Download White Papers on Their ESG O‰ Erings Go To

May 17, 2021 PIonline.com $16 an issue / $350 a year

THE INTERNATIONAL NEWSPAPER OF MONEY MANAGEMENT

Legislation SECURE 2.0 getting good reviews but fate uncertain Bill Clark/Congressional Quarterly Some want changes to no such thing as a sure thing in sides of the aisle commended the Washington. bill and approved it unanimously House bill, plus Senate Nonetheless, for proponents of re- via voice vote. It now heads to the tirement security legislation, the month full House, though a vote has yet to could stymie any action of May is off to a promising start. be scheduled. The leaders of the House Ways The bill, a version of which was By BRIAN CROCE and Means Committee — Chairman originally introduced in October Richard Neal, D-Mass., and Rank- during the previous congressional Optimism is high in the retire- ing Member Kevin Brady, R-Texas session, includes dozens of provi- ment industry for Congress to pass — reintroduced the Securing a sions aimed at boosting retirement another major retirement security Strong Retirement Act of 2021 on security. It builds on the Setting Every package this session, but the path May 4 and held a markup May 5 Community Up for Retirement En- TRYING AGAIN: House Ways and Means Committee Chairman Richard Neal, left, and forward is uncertain and there’s during which members on both SEE SECURE 2.0 ON PAGE 34 Ranking Member Kevin Brady reintroduced Secure Act 2.0 earlier this month.

SPECIAL REPORT DIVERSITY, EQUITY & INCLUSION Regulation Money managers get serious on DEI efforts More risks Michael Glenwood Firms add senior executives than rewards to lead push to create a more diverse, inclusive workforce seen in super

By JAMES COMTOIS and fund reforms PAULINA PIELICHATA By DOUGLAS APPELL Money managers are creating new senior executive positions within their orga- Australia’s government is nizations to lead their diversity, equity and counting on superannuation inclusion efforts. system reforms to get employees Such efforts come as the industry overall to play a greater role in maxi- has struggled to create a diverse workforce mizing their retirement savings, — not only when but industry participants fear MORE ON DIVERSITY, it comes to wom- more harm than good. EQUITY & INCLUSION en and ethnic mi- Analysts warn the Your Fu- norities, but also ture, Your Super reforms — out- n Diverse slate of candidates is now the LGBTQ, veterans, lined last October in Australia’s expectation. Page 14 the disabled and 2021 budget proposal and set to n U.K. managers show caregivers. Such take effect July 1 — are likely to progress in closing shortcomings constrain asset allocators and pay gap. Page 16 were spotlighted hurt the disengaged workers the n Managers urged to over the last year reforms are ostensibly focused start building diverse during the coro- on helping. talent earlier. Page 17 navirus pandem- DIVERSITY, EQUITY & INCLUSION | MEASUREMENT A final round of consultations, n MassPRIM embraces ic and a push for under the auspices of the Trea- diverse FUTURE to racial equity after sury Department, gives industry eliminate barriers. the murder of Diversity officers set metrics for success players until May 25 to urge Page 18 George Floyd in changes on regulators. Minneapolis. New executives want their companies to outline DEI efforts and analyzes any gaps Critics predict that, under Having a top-level diversity chief who tangible goals and quantifiable targets for change in the experience of underrep- current plans, a litany of govern- reports directly to the CEO, rather than be- resented groups through its an- ment good intentions — working ing siloed in human resources, is expected Chief diversity, equity and in- nual employee opinion survey. toward goals such as weeding By JAMES COMTOIS and to bring greater urgency and accountability clusion officers in interviews with “The survey gives us insights out perennially underperform- PAULINA PIELICHATA to firms’ efforts, sources said. Pensions & Investments outlined into where to look further to ening super funds and preventing “The world is waking up to the fact that ‘I’ With so many money manag- tangible goals and quantifiable gage our employees directly in job-hoppers from accumulating and ‘D’ can’t just be a side-desk topic any- ers hiring chief diversity, equity targets they have set for them- problem-solving dialogue and dormant retirement accounts — more for the dedicated few across the firm, and inclusion officers, how are selves and their organizations. focus group discussions,” said could come to naught, due to but it needs to have a dedicated role to look these new senior executives For example, BlackRock Inc. Michelle Gadsden-Williams, faulty design and execution. CONTINUED ON PAGE 14 measuring progress? measures employee reaction to its SEE METRICS ON PAGE 16 Their biggest focus for now is SEE SUPERS ON PAGE 29 SOUND BITE Small cap and high yield lead Q1 DAVID SWENSEN ‘had an uncanny ability to identify Small-cap equity and investment talent and backed many investors who would high-yield bond strategies later become household names in the industry.’ led Morningstar’s Q1 — Bowdoin College’s Paula J. Volent Page 3 rankings. pionline.com/ top-managers 2 | May 17, 2021 Pensions & Investments

IN THIS ISSUE Defined Contribution

VOLUME 49, NUMBER 10 Defined contribution U.K. effort to bring illiquids to DC faces hurdles For the 12 months ended Sept. 30, record keepers saw their assets swell to $8.21 Government proposal the proportion of U.K. DC assets allocated to private markets or illiq- trillion, up 9.6%. Page 6 seen as fruitless unless uid investments, excluding real es- ESG tate, is currently below 1%. managers reduce fees So in March, the government OMERS executives have found that putting proposed that DC plans could in place a decarbonization policy that By PAULINA PIELICHATA spread the costs they incur from in- balances ambition with fiduciary duty can vesting in private equity, venture be hard work. Page 34 The U.K. government’s latest at- capital and other alternative invest- The Texas House passed a bill requiring tempt to encourage defined contri- ments over five-year periods rather the state’s pension funds to stop investing bution plan investment into alter- than looking at them on an annual in firms that plan to divest from fossil-fuel native asset classes is missing a basis — potentially allowing them companies. Page 31 major issue: DC executives are un- to invest in more alternatives with- likely to allocate to illiquids unless out breaching the charge cap. The Exchange-traded funds managers reduce their fees. new method would give plan exec- The government wants DC plans utives the option of using a five- Accessed through an ETF, REITs offer a to help rebuild the U.K. economy in year average calculation for perfor- variety of pluses that include higher yields, the aftermath of the coronavirus mance fees as an alternative to the low correlation and liquidity. Page 19 pandemic. It also wants to improve in-year performance fees accrued, plan participants’ retirement out- consultants said. Currently, plans Money management comes — something it has been can either look back at the year’s CEO pay at the largest publicly traded consulting on with the industry data to determine charges or look at money managers and banks with asset over recent years. The problem is, the planned charges to ensure they management units was a mixed bag in plans must invest in a way that does are compliant with the cap. 2020. Page 4 not breach a 0.75% charge cap on But despite the government’s ef- default funds under management forts, DC plan executives and con- Pension funds and administration — meaning sultants said an increase in alterna- Indiana and Los Angeles funds announced pricier alternative assets are usual- tive allocations by DC plans is asset allocation changes. Page 33 NOT YET: Darren Philp said the government removed a regulatory ly out of reach. Broadridge Finan- unlikely until managers back down barrier, but others remain, such as how alternatives fees are structured. cial Solutions Ltd. estimates that SEE ILLIQUIDS ON PAGE 35 Retirement plans A new New York City law mandates private Defined Contribution employers to offer a city-run auto IRA using payroll deductions. Page 18 Analysts call counting on employees to play As MEPs grow, ERISA lawsuits rise with them a starring role in superannuation reforms aimed at avoiding retirement savings Providers subject to same shortfalls overly ambitious. Page 29 suits regarding fees, returns Departments as single-employer offerings At deadline ��32 Editorial ��10 By the numbers ��13 ETFs ��19 Changes ahead ��35 Frontlines ��8 By ROBERT STEYER Classified ��28 Hirings ��26 Corrections ��4 Other views ��10 As companies seek efficiency, lower cost DC roundup ��12 RFPs ��28 and reduced fiduciary headaches by joining a multiple-employer plan, the MEP provid- Investment outsourcing ers are encountering the same ERISA challenges to their 401(k) or 403(b) plans as survey in progress those faced by single-employer sponsors. Responses to Pensions & Investments’ Allegations range from excessive invest- annual survey of investment ment fees to poorly performing investments to outsourcing are due May 21. Firms inadequate monitoring of administrative costs. providing outsourced CIO services to Attorneys representing the retirement institutional clients are eligible. Results industry and consultants who advise it pre- will run June 28. dict that as MEPs become more popular and To request a survey or obtain further gather more assets, their providers face greater litigation risk. Pooled employer SIMILAR: Jerome Schlichter doesn’t see a big difference in managing MEPs vs. single-employer plans. information, please contact Anthony plans, authorized by the SECURE Act, only Scuderi at [email protected] or entered the market as of Jan. 1, 2021, and companies joining an MEP lack sufficient interviewed for this article, he declined to 212-210-0140, or visit www.pionline. haven’t been subject to ERISA lawsuits. assets to attract the plaintiffs’ bar. “The small comment on specific cases. com/section/surveys. “The provider is more vulnerable,” said hardware store is not much of a defendant.” “Some members of the plaintiffs’ bar are Kent Mason, a Washington-based partner at Mr. Mason represents retirement indus- comparing multiple-employer plans to a com- Entire contents ©2021 Crain Communications Inc. All rights Davis & Harman LLP, noting that small try clients in ERISA lawsuits. Like others SEE LAWSUITS ON PAGE 30 reserved. Pensions & Investments (ISSN 1050-4974) is published biweekly by Crain Communications Inc., 150 N. Michigan Ave., Chi- cago, Ill. 60601-7593. Periodicals postage paid at Chicago, Ill. and at additional mailing offices. Postmaster: Send address changes Awards to Pensions & Investments, Circulation Dept., 1155 Gratiot Avenue, Detroit, Mich. 48207-2912. $16 per issue; $350 per year in the U.S.; $375 per year in Canada; all other countries $475. ‘‘Canadian Post International Publications Mail Product (Canadian Distribution) P&I wins national, regional ASBPE editorial awards Sales Agreement No. 0293539’’ GST #136760444. Printed in U.S.A. Pensions & Investments editorial em- ■ “Investing alone not enough, paper CRAIN COMMUNICATIONS INC ployees were recognized by the American argues,” by Ms. Walker. Keith E. Crain, Chairman Society of Business Publication Editors, ■ ”Industry’s reaction to the coronavi- Mary Kay Crain, Vice Chairman winning one national and three regional rus could be good news for diversity push,” KC Crain, CEO awards for their work in 2020. by Ms. Baker and Ms. Jacobius. Chris Crain, Senior Executive Vice President The awards are open to U.S.-based ■ ”More asset owners asking managers Lexie Crain Armstrong, Secretary business-to-business, trade, association industry also shared personal experiences hard questions,” by Ms. Jacobius. Bob Recchia, Chief Financial Officer and professional publications, both print of racism and police brutality that affected ■ “Institutions want manager diversity,” G.D. Crain Jr., Founder (1885-1973) and digital. their lives. by Ms. Williamson. Mrs. G.D. Crain Jr., Chairman (1911-1996) In the category for all-content, enter- In the category for print, single-topic ■ “He’s hopeful U.K. industry can final- Published every other Monday by Crain Communications Inc. prise news, senior reporter Danielle Walk- coverage by a team, Sophie Baker, inter- ly address racial injustice,” by Ms. Baker. Boston: 101 Federal St., Suite 1615A, 02110; Chicago: 150 N. Michigan Ave., 19th Floor, er, who joined another news outlet earlier national editor; Arleen Jacobius, senior re- And in the category for online-web mi- 60601; London: 11 Ironmonger Lane, EC2V 8EY; El Segundo, Calif.: 400 Continental Blvd., 6th this year, won a national bronze award porter; Ms. Walker; and Christine William- crosite/special section, Patrick Roth, web Floor, 90245-5074; New York: 685 Third Ave., 10017; San Francisco: 71 Stevenson St., Suite 400, 94105; Washington D.C.: 601 13th St. NW, Suite 800 South, 20005. and a regional gold award for a story ex- son, senior reporter, won a regional silver producer, Gregg A. Runburg, art director Address all subscription correspondence to Pensions & Investments, 1155 Gratiot Ave., Detroit, amining how Wall Street executives were award for five stories examining diversity and David Schepp, news editor, won a re- Mich. 48207-2912 or email [email protected]. responding to the police killing of George and inclusion in money management in gional bronze award for the 2020 Best Member of Business Publications Audit of Circulation Floyd in Minneapolis in May 2020. Black the U.S. and U.K. Places to Work in Money Management www.pionline.com executives and officials in the investment The stories in that package are: microsite. n Pensions & Investments May 17, 2021 | 3

Michael Marsland Money Management Real Estate Newer rms Managers put taking a fresh the pandemic approach to recapitalization behind them By ARLEEN JACOBIUS Q1 shows growth in AUM and in ows Recapitalizations are no longer a way for in sharp contrast to year-earlier period veteran real estate managers to move the odds and ends left over in their funds into By SOPHIE BAKER new sidecar funds. Now, newer managers are increasingly spinning off majority Most publicly traded money managers reported quarterly stakes in their portfolios or individual and annual increases in AUM as well as net in ows in the rst properties to a growing number of second- quarter of the year — in stark contrast to a 2020 rst quarter ary market managers. ravaged by the coronavirus pandemic. Such deals can be a lifeline for newer Among 23 of the publicly traded managers tracked by Pen- managers, provid- sions & Investments, aggregate AUM grew 5.4% for the quarter ing them with a big and 33.7% for the year ended March 31 to $32.05 trillion. exit and an instant “It’s been a very different quarter from Q1 2020,” said Nalini track record to use Kaladeen, London-based director in the EMEA non-bank to raise a new fund. xed-income team at This option is es- Fitch Ratings Inc. pecially welcomed “In that period last by emerging real year we did see in par- ‘YALE MODEL’: David F. Swensen developed a portfolio that increased illiquid assets. estate managers ticular the market ef- struggling to raise fects really dominating In Memoriam capital from asset the AUM picture — for owners that prefer OUTSIDE FORCES: Sarah quite a few of our man- to invest with man- Schwarzschild cited the agers we saw declines Yale’s David Swensen in uenced, agers they already pandemic as a catalyst of around 12% just know. for the investment shift. from the market effect In the history of alone.” trained a generation of investors alternative investment secondary markets, At its height in terms there have been catalysts — such as the of impact on nancial By JAMES COMTOIS RELATED CONTENT global nancial crisis — that spurred the markets, the COVID-19 growth of these markets, said Sarah pandemic caused an al- David F. Swensen, the longtime  David F. Swensen’s legacy by the Schwarzschild, New York-based managing most 23% drop in the chief investment of cer of Yale numbers. See below director and co-head of BGO Strategic Cap- S&P 500 index for the University known for his pioneer-  Yale CIO had profound impact on ital Partners, BentallGreenOak’s secondary WHAT A DIFFERENCE A YEAR MAKES: year-to-date March 23. ing investment approach who in- asset management. Page 10 real estate market business. Nalini Kaladeen said the market plunge But the rst quarter spired a generation of investment The pandemic increased some manag- last year really hurt money managers. of 2021 has been “a lot leaders, died May 5 after a nine- beloved mentor to many in our ers’ need for liquidity, she said. The ensu- more stable. ... The gen- year battle with cancer. He was 67. community,” wrote Yale President ing uncertainty surrounding valuations eral picture we’re seeing ... is a robust Q1 performance but Mr. Swensen was credited with Peter Salovey in a letter posted on also extended the time managers are with the overhang of the continued pandemic issues and slight developing the “Yale model” of in- the New Haven, Conn.-based uni- holding properties, which means the frothiness of markets,” Ms. Kaladeen said. vesting, which moved away from versity’s website. “Future genera- funds that own those properties may be The S&P 500 index gained 6.2% in the rst quarter of 2021. traditional stocks and bonds and into tions will bene t from his dedica- running out of capital, requiring an infu- At BlackRock Inc., for example — the largest money man- more illiquid assets like private eq- tion, brilliance, and generosity.” sion of fresh funds to continue owning ager in the world with $9.01 trillion in assets as of March 31 uity, hedge funds and venture capital. Mr. Swensen made the endow- them, she said. — market increases alone added $164.7 billion in the rst This became the standard for many ment less liquid — a groundbreaking The nancial crisis, for example, resulted quarter. BlackRock, which saw AUM grow 3.8% over the quar- universities and endowments. move, it turned out — because he in investors using limited partnership inter and 39.3% vs. March 31, 2020, also recorded the highest net “David served our university believed that alternative investments terest sales for portfolio management and in ows for the quarter among the 23 managers, at $172 billion. with distinction. He was an excep- offered inef ciencies and therefore for liquidity, Ms. Schwarzschild said. The rm attributed the growth to its iShares exchange-trad- tional colleague, a dear friend, and a SEE SWENSEN ON PAGE 31 The COVID-19 crisis will emerge as a ed funds business at $68.5 bil- | SEE EARNINGS ON PAGE 32 SEE RECAPS ON PAGE 32

A monumental legacy David F. Swensen, Yale University’s chief investment of cer from 1985 until his death this month, developed the “Yale model” of investing, which included embracing less-liquid asset classes such as leveraged buyouts and venture capital. Over the 10 years ended June 30, Yale’s endowment nearly doubled to $31.2 billion and produced a 10.9% annual return net of fees, besting its benchmarks and placing it in the top 2% of colleges and universities.

Shifting allocations: Within Benchmark busters: Among Cash cow: The endowment’s strong returns Family tree: After working under Mr. private equity, venture capital allocations the more impressive asset-class allowed it to fund a greater portion of Yale Swensen, endowment employees have rose to 22.6% from 10.3% over the past performances over the 20 years University’s operating budget. The $189 million gone on to take prominent investment 10 years, while leveraged buyouts fell to through June 2020 were buyout and VC spent in 1997 covered about 17% of the positions at major non-pro t and 15.8% from 24.8%. Domestic equities strategies, at 11.2% and 11.6%, school’s operating budget revenue, while in investment organizations. Thus, his made up just 2.3% of the endowment’s respectively ; international equities, 2020 the endowment’s $1.4 billion contribution investment legacy continues, bene ting asset mix in 2020 vs. 1997’s 21.5%. which returned 14.8% annually; and accounted for greater than one-third of revenue. a new generation. natural resources, with a 13.6% return. Change in asset allocation Contribution to Yale’s budget Notable alumni 100% 20-year average annual return Spending Operating budget % covered by Seth D. Alexander Kauffman Foundation U.S equity (billions; revenues (billions; endowment President, MIT Investment Lauren Meserve 90% Non-U.S. equity Mgmt. Co. 14.8% left axis) left axis) (right axis) CIO, The Metropolitan $5.0 50% Museum of Art 80% Peter Ammon Foreign equity Natural resources CIO, University of 13.6% $4.5 45% Kimberly Sargent 70% Pennsylvania CIO, David & Lucile Packard Real assets Venture capital $4.0 40% Donna Dean Foundation 60% 11.6% $3.5 35% Former CIO, The Rockefeller D. Ellen Shuman Leveraged buyouts Foundation Co-founder, Edgehill 50% Cash & $3.0 30% bonds 11.2% Andrew K. Golden Endowment Partners 40% U.S. equity $2.5 25% President, Princeton Paula Volent University Investment Co. Absolute return 9.7% $2.0 20% CIO, Bowdoin College 30% Randy Kim Real estate $1.5 15% Robert F. Wallace 8.3% CIO, Rainwater Charitable CEO, Stanford Mgmt. Co. 20% Foundation Private equity Absolute return $1.0 10% Casey D. Whalen 10% Anne Martin 8.1% $0.5 5% CEO and CIO, Truvvo Partners CIO, Wesleyan University 0% Cash & bonds $0.0 0% Ana Yankova 3.7% Mary McLean CIO, Mount Holyoke College 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Former CIO, Ewing Marion Source: Yale University Compiled and designed by Larry Rothman and Gregg A. Runburg 4 | May 17, 2021 Pensions & Investments

Money Management Dan Bigelow CEO pay a mixed bag following a year of volatility in pandemic Number of CEOs who demic and new volatility in the at the start of the pandemic but market, according to an annual quickly rebounded as earnings im- got raises equal to analysis of proxy statements by proved on the back of increased Pensions & Investments. trading revenue. those who saw declines For the 11 institutions analyzed In a recent research note, New by P&I, as many CEOs saw pay in- York-based Deutsche Bank AG an- By BAILEY McCANN creases as saw decreases. That alyst Matt O’Connor suggested that there were decreases at all may bank stocks could climb another CEO pay at the largest publicly come as a surprise to investors in 30%-50% on the “catch-up” trade — traded money managers and banks bank and money manager stocks catch-up meaning what they lost in with asset management units was a who have participated in a signifi- the pandemic — but it may not UNDER DISCUSSION: Amanda Walters said more firms are considering expanding mixed bag in 2020, as financial in- cant rally over the past several translate directly to big increases in the metrics and targets used to determine CEO pay to include diversity and ESG. stitutions responded to the pan- months. Bank stocks took big losses CEO pay. Proxy statements for 2020 highlight a variety of transitions happening within executive management and banks themselves which could keep compensation mixed over the near term.

Outperformers CEO compensation rose at J.P. Private Markets Virtual Series Morgan Chase & Co.; Morgan Stan- ley; BlackRock Inc.; T. Rowe Price Group Inc. and State Street Corp. June 15-17, 2021 This group also reflects the highest stock performers within the 11 in- If In addition to the fantastic line up of asset owner speakers you will see this June, P&I’s Private stitutions analyzed. On the whole, Markets Virtual Series will test your knowledge of the space through our Private Markets Trivia Breaks these institutions maintained posi- inspired by P&I’s very own Research Center. tive share price performance and in some cases engaged accretive Over the course of three days, attendees will hear twelve, carefully crafted questions meant to expand mergers and acquisitions activity their knowledge of the space. These questions will be supplemented by conversation and commentary during the pandemic. The most significant increase in from Aaron Cunningham, who will share exclusive commentary on the questions and market from his CEO pay was for BlackRock’s position as Director of Research & Analytics at P&I – including his work on the P&I 1000! Chairman and CEO Laurence D. “Larry” Fink, whose total compensation rose to $29.85 million in 2020, an 18.2% increase from $25.25 million in the prior year, according to the company’s proxy statement. At T. Rowe Price, CEO William J. Stromberg saw a 5.1% raise to $15.34 million from $14.59 million in 2019. In its proxy statement, T. Rowe Price said that the increase was the result of the asset manager performing well despite the pandemic. James P. Gorman, CEO of Morgan ASSET OWNER SPEAKERS INCLUDE: Stanley, also saw an uptick in pay to $33 million from $31.6 million last year. In its proxy statement, Morgan Stanley said that Mr. Gorman has led “transformational change” over the past year. Morgan Stanley beat performance expectations for 2020 and completed acquisitions of E-Trade Financial Corp. and Eaton Vance Corp., which have increased Sarah D. Capozzo Edward B. Creedon Terrance Davis Brad J. Gates, CFA its overall footprint within the fi- Knights of Columbus University of Illinois Foundation Florida SBA Southern Company nancial services industry. The company’s share price increased by 34% SEE CEO PAY ON PAGE 31 CORRECTIONS & CLARIFICATIONS

■ Pennsylvania State Brian Neale Tara Mason Juan Prieto Antonio Rodriguez Employees’ Retirement System University of Nebraska Health Care Service Corporation Mutual of Omaha NYC Board of Education agreed to commit $50 million to Foundation Retirement System Providence Strategic Growth. The name of the manager was COMPLIMENTARY REGISTRATION AT PIONLINE.COM/PM2021* incorrect in the Hirings section on page 19 in the May 3 issue. SPONSORS: ■ The page 1 story “Hopes rising on new SEC chief’s agenda” in the May 3 issue had an incorrect spelling for John Ramsay of IEX Group, who previously served at the SEC Questions? For more details please contact Elayne Glick at (212) 210-0247 or [email protected]. when Gary Gensler chaired the *Only asset owners and a limited number of consultants are invited to attend. All registration requests are subject to veriﬁcation. CFTC. Incorrect information about P&I reserves the right to refuse any registrations not meeting our qualiﬁcations. The agenda for Private Markets Virtual Series is not created, written or produced by the editors where Mr. Ramsay previously of Pensions & Investments and does not represent the views or opinions of the publication or its parent company, Crain Communications Inc. served was also in the story. Are you (or someone you know) doing something innovative to improve retirement income security for plan participants?

Pensions & Investments and the Deﬁned Contribution Institutional Investment Association are once again co-sponsoring an awards program for excellence and innovation by deﬁned contribution plan executives.

We want to recognize out-of-the-box thinking by those DC plan executives and their employers who are making new and unusual changes to help improve participants’ retirement income security.

The possibilities are endless; there are no categories. A prominent theme among last year, four of the seven winners centered their campaigns on people nearing retirement, addressing topics such as drawndown strategies, managed accounts and guaranteed retirement income that won’t run out.

Whatever the innovation is in design and/or excellence in execution, it undoubtedly is something others are just now considering. Help your peers by sharing your innovation and receive recognition for your ingenuity.

NOMINATION DEADLINE Full details and nomination form are available at May 28 pionline.com/innovationawards2021

Any questions, please contact Ashley Perrucci at [email protected]

Excellence in Innovators.pdf RunDate: 05/03/21 Full Page Color: 4/C 6 | May 17, 2021 Pensions & Investments

Defined Contribution Record keepers roll on despite challenges posed by pandemic

Assets increase 9.6% to MORE ON RECORD KEEPERS Record keeper stats at a glance The largest $8.21 trillion on inflows, For the full report, including a full U.S. DC plans; assets are in millions as of Sept. 30. record keepers set of data, go to pionline.com/ market gains, outreach One-year Five-year U.S. DC plans as of Sept. 30. RK2021 Assets change change By MARGARIDA CORREIA part of Truist Bank’s record-keep- Total assets under record keeping $8,205,696 9.6% 51.5% Ranked by assets, in millions ing business, a transaction it com- Rank Record keeper Assets Total number of participants 104,842,071 2.7% 14.2% Despite all the business disrup- pleted in February. Ascensus record kept 1 Fidelity Investments $2,576,063 tions the pandemic caused their bought the other part of Truist Total number of sponsors 2 Empower Retirement $883,478 plan sponsor clients, record keep- Bank’s record-keeping unit in 680,880 0.6% -2.8% record kept ers have nevertheless been able to March. Empower retroactively in- 3 TIAA $656,538 post solid asset growth, buoyed cluded MassMutual’s assets as of Number of platforms accommodating stand-alone investment options: 4 Vanguard Group $592,695 they say by positive net flows and to Sept. 30 in its survey response. Annuities 14 7.7% -12.5% 5 Alight Solutions $480,186 a lesser extent market gains. “Over the last several years now, For the 12 months ended Sept. there has been a steady volume of ETFs 10 0.0% N/A 6 Voya Financial $423,490 30, record keepers saw their assets industry transactions and that’s go- Private equity 6 0.0% N/A 7 Principal $386,782 swell to $8.21 trillion, up 9.6% from ing to continue,” said Edward F. Mur- Real estate equity 6 20.0% N/A 8 Bank of America $283,472 $7.49 trillion in 2019, according to phy III, Empower’s Greenwood Vil- Pensions & Investments’ latest sur- lage, Colo.-based president and CEO, Number of business professionals: 9 Prudential Financial $229,813 vey of record keepers. That’s up citing a statistic he likes to use to il- Record-keeping operations 20,833 6.2% -10.1% 10 T. Rowe Price Group $219,217 51.5% from the same period in 2015. lustrate the degree of record-keeper Investment analysis & due diligence 3,794 -4.7% 65.2% Empower Retirement, Voya Fi- consolidation. An Empower analysis Ranked by number of participants nancial Inc., and Fidelity Invest- of industry data showed that the top Relationship managers 2,814 7.7% -34.4% Rank Record keeper Participants ments Inc. — the biggest asset gain- five record keepers in 2020 account- Cybersecurity 6,741 -2.5% N/A ers among the six ed for a 58% share of the 1 Fidelity Investments 25,728,947 Number of providers offering largest record keepers market, up from 43% in 2 Empower Retirement 11,788,470 — attributed the growth 2012, he said. access to personal digital 8 0.0% N/A assistant devices to everything from Acquisitions can cer- 3 Principal 8,389,260 great online tools and tainly bolster a record Number of SECURE Act pooled 4 TIAA 6,413,542 7 0.0% N/A plan providers overall service to par- keeper’s market posi- 5 Voya Financial 6,078,334 ticipant outreach, better tion. Empower’s acqui- Providers' total DC assets $4,944,441 11.8% 67.6% 6 Vanguard Group 5,479,985 technology and even sition of MassMutual’s under management smart digital design. record-keeping busi- 7 Alight Solutions 4,803,485 Total internally managed $4,121,305 13.5% 80.8% “Smart design in ness, for example, solid- 8 Bank of America 3,967,581 Internally managed for proprietary terms of how digital ified Empower’s No. 2 $1,501,448 7.4% N/A 9 Transamerica 3,593,392 displays are set up TECH: Heather Lavallee spot, widening its lead record keeping clients 10 Prudential Financial 3,279,123 drives measurable im- said improvements in over TIAA-CREF, which Historical data may include retroactive updates. provement in retire- digital design also played had $656.5 billion in as- ment savings,” said a role in the growth. sets as of Sept. 30, ac- Salerno, senior vice president at Fi- played a role. The company “invest- wellness initiatives. The need for Heather Lavallee, cording to P&I data. The delity in Boston. “We generally hav- ed a lot in technology both on the record keepers to differentiate Voya’s Windsor, Conn.-based CEO deal brought 2.5 million partici- en’t done acquisitions of other re- front end” for its customers and “on themselves amid ongoing down- of wealth solutions. pants in 26,000 workplace retire- cord keepers,” he said. the back end in terms of infrastruc- ward pressure on pricing is leading The design of websites and moment plans to Empower’s platform ture and data security,” a factor that many companies to “come up with bile apps, including the choice of and boosted its assets by roughly Factors for growth Mr. Murphy said helped drive Em- more enhanced services,” Callan’s color, language and even the elec- $167 billion. Voya’s Ms. Lavallee also attri- power’s growth. Ms. McAllister said. tion button “can have a significant Still, Empower’s Mr. Murphy butes the company’s asset growth Fidelity similarly chalked up its “We’ve seen a lot more focus on impact on overall plan contribu- maintains that the company’s mostly to its sales efforts. “We had success to its technology and user financial wellness in general,” she tions,” she said. growth has mostly been “organic,” several large record-keeping wins experience. The record keeper’s said, adding that services can range Voya, the sixth-largest record meaning it was driven by retire- in the corporate space as well as in heavy investment in technology from “basic financial wellness edu- keeper by asset size, had $423.5 bil- ment plan “wins” from competitors the government space that brought helped “keep the people’s data se- cation and guidance for participants” lion in assets as of Sept. 30, up 21.6% as well as more contributions going in close to 600,000 net new partici- cure,” while also “providing for an to guidance on emergency savings, year-over-year, the second largest into existing plans. Mr. Murphy not- pants,” she said. excellent user experience when budgeting and student loans. asset gainer among the top six. The ed that for the 12-month period Each of the three asset gainers people log into a web-based chan- Fidelity, for one, is ramping up its strongest gainer — Empower Re- ended Sept. 30, Empower took in gave different reasons for their suc- nel,” Mr. Salerno said. He declined financial wellness offerings in the tirement, the second-largest record approximately $110 billion in new cess in growing organically. Voya to disclose how much the company areas of student debt services as keeper with $883.5 billion — posted client commitments, which included said that its growth was tied to the invested in technology, saying it well as employee-giving services a significant 39.9% jump in assets new 401(k), 457(b) and 403(b) de- fact that it serves all size plans from does not publicly provide the data. for plan sponsors whose partici- from $631.7 billion the year before. fined contribution plans of all sizes. the smallest up to the largest. Other record keepers are also pants have philanthropic interests, Meanwhile, reigning top record “None of that came through ac- “We’ve seen the capabilities that using technology in new ways to Mr. Salerno said. “Financial well- keeper Fidelity Investments grew quisitions,” Mr. Murphy said. “That we continue to invest in is really gain a competitive edge. Vanguard ness and total well-being are key at 14.4%, bringing its total assets to was all organic.” resonating in all size markets,” Ms. Group Inc., the fourth-largest re- areas for us,” he said. $2.58 trillion, up from $2.25 trillion Voya and Fidelity, too, say their Lavallee said. cord keeper with $592.7 billion in Voya, too, is broadening its ser- in 2019. growth has been organic. Fidelity, Empower’s Mr. Murphy also at- assets as of Sept. 30, last year part- vices beyond retirement plan ser- for instance, added about $115 bil- tributed the company’s asset growth nered with Infosys Ltd. of India to vices. Earlier this year, it launched Acquisitions make mark lion in new assets to its 401(k) and to its ability to compete in all mar- deliver what it called a “technolo- an emergency savings program for The healthy growth comes as re- 403(b) platform last year, said Bob kets but added that technology also gy-driven approach to plan admin- employers to add to their benefit cord keepers merge or look to ac- istration.” The deal essentially out- packages and now even offers care- quire other firms, a move that al- sources Vanguard’s record-keeping giver-support services through a lows them to build scale and Growth of U.S. DC plan assets technology operations to Infosys. partnership with Wellthy, an orga- thereby lower their fees. John James, managing director nization that provides concierge “I think as pricing pressure con- under record keeping and head of Vanguard Institutional support to families with complex tinues, we’re going to see more re- Assets are in trillions as of Sept. 30. $8.21 Investor Group in Malvern, Pa., caregiving needs. cord keepers need to keep their said the relationship will allow “We want to help employers participant count numbers high $7.45 $7.49 Vanguard to evolve its record-keep- think about the breadth of needs enough in order to spread all of $6.92 ing capabilities and platform to a and issues that their employees are their fixed costs,” said Jamie McAl- “fully cloud-based solution” that facing,” Voya’s Ms. Lavallee said. lister, senior vice president on Cal- has already yielded positive results, Empower is also reinforcing ef- $5.56 $5.42 $5.47 lan LLC’s defined contribution $5.06 including the rollout of a new par- forts to provide its 12 million partic- team in Chicago. ticipant website featuring behav- ipants with what Mr. Murphy called $4.45 Indeed, the pricing pressure led ior-based navigation. a “more holistic seamless experi- Empower to acquire the retirement “Our agile approach to the new ence that transcends retirement.” plan record-keeping business of participant site means that we’ll “Many of our customers have Massachusetts Mutual Life Insur- continuously roll out new function- other goals, whether it’s college sav- ance Co., in a deal that closed on ality and tools throughout 2021 and ings, emergency savings or health- Jan. 4 following its announcement beyond,” Mr. James said. care savings,” he said. “The more we in September. Empower also closed To drive growth going forward, can help them think through that on buying the record-keeping busi- record keepers are also broadening decision matrix and help them ness of Fifth Third Bank in Novem- 2012 2013 2014 2015 2016 2017 2018 2019 2020 their services beyond retirement achieve the level of savings they’re ber. More recently, it scooped up plans and plunging into financial looking for, the better.” n People, culture, beneﬁts.... Does your company oer great beneﬁts? Provide ample opportunities for employee development — and a great culture to boot?

Work has changed since the start of the pandemic. Many ﬁrms are reviewing plans for bringing people back together in their oces in 2021. But companies with a strong culture, talent base and support network will always be great places to work — regardless of where the work gets done. Tell us what makes your ﬁrm stand out from the others. Register for the 2021 Best Places to Work in Money Management today.

Rankings will be announced in the Dec. 13 issue. Take the ﬁrst step and register your ﬁrm today!

Go to pionline.com/bptw2021 and discover: • How to register and how the registration process works • Answers to frequently asked questions • Sample employer questionnaire • Sample employee questionnaire

Organizations self-nominate through the registration process. To register, please go to www.pionline.com/bptw2021

Take the ﬁrst step. Register your ﬁrm by June 11.

If you have any questions about Pensions & Investments’ Best Places to Work in Money Management, please contact Julie Tatge at (312) 649-5442 or [email protected].

BP2W.pdf RunDate: 04/19/21 FULL PAGE Color: 4/C 8 | May 17, 2021 Pensions & Investments FRONTLINES

BACK TO SCHOOL AB teams with Columbia to probe climate-related financial issues With the risks from climate change data on climate change, “we started to realize requiring an all-hands-on-deck approach, it is incredibly difficult, and we needed to officials at AllianceBernstein LP decided not partner with experts,” said Michelle Dunstan, to wait for others to find solutions. Instead, global head of responsible investing at the asset manager with $697 billion under AllianceBernstein in New York. management went back to school. The alliance really began in fall 2019, AB became the founding member of when AllianceBernstein and Columbia Columbia University’s new Columbia Climate developed an unusual curriculum to School, where researchers are focusing integrate climate science into portfolio exclusively on tackling climate change. construction and management. That gave “The collaboration between science and more than 250 of the firm’s larger investors finance is critical to developing and identify- and directors insight into climate science ing solutions to the climate crisis,” said Alex and implications for investment decisions. It Halliday, founding dean of the Columbia also gave Columbia scientists insight into the Climate School and director of the universi- investing process to help them deliver INSIGHTS: Climate tipping points are discussed at an AB climate and investment training session. ty’s Earth Institute. He believes that effecting practical information. real change will require engaging the Another joint effort with Columbia, the prised by the response,” Ms. Dunstan said. she said. The next assignment is finding business community, and AB can provide Climate Change and Investment Academy, AB also has plans for a series of work- ways to advance their clients’ climate change scientists valuable insight into how their has trained and certified more than 1,000 shops with researchers on specific topics knowledge, said Sara Rosner, director of work and research impacts sectors, indus- asset owners and consultants on key climate- like hydrogen and sea level rise. environmental research and engagement on tries and countries, he said. related finance issues, and AB hopes to grow Co-research on several upcoming projects AB’s responsible investment team. As the asset manager began collecting those numbers. “We were incredibly sur- “will inject that lens of commercial viability,” — HAZEL BRADFORD

A HOW-TO FOR CITY BUSINESS A HELPING HAND NYC comptroller’s office hosts MWBE webinar series KKR fund Seeking to increase the role of minority and pension fund consultants. “Many of the topics women-owned business owners in city contract- come from the business owners,” Ms. Garcia said. ing and the private sector, the New York City The webinars, whose formal name is Minority targets small comptroller’s office is offering a series of and Women Owned Business Enterprises webinars under the name MWBE University. University Series, are conducted in 12 languages businesses, The webinars were borne of city comptroller with simultaneous translations taking place. officials meeting with business owners who were Topics change each year — the impact of seeking city contracts ranging from providing COVID-19 is a theme that runs through this non-profits supplies and services to managing investments year’s offerings — and the comptroller’s office for the New York City Retirement Systems but conducts focus groups with minority and women KKR & Co. Inc.’s $50 million didn’t know the best way to do so. business owners and advisory board members to COVID-19 relief program has been “We realized they needed a place to learn how assess business topics. busy, already in its third round of to navigate city government,” said Wendy Garcia, Lecturers have included asset managers and grants since the relief fund was the comptroller’s chief diversity officer, who runs consultants and MWBE executives who won city launched in April 2020. the webinars. “There was a need” for more contracts. In the latest round, KKR’s relief accessible and transparent information, she said. Shifting from live presentations in previous effort awarded $10,000 each to 52 The series was launched in 2018 by Scott years to Zoom webinars hasn’t thwarted the small-business owners and Stringer, the city comptroller and fiduciary of the business education momentum, Ms. Garcia said. roughly $3.5 million to 22 five pensions funds that are part of the $251 In fact, the webinars offered students greater non-profit organizations. billion New York City Retirement Systems. This access to their peers for both sharing information Of the grant recipients, 52% are year’s education menu includes topics such as and even working together, she added. women-owned, 56% are minori- how to improve diversity on boards of directors This year’s webinars started in March and run ty-owned and 23% are owned by and how minority and women investment through August. veterans or their immediate family ACCESS: The webinars, run by Wendy Garcia, managers can build relationships with the city’s — ROBERT STEYER members. cover topics such as improving board diversity. KKR’s program “strives to meaningfully help those most THERE’S AN NFT FOR THAT COLLIDING impacted by the pandemic,” said WORLDS: Ali Hartman, director, head of Artist global citizenship, in a December Artist creates an NFT to help Amrita blog post when the program made Sethi said its first round of grants. The she aimed program aims to support KKR’s demystify non-fungible tokens to ‘build a portfolio company employees, bridge inspire KKR employees to be If you have ever wondered what on history and evolution of the NFT between changemakers, support small earth non-fungible tokens are, there space, which produced a visual the businesses worldwide and partner is an NFT created by multimedia waveform. She then turned each physical with non-profits, Ms. Hartman artist Amrita Sethi that explains it. vertical line in the waveform into an and virtual said. Demand for digital signa- individual image, such as a bitcoin worlds’ with Business owners awarded grants her new 3D in the most recent round include ture-based collectible goods, which logo. The artwork also featured voice note Austin Blose, general manager of are stored in a digital format and Ms. Sethi’s voice art. New Bethlehem, Pa.-based Zack’s known as NFTs, exploded in early as she pro- Farm to Table Restaurant; Bob 2021 when platforms enabled nounced words Burke, owner of Pot au Feu modern artists to list their work such as Restaurant in Providence, R.I.; online and sell ownership rights. “democracy” Gina Mariko Rosales, owner of United Arab Emirates-based Ms. and “revolution,” allows me to cre- bridge between the physical and event planning company Make it Sethi, who used to work in the concepts that ate dynamic art, virtual worlds. ‘WTNFT?!’ voice note Mariko and Shana Murad, owner insurance and banking sectors and she said enabled while harnessing art provides an explanation of the of convenience store D’s Market in is now a full-time artist, unveiled the development the creative ad- history and evolution of the NFT Scottsdale, Ariz. Among the non-profits awarded her animated art piece called “What of NFTs. vantages of NFT space especially to those who are grants this time around were Aide the NFT?!” on May 7 during an “This is the art,” Ms. Sethi new to the NFT space, while et Espoir aux Refugies — Help online auction. The work, which is first time I have said in a news celebrating and honoring key pivotal and Hope, Lauzerte, France and in a 3D format, sold for $102,000. applied 3D release. and historical moments for those the North Texas Food Bank in To create the art, Ms. Sethi visualization techniques to my voice In an emailed comment to P&I, more familiar with the crypto world.” Plano. recorded herself explaining the note art concept. I believe this Ms. Sethi said: “I wanted to build a — PAULINA PIELICHATA — ARLEEN JACOBIUS INTERESTED IN SUSTAINABLE INVESTING?

LEADERS IN SUSTAINABLE FIXED INCOME

If you are an institutional asset owner searching for sustainable/ESG-driven investment strategies, Global Fund Search is the place to start.

Searching and ﬁ nding sustainable investment strategies can be both challenging and time-consuming. GFS will help you streamline your search process and assist you with capturing the qualitative data often overlooked in the search process.

Contact Global Fund Search today to ﬁ nd out how to use our free database of global asset managers and Sustainable Leaders for your next search.

Featured leaders in sustainable ﬁ xed income investing

Previously Investec Asset Management

To learn more about the ﬁ rms featured above and to download white papers on their ESG o erings go to www.globalfundsearch.com/esg-leaders

In Partnership with

GFS Fixed Income.pdf RunDate: 5/17/21 Full Page Color: 4/C 10 | May 17, 2021 Pensions & Investments OPINION

Christopher J. Battaglia President and publisher, Pensions & Investments

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 Meaghan Offerman Associate editor [email protected] Colette Jordan Chief content 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 Christine Williamson Money management

ART Gregg A. Runburg Art director Roger Schillerstrom Editorial cartoonist

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

EDITORIAL SALES & MARKETING Nikki Pirrello Chief operating officer Julie Parten Head of sales [email protected] Lauren DeRiggi Digital specialist/account executive [email protected]

Yale CIO had huge impact on asset management REGIONAL SALES MANAGERS Rich Kiesel West n the days following Yale CIO David F. Swensen’s death, articles For individuals, he advocated (in this case in an 2009 Q&A with the Paul Kissane Midwest about his work, his dedication to Yale University, its students, Yale Alumni Magazine) portfolios weighted toward equities — as Anna Koules New York its endowment and to investing overall have made it clear how much as 70% — but specifically those accessed through index funds Steve Middleton EMEA +44-(0)77-1012-8464 Hideo Nakayama Asia (Tokyo) +81-3-3479-6131; sorely he will be missed and the profound effect he had on “because they’re transparent, understandable, and low-cost” and [email protected] asset management. By no means did he make investing simple, focused as well on the importance of rebalancing to an asset Eduardo de Alcantara Machado Sao Paulo, Ibut throughout his 36 years successfully running the Yale endow- allocation that ultimately is the “tool that you use to determine the Brazil +55-11-3167-0821; [email protected] ment and teaching others to invest, he espoused clear guidance risk and return characteristics of your portfolio.” CONFERENCES/MARKETING Usha James Group director of conferences about how institutions and individuals should manage money. He recognized that his style of investing could be seen as “boring” [email protected] In his two books — the first, “Pioneering Portfolio Management: An and would not make for good cocktail party conversation. Kimberly Jackson Director of conference sales Unconventional Approach to Institutional Investment,” and the In today’s world, as new ideas and gimmicks swirl, it is important Diane Pastore Director of conference programming second, “Unconventional Success: A Fundamental Approach to for all investors — retail as well as institutional investors guiding Joshua Scott Director of conference programming Personal Investment,” written for individual investors — he offered endowments, pension funds, defined contribution plans and more Kathleen Stevens Investor relations director advice that in the era of cryptocurrency, Archegos, Robinhood and — to keep his principles and his ideas top of mind. Gerry O’Hara Investor relations manager [email protected] GameStop could not be more important. Mr. Swensen in the Yale Alumni interview was clear that he thought Michelle DeMarco Director of relationship For institutions, as author of the “Yale model” he changed the way not all investing styles were for all investors. marketing endowments invest — moving to an approach that capitalizes on “The most important difference, in terms of categories of inves- Assel Chanlatte Conference marketing manager Mirjam Guldemond Conference manager, long-term investors’ opportunity to take on additional risk in the form tors, is between those who can make high-quality active management WorldPensionSummit +31-6-2333-2464 of illiquidity. He made definitive moves into private equity and venture decisions and those who can’t. ‘Pioneering Portfolio Management’ is Kristal Santos Client services project manager capital, international investments and hedge funds. But he did so for those who have the ability to manage portfolios actively. ‘Uncon- Ashley Perrucci Associate manager, client partnerships with significant emphasis on governance, risk management and risk ventional Success’ is a book for the overwhelming number of Rachel Lopez Conference administrative assistant control that took the form of careful selection of both advisers and individual and institutional investors who cannot manage a portfolio CUSTOM CONTENT/CLIENT SOLUTIONS managers, as well as diversification within and among asset classes. actively,” he said. “Almost everybody belongs on the passive end of Gauri Goyal Director of content solutions He apparently was a man who very much sweated the details. the continuum. A very few belong on the active end.” n Corina Lewis Client solutions senior program manager David Joseph Research analyst [email protected] OTHER VIEWS SANCIA DALLEY Tetyana Saucedo Digital campaign manager Deanna Speziale Senior marketing associate [email protected]

SUBSCRIPTIONS/SITE LICENSES 3 ways investors can boost their diversity, inclusion efforts Elayne Glick Director of audience marketing and acquisition David Bomberger Director, enterprise licensing iversity is one of the most familiar increase diversity and racial equity. Sancia Dalley is the Ed Gorman Director, EMEA/international site As the leader of Robert F. Kennedy Human words in the investing world. No senior vice president of licensing +44-(0)20-3823-9891 Rights’ Compass Investors program, I’ve had matter where investors are located, strategic partnerships the chance to convene a series of conversa- RFP/RECRUITMENT who they invest for or why, they and investor engagement tions on the topic of diversity and racial Erin Smith Sales manager know that diversifying their for Robert F. Kennedy equity with our network of more than 300 REPRINTS Dholdings helps them minimize risks and Human Rights, a asset owners, asset managers and consul- Laura Picariello Sales manager optimize their portfolios for the long term. non-profit human rights The inherent logic of portfolio diversifica- tants who collectively control close to $7 advocacy organization. ADVERTISING PRODUCTION tion also makes it easy for investors to see the trillion in assets under management. We’ve She is based in Austin, Robert T. Hedrick Media services manager realized that the answer isn’t as daunting as 312-649-7836; [email protected] wisdom of owning companies with diverse Texas. boards and talent pools — or hiring money it seems. We’ve distilled it into a simple Subscription information - single copy managers from different racial and ethnic action plan that investors can implement, sales: 877-812-1586

backgrounds. But how do you effectively question, don’t worry — you’re not alone. As regardless of whether they’ve already started TO CONTACT A P&I STAFFER implement such strategies once you’ve the events of the past year have shown us, down the path of increasing diversity and Unless otherwise noted above, email us at realized their benefits? corporate America as a whole has woken up racial equity or are just getting started. [email protected] or find phone numbers at pionline.com/staff. If you’re an investor struggling with that to the fact that businesses need to do more to SEE DALLEY ON NEXT PAGE Pensions & Investments May 17, 2021 | 11 OPINION

with is a program for identifying and OTHER VIEWS ANDREW COX hiring investment management firms Dalley run by minority- and women-owned firms. These programs can help institu- CONTINUED FROM OPPOSITE PAGE tional investors promote more diversity Infrastructure put to the ultimate test Here’s how you can help do your part. within their manager lineups and, in the process of doing so, diversify their ■ Build a workplace that is racially portfolios as well. The $248 billion New inclusive at all levels. The most logical York State Common Retirement Fund, by COVID-19 pandemic, lockdowns place to start is one where you have the Albany, has committed $7 billion to an most control: your own workplace. emerging manager program, which has Before institutional investors scrutinize given the pension system access to new fter more than a year company´s reputation with its fund managers and company boards to and diverse managers across public from the beginning of key stakeholders. Speed and help them boost their diversity efforts, equities, private equity, fixed income and a period of sustained flexibility were critical at the they first need to take a look within their other asset classes. More than 20 lockdowns around the beginning of the pandemic. New own walls to see where they can make emerging and diverse managers have world, and despite a processes had to be established improvements. Begin by examining the graduated from the program, which Avaccination program that is to meet new regulations (e.g., makeup of your investment teams, shows the retirement fund has made the providing hope of an exit, we social distancing). Measures that committees and boards of trustees. initiative a priority. already know that the economy seemed impossible were Then, move down the ranks and see if Organizations without programs that and society as a whole have been suddenly realized at record your organization has pockets of actively source for diverse managers can severely affected and the speed. diversity within certain areas like look to New York for an example of how repercussions of COVID-19 will Crises make one learn for the back-office and secretarial work. If all of to create such a program with existing last for years to come. future. Despite the declining your most diverse employees are pools of capital. Those with programs Institutional clients are asking Andrew Cox is co-head infection rates in many countries relegated to supporting roles, it’s time to already in place should update their about the impact of COVID-19 on of infrastructure at and progresses on the vaccina- question whether your organization has strategy to prioritize underrepresented the infrastructure asset class. Did Allianz Capital Partners. tion program, the effects cannot the processes in place to provide minority fund managers, especially infrastructure prove to be be quantified yet, but every asset advancement oppor- those fundraising for resilient? Which companies managed the owner has learned important lessons that will tunities for people of The inherent logic the first or second situation best? To answer these questions help to ensure they are even better prepared color at all levels. You time, so that newer properly, we need to recognize that there are for the next crisis. The pandemic has under- can fix that by of portfolio firms can also get a different types of infrastructure assets and scored the importance of a forward-looking identifying and diversification also look. that they have all had different experiences approach and more than ever we believe that creating practical and performances through the crisis. investors will focus on ESG aspects to weather pathways to advance- makes it easy for ■ Lead by example. The pandemic has revealed stark differenc- future challenges. ment within your investors to see the Once you have es in the sustainability and resilience of organization, such as processes in place to different infrastructure assets. Whereas the Digital infrastructure on duty mentorship opportu- wisdom of owning promote diversity and demand for infrastructure assets such as Most companies were able to adjust nities that encourage companies with racial equity through airports, highways and public transport has rapidly to the new situation. The prerequi- underrepresented your actions, you are seen a sharp drop in traffic due to restricted site to allow people to work remotely is candidates and staff to diverse boards and ready to lead by discretionary travel, utility networks that high-speed connectivity, also in rural areas, network and try out talent pools — or example. Start by provide a critical customer service have which is very often not the case yet. If there new roles. making it clear to your proven to be very resilient. Passenger was any doubt before the lockdown as to One way to expand hiring money investment managers numbers in most transport assets have whether digital infrastructure provided and build these managers from — whether they’re correlated directly with the various lockdowns essential services in the same way as more pipelines is to stop minority-owned firms over the last year and that has put significant traditional gas, water or electric utilities, placing excessive different racial and or not—that diversity pressure on debt covenants and equity there is no more. Even if most European value and confidence ethnic backgrounds. is something you care valuations and exposed again the fragility of countries have made remarkable progress in in candidates from about and want to see combining highly geared capital structures rolling out fiber, the pandemic has shown elite universities and represented in the with volatile business risk profiles. that it is not sufficient. There is still a huge to start actively regular information On the other hand, core assets, such as gap in the digital divide and private inves- recruiting elsewhere. Insisting that all updates they give you. Don’t underesti- regulated energy and telecommunications tors can help to bridge this gap. In recent candidates have traditional backgrounds mate the power of a simple question, networks need to operate efficiently and years, we have seen an increasing appetite and flawless resumes just creates a such as, “Do you track and report the deliver their critical services in both good and from investors for digital assets such as cell culture of closed-mindedness that racial composition of the boards of bad times. Indeed, with working from home towers, data centers and broadband projects. inhibits innovation, and creates blind directors of your portfolio companies?” having become widely accepted, everyone has Allianz, for instance, has been investing for spots to once-in-a-generation talents Asking the question will send the appreciated even more the need for a strong some years in the expansion of digital like Oprah Winfrey, who was one credit message that you care about this data and reliable digital connection. COVID-19 has infrastructure and recently announced a short of graduating from Tennessee point and encourage your investment been the ultimate stress test for many joint venture with Telefonica to further State University in 1975 (she eventually partners to care about it as well, which companies and their business continuity accelerate the fiber roll out in rural and got her degree in 1987). can lead to a deeper conversation about management processes and safety protocols. semi-rural regions of Germany. encouraging more diversity in leader- These have on the whole been sufficient, but We will continue to see people working ■ Take a systemic approach to sharing ship ranks, hiring processes and all the the pandemic has also given pause for remotely in the future as the pandemic has the wealth. The next biggest thing your other initiatives that you’ve implement- thought about how to structure and improve proven that it is not just possible, but effective. organization can control is who it does ed — or are implementing — in your such processes in future. Moreover, active Local and digital supply chains have gained business with. The good news is that organization. asset management has come to the fore as importance during the lockdown and compa- every contract is an opportunity to There is no substitute for leading by investors have had to work closely with their nies need to be able to rely on digital solutions promote racial equity. The bad news is example, whether you have several management teams to ensure a continuity of to sell their products and services. Digital that, far too often, companies owned by billion dollars to allocate to diverse critical services and adaptation to working infrastructure will become a critical competi- underrepresented minorities only get managers or only a small contracting from home practices. tive advantage. looked at for lower-level contracts like pool to fill. The best way investors can food services and custodial work as build a more equitable and just society ESG remains key What’s next? The future! opposed to legal and consulting services is by using their financial capital and The difficult time we are going through due The pandemic is not over yet. There will be or external money management roles. leadership influence to create change to the pandemic does not automatically mean no complete “back to normal” and investors Don’t make that mistake; spread the long term. that ESG aspects are not relevant anymore. need to look at what is essential for our future. wealth by creating processes to ensure If that sounds familiar, it should — it’s The current challenge has actually empha- Governments will launch new stimulus diversity is a factor in all your organiza- how portfolios grow over time, aided by sized the important of the “S” for society and packages to support the economic recovery tion’s contracting needs, not just the diversification. n the “G” for governance as companies try to and will foster new investment structures. ones that are easiest to fill, or are out of keep their customers and stakeholders strong Infrastructure can play a vital role in the public view. This content represents the views of the author. and supported. post-pandemic recovery as a driver toward a One of the most impactful processes It was submitted and edited under Pensions & Many companies and their employees have sustainable future. Projects will pay even more asset owners can set up to increase the Investments guidelines but is not a product of been helping their communities during the attention to the principles of sustainability as number of diverse managers they work P&I’s editorial team. lockdown. Be it the engineer from a gas both governments and investors will increase network who used his customer visits to do their commitment toward decarbonization, the grocery shopping for elderly people in the digital connectivity and the safety of energy MORE INDUSTRY VIEWPOINTS area or the water company that offered their supply. Responsible investors, representing ■ Christopher Smart: It’s the summer of recovery, but can it last? workers at home mental health guidance the population through long-term insurance — COVID-19 has been the pivotal moment for and pension money, can make the difference ■ Jane Bieneman: How institutional is impact investing? all companies to prove that they do not just here, for the benefit of a changing society and ■ William Irving, Avishek Hazrachoudhury and Christopher Kelliher: Improving portfolio talk, but also act. their customers. n resiliency across risk factors, regimes and time horizons The pandemic has tested the governance See pionline.com/industry-voices model, the business continuity management, This content represents the views of the author. It was

To submit an Other Views commentary, email Associate Editor Meaghan Offerman at [email protected]. the robustness of contracted and regulatory submitted and edited under Pensions & Investments frameworks, and focused attention on a guidelines but is not a product of P&I’s editorial team. 12 | May 17, 2021 Pensions & Investments DC ROUNDUP

Key Democrats ask GAO to take a look at target-date funds

Two key congressional Demo- tions to petition for rehearing or stitute, told committee members crats would like the Government petition the U.S. Supreme Court to that though nearly 90% of workers Accountability Office to conduct a review the case. International equity funds at companies with 500 or more em- review of target-date funds. deliver returns — but add risk ployees have access to a retirement Sen. Patty Murray, D-Wash., Bronson Healthcare sued plan, only 53% of workers at com- chairwoman of the Senate Health, For the year ended March 31, 23 of the 25 largest international panies with fewer than 100 employ- Education, Labor and Pensions over fees, fund offering equity mutual funds outperformed the MSCI EAFE index. ees have such access. Moreover, Committee, and Rep. Robert C. Two 403(b) plan participants However, each had higher risk, with standard deviations higher EBRI data shows that having access “Bobby” Scott, D-Va., chairman of have filed a class-action lawsuit than the index’s 17.3%. The total returns ranged from MFS to an employer-sponsored defined the House Committee on Education against Bronson Healthcare Group, contribution plan increases the International Intrinsic Value’s 36.9% to Vanguard International and Labor, said in a letter sent May Kalamazoo, Mich., alleging the chance that workers will have 6 to the GAO that they’re concerned non-profit health-care provider Growth’s 87.1%. enough money to sustain them- certain aspects of TDFs may be breached its fiduciary duties in the Over five years, 19 of the funds had a higher average annual selves in retirement by 50%, accord- placing retirement savers and retir- investment options offered and return than the MSCI EAFE’s 9.5%. Similarly, each had a greater ing to Ms. Lucas’ written testimony. ees at risk. fees charged in the plan. In her written and verbal testimo- risk than the passive index. At the bottom, BlackRock iShares “TDFs are often billed as ‘set it The lawsuit, filed in U.S. District ny, Deva Kyle, of counsel with the and forget it’ investments, yet ex- Court in Kalamazoo, alleges the MSCI EAFE index had an 8.9% return, with Dodge & Cox law firm of Bredhoff & Kaiser, noted penses and risk allocations vary company breached its fiduciary du- International and Fidelity International Index Fund each returning that from 2007 to 2019, the percent- considerably among funds,” the ties under ERISA by failing to mon- 9%. Vanguard International Growth led the way with a 22% age of Hispanic families with retire- lawmakers wrote. “The millions of itor the fees charged by record annualized return. ment savings dropped to 32% from families who trust their financial keeper Fidelity Investments and by 38%; for Black families, the percent- futures to target-date funds need to utilizing Fidelity’s active suite of Return/risk of the largest age dropped to 44% from 47%; and international equity mutual funds know these programs are working target-date funds rather than the white families to 65% from 67%. as advertised and providing the re- less expensive passive offering, ac- ONE YEAR FIVE YEARS There are also disparities in re- Standard Standard tirement security promised.” cording to the court filing. Fidelity Fund Return deviation Return deviation tirement savings between men and Ms. Murray and Mr. Scott out- was not named as a defendant in women that are exacerbated by the American Funds Capital World lined 10 items they’d like the GAO the suit. 51.8% 20.6% 12.7% 17.8% gender wage gap and the fact that Growth & Income to address, including the percent- As of Dec. 31, 2019, the Bronson women, on average, live longer than age of total defined contribution Healthcare Group Inc. 403(b) Tax American Funds EuroPacific Growth 60.8% 21.0% 12.9% 17.7% men, meaning women generally plan assets invested in TDFs; the Sheltered Matching Plan had $738 American Funds New Perspective 67.3% 23.5% 17.9% 19.6% must stretch to make less money percentage of plan participants that million in assets, according to the sustain them for longer periods, Ms. American Funds New World 62.2% 21.4% 14.5% 17.3% are offered, and participate in, tar- company’s most recent Form 5500 Kyle said. get-date funds; and the percentage filing. American Funds Smallcap World 83.9% 22.6% 18.7% 18.4% To broaden the percentage of of plan participants defaulted into BlackRock iShares MSCI EAFE Index 45.7% 21.7% 8.9% 18.0% people saving for retirement, Shai TDFs. Akabas, director of the Economic Progressive adopts auto DFA Emerging Markets 63.6% 30.7% 10.8% 25.5% Also, the lawmakers want to Policy Project at the Bipartisan Pol- know how often investors with de- enrollment for new hires DFA Emerging Markets Core 67.3% 21.6% 11.0% 18.1% icy Center, said there have been two fault TDFs in their DC plans reas- Progressive Corp., Mayfield Vil- DFA International Core Equity 57.9% 22.4% 9.3% 18.2% promising developments on cover- sess their investments, and to what lage, Ohio, added auto enrollment to Dodge & Cox International Stock 57.4% 26.5% 9.0% 21.3% age options: state-backed auto indi- extent do TDFs include alternative its 401(k) plan. vidual retirement account pro- assets, such as hedge funds or pri- Effective in 2021, Progressive Fidelity Diversified International 47.3% 20.6% 10.4% 17.8% grams and the creation of pooled vate equity. added the feature in which new Fidelity International Discovery 57.8% 21.3% 11.3% 17.7% employer plans, or PEPs. The GAO was also asked to hires are automatically enrolled at Fidelity International Index 45.4% 21.4% 9.0% 17.8% weigh in on the “possible legislative a 6% pretax contribution rate, it dis- Invesco OFI Developing Markets 53.1% 22.0% 12.5% 18.3% KeyCorp gets split decision or regulatory options that would closed May 10 in an 11-K filing with not only bolster the protection of the SEC. Invesco OFI Global 64.7% 25.5% 16.4% 21.6% from court in ERISA case plan participants, who are nearing Contributions are matched 100% Invesco OFI Global Opportunities 86.6% 27.7% 21.1% 23.9% A U.S. District Court judge in retirement or are retired, but also by Progressive up to 6% of partici- Cleveland issued a split decision in Invesco OFI Int’l Diversified 52.6% 19.8% 11.1% 16.9% achieve the intended goals of TDFs.” pants’ eligible compensation, ac- an ERISA case against KeyCorp, cording to the 11-K filing. Invesco Oppenheimer Int’l Growth 52.3% 25.0% 9.1% 19.4% dismissing some charges but deny- Court sides with CalSavers As of Dec. 31, the Progressive MFS Institutional Int’l Equity 40.2% 20.8% 11.1% 17.1% ing the company’s request to dis- 401(k) Plan had $6.9 billion in as- miss all charges filed by partici- MFS International Intrinsic Value 36.9% 18.5% 11.9% 15.4% in attempt to halt program sets, according to the 11-K filing. pants in a 401(k) plan. The U.S. Court of Appeals for the Progressive spokesman Jeff E. Oakmark International 84.8% 32.8% 9.4% 24.2% The participants sued in June 9th Circuit on May 6 agreed with a Sibel could not be immediately T. Rowe Price Int’l Discovery 81.8% 20.9% 16.1% 17.3% 2020, alleging among other things, lower court’s decision to dismiss a reached for further information. that the plan’s fiduciaries allowed Vanguard Developed Market Index 50.9% 21.8% 9.6% 17.8% taxpayer association’s lawsuit aim- (Institution Plus) “excessive” record-keeping fees ing to stop the implementation of and administrative expenses start- Chicagoland Chamber of Vanguard Int’l Growth (Admiral) 87.1% 24.9% 22.0% 20.2% the nearly $68 million CalSavers ing in June 2014. They also accused Retirement Savings Program. Commerce starts PEP Vanguard Total Int’l Stock index 52.8% 20.9% 10.0% 17.4% KeyCorp of failing to monitor the CalSavers is a defined contribu- Chicagoland Chamber of Com- plan’s fiduciaries, the Trust Over- MSCI EAFE 45.4% 17.3% 9.5% 14.8% tion plan for private-sector workers merce, Chicago, launched a pooled sight Committee. Source Pensions & Investments, Bloomberg LP in California who do not have ac- employer plan. “Plaintiffs have stated a cogniza- cess to a retirement plan sponsored The plan will offer members the ble failure to monitor claim,” wrote by their employers. opportunity to pool their retire- U.S. District Court Judge Pamela A. The U.S. District Court in Sacra- ment plans together as an alterna- by participants in a company re- er share classes of identical mutual Barker on May 4, rejecting Key- mento dismissed the Howard Jarvis tive to single-employer 401(k) tirement plan that fiduciaries vio- funds offered in the plan, should Corp’s motion to dismiss. Taxpayers Association lawsuit on plans or the Illinois Secure Choice lated their ERISA duties in manag- have chosen index funds vs. active- Ms. Barker also supported the March 10, 2020, without leave to plan, the chamber announced in a ing the plan. ly managed funds and allowed ex- participants in rejecting KeyCorp’s amend. The association had sued to news release May 11. The settlement, which requires cessive record-keeping fees. motion to dismiss allegations of ex- permanently halt the plan’s imple- Mesirow Retirement Advisory court approval, was described in a The WakeMed Retirement Sav- cessive administrative expenses, vi- mentation and prevent its board Services is overseeing the Chicago- document submitted April 26 to a ings Plan had assets of $898 million olating ERISA’s duty of prudence from spending taxpayer money on land Chamber of Commerce PEP, U.S. District Court in Raleigh. as of Dec. 31, 2019 according to the rule. the CalSavers program, arguing according to the news release. The In addition to the payment, latest Form 5500. However, when the plaintiffs ar- that the state program is pre-empt- firm serves as the pooled plan pro- WakeMed, while admitting no gued that these fees also violated ed by federal law. vider as well as the 3(16) plan ad- wrongdoing, agreed to several oth- Senate committee, experts the ERISA’s duty of loyalty rule by The San Francisco-based appel- ministrator and 3(38) investment er terms: conducting an RFP for in- claiming fiduciaries were self-deal- late panel disagreed. The court said manager. vestment advisory services within discuss coverage gap ing, Ms. Barker supported KeyCorp, federal law, namely ERISA, does The chamber is a non-profit or- 18 months of formal settlement ap- Lawmakers and retirement ex- saying it was “too speculative.” not pre-empt the state law that cre- ganization with more than 1,000 proval; conducting an RFP within perts discussed ways to get more The judge also ruled for Key- ated the plan. CalSavers is estab- member companies employing 36 month of approval for re- people saving for retirement, espe- Corp, rejecting the plaintiffs’ allega- lished and maintained by the state, 400,000 workers. cord-keeping and administrative cially women and people of color, tions that a stable value fund per- not employers, and it does not re- services; and within 72 months of and boosting the percentage of formed poorly and charged high quire employers to operate their WakeMed settles with approval conducting a second RFP Americans who can retire comfort- fees. Ms. Barker ruled against Key- own ERISA plans, the opinion said. for record-keeping and administra- ably during a Health, Education, Corp in the allegation that managed Laura Dougherty, staff attorney 403(b) plan participants tive services. Labor and Pensions Committee account fees were excessive. for the Howard Jarvis Taxpayers The Raleigh, N.C.-based health The participants argued that fi- hearing May 13. The KeyCorp 401K Savings Plan, Association said in an email that care system WakeMed has agreed duciaries of the WakeMed 403(b) Lori Lucas, president and CEO of Cleveland, had $3.1 billion in assets the association is reviewing its op- to pay $975,000 to settle a complaint plan should have examined cheap- the Employee Benefit Research In- as of Dec. 31, 2018. Pensions & Investments May 17, 2021 | 13 BY THE NUMBERS

PENSION RISK TRANSFER ACTIVITY MONTHLY CORPORATE FUNDING RATIO Annual volume by category (billions) Most recent transactions (millions) 100% $80 Type Sponsor Date Assets April 2021: 95.8% Total trans- Other ■ ICL Group Pension Plan May 13 $5,100 Total transactions: 95% $70 actions: 79 ■ Nortel Networks UK May 11 $145 54 Pension Trust Lump-sum 90% $60 acceptance ■ Archer Daniels Midland April 29 $700 ■ Arconic April 28 $1,000 85% $50 Lump-sum ■ Association of British April 7 $36 offer Insurers Pension & Total trans- Assurance Scheme actions: 80% $40 49 ■ General Motors April 7 $1,400 Longevity ■ J.C. Penney April 1 $2,800 Total trans- swap 75% $30 actions: Total transactions: ■ Centrus Energy March 19 $30 49 34 AXA March 18 $4,100 Buyout ■ $20 70% ■ Civil Aviation Authority March 10 $152 Pension Scheme $10 Buy-in ■ Reach March 1 $168 65% ■ Greif March 1 $100 $0 For details on all recent pension risk transfers, go to pionline. 60% 2017 2018 2019 2020 2021 com/pension-risk-transfer. 2010 2011 20132012 2014 2015 2016 2017 20192018 2020

TRAILING 12-MONTH RETURNS BY ASSET CLASS 2019 2020 2021 May June July August September October November December January February March April May June July August September October November December January February March April

Real Real BB U.S. Real Real BB U.S. BB U.S. BB U.S. BB U.S. Russell Russell Russell Russell Russell Estate S&P 500 Estate Agg Estate Estate S&P 500 S&P 500 S&P 500 Agg Agg Agg S&P 500 Agg S&P 500 S&P 500 S&P 500 S&P 500 S&P 500 2000 2000 2000 2000 2000 7.1% 10.4% 8.3% 10.2% 13.7% 21.7% 16.1% 31.5% 21.7% 11.7% 8.9% 10.8% 12.8% 8.7% 12.0% 21.9% 15.1% 9.7% 17.5% 20.0% 30.2% 51.0% 94.8% 74.9%

BB U.S. Real BB U.S. Real BB U.S. Real Global ex- BB U.S. BB U.S. BB U.S. Agg Estate Agg Estate Agg S&P 500 Estate MSCI EM MSCI EM S&P 500 Cash U.S. fixed Agg S&P 500 Agg MSCI EM MSCI EM Agg MSCI EM S&P 500 MSCI EM MSCI EM MSCI EM MSCI EM 14.3% 26.6% 16.0% 8.2% 2.3% income 7.5% 16.5% 10.4% 15.0% 18.4% 27.9% 36.0% 58.4% 48.7% 6.4% 9.0% 8.1% 8.4% 10.3% 15.6% 2.6% 9.4% 10.1% 6.2%

High BB U.S. High High Russell Real High Global ex- MSCI ACWI BB U.S. Global ex- Russell Yield Agg S&P 500 Yield Yield MSCI EM MSCI EM 2000 Estate Yield U.S. fixed Cash MSCI EM MSCI EM MSCI EM ex-U.S. Agg U.S. fixed 2000 MSCI EM S&P 500 S&P 500 S&P 500 S&P 500 8.0% 12.6% 13.7% income 2.1% 5.4% 2.1% 7.2% income 16.3% 17.2% 31.3% 56.4% 46.0% 5.5% 7.9% 6.6% 6.4% 25.5% 11.1% 6.1% 0.7% 8.3% 7.0% 5.0% 13.6%

High High Global ex- Global ex- BB U.S. MSCI ACWI Real MSCI ACWI Global ex- High Global ex- Global ex- BB U.S. Global ex- MSCI ACWI MSCI ACWI MSCI ACWI MSCI ACWI MSCI ACWI MSCI ACWI S&P 500 Yield Yield U.S. fixed U.S. fixed Agg ex-U.S. Estate ex-U.S. U.S. fixed Yield S&P 500 U.S. fixed Cash U.S. fixed Agg U.S. fixed MSCI EM ex-U.S. ex-U.S. ex-U.S. ex-U.S. ex-U.S. ex-U.S. 3.8% income income % income 1.8% income 1.7% income income 4.9% 7.5% 6.9% 5.7% 5.3% 11.5% 11.2% 23.6% 9.9 4.8% -6.9% 2.7% 5.9% 6.5% 5.5% 9.5% 10.7% 14.0% 26.2% 49.4% 43.0%

Global ex- MSCI ACWI BB U.S. MSCI ACWI BB U.S. Global ex- High Russell High High Global ex- Global ex- Global ex- High Real Real Cash MSCI EM U.S. fixed S&P 500 S&P 500 MSCI EM S&P 500 MSCI EM Cash U.S. fixed U.S. fixed U.S. fixed U.S. fixed Estate Estate income ex-U.S. Agg ex-U.S. Agg income Yield 2000 Yield Yield income income income Yield 2.3% 5.7% 2.9% 4.3% 3.9% -7.0% -4.3% 1.9% 9.4% 34.4% 32.6% 3.7% 11.3% 10.8% 21.5% 9.6% 0.7% 4.1% 6.0% 3.3% 3.5% 8.9% 10.1% 8.2%

Global ex- Global ex- Global ex- U High High High High Real High High High High MSCI ACWI BB U.S. BB U.S. High High High .S. fixed U.S. fixed MSCI EM Cash Cash Yield Yield Yield Yield Estate MSCI EM Yield Yield Yield Cash Yield ex-U.S. Cash Agg Agg Yield U.S. fixed Yield Yield income income 2.9% 2.4% 2.4% -11.3% 1.5% 0.9% income 0.4% 4.1% 8.4% 9.7% 14.3% 9.4% 3.1% -4.5% 1.3% 0.0% 4.7% 3.0% 7.3% 7.5% 7.4% 6.3% 23.7% 19.7%

Global ex- Russell BB U.S. Russell MSCI ACWI MSCI ACWI MSCI ACWI MSCI ACWI MSCI ACWI Global ex- Russell High High BB U.S. Real Global ex- Global ex- MSCI EM Cash Cash MSCI EM MSCI EM U.S. fixed 2000 Agg 2000 Cash ex-U.S. ex-U.S. ex-U.S. ex-U.S. ex-U.S. U.S. fixed Cash 2000 Yield Yield Agg Estate U.S. fixed U.S. fixed -1.3% 2.3% 2.4% -0.3% 1.4% income 2.2% - income 1.1% income income 7.8% 7.5% 8.7% 9.2% -15.6% -11.2% 3.4% -4.8% 0.7% 4.6% -0.1% 7.2% 7.1% 4.7% 1.6% 7.2% 6.7%

MSCI ACWI MSCI ACWI MSCI ACWI MSCI ACWI MSCI ACWI Russell Global ex- Global ex- Global ex- MSCI ACWI Real Russell Russell Russell Russell Russell MSCI ACWI BB U.S. BB U.S. ex-U.S. ex-U.S. ex-U.S. ex-U.S. ex-U.S. 2000 U.S. fixed U.S. fixed U.S. fixed ex-U.S. Estate 2000 2000 2000 2000 Cash 2000 ex-U.S. Cash Cash Cash Agg Agg Cash income income income 1.3% 0.8% 0.7% 0.6% 0.1% -6.3% 1.3% -2.3% -3.3% -1.2% 4.9% 6.3% 5.1% 3.9% -0.7% -23.0% -13.2% -3.4% -6.6% -4.6% 0.4% -2.6% 1.4% 0.7%

Russell Russell Russell Russell Russell Russell Russell Real Real Real Real Real Real Real Real Real Real BB U.S. 2000 2000 2000 2000 2000 Cash Cash Cash Cash 2000 2000 Estate Estate Estate Estate Estate Estate Estate Estate Estate Estate Cash Cash Agg -9.0% -3.3% -4.4% -12.9% -8.9% 2.4% 2.4% 2.3% 2.2% -4.9% -24.0% -16.4% -16.1% -15.5% -13.2% -12.0% -16.6% -21.5% -10.5% -9.2% -9.8% 0.4% 0.1% -0.3%

A CLOSER LOOK AT THE 100 LARGEST PUBLIC U.S. CORPORATE DEFINED BENEFIT PLANS Change in average asset allocation Change in average assumed rate of return Distribution of assumed rates of return

70% 9% 23 23 Equity 65% Fixed income 8% 60% Alternatives and other 19 55% Cash 7%

50% 6% 45%

40% 5% 35%

30% 4% 9 9 25% 3% 20% 6 5 15% 2%

10% 3 1% 2 5% 1 4% 4.5% 5% 5.5% 6% 6.5% 7% 7.5% 8% 8.5% 0% 0% to to to to to to to to to to 2005 2010 2015 2020 20062005 2007 20092008 2010 2011 20132012 2014 2015 2016 2017 20192018 2020 4.5% 5% 5.5% 6% 6.5% 7% 7.5% 8% 8.5% 9%

Sources: P&I Research Center; NISA Investment Advisors; Bloomberg LP; company reports 14 | May 17, 2021 Pensions & Investments Special Report DIVERSITY, EQUITY & INCLUSION

‘There’s Managers get diversity and inclusion. And diversity without serious about inclusion is like an airplane DEI programs without lift.’ BRIDGEWATER ASSOCIATES’ ALAN BOWSER CONTINUED FROM PAGE 1 set management world and there’s so much work to do and it’s so nice at all aspects of diversity if we (are) that organizations are taking an in- going to see a shift in the numbers,” terest,” said Indhira Arrington, New said Lindsay Hudson, head of in- York-based managing director and clusion and diversity at Aegon As- global chief diversity, equity and in- set Management in London. clusion of cer at Ares Manage- Ms. Hudson took on the role in ment, who took on the role at the January. private equity rm in January. Other managers, too, are taking “When you think about asset man- steps. So far this year, P&I reported agement, it’s one of the last fron- on eight managers appointing se- tiers of DEI.” nior DEI of cials, ve of which were newly created positions, vs. Ensuring both ‘D’ and ‘I’ one hire in 2020, and one in 2019. Sources emphasize that diversity Results from a survey on diversi- and inclusion are two separate con- like an airplane without lift,” said should be,” noting that only a few grams in place within their organi- ty released by the Investment Com- siderations that the money man- Alan Bowser, co-head of the Amer- have focused on it properly. zations — one of the reasons why pany Institute and Aon PLC subsid- agement industry needs to under- icas region and chief diversity of - Ms. Pollock said managers “fall many newly appointed chief DEI iary McLagan show how much stand. While diversity is essentially cer at Bridgewater Associates, at” once they’ve brought diverse of cers said they decided to join work still needs to be done to im- the headcount, inclusion is creating Westport, Conn. “You can think talent into the organization, often their rms — this is the rst time prove DEI in the industry. a culture in which diverse employ- about (adding) a lot of diversity into failing to develop and retain diverse that many rms such as Aegon AM, Women represented 41.8% of the ees feel essential to the rm’s suc- your rm, but if you don’t empower candidates. Loomis Sayles & Co. and Ares Man- money management industry’s cess, sources said. That means cre- inclusion, you’re not really getting Managers need to have a strong agement Corp., among others, have workforce as of Nov. 1, while mi- ating a culture where diverse the value of that diversity.” onboarding process with someone created a senior role to oversee norities made up 30.5%. And when employees feel comfortable sharing Despite an increased push for senior at the rm helping the new such efforts. it comes to senior leaders, things ideas at meetings, know that their increased diversity and inclusion, employee integrate or assimilate become even less diverse, reveal- ideas are heard and valued, and are Laura K. Pollock, New York-based into the organization in order to Taking control ing that most money management considered for promotion to senior founding partner at global execu- help candidates move up the ranks, Sources said there are several executives are white (83.7%) and leadership roles. tive and talent strategy rm Third she said. factors — both internal and exter- male (74.6%). “There’s diversity and inclusion. Street Partners LLC, told P&I: “As- Though most money managers nal to the industry — driving this “DEI is relatively new to the as- And diversity without inclusion is set managers are not where they already had DEI efforts and pro- push for managers to establish se-

DIVERSITY, EQUITY & INCLUSION | RECRUITING Delivering diverse slate of candidates is now the expectation Georgie Clarke By JAMES COMTOIS and and HR consultancy Hoffmann Mr. Battye added: “It’s too easy PAULINA PIELICHATA Reed, said via email that “every think of diversity as men and mandate we undertake now has women and as such, it’s our aim to Executive recruiting rms are an element of diversity to it. It’s no bring true diversity to our clients.” playing an increasingly key role in longer acceptable to present an Jackson Baker, manager and making money managers more di- all-male shortlist.” head of U.S. business development verse and inclusive organizations. Mr. Battye added that while di- at recruitment agency Rutherford Most executive recruiters with versity is important, “it’s also im- Search Ltd. in London said that whom Pensions & Investments portant to note the need for inclu- managers requesting either a 50- spoke said that more money man- sion,” which is about creating a 50 gender split of candidates or agement clients are insisting on a culture that fosters diversity and some form of diversity has “de - diverse shortlist of candidates — makes a rm’s diverse employees nitely been increasing.” mostly from a gender point of view feel essential to the organization. Mr. Baker added that managers — and this demand has grown “Inclusion is the glue that he works with are requiring a over the past few years. makes diversity stick,” he said. shortlist of a “speci c ratio” of can- But while more money manage- While Hoffmann Reed is rarely didates and looking at candidates ment clients are requiring a more given quotas when taking on a on an anonymous basis. diverse shortlist, few are dictating mandate, Mr. Battye explained The main challenge is still to quotas on the headhunting rms. that clients almost always make it come up with a speci c pool of “Every client we work with on clear that having a diverse group candidates. “It becomes dif cult the investment management side of candidates on the shortlist is when there is (a nite number) of is focused on diversity, equity and essential. women, who can meet the require- inclusion,” said Meredith Coburn, “We aim to have at least 30% of ment of a position,” Mr. Baker said. executive director and consultant ALL IN: Russell Reynolds’ Meredith Coburn said all of the rm’s clients are focused our shortlisted candidates come For example, compliance roles on the nancial services sector on diversity, equity and inclusion and want candidates who re ect that. from diverse backgrounds,” Mr. need to be lled fast, and it ulti- and asset and wealth management Battye said, adding that by diverse mately means that the candidate is and insurance practices at execu- diverse slate (of candidates).” Russell Reynolds as it does from backgrounds, he’s referring to chosen based on skill set. “When tive search rm Russell Reynolds Ms. Coburn added that the push the client. “gender, ethnicity, age, cultural there (are) not enough women in Associates, New York. “We have for delivering a diverse slate Paul Battye, CEO of the U.K.- (background and) education,” the talent pool ... rms end up go- clients ensuring that we deliver a comes from just as much within based global executive search rm among others. SEE RECRUITING ON PAGE 18 Pensions & Investments May 17, 2021 | 15

nior positions to head DEI and “We’re looking at who’s getting Who gets advanced? Who becomes External drivers versity, equity and inclusion at make it a top area of focus. hired over time, we’re looking at re- senior management?” Added to these industry-speci c BlackRock Inc. in New York. “The “One primary driver is to create tention, and we’re looking at repre- Mr. Benton added that roughly factors, recent events such as the George Floyd incident was a real a new senior role to coordinate sentation within all those pieces of half of the incoming workforce in coronavirus pandemic, the murder in ection point. Finally, an ac- and take control of the diversity, the puzzle,” Mr. Jackson said. the U.S. are women and ethnically of George Floyd on a Minneapolis knowledgment that disparities ex- inclusion and equity efforts that Meanwhile, Marques Benton, diverse, so the next step is for the street last May and a recent uptick ist is making its way into these or- have been taking place within the who joined Loomis Sayles in De- industry to nd a way to attract and in hate crimes against Asian Amer- ganizations.” asset management rm,” said cember as the rm’s rst chief di- maintain that talent. icans have also brought these is- Ms. Gadsden-Williams, who Daniel Celeghin, managing part- versity, equity and inclusion of cer “We want to make sure asset sues front and center. joined the New York-based money ner at money manager strategy in Boston, said that money man- management is an option young “A lot has to do with incidents manager in September, said that consultant Inde in New York. agement rms are now seriously people consider for a career,” Mr. that happened last year,” said Mi- the increased focus on DEI within “Another is to expand and acceler- “looking at their policies around Benton said. “Engagement is a huge chelle Gadsden-Williams, manag- the industry is a sign of how “this ate the pipeline of diverse candi- hiring, training and succession. priority.” ing director and global head of di- SEE DIVERSITY ON PAGE 16 dates for promotion.” This focus on managers’ pipelines of diverse talent is key. Mon- ey managers are being forced to reckon with an increasingly competitive industry and an increasingly diverse talent pool being given more options for where to work. HOW DO YOU MANAGE For example, Raymone Jackson, who joined T. Rowe Price Group RISK WHEN THE WORLD IS Inc. as global head of diversity and inclusion in late October, said that the rm is focused on broad re- UPSIDE DOWN? cruiting strategies to bring in a wider array of candidates and expects 40% of candidates to be diverse. The company exceeded that goal last year: 64% of the candidates for open positions were diverse, a spokeswoman said. “We want to sh from a broader and deeper pond,” Mr. Jackson said. One such program is its MBA Day, which brings diverse candidates to T. Rowe’s Baltimore head- quarters to spend three days getting to know the rm’s people and culture “in the hopes they consider T. Rowe Price as they join the workforce.” Mr. Jackson added that T. Rowe is also looking at “movement in senior leadership roles” within the rm, “not just in entry-level roles.” Reprints

 2-color, 4-color  Glossy, matte  500-1,000,000  One-sided, two-sided booklet

It’s your choice. We can't control what's next, but we can help navigate it. CME Group provides 24-hour access to trading opportunities in every investable asset class, allowing market participants worldwide to manage risk and capture opportunities. For every economic twist and turn, when the new normal is anything but… CME Group. Contact Laura Picariello (732) 723-0569 [email protected] VISIT CMEGROUP.COM

Derivatives are not suitable for all investors and involve the risk of losing more than the amount originally deposited and any profit you might have made. This communication is not a recommendation or offer to buy, sell or retain any specific investment or service. Copyright © 2020 CME Group Inc. All rights reserved.

%/'A2GPUKQPU+PXGUVOGPVUA,T2IKPFF 2/ 16 | May 17, 2021 DIVERSITY, EQUITY & INCLUSION Pensions & Investments

DIVERSITY, EQUITY & INCLUSION | THE PAY GAP ‘We can say we Diversity want to have CONTINUED FROM PAGE 15 gender balance, U.K. money management rms space has morphed and evolved.” “Back when I started in the in- but that’s not really dustry, it was af rmative action. telling you where show progress in gender pay gap Then it was diversity. Then diversity and inclusion. ... Now equity is also women are in your Some of the U.K.’s largest levels, to help women move into an important factor in the equation,” Ms. Gadsden-Williams added. organization. Are money management rms leadership positions. By These factors all add up to the they in client- improved their gender pay gap in December 2023, the rm wants conclusion that DEI is a matter of 2020 compared with 2019, but to have 35% female representa- key importance for rms if they facing roles? Are managers say they are still tion in senior leadership want to survive, rather than a prob- they being struggling to increase the number positions. lem for human resources depart- of women in the senior roles that LGIM also improved its mean ments to solve. prepared for command the highest pay. gender pay gap to 15.5% in “Whether it was the pandemic or racial injustice, whether it was re- executive U.K.-based companies with at 2020 from 21.3% in 2019. The mote work, 2020 revealed the need leadership roles?’ least 250 employees are required rm’s median gender pay gap for people to speak up and embrace to publicly state on an annual improved to 18.8% in 2020 from their needs,” said Corie Pauling, FRANKLIN TEMPLETON basis the average hourly pay 19.6% a year earlier. LGIM said chief inclusion & diversity of cer INVESTMENTS’ difference between male and in its report that the rm and head of corporate social re- REGINA CURRY female employees. However, due deliberately targeted its 2021 sponsibility and senior vice presi- to the coronavirus pandemic, FOCUS: Sarah Kaiser cited Fidelity’s pay increase budget toward dent at TIAA in Charlotte, N.C. “The efforts to recruit, promote and retain year created a platform for my work rms were given an extension employees in lower-grade roles, women as part of the rm’s progress. that was truly unprecedented. If until October 2021 to publish which are more heavily female in companies aren’t serious about it their 2020/2021 gures. management unit in the U.K. composition. now, they’re behind.” But many of the largest money missed the mark when it came to Among managers that have Last June, TIAA launched a se- The chief DEI of cers with managers still managed to post meeting its own target of 33% of failed to improve the gender pay ries of programs to raise awareness whom P&I spoke detailed their tan- their 2020 gender pay gap figures women in senior vice-president gap year over year was AXA of racial injustice and support com- gible goals and quanti able targets, munities in need through its “Be from increasing the percentage of in the first quarter of 2021, with positions or higher by the end of Investment Managers U.K. Ltd., the Change” initiative. woman and Black managing direc- 2020, only achieving 30.1%. firms such as State Street Global which saw its mean pay gap widen tors within their organizations on Advisors Ltd., Fidelity Internation- Fidelity International said in its to 28.5% from 28% a year ago. Its Tangible goals an annual basis, to using data and al and Legal & General Invest- own gender pay gap report that it median pay gap increased to While more managers are creat- analytics to track demographic ment Management (Holdings) had similar struggles, even though 27.1% from 24.9%. ing a senior role to address issues of trends and pay equity. Ltd. improving on last year’s it increased the share of women “Whilst it is a disappointing diversity and inclusion, Inde ’s Mr. But while almost all of them are results, according to analysis of in leadership roles to 31% in 2020 setback, we refuse to let short- Celeghin cautioned managers using data and analytics to track against the negative repercussions and measure their progress, many eight money managers’ gender compared with 24% in 2017. term hurdles stop us from reaching of hiring a chief diversity of cer if agreed that the qualitative mea- pay gap reports. Fidelity’s mean gender pay gap our long-term goal, and we will the role is “more for show than a sures are just as important, if not SSGA improved its mean fell to 18.3% in 2020 from 22.8% use this as an opportunity to move of actual substance.” more so, than the quantitative goal gender pay gap to 27.3% in 2020 in 2019. The median gender pay further accelerate our efforts,” “This is unfortunately the kind of posts. from 33.6% a year earlier. The gap fell to 23.1% in 2020 from said Amelie Watelet, chief appointment that could degenerate TIAA’s Ms. Pauling said that al- rm’s median pay gap improved to 25.2% in 2019. transformation of cer and global into vague platitudes,” Mr. Celeghin though her rm is “very analytics 10.2% from 20.6%. “We have achieved this head of HR, communication and said. “The initial positive press you driven,” it doesn’t dictate quotas to receive when you announce the ap- its senior leaders. Appointing more women in progress through driving greater corporate responsibility, based in pointment will be great, but if the “We don’t set quotas in the sense higher-level jobs and key roles gender parity in recruiting, Paris. person in this role isn’t empowered, of, ‘You must hire X number of Z that command higher pay helped promoting and retaining women A spokeswoman said that AXA if there’s no tangible mandate, if people.’ It does not breed the type of to narrow the pay gap, said Paul across the rm with the greatest IM launched a new program in there aren’t tangible results within ambassadorship you want,” Ms. Francisco, chief diversity of cer at focus on investment, technology February to improve women’s six to 12 months, it will back re.” Pauling said. “We set targets and do State Street Corp. in Boston. and senior roles,” Sarah Kaiser, progression into leadership roles. “These are positive indicators head of employee experience at The program is aimed at challeng- leadership in the U.S. and 6% each Fidelity, said in the report. that we are heading in the right es women face as young profes- of total employees in the U.S. Over direction," he said of the rm’s Fidelity intends to continue to sionals that could curtail their Metrics the course of 2020, 26% of new hires global and company-wide efforts. work to close the gender pay gap future access to leadership CONTINUED FROM PAGE 1 in the U.S. were Asian, 10% were But despite reducing the by placing more focus on building positions. Black and 11% were Latinx. overall pay gap, the rm’s money a female talent pipeline at all — PAULINA PIELICHATA New York, who joined BlackRock In addition, Ms. Gadsden-Wil- Inc. in September as managing di- liams and Manish Mehta, global rector and global head of diversity, head of human resources, sent a Some progress on U.K. gender pay gap equity and inclusion. memo to BlackRock employees on In terms of speci c targets, April 1 announcing that the rm According to self-reported data mandated by the U.K. government, efforts by large money managers to make BlackRock set a goal last June to in- would undergo an external review compensation more equitable showed mixed results in 2020. crease its overall representation of of how its diversity, equity and in- PROPORTION OF Black and Latinx employees in the clusion policies affect stakeholders. MEAN PAY MEDIAN PAY MEAN BONUS MEDIAN BONUS WOMEN IN TOP U.S. by 30% by 2024 and double its GAP (%) GAP (%) PAY GAP (%) PAY GAP (%) PAY QUARTILE (%) representation of Black and Latinx Rigorous analytics Manager 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 senior leaders by 2024. The rm Meanwhile, TIAA is “doing rigor- AXA Investment 28.0 28.5 24.9 27.1 70.6 68.8 63.7 61.7 21.0 19.7 currently has 14% more Black man- ous pay equity analytics” to make Mgrs. aging directors and directors in the sure it’s providing opportunities BlackRock U.S. than it did a year ago, and since equitably,” said Corie Pauling, chief 19.0 18.0 25.0 24.0 64.0 68.0 36.0 30.0 28.0 28.0 Investment Mgmt. last June, the number of Latinx inclusion & diversity of cer and Fidelity Int’l 22.8 18.3 25.2 23.1 66.2 55.7 51.5 45.2 27.4 29.6 managing directors and directors in head of corporate social responsi- the U.S. grew by 9%. The number of bility at TIAA, Charlotte, N.C. Goldman Sachs Int’l 53.2 51.8 34.4 36.8 67.5 67.1 70.1 68.4 18.7 20.0 directors was not available. “We’re being explicit about our J.P. Morgan Asset After achieving its goal of having focus on equity, which is a tangible 25.8 27.3 23.9 26.3 67.5 64.0 60.0 58.6 24.6 23.8 Mgmt. women make up 30% of its global space where you can measure im- managing directors and directors — pact in objective, quanti able ways,” Legal & General 21.3 15.5 19.6 18.8 51.8 40.4 52.8 48.4 21.1 25.3 Investment Mgmt. a target the rm set in 2017 — Ms. Pauling said. “We’re using data BlackRock intends to further grow points, demographic trends, best State Street Global 33.6 27.3 20.6 10.2 54.7 53.3 47.3 56.4 31.0 33.0 its female senior leadership global- practice information.” Advisors ly by 3% each year. Ms. Pauling added: “Once people Vanguard Asset Separately, a report from Black- join the organization, we want to 22.8 24.4 14.2 16.0 40.2 34.6 36.4 27.2 32.7 32.5 Services Rock showed that as of Jan. 1, Asian see mobility equity: Are they ad- Wellington Mgmt. employees represented 18% of the vancing at a relatively equitable 29.2 28.7 40.6 36.0 79.7 78.4 72.7 75.9 20.0 22.0 Int’l rm’s senior leadership in the U.S. clip? We also want to see equity in and 26% of its total U.S. workforce, development and performance.” Source: Company reports Black and Latinx employees each Ms. Pauling, who has been with represented 3% of the rm’s senior TIAA since 2006, took on her cur- Pensions & Investments DIVERSITY, EQUITY & INCLUSION May 17, 2021 | 17

DIVERSITY, EQUITY & INCLUSION | TALENT CULTIVATION Money managers urged to build up diverse talent beginning with college By PAULINA PIELICHATA

Money managers need to culti- vate talent from different back- Rebecca Faith grounds at entry-level and throughout employees’ careers if they are to develop a strong pipeline of diverse, senior staff. But attracting entry-level candidates will take extra effort from managers seeking to improve their rm’s diversity. Firms can achieve a more diverse workforce by opening up their recruitment sources and criteria to candidates with new and different university degrees, as well as considering candidates from universities that may be considered a lower tier, sources said. “Very often when you speak to other analytics to evaluate where Mr. Bowser from Bridgewater students they have a perception we are. But (our targets) shouldn’t agreed that quantitative aspects are of our industry being quite elitist,” feel like dictates.” important, but they can be given too said Lindsay Hudson, head of in- On May 1, Thasunda Brown much credence and don’t lead to clusion and diversity at Aegon As- TARGETED: Laura Chappell said it can be dif cult to nd minority candidates, so Duckett succeeded Roger W. Fergu- sustainable change if they’re not set Management in London. She rms need to focus on attracting more diverse people to the industry in general. son Jr. as president and CEO of acted upon. said rms should try to reverse TIAA, making the manager the rst “In nance, we love to count the trend of employees falling lay on, you narrow down the pool (it’s) because people aren’t com- Fortune 500 company to have two things,” said Mr. Bowser, who took into the industry by chance or of applicants,” she said. ing to our industry,” she said, add- consecutive Black CEOs. Ms. Duck- on the role of chief diversity of cer learning about it from a family The rm is also paying atten- ing that organizations should ett is also TIAA’s third Black CEO in in January. “But it’s the qualitative member. Ms. Hudson said that tion to “contextualized recruit- grow graduates from the bottom. the rm’s history. aspects that have impact.” Aegon is going to high schools ment,” meaning focusing on stu- Brunel is working on a more Meanwhile, Regina Curry, who and showcasing different oppor- dents from preparatory schools targeted recruitment strategy be- has been Franklin Templeton In- Making it firmwide tunities in the money manage- serving lower-income students yond efforts such as creating vestments’ chief diversity of cer Ultimately, most chief diversity ment industry to students before and not just private school stu- more inclusive job descriptions, since August, explained that while of cers agreed that a core goal of they start their careers. dents who later graduate from top by looking to focus on appren- her rm uses data to set quanti - the job is to insert their rm’s dis- Firms need to cast a wider net universities. ticeships, internships and voca- able targets, hitting targets alone is parate DEI efforts into every aspect when it comes to the capabilities Laura Chappell, CEO at Brunel tional programs to attract candi- not enough. of the organization, and have these and experience of candidates Pension Partnership Ltd., Bristol, dates from ethnic minority “We can say we want to have efforts be sustainable. they are willing to consider for England, said of the pool’s own backgrounds. “To be honest it is gender balance, but that’s not really When Ms. Arrington joined Ares, roles, rather than setting very recruitment efforts that it is quite (about) the right skill set and the telling you where women are in she said that the private equity rm speci c criteria, in order to bring dif cult to get suitable candidates right attitude rather than techni- your organization,” Ms. Curry said. “had put in place all the building a more diverse set of employees from ethnic minority back- cal quali cation. The world is “Are they in client-facing roles? Are blocks to create a DEI strategy,” so into the workforce. grounds. “If we can’t nd candi- changing and moving on,” she they being prepared for executive she sees that her job “is to create a “With every criteria that you dates at the level that we want said.  leadership roles?” SEE DIVERSITY ON PAGE 18

more than just gender and ethnici- verse employees, not just women ty,” Ms. Arrington added. but also ethnic minorities and ‘Once people join the LGBT, Ms. Hudson said: “We need organization, we want Goal achieved to have data to look at what is actu- Aegon Asset Management ally working and compare results to see mobility equity: achieved its goal of 30% of women over time not just through gender Are they advancing at a in senior management roles by the but also including race and social end of 2020. Lindsay Hudson, head mobility, sexual orientation.” relatively equitable of inclusion and diversity, London, Over at Invesco Ltd., the Atlan- says Aegon now plans to increase ta-based rm set a target to in- clip? We also want to the number of women in senior crease the representation of wom- see equity in management positions to 33% by en among senior managers to 30% the end of 2021. Ms. Hudson joined in 2020 from 26% in 2018. Having development and Aegon in January. achieved that, the rm is now aim- performance.’ But when it comes to increasing ing to grow this gure to 35% by the number of women in senior 2022. TIAA’S CORIE PAULING positions, Ms. Hudson said that However, Anna Penn, head of di- having a long-term focus for em- versity and inclusion, North Ameri- ployees can actually hold back di- ca, at Invesco said that data is a versity efforts. challenge when it comes to trying Ms. Hudson noted that the in- to get ethnicity metrics globally. dustry and rm is struggling “Right now, the only place that we “across the board ... with having hold a full set of ethnicity data is in women in portfolio management the U.S., just due to govern- roles” because of low turnover in ment-mandated reporting there,” these positions. Ms. Penn said. “We did launch a “You want that tenure among self-identi cation campaign in Oc- rent role at the rm in August 2018. rst-round candidates. ed that Ares also conducted a qual- portfolio managers, but it makes it tober of last year. So, we’ve asked all For Ares Management Corp., “That means having a minimum itative analysis where all of its busi- more dif cult to move the needle colleagues globally. It’s completely one area in which the investment of four candidates, and half of ness units received inclusion scores on those numbers,” Ms. Hudson said. voluntary.” Ms. Penn added that the rm is setting quanti able targets them have to be diverse,” New from an outside consultant by vari- Aegon isn’t publicly stating other rm asked for primary identity. is in recruiting talent. Indhira Ar- York-based Ms. Arrington said. ous diversity dimensions, which in- targets such as minority employees Ms. Penn added that the rm will rington, Ares’ recently appointed “We’re also asking our executive cluded gender, race, ethnicity, gen- in senior roles because the rm be able to create a better snapshot managing director and global chief search partners to meet this di- der identity, veteran status, doesn’t have the data, which makes of employee base once the data is diversity, equity and inclusion of - verse slate mandate.” disability and caregiver status. such targets dif cult to set, Ms. collected on for example, race and cer, said that the rm is mandating Ms. Arrington, who joined the “We want to ensure our strategy, Hudson said. ethnicity, sexual orientation and diverse slates for interviewing private equity rm in January, add- processes and policies account for To increase the number of di- gender identity.  18 | May 17, 2021 DIVERSITY, EQUITY & INCLUSION Pensions & Investments MassPRIM embraces diverse FUTURE to eliminate barriers

By JAMES COMTOIS vestment managers. the program. rms that don’t necessarily have a MassPRIM currently has about The FUTURE initiative is de- track record,” she added. Massachusetts Pension Reserves $5.3 billion, or about 6% of the fund, signed to help MassPRIM achieve Meanwhile, Mr. Trotsky also not- Investment Management Board, allocated to diverse investment the diversity goals set out by ed that internally, MassPRIM is fo- Boston, unveiled an initiative to managers. H.4887/S.2842, a bill that Massa- cused on increasing the diversity substantially increase its allocation “We want to make sure there are chusetts state Treasurer and Mass- within its staff. The state pension to diverse and emerging managers. no barriers to entry for managers PRIM Chairwoman Deborah B. Gold- fund’s total workforce diversity in- The goal of the FUTURE initia- regardless of size, AUM or track re- berg spearheaded and Gov. Charlie creased to 66% currently, up from tive, which was presented to Mass- cord,” said Michael Trotsky, execu- Baker signed into law in January. 42% for the scal year ending June PRIM’s investment committee meet- tive director and chief investment “We view this legislation as a for- 30, 2018. MassPRIM’s senior man- ing May 4, is to bring the pension of cer of the $90 billion state plan, malization of something we’ve al- agement is currently 33% diverse, plan’s exposure to emerging and in a phone interview. “We’re proud ready been doing,” Mr. Trotsky said. up from 9% in scal year 2018. diverse managers to at least 20%. of the progress we’ve made but In a separate phone interview, Women in senior management in- The FUTURE initiative will also we’re going to continue to ramp up Ms. Goldberg said that the bill “gave creased to 26% today from 7% in s- launch a new page on MassPRIM’s that program.” PRIM the green light to develop cal year 2018. website that will allow asset man- Mr. Trotsky added that although this program. So, when the bill “All the data shows that organi- agers regardless of size or track re- there’s currently no time frame for passed, PRIM took the ball and we zations that are more diverse, have cord to submit their relevant infor- when to achieve that 20%, the board are running with it.” NOT STOPPING NOW: Michael Trotsky more women, have more people of mation, which will then get tracked. plans “to make consistent progress Ms. Goldberg added that since said MassPRIM has made progress but color, are more nancially success- The pension fund will also part- every year.” “ nancial services organizations still has more work to do. ful,” Ms. Goldberg said. “So, we are ner with investment consultants MassPRIM is currently search- have been white male bastions,” it’s hoping to help these organizations and industry advocacy organiza- ing for partners who will help the always been “very hard to break may not have long track records. to grow. And (in turn) they can help tions to build MassPRIM’s knowl- plan identify and select small, through” for smaller asset manag- “And for larger funds such as grow our pension fund. At the end edge and network of diverse in- emerging diverse managers for ers or investment consultants that ours, it’s hard to take risks with of the day it’s a win-win.” 

Marques Benton, chief diversity, Retirement Plans equity and inclusion of cer of Recruiting Loomis Sayles & Co. in Boston. “And CONTINUED FROM PAGE 14 that will help us become a better asset manager.” New York becomes latest to offer ing with a male (candidate),” he Alan Bowser, co-head of the added, referring to a lack of readily Americas region and chief diversity available female talent for compli- of cer at Bridgewater Associates, plan for private-sector workers ance roles in particular. Westport, Conn., told P&I: “We want a wide range of ideas, beliefs, and By ROBERT STEYER The retirement savings board Much has changed perspectives. We hire people from a will consist of three members ap- TC Jefferson, director in London wide range of disciplines. We want New York City Mayor Bill de Bla- pointed by the mayor with experi- of Plenum Search Ltd., said the people who are curious, relentlessly sio has signed two bills into law re- ence in areas such as retirement conversation on diversity and in- inquisitive, and high-quality think- quiring private employers to offer a savings plan administration, invest- clusion has “changed lots” over the ers.” He added that he wants city-managed retirement plan for ment, and actuarial or demographic years. Bridgewater to foster a culture workers if they don’t offer their background, the law says. “Twelve years ago, it wasn’t on where “the best idea wins.” own retirement plan. The mayor, comptroller and pub- anyone’s radar. Now, it’s mentioned Although money management With the May 11 signing, New lic advocate will select one person for every search,” he said, adding ‘We’re fully engaging rms are pushing for greater diver- York joins several states and the city each to serve on an advisory com- that “it still feels like we’re talking our fully diverse staff, sity and inclusion, Laura K. Pollock, of Seattle in offering an auto IRA to mittee for the board. about it rather than doing some- New York-based founding partner workers whose employers don’t pro- Mr. Kallos introduced an authori- thing about it.” making sure people at global executive and talent strat- vide a retirement savings plan. Al- zation bill in 2017 and another coun- “The only way to get a female have a seat at the egy rm Third Street Partners LLC, though the retirement plan law will cil member, I. Daneek Miller, intro- shortlist is to start with a female has noticed that many are focusing take effect in 90 days, implementa- duced a retirement savings board longlist. Get them on to the front table and that their on short-term role replacement tion may take as long as two years bill also in 2017. The bills were stage,” the Plenum Group executive ideas are being rather than growing employees because the city must establish a re- amended in May 2018, but the legis- said. “We need to make sure it’s not over the long-term. tirement savings board to administer lation stalled in the City Council. 90% white male.” heard. And that will “When rms are serious about the program and select investments. Mr. Kallos said legislators were Mr. Jefferson noted that the chal- help us become a diversity, they think about it a year “Employers cannot drop out un- thwarted by former president Don- lenge in addressing the gender im- or more in advance,” she said. less they offer their own retirement ald Trump in April 2017 rolling back balance is that, in his experience, better asset manager.’ “They start to get to know people plan,” said Ben Kallos, a council regulations under President Barack men tend to be more outgoing and LOOMIS SAYLES’ MARQUES and establish a relationship” be- member, the lead author of the en- Obama allowing states and munici- con dent in their abilities when BENTON fore they are hired. But Ms. Pollock abling legislation and co-author of palities to offer retirement plans to seeking positions and negotiating said that managers aren’t keen on legislation that created the retire- private-sector employees. their salaries. long-term negotiations and tend to ment savings board. “If more em- Although several governments “We nd a lot of male candidates Senior DEI of cers with whom focus on replacing employees as ployers offer 401(k) plan on their launched their auto-IRA programs, we talk to may bring only 60% of P&I spoke explained that a more soon as possible. own, I would be ne with that.” Mr. Kallos said city and council what’s required for the role yet still diverse and inclusive workforce The Third Street founding part- Called the Retirement Security members feared their efforts could raise their hand and say, ‘Yes, I can will ultimately lead to a better, more ner encouraged rms to take 36 Plan, the program will affect pri- be defeated in court. He described do this,’ whereas you get a lot of fe- pro table company. months to meet more female can- vate-sector employers with as few the federal court circuit covering male candidates that bring 80% of “We’re fully engaging our fully didates. “I have been pitching this as ve employees, allowing work- New York as “conservative.” what’s required but focus on the 20% diverse staff, making sure people for two years and none of the ers to set aside some of their salary “When Trump did this, the city they can’t bring and say, ‘I don’t think have a seat at the table and that managers has taken me up on for retirement savings through basically felt let the other jurisdic- that’s for me,’” Mr. Jefferson said. their ideas are being heard,” said that,” she said.  payroll deduction. Employers with tions ght it out,” he said. “We didn’t fewer workers can voluntarily join want to risk it.” the program. Soon after Joe Biden was elected DEI model,” adding that “hiring a ty and inclusion strategy, gover- Employers aren’t required to president, City Council members CDO alone isn’t going to be enough, nance structure and performance contribute money to employees’ re- acted quickly. The Committee on Diversity (since) meaningful change has to measurements. tirement account. Although the city Civil Service and Labor approved CONTINUED FROM PAGE 17 come from dedicated leadership.” Bridgewater’s Mr. Bowser told will administer it, this private-sec- the bills April 29. On the same day, “You can have great inclusive P&I that there’s still more work to tor program is unrelated to city the council voted 45-3 to support framework and infrastructure to leaders, but if you don’t have the do. Ultimately, he wants DEI to be public employee retirement plans. both bills. operationalize it and take DEI to right processes, those won’t help sustainable throughout the rm The law covers employees age 21 “With the Biden administration, the next level.” you,” Ms. Curry said, adding that and doesn’t need to be constantly or older who work at least 20 hours a we have the support we need,” Mr. “I was brought in to solidify these neither she nor Franklin Temple- enforced by the top leadership. week. The New York City program Kallos said during the May 11 processes within the organization,” ton’s CEO Jennifer M. Johnson can “We want to systemize how DEI will default to a Roth IRA with a con- law-signing ceremony, re ecting Ms. Arrington said, adding: “20% of be everywhere. “Is the right strategy gets embedded into the whole orga- tribution rate of 5% of annual salary his belief that the Biden adminis- my job was embedding DEI into our and framework in place?” nization,” he said. “It shouldn’t de- based on an annual maximum of tration won’t try to block imple- business practices.” In mid-March, Franklin Temple- pend on Alan Bowser being CDO. It $6,000 in 2021 for workers below age mentation of the program. New Ms. Curry, who had served in this ton expanded its diversity and in- shouldn’t depend on David McCor- 50 and $7,000 for older workers. Yorkers should have a “right to re- role at Legg Mason since January clusion efforts by appointing Lee- mick being CEO.” Employees can change the con- tire,” said Mr. Kallos, adding that 1.5 2018 before Franklin Templeton ac- Ann Sims as director, diversity & Mr. Bowser added: “My real goal tribution rate, choose a traditional million workers could be aided by quired the rm, said: “When I think inclusion. Ms. Sims is based in Bal- is to work myself out of a job. If I do IRA or opt out of the program. The the legislation. about my core deliverables, one thing timore and reports to Ms. Curry, my job right, there eventually won’t Retirement Security Plan would “This is going to change lives,” was to create a more sustainable helping her drive the rm’s diversi- be a CDO.”  be portable. Mr. Miller said.  Pensions & Investments May 17, 2021 | 19 EXCHANGE-TRADED FUNDS Real estate ETFs riding post-pandemic wave of interest Jerry Goldberg By ARI I. WEINBERG tual fund research at CFRA. “And last year alone as the pandemic and 4% by pensions directly. the flows have been relatively highlighted the importance of data “The REIT industry has under- Even as many parts of the world broad-based, with several products centers and communications tow- gone a dramatic transformation,” remain in the throes of the relent- gathering over $100 million this ers to a socially distanced world. according to a March research note less pandemic, exchange-traded year. It’s not just VNQ — the Van- REIT ETFs have had a median from Green Street. “Traditional sec- fund investors are headed back to guard Real Estate ETF,” he said. total return of 15.1% in 2021 through tors (apartment, office, retail, in- the office … and more. Of the nine REIT ETFs adding May 3, compared to a median de- dustrial) now account for just 40% “The reopening trade has lifted more than $100 million in net as- cline of 7.3% for 2020. of the equity REIT universe. Prop- all real estate investments trusts, sets so far this year, the Invesco erty types previously considered to regardless of the interest rate out- KBW Premium Yield Equity REIT Growth area be tiny niches or once simply un- look,” said Gargi Chaudhuri, head ETF added 33% of its $340 million For pensions, endowments and fathomable in the REIT structure of iShares investment strategy, in total assets and the J.P. Morgan other long-term holders, the pub- have blossomed. Today’s REIT uni- Americas, at BlackRock Inc. Ac- BetaBuilders MSCI US REIT ETF licly traded market for real estate verse reflects tomorrow’s economy cessed through ETFs, REITs offer added 20.5% of its $1.4 billion in to- — easily accessed through ETFs — far better than does the traditional higher yields in a low-interest-rate tal assets. offers an opportunity to shift or re- definition of real estate.” environment, low correlation to Still, VNQ eclipses its competi- weight a traditional portfolio to Take, for example, the recently other asset classes, liquidity in a tors like few other ETF strategies. emerging areas of growth. In its De- launched Invesco MSCI Green less-liquid asset class, and a natural With $38 billion in assets (and cember 31 regulatory filing, for ex- Building ETF. More global in na- inflation hedge, Ms. Chaudhuri the largest share class of a $68 bil- ample, the Canada Pension Plan ‘If we get that rise in ture, with only 27% exposure to the said. lion fund), the ETF has a 0.12% ex- Investment Board disclosed a new inflation expect- United States, the new ETF is look- BlackRock’s analysis shows that pense ratio and holds 174 U.S.-list- 2.25 million share position in IYR, ing to capitalize on investor-prefer- REITs are 30% to 45% more sensi- ed real estate investment trusts. while the State of New Jersey Com- ations, REITs would ences for more environmentally tive to inflation relative to the However, the next largest product mon Pension Fund D and the State rise in value by a aware products by holding a portfo- broad equity market, Ms. Chaud- by assets, the $6.5 billion iShares of Tennessee, Treasury Depart- lio of real estate investment trusts huri said. “In other words, if we get U.S. Real Estate ETF (IYR), with an ment, are holders of VNQ. factor of 1.3 to 1.45.’ or companies that have made a that rise in inflation expectations, expense ratio of 0.42%, has greater The state of Tennessee utilizes BLACKROCK’S GARGI strategic commitment to green REITs would rise in value by a fac- daily secondary market liquidity. VNQ in its OPEB trust fund and CHAUDHURI building and derive more than 50% tor of 1.3 to 1.45.” In aggregate, U.S.-listed real es- the Tennessee Promise Scholar- of their revenue from the green Current yields for the 52 real estate ETFs had $80.4 billion in assets ship Trust Fund, which both hold building theme. The fund carries a tate ETFs tracked by CFRA Re- under management through May 3, portfolios of ETFs. “Purchasing data through 2018, pension fund 0.39% expense ratio. search range from roughly 2% to according to CFRA. Net inflows VNQ allows us to obtain efficient real estate allocations in aggregate “Green building projects take 6%, but activity has been picking up were $3.9 billion compared to a net exposure to the REIT sector and to allocated roughly 5% to private real 11% more time to build and cost 6% across the board. outflow of $2.2 billion for 2020. One the real estate portfolios that un- estate and less than 1% to public more, but they can earn premium “Flows to real estate ETFs are notable exception in 2020 was the derlay the REITs,” Chief Invest- REITs. In Green Street’s analysis rents of 13% to 37% more,” said Rene standing out relative to traditional $1.1 billion Pacer Benchmark Data ment Officer Michael Brakebill of institutional ownership of pub- Reyna, head of thematic and spe- defensive sectors,” said Todd & Infrastructure Real Estate SCTR said in an email. lic REITs, 41% is held by passive cialty product strategy, ETF and in- Rosenbluth, head of ETF and mu- ETF, which gathered $831 million Yet according to Green Street strategies, 55% by active strategies, dexed strategies at Invesco U.S. n

Connect with us.

Like us Follow us Follow us pionline.com/facebook pionline.com/linkedin @pensionsnews SPONSORED ROUNDTABLE

Investing in China: Uncovering Growth Opportunities in the Post-COVID Economy

READ ONLINE www.pionline.com/investinginchinart2021

ven as the broader geopolitical environment and global economic uncertainty continue Eto impact the headlines on China, strong growth prospects underpin several sectors and companies in this vast market. China is forecast to become the world’s largest economy by the end of the decade. To explain the current challenges and opportunities, Pensions & Investments spoke with Dan Chace, portfolio manager at Wasatch Global Investors; Ronald Chan, chief investment officer, equities, Asia (ex-Japan) at Manulife Investment Management; and Jin Zhang, portfolio manager and senior research analyst at Vontobel Asset Management. Dan Chace Portfolio Manager Wasatch Global Investors Pensions & Investments: Covid-19 has arguably is large and diverse. It has a number of different sec- accelerated deglobalization, yet China seems to tors and different drivers. China’s middle class is quite have emerged, if anything, stronger from the pan- sizable and still growing, which contributes to several demic. What are China’s prospects for growth positive domestic consumption stories. post-pandemic? One area within domestic consumption that’s an RONALD CHAN: In terms of Covid-19, China has been interesting growth theme is snack food. As people first in, first out. As the manufacturing hub of the world, are getting busier, the younger generation is actually China has been able to take advantage of work from snacking a lot more than the previous, older genera- home, the demand for [information technology], com- tion. This food sector has several good, high-quality puter gadgets and related trends. From here on, we companies that are tapping into this trend in domestic expect the momentum will continue, but it will be of consumption and growing well. a slightly different nature. The demand in China for leisure, domestic travel, gaming and cinemas will all P&I: What changes in the Biden Administration’s improve. Another ingredient is the demand from the policies toward China should investors be paying U.S. for Chinese goods, given America’s stimulative attention to? Ronald Chan Chief Investment Officer monetary and fiscal policies. China, as the manufac- turer of the world, should benefit. ZHANG: We are bottom-up investors, but we are Equities, Asia (ex-Japan) watching these changes carefully. U.S. policies are Manulife Investment Management A number of sectors have been able to do well due to more coordinated than before. We are very aware of domestic demand within China but have yet to build the potential risks and disruptions to previous Chinese additional capacity to cater to the increase in demand business models, and we are watching how these from overseas. As interest rates are low, these sec- changes will affect industry dynamics. One example is tors will likely spend more on [capital expenditure] to the distrust [between the U.S. and China] that is grow- respond to this demand. Corporate capex will help ing in the technology sector. There could be domestic China continue with its strong investment and growth champions in China that will emerge from this trend, cycle, as opposed to just relying on infrastructure for example in software, and we are watching that side spending from the government. of the situation too.

DAN CHACE: One of the things that China has that CHACE: One of the few bipartisan mindsets in the U.S. many emerging markets countries don't have is that it right now is in the eﬀorts to contain China. I agree with is self-sustaining. We think the prospects for growth Jin that [the Biden administration’s] policy will be more are very strong. You can’t put that genie back in the coordinated. But, as I said before, you can’t put China bottle. We're positive that from China’s dual-circulation back in the bottle. Jin Zhang strategy, there will be growth from a domestic demand Portfolio Manager component and also from an export component. CHAN: America and China are linked economically in and Senior Research Analyst several ways, and they rely on each other. So when JIN ZHANG: I agree with Dan. The Chinese economy you talk about the trade tariffs, we don’t see them Vontobel Asset Management

INVEST CHINA PG1.pdf RunDate: 05/17/21 Full Page Color: 4/C SPONSORED ROUNDTABLE

as being that successful because there the [American] government, is going to are a lot of American companies oper- invest in the U.S. ating in China. Europe also has a lot of interests in China. The only way that the [The dual-circulation strategy] is keep- U.S. can come out ahead in its strategic ing China's historical strength in exports competition with China is with the help of but also fostering domestic consumption its allies. Yet none of its allies in Europe China’s prospects for growth are very strong. which, if you look at the data, has done or Asia is interested in a cold war (alia quite well. Domestic consumption has Soviet Union in 1970s), since their econ- You can’t put that genie back in the bottle. grown considerably, as Jin mentioned. omies depend heavily on engagement with China, and few of them see China — DAN CHACE, Wasatch Global Investors P&I: What are the most common as an existential security threat. questions you hear about China from existing or potential institutional P&I: What are the implications for clients, and what solutions do you investors of the technology bifurca- present? tion between the U.S. and China, as well as China’s dual-circulation economic strategy? that are in the middle. It could be an investment oppor- ZHANG: There is definitely a sense of opportunity in tunity if [those country’s companies] do the right thing. China among investors but it is mixed with fear and CHAN: This strategy is really about China gaining For example, Samsung Electronics is a very strong confusion. We approach investing in China the same more control over long-term domestic growth without player in semiconductors and technology in general. way that we approach any other market. We do bot- losing its role as a manufacturing hub of the world. They supply to both sides of the Pacific, and they are tom-up research, a deep dive [into the companies we The reasons behind this policy are rising protection- also increasing their production capacity in Texas. If identify], and we want to own the best, highest-quality ism around the world and a global economic cycle on companies like Samsung play their cards right, we will businesses. If we do our jobs right, we can buy and the decline. On the domestic part of that equation, it’s see more investment opportunities. hold [these stocks] and bring that benefit of growth to about modernizing domestic industry and upgrading our investors. consumer necessities so that China is less reliant on CHACE: This [technology bifurcation] is really sig- foreign products and is self-sufficient, especially in nificant, and the nexus of that is in semiconductors One concern we hear is that China’s market itself is technology. specifically. The semiconductor sector is likely to be relatively new and many companies in it are new to the a flashpoint in trade and diplomatic relations. China is market. We believe the advantage we have is a very ZHANG: We want to look outside of this technology going to invest heavily in its own semiconductor manu- experienced research team with diverse backgrounds, bifurcation that you mentioned to the other countries facturing capability, and Intel, with some pressure from located in the U.S. and Hong Kong. We also have three

čÍ¯œȆĬĬì¯ĆÑħĹìĴœą¯ĨüÑĴĬ Ç¯ÿÿãčĨ¯ąčĨÑselective¯ĥĥĨč¯Çé

ĆÿčÇüìĆäĬì¯ȆĬŌ¯ĬĴìĆŌÑĬĴąÑĆĴĥčĴÑĆĴì¯ÿĨÑħĹìĨÑĬ¯ĆìĆĴìą¯ĴÑüĆčōÿÑÍäÑčã ĴéìĬÍœĆ¯ąìÇĨÑäìčĆǚ_ĹĨĹĆìħĹÑĥÑĨĬĥÑÇĴìŌÑìĬÍĨìŌÑĆÆœąčĨÑĴé¯Ć¯ÇÑĆĴĹĨœčã čĆǹĴéÑǹäĨčĹĆÍÑŒĥÑĨìÑĆÇÑ¯ĆÍÍÑÑĥĨÑĬÑ¯ĨÇéÇ¯ĥ¯ÆìÿìĴìÑĬǛōìĴéčşšìÇÑĬìĆůŮ üÑœĬì¯Ćą¯ĨüÑĴĬǛìĆÇÿĹÍìĆäčĹĨÑìùìĆäǹÆ¯ĬÑÍǛéìĆ¯ǹãčÇĹĬÑÍùčìĆĴŌÑĆĴĹĨÑǛ X¯ĆĹÿìãÑ&"ǚ

"ìĬÇčŌÑĨéčōōÑȆĨÑéÑÿĥìĆäìĆŌÑĬĴčĨĬĨÑ¯ÿìśÑĴéÑĥčĬĬìÆìÿìĴìÑĬǚ

ą¯ĆĹÿìãÑìąǚÇčąǧìĆĬĴìĴĹĴìčĆ¯ÿǧ¯Ĭì¯

X¯ĆĹÿìãÑǛX¯ĆĹÿìãÑAĆŌÑĬĴąÑĆĴX¯Ć¯äÑąÑĆĴǛ~ĴœÿìśÑÍX"ÑĬìäĆǛ¯ĆÍX¯ĆĹÿìãÑAĆŌÑĬĴąÑĆĴX¯Ć¯äÑąÑĆĴɅ~ĴœÿìśÑÍX"ÑĬìäĆ ¯ĨÑĴĨ¯ÍÑą¯ĨüĬčãéÑX¯ĆĹã¯ÇĴĹĨÑĨĬRìãÑAĆĬĹĨ¯ĆÇÑčąĥ¯Ćœ¯ĆÍ¯ĨÑĹĬÑÍÆœìĴĬ¯şšìÿì¯ĴÑĬĹĆÍÑĨÿìÇÑĆĬÑǚ

&360,03 ,,QYHVWLQJLQ&KLQDURXQGWDEOHSULQWDGLQGG $0

INVEST CHINA PG2.pdf RunDate: 05/17/21 Full Page Color: 4/C SPONSORED ROUNDTABLE Phot o cr edit : iS to ck

former journalists on our team. They have become our of [initial public offerings]. The U.S. has 3,500 names, fourth area is in consumer upgrades — to look for internal investigative analysts and bring resources and and that number is shrinking because of [merger and opportunities in Chinese products with brands that are insights that are not accessible to Wall Street research acquisition] activity. There are a lot more opportunities on a par with, or better than, international products. methods. Applied with our team approach, that goes in China than in the U.S., especially when the U.S. a long way in helping us overcome [the uncertainties] market is already at the very expensive end of the ZHANG: As bottom-up investors, by picking what we associated with this newness. spectrum. see as the right stocks with exciting [growth opportunities], we see several themes that come up. I mentioned CHACE: We hear similar concerns. China has led We offer solutions for investors with different risk appe- the consumer sector earlier on. Others are technology the world in terms of [initial public offering] activity tites. We have a product that is high active shares; and healthcare. by number of companies, though not necessarily in another that is All-China so that clients don’t have to terms of capital raised. The market is hugely dynamic. decide between onshore China and offshore China or Some investors have a misconception about China ben- For Wasatch, with our historical legacy in small-cap ADR and Hong Kong; and the Greater Bay Area Bal- efiting from the 'demographic dividend', which refers to stocks, that’s something that we like to see. It rep- anced product, which focuses on the highest-growth cheap labor. But, in fact, this is no longer the case. resents innovation and change, and that brings elements of China in the Pearl River Delta while man- At the current stage, what’s paying off is actually the opportunity for investors. But you need to have the aging volatility through fixed-income exposure. 'engineer dividend', meaning that the sheer numbers resources to address that as well as an experienced of engineers being trained by the education system is team that can filter through all of that change. P&I: Which investment themes within China do you breathtaking, and that's driving a lot of this innovation. see as most compelling right now? Many potential institutional investors are still trying P&I: What are your thoughts on the active/passive to figure out how to approach China. Do you pursue CHACE: The growth opportunity in China that we get debate when it comes to investing in China? China exposure through an emerging markets strat- excited about is in innovation. China has had a lot of stu- egy or, ultimately, will clients want to have a separate dents come to the U.S. and Europe, and they return as CHACE: We think it's important to be active. The struc- China allocation and an EM ex-China allocation? And a entrepreneurs to start businesses in sectors that histori- ture of the benchmark if you wanted to go passive in separate question within that is, ‘Do you have a great- cally weren't significant in emerging markets. Healthcare China is so highly tilted towards mega-cap companies er-China strategy or an Asia strategy or a Hong Kong technology is a big one, and we are overweight in the like Alibaba or Tencent that there’s really no value to H-share strategy [Chinese companies listed on the sector. It is seeing massive amounts of change and be had unless you’re active. Given Wasatch’s history Hong Kong Stock Exchange]?’ innovation, to link back to that capital formation that I as a small-cap investor, we strongly believe that with described earlier in terms of the number of IPOs. an all-cap strategy, we can find small companies that Part of the reason that we launched a greater-China strategy has been that the exchange is irrelevant for CHAN: Investors come to China for us. It can be Taiwan with mainland China exposure, growth and for yield because of the ADRs [American depositary receipts, foreign company ultra-low interest rates in the U.S. So stocks that trade on U.S. exchanges] with mainland China will give you the positive carry, China exposure, Hong Kong companies that are main- that’s number one. The second theme is land China companies, and then A-shares as well. So the wider technological innovation and the venue to us is irrelevant, relative to the opportunity adoption of 5G technology, and how that we're trying to access. that can be transmitted onto the Inter- net of Things. The third element we are China [is] gaining more control over long- CHAN: Everyone wants to come to China for the focusing on this year is climate change. growth, but they don't want the volatility. Clients say, [President] Xi Jinping has been talking term domestic growth without losing its ‘Give me the stuff that’s not in the benchmark.’ They about achieving carbon neutrality by want high-alpha products, off-benchmark products, 2060. That will bring opportunities in cli- role as a manufacturing hub of the world. high-active-shares products. mate-friendly and sustainable projects like energy storage, battery charging — RONALD CHAN, Manulife Investment Management The Chinese stock market has over 4,500 names, stations, energy efficient semiconduc- and that number is growing because of the number tor chips and recyclable materials. The

INVEST CHINA PG3.pdf RunDate: 05/17/21 Full Page Color: 4/C SPONSORED ROUNDTABLE

really don't fit the benchmark. We're strong believers in lysts to sift out any candidates that have high ESG risk. nance aspect is key. To address that, you can't be an active versus passive around the world, but especially We do ESG rankings and engage with companies to income-statement investor in China. You have to be a in China. Given the breadth and depth of that market, if think about how they can improve their ESG score. balance-sheet and cash flow investor as well. Com- you're not looking for undiscovered companies, you're Typically, our ESG analysts join the conversations with panies that have great business models also have a not doing your job. a company and talk about potential improvement and lot of other operating income and other assets on the what peers are doing. balance sheet that don't really reflect what the oper- ZHANG: If you want to invest in China, you want to be ating business is, and you really have to analyze that. an active investor in order to find the right opportuni- ZHANG: ESG is incorporated into our investment ties. The trading volume in domestic equity markets research process, and it's been that way for years, P&I: What is your currency perspective on the ren- in China is fairly high. The market is moving to mutual given the quality characteristics we look for in busi- minbi versus the dollar? funds, but they churn their holdings rather quickly, nesses in our portfolio. We have to be aware of the which produces opportunities for active investors social impact of the businesses we own as well as CHACE: China is a hard currency country. You don't like us. Stocks of good companies can get penalized the potential regulatory pressures and the environ- really think about depreciation as a significant factor because of this short-term orientation. We feel this is mental implications. We engage with managements of as you might for Brazil, India and Turkey. It's a positive a very good market to be active in and to add value. the companies in which we invest. We have thoughtful factor if you're looking to allocate to China. China is questions related to the sustainability of their earnings one of the largest countries in the world economy, and CHAN: We think the current China equity index reflects growth. If the earnings are not sustainable or issues it is realistic to think that the renminbi also becomes a the past but not the future of China. As previously men- emerge on the regulatory front, then our focus on ESG reserve currency over the long term. tioned, our high active-share approach would best definitely will have helped us to avoid potential traps. capture what we think could be beneficiaries from Chi- CHAN: The renminbi will play an increasing role in the na’s dual-circulation strategy, tech self-sufficiency and We also discover opportunities with our ESG focus. world currency system, but it will not replace the dollar the shift in consumer behavior post-pandemic. There’s a strong push in China for companies to as a reserve currency. The general adoption of RMB become more environmentally friendly. One area that in international transactions will rise over time, starting P&I: How do you incorporate environmental, social we find interesting is solar energy. off with the One Belt One Road countries. With China’s and governance investing into your considerations economy running strong versus the stimulus package regarding China? CHACE: We have followed ESG practices for years. in the U.S., there will be a relative bias toward the ren- If you want to have a sustainable business, you have minbi versus the dollar. CHAN: We have a team of ESG analysts in Asia and to follow ESG principles. But one thing in particular in globally. We do a negative screen from our ESG ana- emerging markets, and in China too, is that the gover- ZHANG: We don't hedge our currencies. We let the

Data shows information, detective work reveals the truth.

Vontobel’s Quality Growth Boutique seeks to invest in the best of global equities. To ﬁ nd them takes an uncompromising mindset and unsentimental view of companies.

vontobel.com/quality-or-nothing

Asset Management

This document is for informational purposes only and nothing contained in this document should constitute a solicitation, or oﬀ er, or recommendation, to buy or sell any investment instruments.

INVEST CHINA PG4.pdf RunDate: 05/17/21 Full Page Color: 4/C SPONSORED ROUNDTABLE

China’s middle class is sizeable and still growing, which contributes to several positive domestic consumption stories. MANULIFE INVESTMENT MANAGEMENT — JIN ZHANG, Vontobel Asset Management 197 Clarendon Street Boston, MA 02116 www.manulifeim.com/institutional

Todd Cassler Head of Institutional Distribution, U.S. and Europe 617.646.9719 [email protected]

earnings of companies we hold take care of the cur- what are your thoughts on Stock Connect linking rency impact. If China continues to deepen financial mainland markets to Hong Kong? reforms, it will be able to gain some currency market share. The gain will not come at the expense of a core ZHANG: We view A-shares as an opportunity, as they currency like the U.S. dollar due to the network effect provide exposure to a lot of different growth com- of global currencies. It will come from smaller, more panies. But you need to be cautious to play in this peripheral currencies like the British pound. market, as China is a relatively new growth market. We want to make sure that our interests are aligned P&I: Do you feel it’s important to have an on-the- and that we're buying into companies whose earnings VONTOBEL ASSET MANAGEMENT ground presence in China? are sustainable. We look for good businesses that we 1540 Broadway feel we can hold for years, if not decades. 38th Floor CHACE: The answer is no. We're based out of Salt New York, NY 10036 Lake City, so part of our DNA is that you don't need We view the Hong Kong market as similar to the www.vontobel.com/am to be in the news flow. However, prior to this pan- domestic Chinese market in the sense that a lot of demic, we traveled extensively to China. And since the businesses that are traded in Hong Kong mainly Amit Mukadam the start of the pandemic, we've done extensive calls operate in China. Through Hong Kong Connect, Managing Director [with the companies in our portfolio]. we have access to practically all of the large liquid Head of North America Institutional Client Group stocks in the domestic market now. China’s a large 212.804.9334 Hong Kong Connect makes it a lot easier to transact and diverse country with many different sectors and [email protected] in the A-share market in particular. We’re not looking different business models, so it presents many very to make 10% on a trade and move on. We're looking exciting opportunities. to own something for as long as we can, which makes the research process very different and much more CHAN: The U.S. is very good at innovation and insightful rather than a transactional process. So a lot research and development. But the Chinese have of the topics that are brought up by the local sell-side been able to use that R&D and monetize it into prod- culture are not interesting to us. ucts. For instance, Chinese e-commerce companies have used big data and [artificial intelligence] in wid- ZHANG: On this one I have to disagree with Dan. We ening their customer base and product segment s. do have an on-the-ground presence in China, with That's why investors need to look into investing in an office in Hong Kong. An on-the-ground presence China A-shares as opposed to just considering the allows you to be aware of the issues locally. You hear U.S. market. Currently, the Chinese market in cer- a lot through the grapevine. You want to be invested tain sectors is already bigger than the U.S., such as WASATCH GLOBAL INVESTORS in companies that are led by executives that are trust- in movies, autos, smartphones and online gaming. 505 Wakara Way, 3rd Floor worthy. You really need to tap into the grapevine and Hence, China equites offer growth and are a good Salt Lake City, UT 84108 ask about their reputation and their shareholder ori- diversifier for U.S. investors. www.wasatchglobal.com entation. You can’t really understand the [executive leadership] by just looking at the financial statement. Stock Connect represents more than 80% by market Eric Bergeson cap of the China A-shares market. From a market-cap President CHAN: We have a joint venture in Beijing where we perspective, it is relatively well covered. But there are 801.533.0777 have more than 25 equity professionals. We believe certain sectors it does not cover, especially non-bench- [email protected] it gives us a strong proprietary research capability in mark names. So if you want small-cap or mid-cap terms of fundamental, bottom-up stock selection and exposure, Stock Connect has still got some way to go. also an ESG perspective. Investors come to China for alpha. Having people on the ground doing the CHACE: Through Hong Kong Connect Northbound, tire kicking is very beneficial in finding the bottom-up the A-shares market has really opened up for insti- opportunities in China and delivering that alpha. tutional investors. Part of our enthusiasm for China has been the opening up of this market and the vast P&I: What is distinctive about mainland Chi- expansion of investable companies and IPOs. na-based companies that trade on the Shanghai or Shenzhen exchanges — Chinese A-shares? And Most other countries have been extensively covered

INVEST CHINA PG5.pdf RunDate: 05/17/21 Full Page Color: 4/C SPONSORED ROUNDTABLE

[by research analysts] — China A-shares much less take advantage of these kinds of ongoing changes. it because we think it's an opportunity that we want to so. It's clearly a place where, as active investors, we We mentioned the tech divide. Some companies are be invested in for our clients and personally, too. can add value. But you have to go into it with eyes tapping into that change and becoming domestic wide open. In short, while A-shares have been the champions. Other consumer-oriented companies CHAN: China’s growth rate might slow, but it will be wild west for a long time, we believe it is one of the that are not affected by these changes will just keep sustained at 6% to 7% for an extended period. The last areas of global alpha exploration. working in their niche, continue to strengthen their rest of the world, especially the U.S., is talking about competitive position and deliver very good returns. 2% growth on a normalized basis. If that continues, P&I: What is your view of the world post pandemic? We tell investors, when it comes to investing in China, China will be the No. 1 economy in the world within How does your view underpin your investment or anywhere, know the businesses that you own. the next decade or so. We are focused on long-term approach and strategy for investing in China? sectoral, secular growth in our strategy and incorpo- CHACE: Institutional investors have to figure out rating a company-specific approach in our portfolio ZHANG: China is a very big market, and it doesn't how to approach China. Do you want an A-share construction. matter where it shows up in the benchmark. There dedicated greater China strategy, or a Hong Kong-fo- are very important changes that are occurring in its cused one where the governance is arguably, but not Given how each country has handled the pandemic economy. A lot of companies are talking about hav- necessarily, better? differently, it may not be a surprise that China’s mon- ing a one-plus-one strategy, meaning they have one etary policy and fiscal policy is not in sync with the manufacturing site in China and another one outside In terms of the opportunity in China, its expansion is U.S. The Fed is talking about dovish monetary policy, of China, maybe in the Southeast Asia region. self-sustaining, its growth is real and it's a strategic but China is already starting to tighten. With the world rival to the U.S. and Europe. That doesn't have to be a becoming less globalized, investors may need to look As bottom-up investors, we feel that if you own the bad thing. Wasatch doesn't launch a strategy—as with at China as a separate asset class and diversifier for right businesses, they tend to be able to navigate and China—because we think we can gain assets, we launch their global investment. ■

$FWLYH0DQDJHPHQW */2%$/ (0(5*,1*0$5.(76 ZLWK*OREDO5HDFK )5217,(50$5.(76

ZDVDWFKJOREDOFRP

This sponsored roundtable is published by the P&I Content Solutions Group, a division of Pensions & Investments. The content was not produced by the editors of Pensions & Investments and www.pionline.com and does not represent the views of the publication or its parent company, Crain Communications Inc.

INVEST CHINA PG6.pdf RunDate: 05/17/21 Full Page Color: 4/C 26 | May 17, 2021 Pensions & Investments HIRINGS

Border to Coast Pensions includes rolling over the pension fund’s million to two alternative investment Partnership, Leeds, England, $3.5 million position from Energy funds and added up to $17.5 million committed about $735 million to six Capital Partners III. FLORIDA BOARD ALLOCATES $2.6 BILLION to two funds in which it had previously private credit funds as part of its £3 Florida State Board of Administration, Tallahassee, disclosed $2.6 invested, a staff report on closed billion ($4.1 billion) private markets Connecticut Retirement Plans billion in manager hires, commitments and investments in the first session actions for the $28.7 billion program, a spokesman confirmed. & Trust Funds, Hartford, committed quarter, said John Kuczwanski, communications manager, in an pension plan shows. The pool, whose U.K. local authority a total of $150 million to two email. Plan officials committed up to $80 partner funds have £46 billion in alternatives funds. million to RREEF Core Plus Industrial Within its global equity asset class, the board, which oversees a assets, committed $160 million to Shawn T. Wooden, state treasurer Fund, an open -end industrial fund total of $245.8 billion, including the $193.2 billion Florida Retire- Churchill Middle Market Senior Loan and fiduciary of the $40 billion state managed by DWS Group; and up to Fund IV, a North American direct-lend- pension system, announced at the ment System, hired Wellington Management to run $420 million in $15 million to Avance Investment ing strategy focused on middle-market state’s investment advisory council active domestic large-cap core equities, and hired Clarivest Asset Partners, a buyout fund managed by companies managed by Churchill Asset May 12 he committed $100 million to Management, Global Alpha Capital Management and Wells Capital Avance Investment Management. Management; $125 million to GSO Mesirow Financial Real Estate Value Management to run $400 million each in active international LAFPP also committed an additional Capital Opportunities Fund IV, run by Fund IV, which targets multifamily small-cap equities. up to $10 million to One Rock Capital Blackstone Group and focused on investment opportunities in the U.S.; Also during the first quarter, the board terminated QMA from an Partners III, a middle-market buyout global mezzanine investments in North and $50 million to Penzance DC Real $834 million active domestic large-cap value equity portfolio, and fund. The additional allocation brings America and Europe; and $115 million Estate Fund II, a fund focused on also terminated AQR Capital Management and Dimensional Fund the pension plan’s total commitment to Ares Capital Europe V, focused on assets in the Greater Washington area. to the fund to $40 million. Plan Advisors from active international small-cap equity portfolios with European direct lending to middle-mar- Mr. Wooden told the council that he officials also committed another up to ket companies. is also considering committing a total assets of $375 million and $367 million, respectively. $7.5 million to Resolve Growth The pool also committed $104 of $700 million to six funds. Mr. Kuczwanski said the changes were part of an ongoing restruc- Partners Fund I, a small-cap growth million to HPS Mezzanine Partners The possible commitments include: turing of the global equity asset class, with any additional funding equity fund focusing on software 2019, a mezzanine financing fund up to $200 million to Carlyle Realty coming from asset class liquidity. investments managed by Resolve focused on North America and Europe Partners IX, an opportunistic real Within its strategic investments asset class, the board committed Growth Partners. This latest allocation run by HPS Investment Partners; $100 estate fund; $150 million to Vistria $200 million to BlackRock U.S. CRE Debt Fund, a real estate debt to the fund brings LAFPP’s total million to Fortress Credit Opportunities Fund IV, a middle-market buyout fund; fund; $150 million each to Grain Communications Opportunity Fund commitment to $15 million. V, managed by Fortress Investment $100 million each to Avance Invest- III, a communications infrastructure fund managed by Grain Manage- Group and focused on ment Partners, a Louisiana Teachers’ Retire- ment, and LLCP Lower Middle Market Fund III, a lower middle-market stressed and HAVE SOME NEWS? middle-market buyout ment System, Baton Rouge, hired distressed companies fund; and Covenant buyout fund managed by Levine Leichtman Capital Partners; and Franklin Templeton and William Blair & in North America and Please submit news of Apartment Fund X, a invested $100 million in Highbridge SPAC Opportunity Fund, a hedge Co. to manage about $700 million Europe; and £95 changes to David Schepp, value-added real fund that invests in special purpose acquisition companies managed each in active emerging markets news editor, at dschepp@ million to Barings estate fund managed by Highbridge Capital Management. equities, said Dana T. Brown, director pionline.com European Private Loan by Covenant Capital Within private equity, the board committed $125 million to Peak of public markets. Fund III, a European Group that acquires, Rock Capital Fund III, a middle-market private equity fund, and $75 The $24.5 billion pension fund direct-lending strategy focused on renovates and repositions apartment million to Atlas Capital Resources IV, a turnaround private equity fund issued a solicitation for proposals in middle-market companies. communities in Midwest, Southwest- managed by Atlas Holdings. February due to the pending expiration ern and mid-Atlantic states; and $75 of the contracts of value equity Finally, in real estate, the board committed $100 million each to Cadillac Fairview, the real estate million each to Hg Titan 1, a private manager Dimensional Fund Advisors CBRE AVP V Japan Co., a real estate co-investment fund managed by subsidiary of the C$221 billion ($179.7 credit fund, and Hg-CRPTF Co-Invest- and growth manager Harding Loevner. billion) Ontario Teachers Pension Plan, ment, a private equity co-investment CBRE Global Investors that invests alongside CBRE Asia Value Both managers rebid for the Toronto, committed $400 million to fund, both managed by Hg Capital. Partners V, and Principal Digital Real Estate Fund, a real estate fund services. Franklin Templeton will Hines Asia Property Partners. that invests in data center properties managed by Principal Real manage a value portfolio, and William Hines Asia Property Partners is an Howard County Retirement Estate Investors. Blair will run a growth portfolio. open-end, multisector, diversified real Plans, Ellicott City, Md., made two Separately, TRSL rehired Aon as estate fund that targets investments in new infrastructure commitments investment consultant for the pension Australia, China (including Hong Kong), totaling $8 million. & Friedman Capital Partners VII. CIO Jonathan Grabel said in an email in fund. Also, the pension fund commit- Japan, Singapore and South Korea, The joint committee for the Howard response to questions. LACERA’s ted up to $75 million each to ICG Cadillac Fairview spokeswoman Janine County Retirement Plan and the Howard University of Kentucky, target allocation to high yield is 3%, Europe Fund VIII, a middle-market debt Ramparas confirmed May 4. County Police and Fire Employees’ Lexington, made two new commitments with a range of zero to 6%. LACERA had fund managed by Intermediate Capital Cadillac Fairview serves as the Retirement Plan approved commit- totaling $18 million for its $1.6 billion $2.2 billion in high yield as of Feb. 28. Group, and private credit fund Summit founding investor for the newly ments of $5 million to IFM Global endowment. LACERA also committed a total of Partners Credit Fund IV; and up to $25 launched fund. Cadillac Fairview has Infrastructure Fund, an open-end fund Investment staff committed $10 up to $555 million to five alternative million to Asterion Industrial Infra Fund more than C$36 billion in assets managed by IFM Investors; and $3 million to Lime Rock New Energy I, a investment funds and three co-invest- II, an infrastructure fund managed by under management. million to infrastructure fund Tiger growth equity fund managed by Lime ments alongside approved alternative Asterion Industrial Partners. Infrastructure Partners Fund III at its Rock Management that invests in investment managers, the report said. Chicago Policemen’s Annuity March 25 meeting, recently released energy companies with a positive The pension fund committed up to National Trust, Swindon, England, and Benefit Fund at its April 29 meeting minutes show. environmental impact; and $8 million $150 million to Hellman & Friedman selected Robeco to manage an €87 meeting approved a commitment of The two plans have a combined to IPI Partners II, an infrastructure fund Capital Partners X, a North America million ($105 million) allocation to $20 million to private debt fund $1.2 billion in assets. investing in data centers that is and Europe large-cap buyout fund. global credit with a climate focus, a Monroe Capital Private Credit Fund IV. managed by a joint venture of ICONIQ LACERA also committed up to $110 spokesman confirmed. The $2.9 billion pension fund’s board Indiana Public Retirement Capital and Iron Point Partners, said million to TA XIV, a middle-market The conservation charity, which has also approved an additional investment System, Indianapolis, made CIO Todd Shupp, in an email. growth equity fund managed by TA £1.4 billion ($1.9 billion) in assets, of $5 million with opportunistic credit commitments totaling $385 million for Associates; and up to $40 million to TA chose Robeco’s Climate Global Credits manager BeachPoint Capital Manage- its $34.8 billion defined benefit plan, Kern County Employees’ Select Opportunities Fund II, which will Fund. The fund invests in diversified ment, bringing its total investment with the retirement system disclosed in an Retirement Association, recapitalize portfolio companies in corporate bonds with explicit climate the manager to $32 million. investment report included with Bakersfield, Calif., approved new other TA Associates funds. targets that contribute to the goals of materials for its board meeting May 7. investments and commitments totaling The pension fund also committed the Paris Agreement. The fund aims to Colorado Fire & Police The system disclosed commitments up to $80 million, said Daryn Miller, up to $100 million each to Lightyear decarbonize the portfolio by 7% a year. Pension Association, Greenwood of $100 million each to 352 Capital chief investment officer, in an email. Fund V, a buyout fund managed by Village, committed $130 million to six Fund, a private markets fund that The $5.1 billion pension fund’s Lightyear Capital that focuses on New York State Common alternatives funds, said Scott Simon, seeks to structure a portfolio of board on May 5 approved a $50 million financial services firms; and Veritas Retirement Fund, Albany, made 11 chief investment officer of the $6.2 consumer-oriented asset-based investment in Garda Fixed Income Capital Middle Market Fund, a buyout commitments totaling $1.08 billion in billion pension fund, in an email. securities; Hamilton Lane Equity Relative Value Opportunity Fund, a fund managed by Veritas Capital Fund March, a newly released transaction The pension fund’s staff approved Opportunities Fund V-A, a private relative-value fixed-income hedge fund Management that will invest in report shows. The report, posted on investing $60 million in Jackson Square equity fund that makes buyout, growth managed by Garda Capital Partners; companies operating at the intersec- the website of Thomas P. DiNapoli, the Partners Small Cap Opportunities and co-investments in small and and commitments of up to $15 million tion of technology and government. state’s comptroller and sole trustee of Fund, a growth-oriented hedge fund. midsize companies; and private credit each to growth equity funds Level LACERA also co-invested up to $20 the $247.7 billion pension fund, The staff also committed $25 fund Pathlight Capital Fund II. Equity Growth Partners V and Level million each alongside Onex Partners disclosed within its real estate asset million to Atlas Capital Resources IV, a The system also committed $60 Equity Opportunities Fund 2021, both and alongside Lightyear Capital. It class a commitment of $300 million to buyout fund managed by Atlas million to Stride Consumer Fund I, a managed by Level Equity Management. completed a $15 million private equity LaSalle Property Fund, an open-end Holdings; $20 million to Stride lower middle-market buyout fund, and investment alongside Storm Ventures. core real estate fund; $200 million to Consumer Partners, a private equity $20 million to Stride Consumer Fund I Los Angeles County Employ- Separately, the board also at its Oaktree Real Estate Opportunities fund; and $10 million each to Coinvest, which will invest in select ees Retirement Association, April 14 meeting hired Institutional Fund VIII, a distressed real estate fund; Goodwater Capital IV and Goodwater deals alongside the other fund. Both Pasadena, Calif., hired PineBridge Shareholder Services to provide full and $150 million to Kayne Anderson Infinity II, two venture capital funds are managed by Stride Consumer Investments to manage $1 billion in a coverage proxy research and online Real Estate Partners VI, an opportunis- managed by Goodwater Capital. Partners, a new manager for the high-yield separate account for the proxy-voting services, and Glass Lewis tic real estate fund managed by Kayne Finally, staff committed $5 million retirement system. $66.4 billion fund, said a closed for additional limited coverage proxy Anderson Capital Advisors. to ECP Terra-Gen Growth Fund, a Finally, the system committed $5 session report. research services. In its emerging manager program, the growth fund managed by Energy million to Samson Brunello 1, which PineBridge was the only manager pension fund committed $250 million to Capital Partners that will invest in holds the system’s rolled interest in an selected to manage the mandate Los Angeles Fire & Police Avance Investment Partners, a renewable energy firm Terra-Gen. This investment previously held in Hellman following an RFP launched in July 2020, Pensions committed up to $95 middle-market buyout fund managed by Pensions & Investments May 17, 2021 | 27 HIRINGS

Avance Investment Management, and San Francisco City & County at its April 8 meeting, said Jason commitments totaling $425 million, a April, according to a transaction report up to $10 million to Roxborough Fund Employees’ Retirement System Malinowski, chief investment officer, in transaction report on the pension from the $176.9 billion defined benefit III, an opportunistic real estate fund. disclosed an investment of $15 million an email. fund’s website showed. plan. For its real estate portfolio, TRS In its credit asset class, the in Project Mirasol Co-Invest Fund in a The $35.7 billion pension fund committed $150 million to Harrison pension fund committed €100 million report from CIO William J. Coaker Jr. Statewide Super, an Adelaide, closed commitments of $150 million Street Real Estate Partners VIII, an ($120 million) to Madison Square ahead of its May 12 board meeting. Australia-based superannuation fund to Genstar Capital Partners X and $25 opportunistic fund; $50 million to Fund II, a European lower middle-mar- The $32.7 billion pension fund’s with A$10.8 billion ($8.3 billion) in million to Genstar X Opportunities Banner Oak BOV UK, managed by ket private credit fund managed by investment in the private equity retirement assets, hired Loomis, Fund, both buyout funds managed by Banner Oak Capital Partners; and $40 Blantyre Capital. co-investment fund managed by Thoma Sayles & Co. to manage A$180 million Genstar Capital, on April 1; and closed million to USEF Whisper Pooling, In private equity, the pension fund Bravo closed April 16, the report said. in U.S. asset-backed securities. Con a commitment of $100 million to managed by USAA Equity Advisors. completed four new commitments Michalakis, Statewide Super’s chief Roark Capital Partners VI, a buyout For energy, natural resources and made through the NYAI Co-Investment Seattle City Employees’ investment officer, said in a written fund managed by Roark Capital Group, infrastructure, TRS also committed Fund III, a separate account managed Retirement System hired ABS response that the Loomis strategy will on April 30. It also committed $150 €80 million ($96 million) to interna- for the pension system by Asia Investment Management to run up to be a new addition to the fund’s million to Hellman & Friedman Capital tional developed infrastructure fund Alternatives, which makes private $60 million in a Japanese equity “defensive alternatives” allocations. Partners X, a large-cap buyout fund. Antin Infrastructure Partners Mid Cap equity investments in Asia: $25 million portfolio. The $3.5 billion pension I-A. For its private equity portfolio, TRS to buyout fund Boyu Capital Fund V; $5 fund’s board approved the hiring of ABS Texas County & District Texas Teacher Retirement committed $39 million to large buyout million to growth equity fund Boyu to run its multimanager strategy Retirement System, Austin, System, Austin, disclosed five co-investment fund ASP LS Co-Invest, Capital Growth Fund I; $5 million to focused on the Japanese equity market disclosed four new private equity commitments totaling $375 million in managed by American Securities. late-stage venture capital fund 5Y Capital Growth Fund I; and $3 million to early stage venture capital fund 5Y Capital Evolution Fund II. Also in private equity, the pension fund committed $10 million to Viola Ventures VI, an early stage venture Introducing Digital HTML Reprints capital fund that invests in Israeli technology companies. The commitment was made through the Hamilton Lane/NYSCRF Israel Investment Fund, A new way to share Pensions & Investments’ a separate account managed by Hamilton Lane. content with your digital community North Dakota State Invest- ment Board, Bismarck, hired 50 South Capital to manage $250 million in an in-state investment program for the $8.2 billion Legacy Trust Fund, said David J. Hunter, executive director and chief investment officer of the North Dakota Retirement & Investment Office. The hiring is the result of the board’s creation earlier in 2021 of a new target allocation of 3% to private capital with a focus on in-state investments for the legacy fund, an endowment fund for oil and gas tax revenue. Separately, the board committed a total of $200 million to Invesco U.S. Value-Add Fund VI, a value-added real estate fund. The commitment is to be split evenly between the legacy trust fund and the state’s $6.4 billion pension assets pool.

Retail Employees Superannu- ation Trust, a A$60 billion ($46.3 billion), Sydney-based retirement fund, hired Morgan Stanley Investment Management affiliates Parametric Portfolio Associates and Calvert Research and Management to oversee the equity exposures for REST’s newly launched sustainable growth option, a We're excited to oer the next level of article reprints! REST spokeswoman confirmed. Customize your P&I Digital Calvert will manage the equities A stand-alone HTML link that will never be placed behind a portion of the new option, which will HTML Reprints with: comprise roughly 72.5% of the subscription paywall. The HTML Reprint can be licensed to • Your corporate logo portfolio, “supported by implementa- post to your website, share on social media, used in email tion specialist manager Parametric.” • Highlighted quotes or The portfolio — with asset allocated correspondence, presentations and so much more. call-out boxes in Australian and overseas shares, property, infrastructure, bonds and cash — will have “enhanced environ- Select from news articles (print and digital), rankings, opinion • Custom hyperlinks within mental, social and governance pieces, editorials, awards and more. HTML Reprints have the article text investment characteristics,” a news release said. same look and feel as traditional reprints including photos, • Key contact details charts and infographics. • Photos Sacramento County (Calif.) Employees’ Retirement System • and more... committed about $111 million to three alternatives funds, confirmed Steve Davis, chief investment officer of the $12 billion pension plan. SCERS committed €42 million ($51 million) to Meridiam Sustainable Contact Laura Picariello at [email protected] Infrastructure Europe IV. It also or 732.723.0569 for pricing and details. committed $40 million to Ares Capital Europe V, a direct lending fund; and $20 million to Shamrock Capital Growth Fund V, a buyout fund. 28 | May 17, 2021 Pensions & Investments

CAREERS RFPs

San Diego City Employees’ Retirement System (SDCERS) Chief Investment Ofﬁcer RFP for Investment Legal Counsel

SDCERS invites experienced investment attorneys and law firms to respond to this Take your portfolio management skills to the next level. We Request for Proposals (“RFP”) to provide investment legal services. The RFP can be offer an exceptional opportunity. Join this prominent New York found at www.sdcers.org (tab “About SDCERS,” click RFP) and the deadline to submit City-based not-for-profit. This is a professional, hands on en- a proposal is June 4, 2021. vironment. At the outset the CIO will have responsibilities Where the movers, including manager selection, based on strong risk analysis, shakers and quantitative and analytic market positioning. California Wildfire Fund (CWF) Request for Qualifications (RFQ) – decision makers As a strategic thinker, the CIO will work alongside senior man- Investment Managers RFQ #03-2021: agement. We welcome an industry veteran with a minimum of Investment Managers Advertise your RFP in find their next five to ten years of direct experience across all asset classes Pensions & Investments, (equity, fixed income, real estate, alternatives, liquid and illiquid The California Wildfire Fund (CWF) is and reach the top investment career move managers and service providers investments). The right fit will have been in the first or second soliciting proposals from investment management firms to invest monies on in the money management industry. investment chair at a university endowment, foundation, pension Have a position you need to fill? behalf of the CWF. Please refer to the P&I RFPs | Print. Online. Email. fund or family office. MBA or CFA (major in finance) preferred. Contracting Opportunities section of Contact Erin Smith at 212.210.0719 or Direct experience in attribution analysis required. the CWF’s webpage at www.calwildfire- Place your ad today. [email protected] fund.com for a copy of the RFQ, min- Contact Erin Smith at imum qualifications, and contact infor- (212) 210-0719 for details. Please e-mail, on a strictly confidential basis, your resume mation. The response is due on Friday, Search job opportunities with cover letter and salary expectations to May 28, 2021 by 5:00 p.m. Pacific Time. www.pionline.com/RFPs Go to www.pionline.com/careers [email protected].

Reach a targeted audience of executive investment professionals

Your company’s best investment strategy. Find the quality talent you seek for your team at P & I Careers - the premier destination for the industry’s most influential investors. Place your ad today.

Contact Erin Smith at (212) 210-0719 or [email protected]

P028_PI_20210517.indd 28 5/13/21 5:04 PM Pensions & Investments May 17, 2021 | 29

signaled it will recognize for those downside, he said. MySuper-specific reference portfo- “Who can afford to be under- Supers lios remain broad, leaving well-di- weight listed equities, in case you’re versified super fund investment wrong in the short term,” agreed Mr. Expecting participants CONTINUED FROM PAGE 1 teams facing enormous tracking Rieck. “The implications of what on the government’s plan to intro- error risk. might be sound, long-term invest- to play key role in super duce an annual performance test “It’s not your precise strategic as- ment decision-making are too for the MySuper balanced default set allocation, it’s a top-level strate- great,” he said. options super funds were required gic asset allocation,” Frontier’s Mr. “If this legislation gets through reforms seen as risky move to launch eight years ago to ensure Carruthers said. For example, for then the industry in five years’ time that even Australian workers un- bonds “there’s Australian bonds looks a lot different,” with more “in- The annual performance test at members sitting in poor-perform- willing to learn the first thing about and there’s global bonds but no dex hugging (and) less willingness the center of the Australian ing funds … because for whatev- the country’s highly regarded A$3 credit, no high yield, no bank loans” to try alternative assets that might government's Your Future, Your er reason … they don’t have the trillion ($2.31 trillion) defined con- — a much less diversified bench- not be well represented in the in- Super reforms is part of a time, energy or confidence to do tribution system could count on de- mark, he said. dexes,” Mr. Knox said. broader push to help disengaged something,” noted Melissa Birks, cent retirement outcomes. Likewise, the test doesn’t take But it won’t be the same for all workers help themselves when it general manager, advocacy with To pass the test, as currently account of how much risk a portfo- funds and will vary over time for comes to managing their the Australian Institute of constituted, MySuper products lio is taking on. “If you were under- specific funds, depending on how retirement savings — a quest Superannuation Trustees. can’t underperform a reference performing the test by 50 basis far head of the benchmark they’re critics warn could backfire. The new reforms, meanwhile, portfolio of passive exposures tai- points but ... you had a risk level 2% likely to be at any point in time, Mr. Previous rounds of reform — could leave those disengaged lored to each product’s strategic as- less than the benchmark, your Rieck said. like the one which ushered in participants worse off rather than set allocation by more than an an- risk-return outcome — your Sharpe For funds comfortably clearing low-cost, balanced MySuper better off, observers say. nualized 49 basis points over a ratio — is much better” but the the performance test, the lure of se- If all participants of funds that rolling eight-year period. strategy still gets a failing grade, Mr. curing the top one, two or three po- default options eight years ago If a MySuper product’s perfor- Carruthers said. sitions in the promised comparison for workers who fail to select a fail the performance test get the mance drops below that, its super And with a six- or seven-year ranking tool — which would make retirement fund on their own — letter informing them of that fact, fund sponsor will be required to evaluation period tail, a fund that them the easy choice for partici- were designed to ensure that those who are relatively engaged send participants a letter to that ef- takes appropriate or innovative pants looking to shift out of poorly even the most disengaged will open it and possibly move to fect and refer them to performing funds — participants could count on a better-performing fund, leaving a new “comparison could prompt them to securing a reasonable retirement those who don’t open it or do so tool” ranking compet- take on more risk, Mr. outcome. and take no action in a shrinking itors by investment Carruthers said. By contrast, for the fund, probably facing returns and fees, latest reform package higher fees, said should they opt to se- Reviewing impact the government is David Carruthers, a lect a better-perform- If super funds have emphasizing the senior consultant ing fund. different starting importance of getting with Frontier Advisors points, all are review- those laggards to LLC and head of the Masking returns ing their investment come off the Melbourne-based As the government approaches now. sidelines. firm’s members noted, the steady “Most of our funds “Greater member solutions group. growth of retirement have gone through or engagement is AIST is one of savings from employ- are currently going critical to the many organizations ers’ monthly through a big analysis INERTIA: Melissa Birks success of the calling on the 9.5%-of-salary contri- on how (the reforms) said participants in poor superannuation government to take a butions to employee will impact the invest- performing funds who accounts can serve to ment strategies that system,” driving don’t act may get stuck. more active role in obscure subpar in- they run for their competition, lowering closing perennially vestment returns, members,” Mr. Car- fees and producing better results weak funds and ensuring their with severe long-term ruthers said. “All need for participants, Treasurer Josh participants are transferred to consequences. For ex- to know what the im- Frydenberg wrote in the govern- stronger funds. ample, the govern- pact is and what level ment's introduction of the reform “It’s a compulsory system so ment said employees of risk it runs for package. you should be able to do nothing in the worst perform- ROLLING THE DICE: David Carruthers believes the lure of securing a top them, or level of risk it Australia’s Productivity and be OK,” Ms. Birk said. If, ing My Super product spot in the ranking tool could prompt some funds to take on more risk. introduces for them,” Commission found that two-thirds instead, this goes ahead as would be “up to he said. For now, how- of superannuation system planned, “you’re going to have A$98,000 worse off at retirement.” steps to turn around performance ever, it’s the funds that are closer to participants don’t actively select more people potentially stuck Meanwhile, funds that don’t pass could remain underwater for years, that negative 50 basis points danger a superannuation product when because they haven’t read the the performance test two years in a analysts said. zone that are “actively doing stuff or starting a new job. letter or taken action,” she said. row would not be allowed to take on have already put stuff in place to The latest reforms are Meanwhile, the ranks of new participants. Reason to trim risk make sure they reduce the risk” of designed to give that army of Australian employees stuck in Analysts note that the test Analysts said inevitably a sizable being flagged for underperfor- disengaged workers the informa- underperforming funds remain doesn’t touch on areas crucial to re- segment of the industry will have mance, he added. tion and tools they need to avoid small. tirement savings outcomes, such as an incentive to trim risk exposures Much depends on the final list of getting stuck in persistently The Productivity Commission asset allocation. to better position themselves to benchmark indexes used for the underperforming MySuper funds reported 21 out of 77 MySuper It’s “a very narrow test” of wheth- clear the new performance hurdle. annual performance test — a likely that, if unaddressed, would find funds falling short on a similar er a fund is doing a good job of im- Your Future, Your Super “is focus of submissions to the Trea- plementing its strategy — more fo- forcing funds to reconsider how sury over the final week or two of them retiring with inadequate performance test — perhaps 20% cused on operational matters than they construct and manage portfo- consultations. nest eggs. MySuper funds that of the system’s 15 million whether the strategy is effective in lios, and that will have a bearing On that score, market partici- fail to achieve the test’s minimum accounts but only A$100 billion terms of long-term outcomes for on their risk taking,” said Troy pants welcomed an April 28 update target return will be required to ($77.1 billion) in retirement participants, said David Carruthers, Rieck, chief investment officer of from Treasurer Josh Frydenberg inform members of that fact by assets, or less than 5% of the a senior consultant with Frontier A$13 billion, Brisbane-based adding Australian unlisted infra- letter and refer them to a new industry total, noted David Knox, Advisors LLC and head of the Mel- LGIAsuper. structure and unlisted property as “comparison tool” to help them Melbourne-based senior partner bourne-based firm’s members The government’s goals are specific asset classes covered by the easily identify a better-performing at Mercer Australia and lead solutions group. laudable but “there’s strong poten- test. The government’s initial an- fund. author of the annual Mercer CFA It’s “a very harsh measure — 49 tial for collateral damage, that funds nouncement had only mentioned a But the system will require Institute Global Pension Index. basis points, I survive, 50 basis will take actions based on this test global listed infrastructure bench- members in those underperform- Against that backdrop, the points, I don’t, black or white, pass that they wouldn’t do in the inter- mark, which would have left Aus- ing funds to take the initiative in measures being proposed are or fail,” said David Knox, Mel- ests of long term member out- tralian super funds with material switching funds. “very strong” — effectively “using bourne-based senior partner at comes,” Mr. Carruthers agreed. allocations to domestic infrastruc- It’s “a huge leap,” said Simon a hammer to crack a nut,” Mr. Mercer Australia and lead author of And that fund-level environ- ture and real estate facing big Russell, director of Mel- Knox said. the annual Mercer CFA Institute ment will have broader implica- tracking error risks. bourne-based consulting firm Super fund executives say Global Pension index. tions for Australia’s retirement pre- The Conexus Institute’s Mr. Bell Behavioural Finance Australia, they're ready to roll with whatever And it’s far from foolproof, ac- paredness, analysts say. said the ability to use those unlisted pointing to the fact that only 2% punches come their way. cording to The Conexus Institute, a “Inevitably across the industry domestic infrastructure and real or so of super fund participants “In the end, there's little that Sydney-based research outfit fo- there’ll be lower returns,” result- estate benchmarks should slash the moved into cash during the 40% we can do as a fund to influence cused on achieving better retire- ing in smaller retirement benefits, bulk of the A$3.3 billion in annual ment outcomes for Australians. Da- Mr. Knox predicted. For example, opportunity costs his research team COVID-19 sell down in the first the regulatory environment,” vid Bell, the institute’s executive when equity multiples push to had initially calculated from super quarter of 2020 as a good noted Troy Rieck, chief investment director, said Conexus research historic highs, investment teams fund investment teams having to indication of the system’s officer of A$13 billion, Bris- suggested the proposed perfor- that previously would have re- cut exposures to reduce tracking underlying inertia. bane-based LGIAsuper. “Instead mance test would identify “good” sponded by trimming stock mar- error. Even so, he said, the contin- Even after a royal commission we will adapt to it, looking to meet funds as “poor” 35% of the time, ket exposures could decide the ued focus on a performance test splashed news about underper- our obligations to members and while correctly identifying poor risks of doing so are too great, that doesn’t take account of risk or forming funds on front pages beat those regulatory hurdles as funds roughly half the time. leaving portfolios facing the full asset allocation will leave super across Australia, there are “still well,” he said. Meanwhile, the asset-class brunt of a potential sell-off rather funds facing considerable chal- hundreds of thousands of — DOUGLAS APPELL benchmarks the government has than trying to mitigate potential lenges. n 30 | May 17, 2021 Pensions & Investments

charged high fees for poor-per- Reducing risk UPCOMING WEBINARS | REGISTER TODAY forming investment options. A com- Because MEP provider lawsuits Lawsuits pany representative didn’t respond are relatively new, “it will be a while at the time, or again last week. before the chips fall where they CONTINUED FROM PAGE 2 ■ In February, participants in a may,” said attorney Nancy Ross, a parable-sized single-employer 401(k) plan, with $2.4 billion in as- Chicago-based partner at Mayer plan,” said Mr. Mason. “It’s just sets, run by MEP provider Wood Brown LLP who defends retire- wrong.” Group U.S. Holdings sued the pro- ment industry members in ERISA Plaintiffs’ attorneys are “misun- vider and investment adviser NFP cases. derstanding” the nature of MEPs Retirement Inc. They contended To reduce litigation risk, she said when they try to make cost compar- that fiduciaries failed to offer low- MEP providers must demonstrate Time for Action: Shifting Pension Dy- isons to single-employer plans, he er-cost share classes and claimed a they followed and documented ER- said. conflict of interest between the two ISA procedures to avoid raising namics from a Macro and Regulatory For example, MEP providers defendants in offering certain in- “red flags” to the plaintiffs’ bar. must deal with many different pay- vestments. “The lawsuit contains For example, if an MEP takes a Relief Perspectives roll systems among their sponsor numerous inaccuracies pertaining payment out of plan assets, it must Live, Wednesday, May 26 • 2:00 p.m. - 3:00 p.m. ET clients, he said. The cost of commu- to our fees, services and processes,” substantiate that the costs are the nication to many sponsors is more and NFP spokeswoman wrote in an same as the market rate for the How can plan sponsors solidify recent funded status improvement? complex and the cost of marketing email at the time. A representative same services, Ms. Ross said. MEPs to many clients is different than for Wood Group didn’t respond at could get paid directly by charging Pension dynamics have shifted, warranting a more proactive approach challenges faced by even the larg- the time, or again last week. participants an individual fee each to de-risking. Fidelity actuaries and investment professionals share est single-employer plans, he add- ■ In September 2020, MEP pro- quarter or annually rather than steps plan sponsors may take to lock-in current valuations and evaluate ed. vider Pentegra Retirement Services taking their fee based on a percent- if/when new regulatory provisions should be considered. Plaintiffs’ lawyer Jerome was served with a lawsuit alleging age of assets, she added. Schlichter disagrees that MEPs the charging of high administrative The same care must be taken if present significant differences in fees, failing to monitor costs and the MEP offers proprietary prod- Register Now: pionline.com/FidelityWebinar 401(k) plan management vs. sin- failing to conduct competitive bid- ucts. “As long as it’s done properly,” gle-employer plans. ding for several years for adminis- such actions should pass muster Sponsored by: “From our perspective, these are trative services relating to its $2.1 with ERISA, she said. “You have to not difficult, complicated plans to billion asset 401(k) plan. “We reject show you did your homework.” record keep,” said Mr. the claims and intend DC consultant Robyn Credico Schlichter, founding to mount a vigorous predicts ERISA lawsuits will con- and managing partner defense against them,” tinue against MEP retirement plans of Schlicter Bogard & the company’s general as MEPs gain more retirement as- Denton LLP, St. Louis, counsel wrote in an sets and as plaintiffs’ lawyers look who represents clients email at the time. In for weaknesses in administration. suing MEPs for alleged October, another law MEPs “are taking on a lot more ERISA violations. “We firm representing oth- than record keeping,” said Ms. don’t see a big differ- er plaintiffs, filed an Credico, the Las Vegas-based de- ence in multiple em- ERISA complaint with fined contribution consulting lead- ployer plans compared similar allegations. er for Willis Towers Watson PLC. Investing in infrastructure at the to single-employer The lawsuits have “Some provide payroll. Some plans.” been consolidated. provide legal services. Some pro- right price Among his clients SHOW: To avoid lawsuits, ■ Also in Septem- vide advice on plan design,” she This webinar presented a novel and powerful approach to measur- were participants in a Ms. Ross says MEP ber 2020, participants said. “In effect, it’s a one-stop shop.” ing the market value and understanding the valuation and cash ﬂow $4.9 billion asset MEP providers need to prove in two 401(k) plans, That means MEPs must justify dynamics of unlisted infrastructure equity investments. Using the larg- 401(k) plan run by Ins- they did their ‘homework.’ with total assets of $4.1 and document their various fees. est database of global infrastructure investments and robust statistical perity Holdings Inc. billion, managed by “You have to prove what you are analysis, the speakers will show how investors in infrastructure now can: The participants sued Insperity, MEP provider TriNet Group Inc., doing is more efficient than if the some Insperity subsidiaries and filed suit with an assortment of employers were doing it them- • Measure risk, value and performance Reliance Trust Co., the plan’s trust- “mismanagement” claims, such as selves,” she said. • Analyze the asset class at the strategic level ee, in 2015. maintaining some higher-cost mu- • Invest using up to date metrics of expected returns and cash ﬂows In October 2020, the defendants, tual funds when similar or identical Scrutinize fees, performance while admitting no wrongdoing, funds were available in the market- Noting that MEP ERISA lawsuits Replay Available: settled the case. Reliance paid the place that were cheaper and bet- often focus on issues such as re- full $39.8 million settlement. Plain- ter-performing. “TriNet is commit- cord-keeping fees, poor perfor- pionline.com/EDHECInfraWebinar tiffs had accused Reliance of mak- ted to transparency with all fees mance and failure to offer lower ing “imprudent” investment deci- charged on its 401(k) plans and share classes in DC plans, consul- Sponsored by: sions, including selecting and works with an independent invest- tant Michael Barry asked — and retaining “its own high cost and ment adviser to conduct ongoing answered – the question: “At whose poorly performing” investments, benchmarking of plan fees and in- doorstep do you lay responsibility? the original complaint said. vestment fees,” a spokeswoman re- The entity that has the most mon- Another MEP settlement — Mr. sponded at the time. e y.” Schlichter’s firm wasn’t involved — ■ In June 2020 and again in July Because courts haven’t offered a was a $10 million payment, an- 2020, a Quest Diagnostics Inc. clear picture on MEP fiduciary lia- nounced in July 2020, by the Na- MEP-sponsored 401(k) plan, with bility, sponsors should pay close at- tional Rural Electric Cooperative $4.6 billion in assets, was sued by tention to how MEPs deal with fees Association. The association was two different law firms represent- and fund performance, especially to sued in July 2019 by participants in ing different participants, alleging the adequacy of the process for New Outlook on Income: a $12.07 billion asset MEP 401(k) ERISA violations. The cases were managing these issues, said Mr. plan, alleging excessive fees in vio- consolidated. In May 2021, a U.S. Barry, president of O3 Plan Adviso- A Framework for Evaluating DC lation of ERISA. The association District Court judge in Newark, N.J. ry Services LLC, a part of October admitted no wrongdoing in the case rejected the company’s request to Three Consulting in Chicago. Retirement Income Solutions of Intravaia et al. vs. The National dismiss the case. Mr. Barry and other interviewees There has been much discussion about bringing retirement income Rural Electric Cooperative Associa- ■ In May 2020, ADP Inc. was said the trend in MEP lawsuits like- solutions into DC plans as more plan sponsors report a preference to tion, et al. served with two lawsuits alleging ly will encourage plaintiffs to file help their participants into retirement. However, progress has been slow. An earlier MEP settlement of $6 ERISA violations in its MEP ad- similar lawsuits against providers Without processes to match objectives to income solutions, evaluating million was announced August ministration — one by employees of pooled employer plans. “If these investments and strategies that address the wide range of participant 2018 in the case of Clark et al. vs. in company participating in the plans are successful and a lot of needs can be complicated and intimidating. Oasis Outsourcing Holdings Inc. et multiple employer plan and one by money flows into them, they can al. in which participants in an MEP a sponsor. In the latter, a rare case expect lawsuits,” he said. Informed by original research with plan sponsors and consultants, as 401(k) alleged an assortment of among MEP lawsuits, the sponsor “The jury is out on the extent if well as longitudinal data on trends in retirement spending, we will work high fees. The defendants admitted claimed ADP failed to monitor the PEPs will be highly utilized,” said through a retirement evaluation framework to help organize progress no wrongdoing related to the $1.84 plan’s record keeper’s offering of Andrew Oringer, a New York-based billion asset plan. partner at Dechert LLP, who rep- towards helping retiring participants who choose to remain in your plan. products, which it alleged represented a conflict of interest. At the resents the retirement industry in Still evolving time, a company spokeswoman, de- ERISA lawsuits.“You’ve got a finan- Replay available: pionline.com/TRPWebinar A picture of MEP ERISA lawsuit clining to comment on both law- cial institution ramping up and cre- trends is still evolving as because suits against the $5.72 billion asset ating an entire infrastructure. You Sponsored by: most cases are still working their plan, wrote in an email that the have a new target for a plaintiff’s way the through the courts, includ- MEP “works diligently to fully and lawyer.” ing MEPs that have recently be- properly discharge all of its fiducia- Ms. Credico said, “there’s not a come defendants. Among the re- ry and other duties.” whole lot of difference” between cent MEP provider lawsuits: All asset figures above are based the MEP and PEP structures. ■ In March, participants sued on the latest available data from “There’s no big PEP out there now,” For a full list of webinars, go to pionline.com/webinars MEP provider Nextep Inc., alleging Form 5500s, 11-K statements or she added. “As they grow, there will that its $283.1 million 401(k) plan lawsuits. be a risk.” n Pensions & Investments May 17, 2021 | 31

CEO pay 2020 CEO compensation CONTINUED FROM PAGE 4 in 2020, and its market value increased by 52% to $124 billion. Rat- ings agency Moody's Investors Ser- vice Inc. also raised Morgan Stanley’s credit rating to A1, the highest among its banking peers. James Jamie Larry Charlie David William J. Martin L. Thomas Ronald Michael Jennifer Gorman Dimon Fink Scharf Solomon Stromberg Flanagan Gibbons O’Hanley O’Grady Johnson Pay cuts Morgan J.P. Morgan BlackRock Wells Fargo Goldman T. Rowe Price Invesco BNY Mellon State Street Northern Trust Franklin Not everyone had a positive story Stanley Sachs Templeton to tell coming out of the pandemic, Compensation: Compensation: Compensation: Compensation: Compensation: Compensation: Compensation: Compensation: Compensation: Compensation: Compensation: however. CEOs saw pay cuts at $33.0 $31.5 $29.9 $20.3 $17.5 $15.3 $10.3 $9.4 $9.3 $9.2 $8.9 Goldman Sachs Group Inc.; Wells million million million million million million million million million million million Fargo & Co.; Invesco Ltd.; The Bank Change Change Change Change Change Change Change Change Change Change Change of New York Mellon Corp. and from 2019: from 2019: from 2019: from 2019: from 2019: from 2019: from 2019: from 2019: from 2019: from 2019: from 2019: Northern Trust Corp. For this group, 4.4% 5.0% 18.2% -40.8% -29.1% 5.1% -10.3% -24.8% 6.9% -3.2% -- the rebound in share prices hap- CEO pay ratio: CEO pay ratio: CEO pay ratio: CEO pay ratio: CEO pay ratio: CEO pay ratio: CEO pay ratio: CEO pay ratio: CEO pay ratio: CEO pay ratio: CEO pay ratio: pened later in the year in 2020 and 234 to 1 395 to 1 186 to 1 274 to 1 172 to 1 134 to 1 78 to 1 121 to 1 157 to 1 135 to 1 154 to 1 other headwinds also diminished Source: Company reports CEO pay. The biggest cuts happened at Goldman Sachs and Wells Fargo. scandal. before the pandemic, she also over- “There’s a bigger discussion mixed. Banks opted to reward front- At Wells Fargo, CEO Charles W. Invesco’s CEO Martin Flanagan saw Franklin Templeton’s acquisi- around what metrics to use and line workers for a challenging time Scharf, who was previously the took a cut in compensation last year, tion of Legg Mason Inc. — a $4.5 bil- what the targets should be,” says during the pandemic. That, com- highest-paid bank CEO in the coun- bringing his 2020 pay to $10.31 million dollar deal that more than Amanda Walters, a New York-based bined with cuts in CEO pay at some try, saw his 2020 pay decline to $20.3 lion down from $11.5 million. Inves- doubled Franklin Templeton’s AUM strategic adviser on the investment institutions, meant that ratios million from $34.3 million in 2019. In co cited pandemic-related challeng- to approximately $1.5 trillion. Ms. management industry at Casey dropped in some cases. its proxy statement, Wells said that es and “only partially meeting our Johnson has been with Franklin Quirk, a practice of Deloitte Consult- BNY Mellon had the largest drop the company failed to meet many of goals” for 2020 as reasons for the Templeton since 1988. ing LLP. “Some institutions are look- going to 121:1 in 2020 from 213:1 in its internal goals as a result of the decline. ing at new targets around DEI (di- 2019. Invesco and Morgan Stanley pandemic. Mr. Scharf’s pay is tied to Two of the top 12 firms tracked Challenges ahead versity, equity and inclusion) as well followed: Invesco's pay ratio meeting those goals. saw changes in executive manage- While the outlook for financial as ESG. Those are metrics that could dropped to 78:1 in 2020 from 92:1 in Goldman Sachs CEO David Solo- ment in 2020. BNY Mellon moved to institutions is generally positive for impact the discretionary pay CEOs 2019; and Morgan Stanley's fell to mon was paid $17.5 million in 2020, make Thomas Gibbons CEO in the rest of this year and heading into receive.” Ms. Walters adds that CEO 234:1 in 2020 from 248:1 in 2019. down from $24.7 million in 2019. Mr. March of 2020. Mr. Gibbons had next, there are some challenges pay is likely to continue to increase, The biggest increase was North- Solomon’s initial compensation de- been acting CEO since 2019, follow- ahead for CEOs. Many proxy state- especially if banks are able to re- ern Trust, which climbed to 135:1 in termination was $27.5 million, which ing transition within the executive ments noted the difficulty of match- bound along with the rest of the 2020, up from 123:1 in 2019. For the would have been an increase. How- management at BNY Mellon. ing performance metrics to the real- economy. But whether those in- other institutions in the cohort, pay ever, the company assessed a $10 Franklin Resources Inc. also ity of volatile market environments, creases will be significant or incre- ratios increased marginally, with J.P. million penalty deducted from exec- changed CEOs in 2020. Jennifer such as that which occurred at the mental remains to be seen. Morgan's, for example, increasing to utive compensation as a result of Johnson took over leadership of the onset of the pandemic. Even if vola- Pay ratios, the rate at which CEO 395:1 in 2020, up from 393:1 in 2019 Goldman Sachs’ management in- asset manager in February of 2020. tility normalizes, discussion around pay is larger than median employee — in line with CEO Jamie Dimon’s volvement in the Malaysian 1MDB Not only did she come in moments pay metrics will likely continue. pay, also ended 2020 somewhat compensation increase. n

ments. Long term, endowments gree, starting as an intern before said. saw average annualized returns becoming a senior associate. Mr. Swensen also lectured at Bill puts pressure Swensen of 7.5% and 5.5% for the 10 and 20 “Dave was revolutionizing the Yale’s undergraduate college and years ended June 30, respectively. way endowment investing gets the School of Management. On CONTINUED FROM PAGE 3 Colleagues who had worked done,” Mr. Golden said. “He taught May 3, he and Dean Takahashi, on Texas funds potential returns not found in for Mr. Swensen mourned the me how to think clearly and how his longtime friend and former the public securities markets. He loss of their mentor and remem- to have confidence in that clear senior director at Yale Universi- thought that institutions were in a bered his friendship, guidance thought in the face of convention- ty’s investment office, taught the over divestment unique position to buy less-liquid and impact on not just the indus- al wisdom. He will be deeply last class of the term for Invest- securities at a much lower cost try, but their careers. missed.” ment Analysis, a seminar they By ROB KOZLOWSKI than public stocks and bonds, and “David was a remarkable Mr. Golden added: “He’s got a taught for 35 years. often with less risk. teacher and mentor from the first long list of people he’s impacted. Mr. Swensen was also a fellow The Texas House passed a bill that would “You can be paid for accepting time I met him as an undergradu- What he did for the endowment of the American Academy of Arts require the state’s pension funds to stop in- illiquidity. The markets overvalue ate. I knew nothing about the en- management world and the in- and Sciences, a member of the vesting in firms that plan to divest in some liquidity to a degree that’s hard to dowment industry, but I knew I vestment world is obvious, but the Council on Foreign Relations and form from fossil-fuel companies. understand,” Mr. Swensen had wanted to go work for him,” said extension of that revolution had a a member of President Barack The state’s House of Representatives vot- said at a conference sponsored by Seth Alexander, president of broad impact in our economy. The Obama’s Economic Recovery Ad- ed 92-51 in favor of the bill May 3 after the publisher James Grant in 1996, Massachusetts Institute of Tech- venture capital industry owes a visory Board. He served as an ad- Senate approved the bill 26-4 on April 15. adding that the portfolio had nology Investment Management lot for Dave’s endorsement and viser or trustee for the Brookings The bill calls for the state’s comptroller to “achieved true diversification.” Co., which manages the Cam- investment.” Institution, Cambridge University, “prepare and maintain, and provide to each After receiving his doctorate in bridge-based school’s $18.4 bil- the New York Stock Exchange, the state governmental entity, a list of all compa- economics from Yale in 1980, Mr. lion endowment, in an email. Changed many lives Investment Fund for Founda- nies that boycott energy companies.” The Swensen worked for Salomon Mr. Alexander, who worked at Paula J. Volent, CIO at Bowdoin tions, the Edna McConnell Clark state’s asset owners would be required to Brothers and Lehman Brothers Yale’s investment office for more College, agreed that Mr. Swensen Foundation, and the common- notify those companies of their inclusion on before returning to his alma ma- than 10 years before moving over “was instrumental in changing wealth of Massachusetts. the list and given 90 days to amend their po- ter to lead its investments office to MIT’s endowment in May 2006, many of our lives.” Mr. Swensen is the author of sitions. in 1985. When he took the reins of added: “David did not just lead “He had an uncanny ability to two books: “Pioneering Portfolio If those opinions are not changed in 90 the university’s endowment, it the endowment industry, he identify investment talent and Management: An Unconventional days, the state funds “shall sell, redeem, di- had $1.3 billion in assets. Now, it transformed it. He remade the backed many investors who Approach to Institutional Invest- vest, or withdraw all publicly traded securi- stands at $31.2 billion. way all of us invest.” would later become household ment” and “Unconventional Suc- ties of the company.” “I think he influenced so many names in the industry,” she said. cess: A Fundamental Approach to Madi Biedermann, spokeswoman for Gov. Outperformed peers people because he was doing Ms. Volent, who oversees the Personal Investment.” Greg Abbott, could not immediately provide Under Mr. Swensen’s leader- something he loved, doing it bet- Brunswick, Maine-based col- Alex Banker will serve as in- further information on whether Mr. Abbott ship, Yale’s endowment posted a ter than anyone else, he dedicated lege’s $1.8 billion endowment, de- terim CIO while the university will sign the bill. net return of 6.8% for the fiscal decades of effort to it, and he did scribed Mr. Swensen as “a true plans to install a permanent re- The funds cited in the bill include the year ended June 30. For the 10 it on behalf of a great cause,” Mr. pioneer in investment manage- placement. Mr. Banker, who $155.2 billion Texas Teacher Retirement and 20 years ended June 30, the Alexander said. ment as well as an amazing men- joined the endowment in 1997, System, $35.7 billion Texas County & District endowment returned annualized Andrew K. Golden, president tor, teacher and friend.” She was oversaw risk management and Retirement System, $35.2 billion Texas Per- net returns of 10.9% and 9.9%, re- of Princeton University Invest- once a senior associate at Yale’s capital markets. manent School Fund, $31.5 billion Texas spectively. Over the course of his ment Co., which manages the investment office. Mr. Swensen is survived by his Municipal Retirement System, $30.9 billion entire tenure, the endowment New Jersey-based university’s Bowdoin’s CIO also noted that wife, Meghan McMahon; three Texas Employees Retirement System, $116 posted an annualized net return $26.6 billion endowment, said in a Mr. Swensen “loved to teach” and children; and two stepchildren. million Texas Emergency Services Retire- of 13.1% through June 30. By com- phone interview that Mr. Sw- “was generous with his time and Donations can be made in Mr. ment System, all based in Austin. parison, the average annual re- ensen “was a big part of the rea- took great pride in watching Swensen’s memory to the David Teacher Retirement System spokesman turn for U.S. educational endow- son why (he) chose this career.” many of us take the Yale invest- Swensen Initiative at Yale, which Rob Maxwell declined to comment. Texas is ments was 1.8% in fiscal year Mr. Golden worked at the Yale in- ment strategy” to other institu- supports activities, projects and the largest provider and refiner of crude oil 2020, according to the 2020 NA- vestment office when he was tions. people that he found especially in the U.S., according to the non-profit Texas CUBO-TIAA Study of Endow- working to get his master’s de- “He will be sorely missed,” she meaningful. n Economic Development Corp. n 32 | May 17, 2021 Pensions & Investments AT DEADLINE mance bolstered AUM. lion), BrightSphere Investment Next in the ranking was The Car- Group ($2 billion) and Victory Cap- Earnings lyle Group Inc., which recorded ital Holdings ($1 billion). 123.1% as of June 30, 2019, 5.7% quarterly growth in AUM to a Harvard CEO paid $6M CONTINUED FROM PAGE 3 according to the most recent record $259.8 billion. The increase Acquisition-related growth Harvard University paid its top actuarial valuation. lion in net inflows, cash manage- was mostly attributed to fund per- The main contributor to some six endowment officials $31 ment strategies, retail and institu- formance. huge AUM increases for the quarter million total in 2019, according to tional net inflows. Ares Management Corp. AUM and the year was M&A activity. a May 14 news release. SEC charges settled Passive was a continued success grew 5.2% over the quarter to $207.2 Morgan Stanley Investment Nirmal P. “Narv” Narvekar, GWFS Equities Inc., a bro- story for managers in the first quar- billion, while Blackstone Group Inc. Management recorded the largest president and CEO of Harvard ker-dealer subsidiary of Empower ter, sources said. assets grew 4.9% to $648.8 billion. percentage increase in AUM, up Management Co., which oversees Retirement, agreed to pay $1.5 U.S. mutual funds and ex- “If you look broadly at the asset 81.7% for the quarter, due to the the university’s $41.9 billion million to settle Securities and change-traded funds attracted re- management space, the traditional March 1 close of its deal to acquire cord total inflows in the first quar- asset managers are undergoing Eaton Vance Corp. MSIM ended the endowment, took home more Exchange Commission charges ter, at about $400 billion, according some secular challenges because of first quarter with $1.42 trillion in that it failed to properly report than $6.25 million in 2019. to Morningstar Inc. Within the wall the threat from passively traded as- AUM, thanks in part to the addition Although Sanjeev Daga, HMC’s detected cases of hackers of money moving into equities — sets like ETFs. But in the alterna- of Eaton Vance’s $583.1 billion in chief operating officer, made near- gaining, or attempting to gain, with value strategies attracting a tive space — not necessarily hedge AUM as of Dec. 31. MSIM’s AUM ly $5 million in compensation for access to participant retirement huge amount as part of a rotation funds, but alternatives and private was up 143% for the year. 2019, he was reimbursed accounts. out of growth — “all this money is equity — what’s happening is the However, that was surpassed in compensation that he forfeited Greenwood Village, Co- basically going to passive strate- persistently low-interest-rate envi- the annual AUM change by Frank- when he left Columbia Universi- lo.-based GWFS did not admit to gies,” said Adam Sabban, Chica- ronment is causing institutional in- lin Templeton, with a 158.3% in- ty’s investment office to join HMC or deny the SEC’s findings in go-based manager research ana- vestors … to look for other ways to crease in AUM to $1.5 trillion. The lyst, equity strategies at Morningstar get yield,” said Catherine Seifert, firm acquired Legg Mason Inc. in in February 2019, which brought agreeing to the settlement, the Research Services LLC. That means vice president and equity analyst at July and its $730.8 billion in AUM as what he received for the year to SEC said May 12. the “index fund titans have been CFRA Research Inc. in New York. of March 31, 2020. more than $6.26 million. From 2015-2018, GWFS was taking in the most assets by far,” he “Many shifted asset allocation M&A can also mean a firm loses Richard Slocum, HMC’s chief aware of increasing attempts by said. strategies into alternatives. I think AUM in terms of percentage change investment officer, made $5 external hackers to gain access In fact, while some of the value that is going to continue,” she said. — something that affected Bright- million during the year. Robert to the retirement accounts of indi- trade has translated into inflows for While passive and alternatives Sphere’s first-quarter results due to Ettl, former COO, earned $4.8 vidual plan participants, accord- active managers, “it’s still over- strategies pulled assets in, manag- its announced divestment of Land- million in 2019. ing to the SEC order. Moreover, whelmingly passive overall. Even ers may have suffered from the im- mark Partners. Landmark will be Adam Goldstein and Carlos GWFS knew that the hackers though U.S. equity funds took in a pact of the low-interest-rates envi- acquired by Ares Management in a Saravia, managing directors on attempted or gained access by, record amount, actively managed ronment and its impact on money $724 million deal that is expected to funds actually suffered outflows — market funds, Ms. Seifert said. close in the second quarter. the general team, made $4.4 among other things, using passive offset that” in the month of Firms like Federated Hermes The firm was the only one among improperly obtained personal million each. March, Mr. Sabban added. Inc., for which money market fund the 23 managers to lose AUM over Harvard University’s endow- identifying information of the plan assets accounted for almost 50% of the quarter according to P&I analy- ment returned 7.3% for the fiscal participants, and that the hackers Alternatives stay in focus a total $625 billion in AUM, are ex- sis — but that drop was largely due year ended June 30. frequently were in possession of Also benefiting money managers periencing “downward pressure” to the fact that, in its first-quarter electronic login information such in the first quarter was a continued from low interest rates on assets update, BrightSphere already chose Investment chief resigns as usernames, email addresses focus on alternative asset classes, that already are subject to fee waiv- to exclude Landmark’s $18.7 billion and passwords, the SEC said. with most of the largest quarterly ers, she said. Federated Hermes in AUM from its total. That, coupled Corey Amon, former director of percentage changes in AUM fo- said money market funds AUM was with net outflows, led to a 7.4% drop the New Jersey Division of cused on alternatives. down 2% for the quarter and 12% in AUM to $145.1 billion as of March Investment, was named chief Texas fund commits $75M KKR & Co. Inc. recorded a 46% for the year. 31. The divestment is one of a num- investment officer of the National The $35.7 billion Texas County increase in AUM to $367.5 billion, The highest net outflows were ber of BrightSphere’s sales of affili- Rural Electric Cooperative & District Retirement System coming in second place in the rank- recorded by Affiliated Managers ates. Last year it sold value-orient- Association, a spokesman for the disclosed two new direct lending ing by quarterly changes. A positive Group Inc., at $7.5 billion for the ed equity manager Barrow, Hanley, Arlington, Va.-based trade commitments totaling $75 million fundraising environment — cou- quarter. The majority of net out- Mewhinney & Strauss Inc. and flows were from institutional cli- growth equity manager Copper Rock association confirmed in an in a transaction report on its pled with the acquisition of Global Atlantic Financial Group Ltd., ents at $6.3 billion and across glob- Capital Partners LLC; this year it email. website. which closed on Feb. 1 — were al equities strategies, at $8 billion. announced the sale of Investment Effective June 7, he will The pension fund committed highlighted by the firm as contrib- However, $24.4 billion in market Counselors of Maryland LLC and replace John Szczur, who is $50 million to Atalaya A4, uting to growth. The firm added changes helped bolster AUM by 3% agreed to sell Landmark; and this retiring. managed by Atalaya Capital about $90 billion in AUM. Craig for the quarter to $738 billion. month announced the sale of Thomp- Mr. Amon will oversee NCERA’s Management, and $25 million to Larsen, partner and head of inves- Net outflows were also recorded son, Siegel and Walmsley LLC. three employee benefit plans WTI Fund X, managed by Western tor relations, also said on an analyst by Janus Henderson Group PLC ($3 Looking ahead, Fitch’s Ms. Kala- totaling $25 billion in assets. Technology Investment the report call that strong investment perfor- billion), Franklin Templeton ($3 bil- deen said the agency’s base case is As director of the New Jersey said. Division of Investment, Mr. Amon hold onto parts of their portfolios oversaw the unit that manages Plans weather 2020 for longer than their fund lives investments for the $85.8 billion Multiemployer pension plans Recaps would otherwise allow, he said. New Jersey Pension Fund. Shoaib managed to ride out the econom- “Increasingly managers and in- CONTINUED FROM PAGE 3 Khan, deputy director of the ic turbulence of 2020, thanks vestors are understanding division, will serve as acting largely to investment returns, catalyst in real estate, for GP-led high-quality portfolios are difficult director. according to a Segal zone status transactions rather than for LP stakes, to assemble or access, difficult to she said. GP-led transactions aren’t replace, and continue to gain value survey released May 12. Tenn. contributes $250M new, but until now, most of them in- over periods longer than three to Segal surveyed nearly 200 volved recapitalizations of so-called five years,” Mr. Kohn said. The Tennessee General Assem- calendar-year plans that had to tail-end funds, those at the end of In 2020, alternative investment bly approved a one-time addition- certify their zone status by April their lives that held a few assets that managers across asset classes ac- al contribution of $250 million to 30. Those plans, with a collective needed to be sold, she explained. counted for 27.3% of all secondary the $55.9 billion Tennessee $125 billion in assets, represent “What we saw emerging in the market sellers, as they looked to Consolidated Retirement System. approximately 25% of all multiem- past year or so was not just recapi- raise money to support their port- The special appropriation is ployer plan participants. talizations of funds but individual folios or to create liquidity for their the largest single contribution The average funded status for assets or pools of assets” as well as LPs, according the most recent vol- more structured transactions than RETAINING QUALITY: Park Madison’s ume report by secondary market made to the pension fund in its all calendar-year plans increased in the past, Ms. Schwarzschild said. Robert Kohn said interest in recapitaliza- broker Setter Capital Setter Capital. history, according to a May 12 to 89% as of Jan. 1, 2021, up Joint ventures are also being recap- tions ‘is at an all-time high.’ Indeed, GP-led recapitalizations news release from David H. from 87% a year earlier, and the italized, she said. were up by 10.8% to $32.4 billion in Lillard Jr., state treasurer, who percentage of plans in the healthy “You can recapitalize anything. with “meaningful portfolios” also 2020, while traditional secondary oversees the pension fund. green zone increased to 72% Recapitalization means inserting get the benefit of working with a deals involving sales of alternative The system consists of three from 70%, with 58 plans able to new capital into a structure,” Ms. more institutional partner such as investment fund interests fell by traditional legacy defined benefit upgrade their zone status. Plans Schwarzschild said. a secondary market manager, rath- 47.7% to $29.36 billion from the pri- plans representing general in critical and declining status In a recapitalization, the manager than high-net-worth investors, or 12-month period. employees, grade-school and projected to become er moves an entire portfolio or a said Robert Kohn, New York- There were $1.04 billion in real selection of properties to a new backed partner at Park Madison estate GP-led recapitalizations in teachers and political subdivi- insolvent saw their average fund, a joint venture or other vehi- Partners LLC, a placement agent 2020, from $1.29 billion in 2019. sions, and two hybrid retirement funding ratios decline to 31% cle in which the investors are a sec- that is also arranging these recapi- “Our fund manager solutions plans representing general from 35% in 2020. ondary market manager or a sec- talizations. “Interest in recaps (re- team have predicted larger GP-led employees and grade-school The median net return for ondary market manager and capitalizations) is at an all-time transactions in 2021 as they have teachers. plans in the survey was 11% in limited partners. high,” Mr. Kohn said. recently seen an increase in GP-led The five plans had funding 2020, with half of the plans More real estate managers — transactions due to the delay the ratios ranging from 91.7% to within a range of 9.1% to 12.7%. Institutional partner veteran and emerging — are turn- pandemic has caused on GPs’ exit Emerging real estate mangers ing to recapitalizations as a way to plans and stronger buyer appetite Pensions & Investments May 17, 2021 | 33

Pension Funds Manager earnings for Q1 2021 Dollar values are in billions unless otherwise stated. Indiana PRS, LACERS Change Change Assets under Change from Q1 Revenue Change from Q1 Manager management from Q4 2020 (millions) from Q4 2020 Net flows approve alterations to BlackRock $9,007 3.8% 39.3% $4,398 -1.8% 18.5% $172 State Street Global Advisors $3,591 3.6% 33.5% $493 0.0% 6.3% $39 their asset allocations J.P. Morgan $2,833 4.3% 28.2% $2,185 -1.1% 25.6% $92 By ROB KOZLOWSKI from 10.6%; fixed income (ex-infla- BNY Mellon $2,214 0.8% 23.3% $850 1.3% 4.7% $36 and ARLEEN JACOBIUS tion-linked) to 20% from 22.5%; and Goldman Sachs $2,204 2.8% 21.2% $4,614 43.7% N/A $60 public equities to 20% from 22%. Indiana Public Retirement Sys- Also as a result of the asset-lia- T. Rowe Price $1,518 3.2% 50.5% $1,827 5.4% 24.9% $1 tem’s board approved a new asset bility study, the board approved Franklin Templeton $1,499 0.1% 158.3% $2,077 4.1% 58.4% -$3 allocation for its $34.8 billion de- dropping its assumed rate of return Northern Trust $1,449 3.1% 29.5% $1,590 3.7% -0.4% N/A fined benefit plan that includes a to 6.25% from 6.75%. new derivatives portfolio and a sig- Los Angeles City Employees’ Re- Morgan Stanley $1,419 81.7% 143.0% $1,314 19.5% 89.9% $42 nificant increase in its target alloca- tirement System on May 11 adopt- Invesco $1,404 4.0% 33.3% $1,660 1.8% 3.8% $32 tion to risk parity. ed a new asset allocation, increas- The Indianapolis-based retire- ing private equity by 2 percentage Affiliated Managers Group $738 3.0% 23.0% $559 0.8% 10.2% -$7.5 ment system’s board approved points to 16%. AllianceBernstein $697 1.6% 28.7% $1,007 -5.2% 15.2% $5 changes recommended by invest- Within public equities, the $21.8 ment consultant Verus Advisory billion pension fund’s board also Blackstone $649 4.9% 20.6% $5,299 0.5% N/A $22 following an asset-liability study at increased the allocation by 1 per- Federated Hermes $625 0.9% 3.2% $341 -6.3% -5.0% $3 its May 7 meeting, spokesman Dim- centage point to 47%. Within public Apollo Global $461 1.2% 46.1% $449 2.6% 17.3% $7 itri P. Kyser said in an email. The equities, domestic large-cap equi- board hired Parametric Portfolio ties, domestic smid cap equities and Janus Henderson $405 0.9% 37.6% $644 -2.0% 16.1% -$3 Associates to run the new deriva- emerging market equities were KKR $368 46.0% 77.4% $4,563 127.6% N/A $6 tives portfolio. boosted by 1 percentage point to Asset class targets total 115% 15%, 6% and 6.7%, respectively. Carlyle Group $260 5.7% 19.8% $381 -3.4% 7.1% $0 with the introduction of the new Non-U.S. developed market equity Ares Management $207 5.2% 39.4% $658 0.1% 4,810.0% $7 derivatives portfolio to complement was reduced by 2 percentage points Artisan Partners $163 3.2% 71.1% $291 11.3% 43.3% $1 the current cash overlay portfolio in to 15%. order to increase economic expo- Fixed income was cut by 2 per- Victory Capital $154 4.8% 24.7% $213 6.2% 4.2% -$1 sure to U.S. long-only government centage points to 24%. The fixed-in- BrightSphere $145 -7.4% -10.3% $131 -26.6% -28.1% -$2 bonds and domestic large-cap eq- come portfolio changes included a uities, a presentation included with 2-percentage-point increase of pri- Sculptor Capital Mgmt. $37 1.6% 11.9% $123 -79.6% 55.7% $0 meeting materials showed. vate debt to 5.75%, reducing core Source: Company reports The board approved the hiring bonds by 2.5 percentage points to of Parametric when Verus Adviso- 11.25% and cutting high yield and ry recommended choosing the domestic leveraged loans by a half that nothing so major as the un- competition in the industry, “giving performance, and as a corollary to firm since the manager already of a percentage point each, both to foreseen COVID-19 pandemic will rise to margin pressures in particu- that, their AUM growth or organic oversees the cash overlay pro- 1.5%. Emerging markets debt and upset managers’ apple carts this lar as we’ve seen the passives doing AUM growth.” gram. Parametric uses futures emerging markets local currency year. quite well over 2020 and increasing The second is that the pandemic contracts to get market exposure debt were each cut by a quarter of a “We definitely wouldn’t expect allocations going to passives,” she caused many investors to push with the system’s frictional cash. percentage point, both to 2%. support measures (from govern- said. pause on discretionary or transac- With the cash overlay program, LACERS eliminated its 1.2% ded- ments and central banks) to sud- tion-oriented items “because so asset class targets previously icated commodities allocation, denly be withdrawn in order to Look for 2 things many companies were just ... in fro- equaled 109.1%. while increasing its domestic real cause volatility,” Ms. Kaladeen said. CFRA Research’s Ms. Seifert zen mode, weren’t making any Targets that were increased are estate investment trust allocation to “We wouldn’t expect any sudden added that managers and analysts long-term strategic decisions. We risk parity to 20% from 12%; private 1.4% from 1.2%. All of the other sec- hikes (in interest rates), but there’s should look out for two things going may start to see more back and markets to 15% from 14%; fixed in- tors within LACERS’ real assets al- only so much you can really predict forward: “There may be an in- forth among some institutional income (inflation-linked) to 15% from location stayed the same, resulting with these things. But definitely creased degree of activism as investors as they regroup and reas- 13%; commodities to 10% from 8%; in a 1-percentage-point drop in more stable than last year for the vestors start to lose patience with sess some of their fund managers” and real assets to 10% from 7%. real assets to 12.4%. developed markets.” some of the firms who continue to and look at how they have per- Targets the board approved de- LACERS retained its 1% cash al- One of the main pressures is lag their peers in terms of stock formed, Ms. Seifert said. n creasing were absolute return to 5% location. n for GP-led transactions from sec- buys the properties or portfolio and had a gross asset value of $360 mil- Earlier during the COVID-19 cri- ondary investors,” said Cecilia becomes an LP in the new fund or lion, represented just a portion of sis, Mr. Reilly said his team saw Banares, Setter administrative di- joint venture, he said. NB Partners II, said Greg Lauze, more sales of limited partnership rector, in an email. Increasingly, in addition to re- managing partner, NorthBridge interests in commingled funds by Newer real estate managers are capitalizing assets in the old fund, Partners in an email in response to investors that needed liquidity, he increasingly embracing GP-led re- investors can choose to commit questions. said. At this stage in the pandemic, capitalizations to speed up liquidity fresh capital with the manager, ei- The recapitalized portfolio was Brookfield executives are seeing for LPs, in some cases so these LPs ther in another new fund the GP is spun into a joint venture, in which more deals along the lines of what can commit to the GP’s new fund, raising at the same time as the GP Brookfield is the majority owner. NorthBridge did, he said. said Larry Abraham-Ajayi, vice is recapitalizing assets in the old NorthBridge executives bought the “The GP’s investors are high net president and head of Setter’s fund fund or in the form of co-invest- remaining minority interest in the worth individuals and the GP made manager solutions team. Recapital- ments, Mr. Kohn said. recapitalized portfolio that had a good return. The GP may be look- izations also preserve the manag- Recapitalizations are the latest been in NP Partners II and contin- ing to raise a new fund or to transi- er’s assets under management be- evolution of the GP-led transac- ues to manage it, said Chris Reilly, tion from high net worth investors cause the GP continues to manage tions, which is a small but growing New York-based managing partner to having a larger, more institution- the properties in these GP-led portion of the real estate secondary who heads the secondary markets al investor like a Brookfield,” Mr. deals and recapitalizations help to market. New managers are also team at Brookfield. Reilly explained. expand their investor base, Mr. looking to GP-led transactions to NEW PLAY: Brookfield’s Chris Reilly has “NorthBridge wanted to raise a “That’s a theme we’re seeing on a Abraham-Ajayi said. reduce their funds’ investments in seen a shift to recapitalizations from LPs third fund and they needed a li- regular basis: a small to midsized certain property types or regions, selling their interests to get liquidity. quidity event and to print the track GP that’s a good operator and wants More transparency which may be over their funds’ record,” give their investors an op- to transition to a more institutional At the same time, the recapital- concentration limits, BGO Strategic capital to buy more assets, she portunity cash out the investment asset manager,” he added. ization market has matured with Capital Partners’ Ms. Schwarzchild said. Both new managers and more or allow them to invest in the third Recapitalizations, that started as increased liquidity and transparen- said. This can occur with asset mature managers are leading re- fund, Mr. Reilly said. a private equity strategy, are in an cy, he said. types that are selling at a premium capitalizations for this reason, she On April 26, NorthBridge Part- early stage in real estate and an “The perception of discounts as- such as industrial properties, caus- said. Managers like the strategy ners and its placement agent, Park even earlier stage in infrastructure, sociated with recapitalizations is no ing the fund to exceed its maxi- because the seller usually keeps a Madison Partners announced the Mr. Reilly said. longer accurate for high quality as- mum invested in warehouses, she small interest in the portfolio and final close of NB artnersP III at its In private equity, general part- sets that are managed well,” Mr. said. In such a case, the manager also is retained to continue manag- $500 million hard cap. ners started off using recapitaliza- Kohn said. can move assets into a sidecar ve- ing the portfolio. “We were able to get access to a tions to sell their worst and prob- In many GP-led recapitaliza- hicle with the secondary manager A recent example is Bos- good portfolio of industrial assets lem assets, he said. Now more tions, LPs have the choice of exiting and sometimes also limited part- ton-based NorthBridge Partners, that still have upside and is pret- managers are familiar with these their investment in the fund or roll- ners, solving the issue. which sold off a majority interest in ty-well stabilized,” he said. deals and want to “recapitalize ing that investment into a new fund, its second fund to Brookfield Asset The COVID-19 pandemic en- their crown jewels,” Mr. Reilly ex- joint venture or other vehicle. Typi- Capital to grow Management in March. hanced the opportunity set even plained, because it’s hard to find cally, a secondary market manager Recapitalizations also free up The industrial portfolio, which more, he said. good investments. n 34 | May 17, 2021 Pensions & Investments

ESG OMERS seeks balance in embracing decarbonization Fund executives set for The pension fund, which had quite a bit.” funds — the “Maple 8,” Ms. Preston with our internal people who are C$105 billion ($82.1 billion) in as- The plan is to pull two levers that said — called on companies and in- managing assets, and (they have) carbon cuts without too sets as of Dec. 31, has a 45% alloca- OMERS executives have as inves- vestors to step up when it comes to all been very supportive” with the much portfolio ‘surgery’ tion to equities, 23% allocation to tors: capital allocation and engage- the ESG information they disclose ambitions, Mr. Kelly said. fixed income, a 20% investment in ment. and use in investment deci- The pension fund also has the infrastructure and a 14% allocation They can make capital allocation sion-making. The call came in No- benefit of being very close with its By SOPHIE BAKER to real estate, as well as a -2% allo- decisions because they know the vember and the pension funds in- Canadian retirement plan peers. cation to short-term instruments. market is moving toward the volved represent about C$1.66 While they may have differing Putting in place a decarboniza- But what does a long-term inves- low-carbon transition. And regard- trillion in assets. views on whether targets are the tion policy for a large, diversified tor do with the carbon “We know this will right way to manage carbon reduc- portfolio that balances ambition footprint figure? “It’s a help companies focus on tions, sharing experiences is help- with fiduciary duty can be hard backward-looking num- what they need to focus ful, Mr. Kelly said. OMERS is also a work, executives at the Ontario Mu- ber. ... Our view on cli- on ... to get to the data we founding partner of the Investor nicipal Employees’ Retirement Sys- mate change generally is need,” Ms. Preston said. Leadership Network — a collabora- tem, Toronto, have found. that it does present risks tive platform where plans and The goal is to reach a 20% reduc- and it does present op- Focused today money managers share ideas and tion in carbon emissions in the en- portunities to our portfo- Setting a 2025 goal for best practices covering areas in- tire portfolio by 2025. “We want to lio. The question is, ‘How cutting carbon emissions cluding diversity and inclusion. be ambitious about this, but also do we ... put some direc- rather than committing And the sustainability group’s disciplined about how we can do tion on that transition at to being net-zero by 2050 work doesn’t stop at carbon reduc- this and what we can do to get start- OMERS?’” Mr. Kelly said. — as many European tions. Executives are also in partic- ed on it without necessarily having “It’s not necessarily natu- pension funds have ular considering issues pertaining (to do) some major surgery to the ral for pension funds to pledged — “focuses peo- to the “S” — social — in ESG, such portfolio in terms of the investment want to set targets — ple today, right now,” Mr. as health and safety in infrastruc- program,” said Michael Kelly, chair- we’re a fiduciary so in- Kelly said. “This is our ture, labor practices and social in- man of OMERS’ sustainable invest- vest every asset with a CHANGE AGENTS: Ontario Municipal Employees’ Retirement first goal. I don’t think it equality. ing committee, in an interview. risk/return lens ... but System’s Michael Kelly and Katharine Preston believe climate will be our last goal. Our On the governance side, cyberse- That required a significant given that we believe the change presents risks and opportunities for the fund’s portfolio. view is the data, metrics curity is a big issue that executives amount of work. First, a “carbon ac- world is in transition, this and regulatory environ- think a lot about, such as how port- counting exercise” — something kind of puts some guideposts in for ing engagement, executives will ment is evolving so much and so folio companies are protected executives had never done before, us.” make sure they understand the car- rapidly, we thought it best to start” against cyberattacks. That’s a “huge was needed, Katharine Preston, The bulk of the work to be done bon transition plans of the compa- with this goal. While some investors risk for our companies,” Mr. Kelly vice president, sustainable invest- is in the infrastructure and public nies they already own. take a longer-term view and have said. ing, said in the same interview. equities portfolios, Mr. Kelly. “We But Ms. Preston does not antici- goals stretching further out, “we see But it’s also important for execu- OMERS worked with a data partner know that the emissions tend to be pate it to be simple — the biggest it as a pathway that we’re on,” Mr. tives to remember that E, S and G to look at its almost 2,000 assets. concentrated (in those portfolios), challenge executives face in reduc- Kelly added. factors are intertwined. Climate “One area we wanted to focus on so naturally the focus will be there. ing the carbon footprint of the port- Executives are developing dash- change is thought of as an environ- (was the) carbon footprint of the Our private equity, just given the folio is in disclosure. “We need the board models to show progress be- mental or “E” issue, “but it impacts entire portfolio,” Mr. Kelly said. “It’s nature of some of the assets that it information to actually do these as- tween 1990 and 2025, tracking on across all aspects of our economy not a simple thing to do, is a large owns, does not have a high carbon sessments” of public and private an annual basis how the fund is do- — how people work, (what the tran- undertaking” and required analysis emissions profile. And the real es- companies, Ms. Preston said. ing against its target and where any sition means) for people working in of the public and private parts of tate book (under Oxford Proper- As such, the pension fund and pressure points may be. “It creates the traditional energy space,” Ms. the portfolio. ties Group) is separate but doing seven other Canadian pension this feedback loop and dialogue Preston said. n

significant retirement legislation to bill’s paper statement provision is a that’s appropriate for it to be at- become law in over a decade,” Mr. step back and lengthy annual paper tached to.” SECURE 2.0 Neal said during the May 5 markup. statements are not as helpful for He said it’s unlikely the bill will “Let’s not wait another decade to participants. be passed through budget reconcil- CONTINUED FROM PAGE 1 enact important provisions in the iation in the Senate — a process hancement Act, known as the SE- SECURE Act 2.0.” What will the Senate do? that requires only a simple majority CURE Act, which Congress passed Industry stakeholders expect a to pass instead of the traditional 60 and was signed into law in late 2019. Requested changes wide show of support for the bill in votes — because reconciliation can The Securing a Strong Retire- Many of the bill’s provisions have the House. only be used on spending-related ment Act, also being referred to as been featured in previously intro- “They’ve found areas of common items and some of the retirement SECURE Act 2.0, includes provi- duced bills, sponsored by both Re- ground,” Michael P. Kreps, Wash- security provisions would not qual- sions that would require 401(k), publicans and Democrats. ington-based principal and ify. Also, using budget reconciliation 403(b) and SIMPLE plans to auto- And although the bill is widely co-chairman of the retirement ser- typically means the item being vot- matically enroll participants upon supported in the retirement indus- vices practice at Groom Law Group, ed on does not have broad biparti- becoming eligible, allow 403(b) try, there are a few changes some said of House lawmakers. “Nothing san support. plans to participate in multiple em- stakeholders would like to see in there is going to be a massive It’s more likely the Senate will ployer plans and invest in collective made before the House votes on it. disruptor or game changer either MAKING A PITCH: Melissa Kahn is keen see what version of the bill passes investment trusts, create a national For instance, the first version of positively or negatively, but there on working with lawmakers to get the the House and then use that as a online database of lost retirement the bill introduced in October are incremental reforms that push QLAC limit raised in the final bill. jumping off point, said Mr. Kreps, accounts to reduce the number of raised the QLAC limit to $200,000 in the right direction as a whole.” who served as the senior pensions missing participants, and make from $135,000, but the current ver- The more interesting question at coming weeks to help make it easi- and employment counsel for the changes to qualifying longevity an- sion does not. “We are going to be this point, sources said, is what will er for all Americans to save for re- Senate HELP Committee from the nuity contracts, or QLACs, by re- working with both the House spon- happen in the Senate? tirement.” 110th Congress through the 114th moving the 25% cap — currently sors as well as the Senate to ensure Though retirement security is a Congress. The Senate can then retirement savers can spend up to that in the final bill it’s (reinstated),” bipartisan issue, “people vote Attached to larger legislation modify the bill and attach it to a 25% of their account on a QLAC. said Melissa Kahn, Washing- against things, or stymie them, or In order for a SECURE Act. 2.0 larger vehicle at some point during The bill’s auto-enrollment provi- ton-based managing director of re- block progress for reasons other bill to pass the Senate, it’s likely that the year, he added. sion initially enrolls participants at tirement policy for State Street than the substance of a bill all the the bill will be attached to a larger Both Mr. Portman in the Senate a floor of 3% of pay, and that contri- Global Advisors’ defined contribu- time,” Mr. Kreps said. “I don’t know piece of legislation, said Bradford P. and Mr. Brady in the House have bution is then increased — unless tion team. if this will get tied up in larger poli- Campbell, a Washington-based announced that they will not seek the participant opts out — by 1 per- The bill would also require ERI- tics, but it does seem that it can at partner for Faegre Drinker Biddle re-election in 2022. Ms. Kahn said it centage point each year until it SA-governed defined contribution least clear the House and move & Reath LLP and former assistant would be a “great farewell gift to get reaches 10%. plan sponsors to provide a paper onto the Senate.” secretary of labor for EBSA during some of this major legislation that The bill would also raise the age benefit statement at least once a Sens. Rob Portman, R-Ohio, and President George W. Bush’s admin- they’ve been championing across at which individuals are required to year to participants. Last year, the Ben Cardin, D-Md., last year intro- istration. In 2019, the SECURE Act the finish line.” begin withdrawing a percentage of Department of Labor finalized a duced the Retirement Security and passed after it was attached to a Mr. Campbell said Messrs. Port- their tax-deferred retirement plan rule that permits default electronic Savings Act, which includes many year-end spending bill. man and Brady’s impending retire- to 75 from 72 over the next decade. delivery of retirement plan disclo- of the same provisions as Messrs. “There are just some realities of ments and the support from both Moreover, the bill would permit an sures, which the retirement indus- Neal and Brady’s House bill. In a the legislative process that make powerful Republicans and Demo- employer to make matching contri- try hailed as a major resource and statement supporting the Ne- even widely supported bipartisan crats is a good recipe for the bill’s butions to a 401(k) plan, 403(b) plan time saver. al-Brady bill, Mr. Portman said he legislation sometimes difficult to success. or SIMPLE IRA — a Savings Incen- Aliya Robinson, senior vice pres- looks forward “to working with move,” Mr. Campbell said. “So at- “Nothing is ever certain, but I tive Match Plan for Employees ident of retirement and compensa- Senate Finance Committee Chair- taching it to a broader vehicle is think this bill is very likely to pass,” used by small employers — on tion policy at the ERISA Industry man (Ron) Wyden, (D-Ore.) and sometimes the best way to resolve Mr. Campbell said. “The goal is qualified student loan payments. Committee in Washington, said Ranking Member (Mike) Crapo, those issues, but you have to have a pretty likely; how you get there is “The SECURE Act was the most during a call with reporters that the (R-Idaho) on our legislation in the larger vehicle that’s moving and still up in the air.” n Pensions & Investments May 17, 2021 | 35 CHANGES AHEAD Smart Pension, which invested with structure, but does not invest in pri- Natixis Investment Managers U.K. vate equity, is hopeful about the Illiquids Ltd., said the government’s propos- proposal helping investors to start a Boston Retirement System is seeking proposals from core fixed-in- al may remove a regulatory barrier, conversation with managers about CONTINUED FROM PAGE 2 come managers to run $950 million on behalf of the plan and from core but it doesn’t mean that DC funds fees. “Typical fees in the private eq- emerging markets equities managers to run about $115 million. NEPC, on 2-and-20 charging structures — will rush into illiquids as there are uity industry are clearly too high to investment consultant for the $6.2 billion defined benefit plan, is assisting where 2% refers to management bigger barriers to overcome. He be affordable for DC schemes. We with the searches. The fixed-income search will be split into two catego- fees and 20% to performance fees. agreed that cost and the structure hope this is the start of a conversa- ries: traditional core fixed income and core fixed income/U.S. TIPS Sources also said that unpredict- of alternatives charges is one obsta- tion that gets private equity manag- strategies. Wells Fargo Asset Management, BlackRock and Income able returns of alternative asset cle, but the nature of the investment ers to reflect hard on fees and fee Research & Management are the system’s current core fixed-income classes will keep executives away is another barrier. structures in their industry. If we managers, documents on the plan’s website show. Current managers are from launching meaningful expo- “We will continue to develop our get this right, millions of U.K. savers encouraged to submit bids. The board may select more than one manager. sures without being “nervous” investment proposition to both im- stand to benefit,” he said. Emerging markets equities strategies must have a three-year track record about breaching the cap regardless prove the climate credentials of our A study by the U.K. Pensions Pol- and assets of at least $500 million to be considered. Vontobel Asset of fee spreading. And single-em- funds and to ensure we are gener- icy Institute conducted in 2019 Management, Polunin Capital Partners, State Street Global Advisors and ployer DC plans won’t lock assets ating long-term risk adjusted re- showed that a global diversified Lazard Asset Management are the plan’s listed emerging markets equities into a seven-to-10-year illiquid turns. So we think illiquids will private equity allocation in a DC managers. The RFPs are available on NEPC’s website. Proposals for the strategy if their sponsors have al- definitely be part of the mix, but portfolio can return 13.5% net of emerging markets search are due 2 p.m. EDT May 20; proposals for the ready decided to outsource retire- they need to be structured in the charges over 20 years, while private fixed-income search are due 2 p.m. EDT on May 24. ment arrangements to multiemploy- right way and meet the scheme’s debt could add 8.8% over the same er plans, known as master trusts. needs, very much like we have al- time period. Global infrastructure Massachusetts Water Resource ready done through the private equity could add 7.1% in the same HAVE SOME NEWS? Authority Employees’ Retirement ‘A bit of a red herring’ credit solution we recently intro- period. Please submit news System, Chelsea, is looking to commit about “I think the smoothing of perfor- duced, developed in partnership of changes to David $15 million to a private equity fund. Growth mance fees is a bit of a red herring,” with Natixis IM,” he said. Not in line with market trends Schepp, news editor, at equity funds, co-investments and special said Nico Aspinall, CIO of the £14 Mr. Philp said the Natixis strate- Consultants also noted that the dschepp@pionline. situations will be considered. Fund of funds, billion ($19.3 billion) defined con- gy addresses some of the key barri- proposal isn’t compatible with mar- com evergreen or hybrid funds will not be consid- tribution multiemployer plan The ers such as access to ket trends such as out- ered. NEPC, investment consultant for the People’s Pension, which is spon- private credit markets, sourcing single-em- $650 million defined benefit plan, is assisting with the search. The RFP is sored by B&CE, West Sussex. “One including that it comes ployer plans to available on the retirement system’s website. Proposals are due by 2 p.m. of the big problems of the govern- in at a price point and multiemployer ar- EDT May 28. ment’s approach … is this sense price structure that the rangements. that 2-and-20 (fees) are acceptable trustees are comfort- Sonia Kataora, part- University of Alabama System, Tuscaloosa, is searching for an and (the) DC industry has to … able with and consider ner and head of DC in- investment consultant for its defined contribution plans. The system work with it. That’s not the page we value for money. It also vestment at Barnett issued an RFP due to the pending expiration of the contract of current are on,” he said. blends an MV Credit Waddingham LLP in consultant SageView Advisory Group as well as due diligence, according to Mr. Aspinall, who said that mas- Partners LLP strategy, London, added that an email from the system’s human resources group. The system’s DC ter trusts themselves are under which provides access smoothing the perfor- plans are the $2.8 billion University of Alabama System 403(b) plan, $160 pressure to keep costs and charges to private credit, with HOPE: With fee progress, mance fee calculation million University of Alabama System 457(b) Deferred Compensation Plan, far below the charge cap, expects to liquidity provided alternatives could go in over a period of, for ex- $123 million UAB Hospital Management LLC 403(b) Plan, and three other see the 2-and-20 structure “mas- through a multiasset a default fund in Nico ample, five years doesn’t plans each with less than $4 million in assets. The RFP is posted on the sively reduced” before he invests. credit strategy through Aspinall’s master trust. address the issue that system’s procurement website. Registration is required. Proposals are due Mr. Aspinall would like to see man- Loomis, Sayles & Co. LP. plan participants would at noon CDT on May 31. agers give a discount of 70% to 80% Both firms are affiliates of Natixis have joined and left the fund over on performance fees. But he noted IM. that period. “It’s difficult to ensure Massachusetts Port Authority Employees’ Retirement System, that private equity managers prefer that members who paid that fee ben- East Boston, is searching for an opportunistic credit manager to run $40 buyers that can afford their Returns can vary efited over that period,” she said. million. The board may select more than one manager. Wilshire Associates, charging structures and he hasn’t Paul Herbert, senior investment WTW’s Mr. Herbert added that investment consultant for the $831 million defined benefit plan, is come across managers that would consultant at Willis Towers Watson while DC plan participants are assisting with the search. The RFP is available on Massachusetts Port offer such a discount. PLC in London, agreed with Mr. long-term investors, they are not Authority’s website. Proposals are due by 4 p.m. EDT on June 1. During investment periods, pri- Philp that the government proposal necessarily going to be invested in vate equity managers running Eu- on its own is a positive develop- the same plan indefinitely as they New York State Common Retirement Fund, Albany, is seeking a real ropean-domiciled funds on average ment, but noted that alternative in- may change jobs. assets consultant. The real assets portfolio, created in 2014, “is in its charge management fees above the vestment returns can differ greatly Such consolidation — which the development phase and continues to build key capabilities,” according to DC charge cap. According to data by from year-to-year in practice. government is also encouraging — an RFP posted on the website of the state comptroller, Thomas DiNapoli, Preqin Ltd., these managers charge “The top-quartile managers are means trustees have shorter invest- who is the sole trustee of the $247.7 billion fund. “The long-term alloca- between 1.58% and 1.95% depend- achieving very strong returns. And ment horizons, “making it difficult tion of the portfolio is 3% and the benchmark is the Consumer Price index ing on the fund size. Venture capital therefore, the uncertainty around to commit to these sorts of asset plus 500 basis points,” the RFP said. Investments in this category include fees during investment periods, de- the potential performance of the classes,” Mr. Herbert said. agriculture, capital assets, infrastructure, renewable energy and timber. pending on the fund size, can range fund and hence the fee that you end There were 38 master trusts in Applications must be submitted by 4 p.m. EDT on June 8. from 1.33% to 2.14%, while infra- up paying means that you end up the U.K. with a combined £52.8 bil- structure fees can range from 0.84% constrained in terms of what sorts lion in assets as of Dec. 31, accord- Concord (Mass.) Contributory Retirement System is searching for to 1.35%, Preqin data showed. of exposure you can have without ing to The Pensions Regulator. This a manager to run $7 million to $15 million in an unconstrained, flexible-du- Mr. Aspinall hopes that The Peo- breaching the charge cap,” he said. compares with 38 master trusts that ration fixed-income strategy. The board is seeking strategies with a positive ple’s Pension, which does not cur- In order to benefit from the re- had £38.5 billion in combined as- absolute-return objective in a variety of market conditions and a broad rently allocate assets to illiquids, turns that alternative investments sets as of Dec. 31, 2019. global focus. Core-plus, multisector strategies or hedge funds will not be will see progress on the fee front so can offer, Mr. Herbert said DC exec- And master trusts are not neces- considered. The search is being conducted to further diversify the that his master trust can include al- utives may want to invest more sarily keen on taking on invest- portfolio, said Linda Boucher, retirement administrator. The RFP is ternative investments in its default than 5% or 10% of their portfolios in ments started by single-employer available on Fiducient’s website. Proposals are due by 4 p.m. EDT June 11. fund in the next few years. illiquids. But they would then likely plans due to the additional gover- And even the £1.6 billion Smart breach the charge cap if the man- nance burden it would create. Delaware State University, Dover, is searching for an investment Pension Master Trust, London, one ager performs well, he said. Mr. Aspinall said his master trust consultant for the university foundation’s $39 million endowment. The of the U.K. master trusts that re- Other sources said that the pro- wouldn’t offer different investments university issued an RFP because the contract of the current consultant cently ventured into the illiquid as- posal could pave the way for DC to different employers, adding that will be expiring soon, university spokesman Carlos Holmes said. The RFP is sets space for the first time by add- plans to negotiate alternatives fees The People’s Pension is also unlike- available on the state’s procurement website. Proposals are due at 3 p.m. ing a £100 million private credit with managers. Mark Fawcett, CIO ly to include investments of an ac- EDT on June 21. allocation into its default fund, will of the £17 billion National Employ- quired plan into its default fund. not be quick to use the proposed ment Savings Trust, London, which “That gives us all of the governance For a comprehensive database of search and hiring activity, visit P&IQ at PIon- calculation method if the proposal invests about 3.5% of its assets in headache and new set of managers line.com/piq. is enacted. Darren Philp, director of private credit and will initially in- without the scale. We wouldn’t go policy and market engagement at vest £900 million in unlisted infra- down that route,” he said. n

P&I Events Calendar Mark your calendar and join us at these upcoming P&I events. '5)+PXGUVKPI8KTVWCN5GTKGU 2TKXCVG/CTMGVU8KTVWCN5GTKGU 4GVKTGOGPV+PEQOG8KTVWCN5GTKGU

May 17-20 June 15-17 September 14-16

pionline.com/ESG2021 pionline.com/PM2021 pionline.com/RI2021 A lifetime of dedication deserves monthly income for life.

With over 100 years of ﬁ nancial expertise, TIAA can help you provide your employees with monthly retirement income for life. TIAA.org/IncomeForLife

Any guarantees under annuities issued by TIAA are subject to TIAA’s claims-paying ability. TIAA-CREF Individual & Institutional Services, LLC, Member FINRA, distributes securities products. Annuity contracts and certiﬁ cates are issued by Teachers Insurance and Annuity Association of America (TIAA) and College Retirement Equities Fund (CREF), New York, NY. Each is solely responsible for its own ﬁ nancial condition and contractual obligations. ©2021 Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, 730 Third Avenue, New York, NY 10017. For Institutional Investor use only. Not for use with or distribution to the public. 1519856

21pi0040.pdf RunDate: 04/05/21 Full Page Color: 4/C