back Clee added. tions by the Fed. Mr. Esack declined to them,” after investors had allo- If sterling interest rates were to to specify the increase but said it cated into cash and away from NO LOSSES: Jemma Clee said if U.K. rates went negative, fees could be waived. move lower, causing net yields on was funded from the sale of money long-term debt, equities and sterling money market funds to dip market funds. The pension fund’s emerging markets earlier in the cri- During the credit crunch in 2008, you try to take a full fee, it would negative, Ms. Clee said the rm strategic allocation to cash is 6%. sis. Mr. Gepp added that cash man- Federated waived $600 million of mean investors earn a negative re- could utilize the approach from the agers in the U.S., including Feder- fees so investors could earn a posi- turn, he said. Federated managed euro funds to accommodate nega- Rotating back to equities ated, began to apply fee waivers to tive return. “We know already that $457 billion in money market fund tive yields. On July 20, the Bank of Tapan Datta, global head of asset clients much like they did during 50% of share classes of (U.S. indus- assets as of June 30, increasing by England signaled to the market it allocation at Aon PLC in London, the global nancial crisis. Federat- try) money market funds are hav- 1.3% since March 31. has policy room available to lower noted that some investors are rotat- ed applied waivers for the month ing to apply fee waivers,” Mr. Gepp By comparison, assets in Eu- rates depending on market condi- ing back to equities from cash be- ended June 30, according to a July said. Although the returns on mon- rope-domiciled money market tions, she said. “They are keeping cause holding safe-haven assets 29 notice. ey market funds are still positive, if funds have increased to $1.4 trillion that possibility (open),” she said. n Pensions & Investments August 10, 2020 | 27 CHANGES AHEAD Mooij thinks more detailed indus- mine future investment choices. try-speci c data disclosure, includ- The European Commission is Euro ESG ing indirect carbon emissions from also gearing up to impose harsher Worcester (Mass.) Retirement System is searching for a closed-end supply chains, is needed for inves- requirements on bond issuers to CONTINUED FROM PAGE 3 non-core real estate fund to which it plans to commit about $15 million. tors to do a thorough analysis. limit the issuance of low-quality Meketa Investment Group is assisting the $977 million pension fund. The to include social standards and def- Sources added that the initial green bonds, sources said. The lack RFP is on Meketa’s webste. Proposals are due at 3 p.m. EDT on Aug. 13. initions of harmful activities. scope of the taxonomy has in- of transparency over how proceeds ■ A renewed Sustainable Fi- creased since the outbreak of the are invested currently stops many Community Transit, Everett, Wash., is searching for a record keeper for its nance Strategy, which aims to ac- coronavirus pandemic. investors from investing in green $31 million 457 plan. The transit agency is seeking a rm to provide celerate transition to a low-carbon The commission currently is bonds that do not meet the interna- “retirement plan administration, record keeping, education, communications, economy through increased private working on aligning its budget tional frameworks backed by orga- investment-related and other services” for the 457 plan, con rmed Audrey investments in sustainable projects. spending with taxonomy objectives nizations such as the European In- White, senior consultant at Hyas Group, the plan’s investment consultant. ■ Sustainability programs that while incorporating additional fo- vestment Bank or the World Bank, The RFP is available on the transit agency’s procurement website. Registra- underpin the post-pandemic recov- cus on social standards on how sources said. tion is required. Proposals are due at 4 p.m. PDT on Aug. 17. ery, such as pushing for employ- companies operate. It’s also work- Enhanced green bond standards ment security. ing on new classi cation of harmful will help investors who are looking ■ HAVE SOME NEWS? Weymouth (Mass.) Retirement System Requirements on how green activities alongside low carbon to increase their green and social is searching for opportunistic and value-added bond issuers invest proceeds in or- economy transitional activities, bond exposures in the coming Please submit news of real estate funds to which it plans to commit a der to qualify under the Green sources said. years. For example, the €420 billion changes to David total of up to $10 million. The $200 million Bond Standard. Nathan Fabian, chief responsible ($489.4 billion) Stichting Pensioen- Schepp, news editor, at pension fund issued an RFP for at least one ■ Voting requirements on inves- investment of cer at Principles for fonds ABP, Heerlen, Netherlands, [email protected] manager to remain in compliance with its tors under the Shareholder Rights Responsible Investment in London, intends to have social and green asset allocation targets, said Edward J. Directive II. said that with green and harmful bond investments constitute 20% of Masterson, retirement system director. The pension fund will consider both The commission’s efforts are set criteria, it will be easier to make all assets by 2025. open-end and closed-end funds, according to an RFP posted on the website to increase disclosure demands on comparisons between companies. Claudia Kruse, managing direc- of Fiduciary Investment Advisors, the pension fund’s investment consul- bond and stock issuers, while help- Such criteria could show that auto- tor and head of responsible invest- tant. Proposals are due at 4 p.m. EDT on Aug. 19. ing investors obtain data on corpo- maker A’s operations, for example, ment and governance at APG Asset rate activities that were not attain- are 70% harmful, 20% neutral and Management NV, the in-house University of Louisville, Louisville, Ky., is searching for an investment able to them before, sources said. Thomas Tolstrup manager of ABP, said in a telephone consultant for its $1.7 billion 403(b) plan and $53 million 457 plan. The Ole Buhl, vice president and interview: “The more clarity there is university is seeking a consultant to provide guidance regarding gover- head of environmental, social and on standards for both green and so- nance, conduct reviews of record-keeper performance, and provide governance at the 889.5 billion cial bonds the more this helps to quarterly reporting and guidance regarding investment fund performance, Danish kroner ($139.3 billion) ATP, ensure the proceeds are being put according to an RFP posted on the university’s procurement website. Hilleroed, Denmark, said that with- to a good use.” Proposals are due at 5 p.m. EDT on Aug. 24. out the enhanced data that will “Standards will support us in our come from the new tools, investors own due diligence,” she added. To Hampshire Pension Fund, Winchester, England, is searching for a would engage by reacting to poor date, APG has invested €9 billion in manager to run a direct U.K. real estate allocation. The £6.9 billion ($8.8 corporate operations on the part of green and social bonds on behalf of billion) pension fund has a strategic asset allocation to U.K. real estate of portfolio companies. Mr. Buhl add- ABP and its other clients. 10%, according to a notice on European procurement website Tenders ed that the upcoming changes, spe- Electronic Daily. Submissions are due at 10 a.m. British Summer Time on ci cally the taxonomy, will help in- Other tools on the way Aug. 27. vestors be more speci c in engaging Brussels-based Johan Barnard, with portfolio companies on, for head of international public affairs Allegheny County Sanitary Authority, Pittsburgh, is searching for an example, why company practices BULL’S EYE: Ole Buhl said the taxonomy also at APG Asset Management, investment manager for its $53 million pension plan. The authority is are not in line with their competi- will help investors with speci c targeting. noted that the EU’s recovery plan in seeking a manager to advise the authority on the asset allocation of the DB tors in terms of the green transition response to the pandemic, agreed plan’s portfolio, establish an investment policy statement, and construct of supply chains. 10% green, but automaker B’s op- to on July 21, could facilitate further and maintain an investment portfolio, according to an RFP posted on the erations are 60% green, 30% neutral transformational tools for investors. authority’s website. Proposals are due on Aug. 28. More data needed and 10% harmful. That would make Under that recovery plan, the Noting climate change mitiga- it clearer for an investor to deter- commission will issue up €100 bil- Pontiac (Mich.) General Employees’ Retirement System is tion, Mr. Buhl said that investors to mine which company to invest in, lion in EU standards-compliant so- searching for an active domestic small-cap growth equity manager to run some extent know the activities of he said. cial bonds and COVID-19- linked about $19 million. The $432 million fund is seeking an active manager portfolio companies, but they need Mr. Fabian added that the com- bonds. The bonds will be guaran- benchmarked to the Russell 2000 Growth index, according to an RFP on the more details on social issues in mission is planning to formalize the teed by EU countries and will - website of Dahab Associates. Proposals are due at 5 p.m. EDT on Sept. 2. supply chains and corporate strate- new emission targets with a goal to nance programs that will pay the gies on employee management. reduce carbon emissions by at least salary of workers to keep their jobs, Fort Smith, Ark., is searching for a record keeper for its $45 million With initiatives like the taxonomy, 50% by 2030 under the renewed Mr. Barnard said. 401(a) plan and $12 million 457 plan. The city is seeking a firm to investors will have clearer, non-en- Sustainable Finance Strategy that For Carola van Lamoen, head of provide “record keeping, fiduciary services, investment review services, vironmental information in regard would see corporations pay more in active ownership at Robeco in Rot- participant education/communication and plan administrative services,” to different aspects of climate emission payments. That would af- terdam, the Netherlands, the EU’s said an RFP posted on the city’s website. Proposals are due at 2 p.m. CDT change, such as data on worker fect companies’ nancial perfor- renewed Sustainable Finance Strat- on Sept. 4. turnover, he said. mance, he added. egy and Shareholder Rights Direc- Addressing current disclosure Addressing current challenges tive II are also a big push toward Central Florida Regional Transportation Authority, Orlando, Fla., is challenges that limit engagement faced by investors who engage with more communication between in- searching for a single record keeper for two 401(a) plans and one 457 plan. efforts, Stephanie Mooij, senior en- companies, ATP’s Mr. Buhl added vestors and executives at portfolio The authority, doing business as LYNX, is seeking a single vendor to provide gagement associate, at Aegon Asset that climate-speci c issues are not companies, including a focus on out- third-party administration, record keeping and participant education Management in Frankfurt, noted the only important issue relative to comes and actual achievements re- services for the three DC plans, which have combined assets of $41 that data on the livestock industry, sustainability that investors need sulting from engagement. million, according to an RFP posted on the authority’s procurement website. for example, has been distorted. information on to evaluate when it Under SRD II, investors across Proposals are due at 5 p.m. EDT on Sept. 16. Once companies start to measure, comes to the sustainability of the Europe are required to vote annu- they can better manage reducing businesses. ally on remuneration of chief exec- Clackamas County, Oregon City, Ore., is searching for a record keeper their greenhouse gas emissions, “It’s extremely important how utives of European companies and for its two 457 plans, which have combined assets of $177 million. The she said. Every company is disclos- portfolio companies are retaining give evidence they are actively par- county is seeking a rm to provide “administration, record keeping and ing in a different way, so it is not expert workers,” he said. “When we ticipating in the voting rather than participant education” for the plan, according to an RFP posted on the state comparable, she said. The taxono- have that benchmark in place, we outsourcing it to external providers. of Oregon’s procurement website. Registration is required. Proposals are my will make comparisons across will be able to lead our engagement Stewardship will become more due at 2 p.m. PDT on Sept. 17. companies easier and more accu- efforts on different social metrics.” demanding, she said, adding that rate, she added. ATP is currently allocating more shareholder proposals are already For a comprehensive database of search and hiring activity, visit P&IQ at research- Still, Ms. Mooij noted that more resources to engagement, Mr. Buhl increasing in volume. “Also, the center.pionline.com/archive/piq. standards are needed beyond what noted, adding that more information quality of the (shareholder) pro- are coming online this year. Ms. on portfolio companies could deter- posals is improving,” she said. n

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