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Washington Single-employer plans James Kegley not forgotten in new law $86 billion from stimulus funds Those measures are also expected to give the U.S. economy a much-needed boost. heading to multiemployer plans The Democratic majority in Congress, moving the package largely without Republican support, By HAZEL BRADFORD also helped struggling multiemployer pension funds. After a multiyear effort to enact structural While multiemployer pension provisions in the reforms fell short, now the most at-risk plans have American Rescue Plan Act of 2021 got more atten- $86 billion in federal assistance grants to pay ben- tion, relief for single-employer plans will be more efits, if they can show the grants will help them sur- significant and long-lasting, sponsor advocates say. vive for 30 years. The ambitious $1.9 trillion COVID-19 relief For single-employer pension plans, the pension package signed by President Joe Biden March 11 funding relief in the American Rescue Plan grabbed has several goals to help the country recover from few if any headlines, but “is very welcome,” said the pandemic, from ramping up vaccinations to Dennis Simmons, executive director for the Com- helping people impacted by the economic fallout. SEE RESCUE ON PAGE 29 TIP OF THE HAT: Dennis Simmons cited pension funding relief in the law as ‘very welcome.’

Investing Emerging passive investing risks a new concern By SOPHIE BAKER aware of (that) is under the RISKY? Craig Baker said his firm bonnet of their passive portfo- believes it might be time to take a Investment consultants around the globe lio?” said Andrew Peach, head look at ESG and concentration issues. are asking their pension fund clients to of factor investing at Aon PLC think carefully about two very real concerns in St. Albans, England. Executives at the £6.8 billion that have emerged in passive investing: Willis Towers Watson PLC ($9.4 billion) Nationwide Pen- ESG-related and concentration risks. also thinks it’s time for passive sion Fund, Swindon, England, Some pension fund clients have heeded investors to rethink whether are looking to take action on ESG NO SINGLE PATH: Elena Lieskovska sees several their advice, reconsidering whether they they might want to go active or concerns. They’re set to submit a different kinds of approaches with the linkups. should be implementing some kind of ESG move to an index “that doesn’t proposal to trustees this month, tilt to their benchmarks and in other cases, suffer quite so much” from con- proposing to move 25% of the Money Management looking to take portions of the allocation to centration, and environmental, social and pension fund’s passively managed equities an active manager instead. governance issues, said Craig Baker, global portfolio into a passive ESG index. If ap- “We are … having exactly these conversa- chief investment officer in London, on a Feb. proved, the transition would begin in April. A perfect match: tions: How much of this risk are people even 9 virtual investment briefing. SEE PASSIVE ON PAGE 29 Alternative firms Courts join with insurers PIMCO discrimination By ARLEEN JACOBIUS suits no trouble so far Apollo Global Management Inc.’s recent announcement that it would merge with in- NEPC puts firm on watch while others wait surance company Athene Holdings Ltd. is for further clarity before making any decision just the latest example in a flurry of the mergers, acquisitions and strategic relation- ships struck between alternative invest- By CHRISTINE WILLIAMSON ment firms and insurance companies. Money managers say the moves produce Pacific Investment Management Co. has been in the spotlight a perfect match, adding a big influx of per- since November after a lawsuit was filed by current and former manent capital to their assets under man- female employees alleging gender and pay discrimination, sex- agement. The combinations also provide ual harassment and other employment issues, but despite the new, major clients that are part of an esti- buzz, asset owners are staying on the sidelines for now. mated $23 trillion insurance industry, help- PIMCO categorically denied the allegations in a response to ing managers to diversify their limited part- the plaintiffs’ lawsuit in a court filing on March 10. ner base and, in some cases, seed new funds Since the lawsuit was filed, P&I’s reporting hasn’t shown as well as existing strategies. any terminations of PIMCO by institutional investors, who say SEE INSURANCE ON PAGE 30 they are monitoring the dispute. Newport Beach, Calif.-based CATEGORICAL DENIAL: PIMCO officials in a March 10 filing rejected the allegations. PIMCO managed $2.21 trillion as | SEE PIMCO ON PAGE 34 SOUND BITE All about P&I’s Eddy Awards Detail, quick innovation are common CALPERS’ MARCIE FROST: The challenge with winning themes for sponsors. Page 3 recruiting is ‘the complex nature of our portfolio. Who won this year’s Eddy Awards? Page 17 And it’s a very public environment ... There is How the pandemic has affected women not anything we can do with that.’ Page 6 and plan administration. Pages 18 & 19 Where’s Eddy? Winners show us. Page 19 2 | March 22, 2021 Pensions & Investments

IN THIS ISSUE Regulation

VOLUME 49, NUMBER 6 Alternatives Investors want more from Biden White House Apollo Global Management leaned heavily that went into effect executive order on his on capital from its limited partners as Rejection of Trump-era rules just days before the first day in office order- it expanded its relationship with Athene good start, but further action Biden administration ing a review of the rule. Holding. Page 31 took office. Stakehold- The other rule — “Fi- wanted before changes begin ers fear the rules duciary Duties Regard- Exchange-traded funds would cause a chilling ing Proxy Voting and Cryptocurrency exchange-traded funds By BRIAN CROCE effect on environmen- Shareholder Rights” — are coming to America, and a U.S.-listed tal, social and gover- outlines the process a product could send a shock wave through Institutional investors welcomed news nance investments. fiduciary must under- the investing world. Page 15 earlier this month that the Department of The first, called “Fi- take when making de- Labor wouldn’t be enforcing two high-pro- nancial Factors in Se- cisions on casting a In memoriam file rules promulgated during the Trump lecting Plan Invest- proxy vote. It under- administration for ERISA fiduciaries on se- ments,” stipulates that scores that fiduciaries Richard H. Driehaus, founder and chairman lecting investments and exercising voting ERISA plan fiduciaries are not required to vote of money manager Driehaus Capital rights, but will want to see more from the cannot invest in “non- every proxy and notes Management and longtime philanthropist, Biden administration before changing pecuniary” vehicles that they must act sole- has died at age 78. Page 6 course, sources said. that sacrifice invest- ly in accordance with “I don’t think floodgates are going to ment returns or take NOT YET: Elizabeth S. Goldberg thinks plan the economic interest Investing open because I think people are still in a on additional risk. It’s fiduciaries are holding off on changes until of the plan and main- High-yield managers are set to focus on wait-and-see mode in regard to what the often referred to as the they see more from the Biden administration. tain records on proxy short-duration corporate bonds to avoid Biden administration is going to do beyond “ESG rule” because the voting activities and its non-enforcement policy,” said Elizabeth initial proposal, which was unveiled in June, other exercises of shareholder rights. interest rate risk this year. Page 32 S. Goldberg, a Pittsburgh-based partner focused on ESG investment factors, but the “These rules have created a perception with law firm Morgan, Lewis & Bockius LLP. final rule walked back the ESG language. It that fiduciaries are at risk if they include Money management The non-enforcement policy pertains to was finalized in November and took effect any environmental, social and governance CI Financial is on an acquisition spree, two rules ­— which remain on the books —­ Jan. 12, but President Joe Biden signed an SEE ESG RULES ON PAGE 35 having scooped up 16 U.S. wealth managers in little more than a year, with Investing more to come. Page 4 Credit Suisse will split out its asset management division with a new CEO, Managers preparing for major bond bonanza following the fallout from its relationship with Greensill Capital. Page 31 Firms position to benefit when mentum is positive for corporate deleverag- ing. ... That’s gone through the pendulum Pension funds high-yield issues are upgraded swing very far down to the downgrade side CalPERS has suspended its search for a Chris Hamilton (when) institutions were deteriorating in chief investment officer and will take another By SOPHIE BAKER and terms of credit quality last year,” and now the run at filling the job in June. Page 6 PAULINA PIELICHATA opposite is true, he said. The firm had $296.4 billion in fixed-income assets under manage- Departments Investment-grade bond managers are la- ment as of Dec. 31. beling 2021 and 2022 as the years of the up- Vontobel Asset Management AG’s fixed- At deadline ��������������������32 Editorial ������������������������10 grade, with a bonanza of high-yield compa- income team expects $200 billion to $300 bil- By the numbers ��������������14 ETFs ������������������������������15 Changes ahead ��������������35 Frontlines ������������������������8 nies set to climb up the credit scale. lion of U.S.-based high-yield debt to be up- Classified ����������������������28 Hirings ��������������������������26 In anticipation of ratings agencies upgrad- graded to investment-grade status by the end Corrections ����������������������4 Other views ��������������������10 ing up to $100 billion in high-yield companies’ of next year, with about €50 billion ($59.6 bil- DC roundup �������������������12 RFPs �����������������������������28 bonds to investment-grade status this year, lion) for Europe over the same period. with a further up to $200 billion earmarked A Dec. 2 paper by S&P Global Ratings said Money manager survey for upgrades in 2022, investment-grade man- an estimated $367.2 billion in outstanding agers — where strategies allow — are adding debt had been downgraded from investment- overdue junk bonds that they expect to be upgraded in grade status so far in 2020. The paper covered Pensions & Investments is accepting hopes they will reap the benefits. the U.S. and Europe, Middle East and Africa. late responses to the annual money “2021 will be the year of the upgrade,” said “It’s tough to get a precise answer (of how manager survey. Firms managing U.S. Matt Brill, Atlanta-based head of North much will be upgraded) but the topic is gain- institutional, tax-exempt assets are COMING SOON: Invesco’s Matt Brill sees America investment-grade and senior portfo- ing traction because we entered a new period eligible. Results will be published May 2021 as ‘the year of the upgrade’ because of lio manager at Invesco Ltd.’s fixed-income in the credit cycle with COVID-19,” said 31. expected corporate deleveraging. business. “The main takeaway is that the mo- SEE CREDIT ON PAGE 32 To request a survey or obtain further information, please contact Anthony Money Management Scuderi at [email protected] or 212-210-0140, or visit www.pionline. com/section/surveys. Challenges prompt Vanguard to narrow China focus

Entire contents ©2021 Crain Communications Inc. All rights By DOUGLAS APPELL reserved. Pensions & Investments (ISSN 1050-4974) is published biweekly by Crain Communications Inc., 150 N. Michigan Ave., Chi- Vanguard Group’s decision last week to cago, Ill. 60601-7593. Periodicals postage paid at Chicago, Ill. and Daniel Burke at additional mailing offices. Postmaster: Send address changes suspend its pursuit of a billion Chinese to Pensions & Investments, Circulation Dept., 1155 Gratiot Avenue, mutual fund investors reflects a business Detroit, Mich. 48207-2912. $16 per issue; $350 per year in the U.S.; $375 per year in Canada; all other countries $475. ‘‘Canadian model whose time has yet to come on the Post International Publications Mail Product (Canadian Distribution) mainland. Sales Agreement No. 0293539’’ GST #136760444. Printed in U.S.A. Vanguard’s decision to focus instead on the joint venture it launched last April with CRAIN COMMUNICATIONS INC Hangzhou-based Ant Group, offering port- Keith E. Crain, Chairman folio advisory services, appeared to be the Mary Kay Crain, Vice Chairman firm’s only immediate way forward after KC Crain, CEO Vanguard last fall stopped offering institu- Chris Crain, Senior Executive Vice President tional separately managed accounts in the Lexie Crain Armstrong, Secretary Asia-Pacific region and then concluded last Bob Recchia, Chief Financial Officer week it was too soon as well to build a retail G.D. Crain Jr., Founder (1885-1973) fund business there. Mrs. G.D. Crain Jr., Chairman (1911-1996) Structurally speaking, Vanguard’s “am-

Published every other Monday by Crain Communications Inc. bition for China” — including direct-to-cli- Boston: 101 Federal St., Suite 1615A, 02110; Chicago: 150 N. Michigan Ave., 19th Floor, ent sales — “is not at all where the market 60601; London: 11 Ironmonger Lane, EC2V 8EY; El Segundo, Calif.: 400 Continental Blvd., 6th is at the moment,” said Nicholas Omondi, 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. director of data analytics with Shanghai- Address all subscription correspondence to Pensions & Investments, 1155 Gratiot Ave., Detroit, based financial sector consulting firm Z- U-TURN: Scott Conking said in October Vanguard was eyeing individual investors, but the plan changed. Mich. 48207-2912 or email [email protected]. Ben Advisors. Member of Business Publications Audit of Circulation A Z-Ben news alert last week amplified shore market and the Vanguard business eign money managers there. www.pionline.com that point: “At the heart of the matter is a model” — an idiosyncratic situation rather Market veterans had foreseen the chal- fundamental disjoint between (China’s) on- than one with broader implications for for- SEE VANGUARD ON PAGE 34 Pensions & Investments March 22, 2021 | 3

SPECIAL REPORT THE EDDY AWARDS Detail, quick innovation common winning themes Winners demonstrate a knack help retirees, active employees and everyone in every generation understand the retire- for methodical planning, rapid ment benefits,” he said. change to meet challenges In addition to a detailed brochure contain- ing investment information, Howard’s educa- HARD WORK FOR THEM: Howard University, left, won for its tion campaign included a resources section campaign to simplify its retirement lineup when it moved to a By ROBERT STEYER and that showed participants where to get addi- single record PATRICK ROTH tional information, including online docu- drive the need to keeper; Illinois ments and both online and on-site seminars. consolidate their SURS, above, Winners of Pensions & Investments’ Eddy As a result, the share of participants mak- plan with one re- wanted to help Awards featured examples of detailed, me- ing voluntary contributions rose to 64% as of cord keeper,” one its participants thodical planning and execution for complex June 30, 2020, vs. 51% in June 30, 2019. The judge wrote. with a lifetime plan changes as well as quick transforma- percentage of participants increasing their income option; tions of education campaigns to adapt to a contributions jumped to 61% vs. 13.9% during SURS revamps and ND paper, virtual reality because of the coronavirus this period. DC lineup lower left, pandemic. “What I liked about this entry is that they The Illinois State sought to Sixty-eight campaigns were recognized used data, focus groups and town halls to Universities Retire- avoid as part of the Defined Contribution Spring ment System, headaches for Virtual Series March 8-11,which replaced Champaign, and its participants the in-person conference traditionally held service provider when it in Florida. Voya Financial, won switched to a Several awards went to sponsors that navi- first place in the new retirement gated the defined contribution version of conversions/403(b) platform. herding cats as they combined, consolidated consolidations cat- or rearranged plans to reflect mergers, new egory for public plans with more than 5,000 ponent is part of a customized target-date record keepers and/or updated strategies to participants, thanks to an extensive revamp- fund series that automatically adjusts as par- improve participation. ing of its DC plan lineup. The sponsor ticipants reach age 50, moving participants’ changed record keepers ­— reducing the assets into a lifetime income option. The tra- Howard seeks simplicity number to one from two — and it created a ditional annuity option remains available. Howard University, Washington, placed In their own words new default investment option emphasizing By the end of February, Ms. Mayer reported first in the conversions/403(b) consolida- lifetime income. that 86.5% of participants were fully invested tions category in the not-for-profit/other cat- Hear from these plan sponsors about “The previous requirement for our mem- in the new lifetime income strategy, 6.2% have egory for institutions with more than 5,000 their Eddy-winning campaigns at pionline. bers to annuitize 100% of their account bal- assets in this strategy as well as in the plan’s plan participants. TIAA-CREF was the ser- com/Eddy2021: ance at a point in time was one of the primary core funds, and 7.3% invest only in core funds. vice provider. reasons for embarking on our plan redesign “We were surprised at how open to change ■ Howard University’s Larry Callahan Participants “weren’t actively managing project and why we sought a solution that of- the majority of our membership was in this their funds,” said Larry A. Callahan, the uni- ■ Phifer’s Russell DuBose fered more flexibility than a traditional annu- regard,” she added. versity’s associate vice president and chief ■ ND Paper’s Bob Fieck ity,” Suzanne Mayer, interim executive director human resources officer, as he explained why and chief benefits officer, wrote in an email. ND Paper: Using every tool ■ RELX’s Christina Heintz the university cut the number of record keep- Before the conversion, approximately 60% ND Paper Inc., Oakbrook Terrace, Ill., ers to one from five and the number of in- ■ Virginia Retirement System’s Kelly of defined contribution plan retirees chose a placed first in the conversions/403(b) con- vestment choices to 25 from 150. Hiers lump-sum payment instead of an annuity. solidations category for corporate plans with “They were confused,” he added. “We had ■ Sony Corporation of America’s Judy “Individuals were opting for the lump sum 1,000 to 5,000 participants. Principal Finan- to do a lot of simple communication.” Leung even though in most instances it was not fi- cial was the service provider. Mr. Callahan said there are five genera- nancially advantageous over the long term,” Having become an independent company ■ tions among Howard University’s partici- USA Swimming’s Eric Skufca Ms. Mayer wrote. in June 2018, “we inherited a (retirement) pants including retirees. “We really needed to ■ Avangrid’s Paul Visconti The SURS Lifetime Income Strategy com- CONTINUED ON PAGE 16

Awards Leadership P&I’s Excellence & Innovation P&I business, editorial units announce changes Awards registration now open Pensions & Investments has named a chief operating officer, a new asso- Pensions & Investments and the Defined Contribution Institu- ciate editor and made other new busi- tional Investment Association are seeking nominations for the ness appointments. Excellence and Innovation Awards program, now in its 10th year. Nikki Pirrello, associate group pub- These awards are designed to recognize DC plan executives lisher, conferences and marketing and their employers for well-executed, creative and unusual services, was named chief operating projects that help ensure a successful retirement for partici- officer at P&I. It is a new position. pants. Entries are judged on innovation as well as excellence in Ms. Pirrello, who has been with P&I execution. since 2007, will work alongside Vice Registrants do not have to self-select the category in which President and Group Publisher Chris J. Nikki Pirrello Meaghan Offerman Usha James Gauri Goyal they wish to compete. A panel of industry experts will work Battaglia to identify new areas of growth alongside P&I editorial employees to determine whether en- for the brand and oversee business op- the Chicago area, where she is based. Goyal will oversee content strategy tries should compete in either the innovation or the excellence erations. She is based in New York. Most recently, Ms. Offerman worked for sponsored content and thought categories. Meaghan Offerman has been as a content strategist and editor-in- leadership. She has previously Entries for the 2021 awards are due May 28. P&I and DCIIA named associate editor at Pensions & chief for Shores Communications. worked as director of programming are looking for programs implemented on or after Jan. 1, 2020. Investments. On the business side, in addition to for the company’s defined contribu- Winners will be announced at P&I’s West Coast Defined Con- In this new role, Ms. Offerman Ms. Pirrello’s promotion, Usha James tion conferences and as a freelance tribution Conference in October. serves as the lead editor on special was named group director of confer- writer for P&I. She is based in Boston. For more information and the nomination form, visit pionline. reports and is the main contact for ar- ences where she will help expand “Over the many years, Pensions & com/innovationawards2021. Need more help? Contact Editor ticles contributed by members of the P&I’s conference efforts. It also is a Investments has been expanding our Amy B. Resnick by email at [email protected]. institutional investing industry. new position. Previously, Ms. James platforms to serve the growing needs Self-nominations are encouraged. Nominations also will be Ms. Offerman (formerly Kilroy) worked as director of event opera- of our audience and customers, and accepted from colleagues and people outside the organization first joined the publication in 2014 as tions at Money20/20 USA and Infor- the changes we are making within who are familiar with the work being done. There is no fee to a reporter for P&I Daily in Chicago, ma. Ms. James is based in New York. our organization are aligned to en- enter. later picking up parts of the defined Also, Gauri Goyal was named direc- sure we can capture the rapid growth Visit pionline.com/InnovatorAwards20 to review the ground- contribution and ESG beats. She left tor of content solutions at P&I, replac- in our global conferences, custom breaking efforts of last year’s winners. n P&I in 2018 to move downstate with her ing Greg Crawford who left the com- content, digital platform and publica- husband and recently moved back to pany for another opportunity. Ms. tion,” Mr. Battaglia said. n 4 | March 22, 2021 Pensions & Investments

Money Management

Nicole Pereira/NYSE CI Financial making big move into U.S. wealth management 16 deals already made ronto-based CI Financial Inc. as Hamill will add C$29.6 billion ($23.5 CEO in 2019 with “a flexible man- billion) to CI’s coffers, said Murray by CEO who also plans date,” said he is particularly fo- Oxby, a CI spokesman, in an email. cused on broadening the compa- The 13 RIA and wealth manage- institutional expansion ny’s geographic reach through an ment firms acquired by CI in 2020 expansion in wealth management include Congress Wealth Manage- By CHRISTINE WILLIAMSON in the U.S. ment LLC, Doyle Wealth Manage- Among the U.S. wealth managers ment LLC, Stavis & Cohen Private Kurt MacAlpine has been a very and registered investment advisers Wealth LLC and Surevest LLC. busy CEO, having commandeered that CI has acquired or is in the Except for Segall Bryant & 16 completed and pending acquisi- process of buying is Segall Bryant & Hamill, the 16 companies CI has ac- tions in a little over a year. Hamill LLC, Chicago. Once the deal quired or is in the process of buying FERTILE GROUND: Kurt MacAlpine sees the U.S. as a ripe market for expansion. Mr. MacAlpine, who joined To- closes this quarter, Segall Bryant & are U.S. regional wealth manage- ment firms primarily focused on high-net-worth individuals. Once all of the firms have been incorpo- rated, CI’s U.S. assets under man- agement will total C$68.5 billion, Mr. Oxby said. Mr. MacAlpine said his focus on expanding CI’s wealth manage- ment capabilities stems from his belief that “the role of financial ad- visers is more important than ever ESG Investing Virtual Series before, and that will continue for the next 20 to 40 years. Investors are well aware that they need high- quality financial advice.” May 17-20 CI Financial had total assets un- der management and advisement of C$231.8 billion as of Jan. 31. Of that, C$134.3 billion was managed As ESG proliferates as a strategy, how can an investor tell the by CI Global Asset Management, di‹erence between a partner that does the real work and one the firm’s money management unit. Although Mr. MacAlpine has his that is guilty of shortcuts? sights set on building a powerful P&I’s 2021 ESG Virtual Series will tackle this topic head on. network of U.S. wealth manage- ment firms, he said in the interview Register now for the opportunity to hear from thought leaders that he has not turned his back on and be able to interact with your peers on this subject that institutional investors and also seeks to increase AUM in that cli- has become more and more important as ESG becomes an ent segment. integrated part of investment management marketing. SEE CI FINANCIAL ON PAGE 30 CORRECTIONS & SPEAKERS INCLUDE: CLARIFICATIONS

■ The $282.5 billion California State Teachers’ Retirement System, West Sacramento, committed $200 million to AlpInvest Co-Investment Fund (Onshore) VIII and $125 million to AlpInvest SSMA. Incorrect Joseph Boateng Geeta Kapadia Juan Martinez Micheal McCauley commitment amounts were Yale New Haven Health State Board of Administration Casey Family Programs The Knight Foundation reported in the hiring section on of Florida page 18 in the March 8 issue. CalSTRS also committed $44 million to Blackstone BioMed Life Science Real Estate and $30 million to GGV Discovery III. Inaccurate fund names were reported. ■ A photo caption in the Feb. Alyssa Rieder Anne Simpson Sherri Trecker Eric Vaang 22 issue accompanying the Page 2 story ­“Biden’s retirement idea CommonSpirit Health CalPERS Washington State The John D. and Catherine getting the cold shoulder” Investment Board T. MacArthur Foundation incorrectly summarized the position of Alicia Munnell of the Center for Retirement Research COMPLIMENTARY REGISTRATION AT PIONLINE.COM/ESG2021* at Boston College. Her position is that the proposed shift to a tax credit would make the retirement SPONSORS: system more equitable. ■ Executives of Barings LLC are looking at the “first mile” alternative ports or airports where goods first enter the U.S., and investing in emerging Questions? For more details please contact Elayne Glick at (212) 210-0247 or [email protected]. industrial markets. Incorrect *Only asset owners and a limited number of consultants are invited to attend. All registration requests are subject to verification. information was in the story P&I reserves the right to refuse any registrations not meeting our qualifications. The agenda for the ESG Investing is not created, written or produced by the editors of “Logistics becomes shining star Pensions & Investments and does not represent the views or opinions of the publication or its parent company, Crain Communications Inc. of investing during virus crisis” on Page 14 of the March 8 issue. INTERESTED IN SUSTAINABLE INVESTING?

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Pension Funds CalPERS halts CIO search after picking finalists Process to resume in search process in April, Ms. Frost uled to recommend a candidate by vironment ... That is a challenge in said in an interview March 19. January or February. recruiting. There is not anything we June as fund wrestles The search was triggered by the The subcommittee last met can do with that.” August resignation of former CIO March 15 and decided to halt the Currently, the CIO does not par- with incentive question Yu “Ben” Meng, in the wake of dis- search, in part, due to the global ticipate in CalPERS’ long-term in- closure filings showing he had in- pandemic and a lack of clarity on centive program. A board commit- By ARLEEN JACOBIUS vested in shares of private equity whether the new CIO would par- tee in April is scheduled to consider managers with which the California ticipate in a long-term incentive whether to change that program Richard Driehaus CalPERS had whittled the num- Public Employees’ Retirement Sys- program, Ms. Frost said. and add the CIO to it. Candidates ber of finalists for its next CIO to tem, Sacramento, had invested in Although the subcommittee had asked about the long-term incen- In Memoriam three, but announced March 19 that the past. a pool of qualified candidates to tive plan during interviews, Ms. it has suspended the search with- Ms. Frost said a 10-member sub- consider it did not end up making Frost said. out making an offer and will pick it committee that included herself an offer to any of them, she said. The board’s former compensa- Driehaus Capital back up in June. had interviewed eight candidates “The ongoing challenge we often tion consultant Grant Thornton Officials at the $439.5 billion and trimmed the list to three final- have in recruiting is because of the recommended late last year that pension fund plan to revisit the cri- ists. Originally, the search process, complex nature of our portfolio,’’ the CIO participate in the long- teria for the job as well as the which began in October, was sched- she said. “And it’s a very public en- SEE CALPERS ON PAGE 32 founder Richard Driehaus dies POSITION YOUR FIRM AS A THOUGHT LEADER By ROB KOZLOWSKI Richard H. Driehaus, founder and chairman of money manager Driehaus Capital Management and longtime philanthropist, died Tues- 2021 P&I Conference day at age 78. He died of natural causes, a news release from his firm said March 10. Mr. Driehaus began his career in the institutional trading depart- Sponsorship Opportunities ment at A.G. Becker and became its youngest portfolio manager in 1970, the same year he received his MBA from DePaul University. A unique multi-channel marketing opportunity He worked at brokerage firms from 1973 to 1979 including Jesup & Content Development & Distribution | Virtual & Live Events | Video, Social & Digital Assets Lamont, where he was a money manager and director of research, and Mullaney, Wells & Co., where he was also director of research. Distinguished and powerful asset owners trust Pensions & Investments to deliver the valuable information they need Mr. Driehaus founded his name- to do their jobs. P&I Conferences combine the power of print, digital and live/virtual conferences to provide the sake firm in 1982, and the Richard thought leadership that institutional investors require to be successful in these dynamic and often volatile conditions. H. Driehaus Foundation in 1983. Both are based in Chicago where Mr. Driehaus was born and raised. P&I Conference sponsors get the benefit of a complete 6+ month, turnkey campaign. This program provides the opportunity “Richard led a life of zest and in- to influence your best prospects on all the platforms where they search for solutions. Sponsorship is exclusive with a limited tellectual curiosity. His path and number of opportunities for each topic. Attendance is inclusive of only highly qualified institutional investors. personal story were larger than life, and the impact he made as an inves- tor is perhaps only rivaled by the extensive legacy he left as a philan- thropist,” said Steve Weber, presi- dent and CEO of Driehaus Capital 2021 CONFERENCE CALENDAR Management, in the news release. “Our thoughts are with his daugh- ters Tereza, Caroline and Kate, his sisters Dorothy and Elizabeth, and ESG Investing Private Markets Retirement Emerging Markets his extended family. Richard will be Virtual Conference Virtual Conference Income Conference dearly missed by all who were fortu- nate enough to know him.” Series Series Conference In 2011, trusts were established to manage his estate, which remain May 2021 June 2021 September 2021 September 2021 the indirect owners of employee- led Driehaus Capital Management. As a philanthropist, Mr. Driehaus focused on gifts to his alma mater DePaul University, historic archi- Managing Pension Canadian Pension The Evolution of Fixed Income & tectural preservation, investigative Risk & Liabilities Risk Strategies OCIO Conference Credit Conference journalism organizations and arts Conference Conference organizations. “Richard was a dear friend, my professional mentor, and a lifelong October 2021 October 2021 November 2021 November 2021 philanthropist,” said Anne Lazar, executive director of the Driehaus Foundation, in that organization’s news release. “He spent decades making an impact in Chicago and A limited number of sponsorships are available per conference. his legacy will live on through his foundation. He was a true gentle- Contact Kimberly Jackson, Director of Conference Sales, at 978.317.5032 or [email protected] to learn more. man of grace and humility, and it is the foundation’s honor and privi- lege to continue Richard’s legacy of support.” Driehaus Capital Management had $13.2 billion in assets under management as of Feb. 28. The Richard H. Driehaus Foundation had $62 million in assets in 2018, the most recent data available. n 5210514'& 5'%6+10

In Challenging Markets, Systematic Global Macro Strategies

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s 2021 progresses, uncertainty about the global every industry and sector of the economy grows, so too does there’s always a narrative for pension plans and institutional economy as well as capital markets, from stocks to the potential for institutional investors to harness the power investors to follow.” A bonds, shows no sign of abating, even as the coro- of that data to hedge the downside risk of equity. navirus vaccine rollouts build hope that the pandemic could DIVERSIFY AND HEDGE subside by the second half of the year. With major equity Leveraging its deep background in trend-following, CFM built its The defensive layer is of particular interest to institutional in- indexes at or near historic highs and interest rates still near SGM strategies with adapted trend-following characteristics to vestors who have struggled to use traditional investments and historic lows, institutional investors continue to face myriad enhance a portfolio’s diversification and provide that downside assets as a hedge against their equity holdings. One common hedge, which Seager said aligns with what pension fund plan hurdles in their efforts to reach their return targets. approach they have used historically is option strategies. But sponsors and other institutional investors are seeking. while options may offer protection, they can be expensive and One significant potential hurdle is inflation. Amid stay-at- generate a significant negative drag on the portfolio. home orders and government stimuli over the past year, con- “Invariably, pension funds or institutional investors are sitting on big piles of equities and are trying to diversify away from sumers have built up cash reserves and pent-up demand, but “Diversification is one of our core beliefs. It’s inherent to our them, but it’s very difficult to do with traditional instruments,” supply chains still haven’t recovered from pandemic-related philosophy,” Seager said. “And the more independent bets he said. “We are providing the diversifier of core macro strat- constraints. The deployment of that cash in a post-COVID-19 you have, the better outcomes you can achieve. We think egies and on top of that, we have a hedge component. And I world could push inflation, which has been persistently low having a portfolio with many different factors across many think that really suits institutional investors.” for years, beyond a tipping point. In addition, central banks different asset classes is going to generate better outcomes.” eager to reenergize economies are expected to allow infla- REFINING AN EXISTING APPROACH WITH NEW TOOLS tion to run higher than they would otherwise. That’s particularly true given the stage of the current market Exploiting effects, or factors, in capital markets to capture cycle, and as the U.S. and other global economies potential- Given that risk, bonds no longer serve as the reliable diversifi- alpha is nothing new for CFM, which has been trading in ly enter a period of long-term inflation. er or equity hedge that they once did, according to Philip Sea- futures markets since 1991 and systematizing macro ideas ger, head of quantitative investment solutions at the quantita- for the past 15 years, since it began researching the con- “Equities have been in a long-term rally since the global fi- tive asset management firm Capital Fund Management (CFM). version of discretionary ideas into trading systems and ex- nancial crisis,” Seager said. “The long rise in performance ploiting their potential to deliver positive returns. In recent looks good in isolation, but [when] expanding the big picture “Return expectations of bonds won’t look very good under years, CFM has refined its approach, incorporating new and looking over long histories, one sees that these rallies an inflationary regime,” Seager said. “That is unambiguously machine-learning tools and techniques to help analyze vast are also accompanied by significant crashes [resulting in] the case if there’s a surge in inflation premium.” amounts of data to build new strategies. It launched its SGM modest risk-adjusted returns.” strategy in November 2020. For that reason, the firm’s macro strategy takes a multi-asset According to Seager, now is the right time to employ SGM approach overlaid with downside protection. strategies mainly because of advancements in technology and growth in data. CFM’s directional, fundamentals-driven “We have done a lot of research on enhancing the convex- SGM strategy uses traditional macro data inputs, such as ity of trend-following so that we can tweak it to enhance We tthinkhink having a portfolio gross domestic product and inflation, but also constructs defensiveness without losing too much in terms of returns. growth and inflation proxies from other data sources. The So when equities crash, we get something that accelerates with many different factors firm then isolates clusters of performance drivers to build upward,” Seager said. long-term models that trade liquid investments across global futures markets. Finally, it applies a defensive layer to pro- Recognizing SGM as a diversifier can also help institutional across many different asset vide equity protection. investors understand how to fund the strategy. Funding may come not only from bonds, but also from parts of the portfo- classes is going to generate “Only algorithms are able to treat this vast amount of data, lio that have an embedded or hidden equity risk premium, a make sense of it and build strategies with it,” Seager said. growing challenge in a global economy. Private equity, infra- “Algorithms are ubiquitous in everyday life. For example, they structure and real estate, for example, all have exposure to better outcomes. are used in piloting an aircraft, medical procedures, apps, equities embedded in them. and more. In investment, algorithms are used to absorb, treat and analyze vast amounts of data to make investment deci- “Our strategies are easier to allocate to than others, since they’re sions. It is our belief that this trend will continue and that naturally easier to follow and explain,” Seager said. “There is al- What’s more, the “anti-correlation” between stocks and algorithms will have an increasing advantage over discretion- ways a narrative, as this is the point of the approach.” ■ bonds, Seager said, is not likely to hold up in the current ary investors over time.” environment, which means that institutional investors need to look at other approaches not only for diversification, but He added that because of the growth and evolution of algo- URQPUQTGFD[ also for return enhancement and downside protection. Mac- rithms beyond finance, investors have become more com- ro strategies, when executed properly, can provide genuine fortable than ever with the type of financial engineering that diversification of stocks and bonds, he said. SGM employs.

Technological advances in machine learning and quantita- “This macro approach is naturally easier to follow and to ex- tive techniques mean that systematic global macro, or SGM, plain because you move away from the black box,” he said. strategies may provide the protection that institutional inves- “There is an intuition behind it, and you can explain that. tors have been seeking. As the availability of data across So I think in that sense, it’s easier to get across because

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21pi0033.pdf RunDate: 03/22/21 Full Page Color: 4/C 8 | March 22, 2021 Pensions & Investments FRONTLINES

HOLISTIC APPROACH FOOT IN THE DOOR: COLLEGE PARTNERSHIP Carolyn Flanagan sees the internship program Los Angeles County as a pipeline to a Advocates create career in private equity, hopefully with Adams fiduciary program floats far-reaching Street. diversity program with universities

Although the Los Angeles County Employees to get a certificate Retirement Association is situated roughly 28 miles from the ocean, it has dubbed its five-pronged effort A team of 35 fiduciary advocates and to advance diversity, inclusion and equity in its professionals has established a public portfolio and the financial services industry as benefit corporation with plans to partner “LACERA TIDE.” with universities in offering an executive The board of the Pasadena, Calif.-based pension education certificate in fiduciary fund approved the label, which stands for LACERA leadership, stewardship and governance. “Towards Inclusion, Diversity and Equity” and the The Center for Board Certified program’s holistic approach, Fiduciaries, which launched March 9, at its March 10 meeting. INTERNATIONAL EXPANSION also plans to develop the curriculum for LACERA officials’ idea the first master’s and doctorate programs for the approach is that with a concentration in fiduciary they do not want to limit Adams Street going global responsibility. The CBCF has been in themselves to a singular negotiations with several universities and strategy or initiative to with first interns in London expects to announce its first formal foster diversity, inclusion agreement in the coming weeks, said Don and equity, a board presen- Adams Street Partners LLC is Street hired will be the first interna- Trone, the group’s CEO, in an interview. tation said. The five pillars ramping up its summer internship tional students to join Adams Street as The group will certify professionals in of LACERA TIDE are program for college students and recent interns and like their 10 fellow interns a specific fiduciary field or specialization Jonathan Grabel promoting diversity, graduates with diverse backgrounds by in the U.S., will work virtually rather inclusion and equity in its hiring its first interns outside of the U.S. than in the firm’s London office own staffing; manager and vendor due diligence The Chicago-based private equity beginning in June. and monitoring; active ownership and corporate manager launched its internship The hope is that the interns will governance; support of capital formation for firms program in 2015 to expose diverse consider a career in private equity, with diverse ownership; and industry advocacy. sophomores, juniors, seniors and recent hopefully with Adams Street, said LACERA’s efforts include asking its money graduates to private market investments. Carolyn Flanagan, partner and global managers to report firm demographics, where Adams Street is one of 200 money head of human resources, in an legal, as well as integrating diversity, inclusion and managers, pension funds and consul- interview. equity reporting requirements into investment tants that have pledged to address the The goal is of the internship program agreements. lack of Black professionals in money is to take students from “intern to hired,” The staff expects to provide a progress report at management by offering internships to Ms. Flanagan said. ELEVATE THE PROFESSION: Don Trone, left, the November meeting, LACERA CIO Jonathan Black college students in the U.K. Adams Street managed $44 billion in and Keith Loveland. Grabel said during the March board meeting. through the #100blackinterns initiative. private equity as of Dec. 31. “The best is yet to come,” Mr. Grabel said. The three U.K. students Adams — CHRISTINE WILLIAMSON and will develop protocols associated — ARLEEN JACOBIUS with the outsourcing of fiduciary responsibility to third parties. “We intend to really elevate the entire COMMITTING TO RACIAL EQUITY profession, elevate those who are both lay fiduciaries and professional fiduciaries,” said Keith Loveland, the CBCF’s general Goldman pledges $10 billion to promote equality counsel, in an interview. “We see as our mission to assist people who are on invest- Goldman Sachs Group ment committees, who are on endowment launched a new investment and foundation boards of directors, who program in the U.S. on work inside of defined benefit and defined March 10 to improve racial contribution plans, and others out there equity and economic attempting to serve Americans.” opportunity for Black In light of new regulations, services women with a commitment and liabilities, the CBCF said it will of more than $10 billion. provide the critical infrastructure to conduct and publish research and Through the 10-year thought leadership on fiduciary stan- initiative, known as One dards and associated best practices. Million Black Women, “Thought leadership in the fiduciary Goldman Sachs plans to space has not been developing or commit $10 billion for evolving,” Mr. Trone said. direct investments and No university in the country offers $100 million in philanthrop- graduate level coursework or a master’s ic donations to “address with a concentration in fiduciary the dual disproportionate responsibility, and the CBCF wanted to change that, Mr. Trone added. gender and racial biases health care, education, job creation, Black sororities, Goldman Sachs also is “I could get a master’s or a Ph.D. on that Black women have faced for genera- workforce advancement, digital connectivity working with Black-women organizations moths and basket weaving and all types tions,” according to a company news and financial health, areas that research such as Black Women’s Roundtable; The of stuff, but for one of the subjects that release. from the firm’s March 9 “Black Womenom- National Coalition on Black Civic Participa- has more impact on the fiscal health of The goal of the program is to improve the ics” report, showed were important factors tion; The National Council of Negro Women; our country than probably anything else lives of at least 1 million Black women by in reducing the earnings gap for Black and We Are Power Rising. there’s no advanced or formal academic 2030 when the program is slated to end. women, the release said. “This initiative is transformational. What and scientific rigor associated with fiduciary responsibility,” Mr. Trone said. Goldman Sachs will be making direct David M. Solomon, chairman and CEO of Goldman Sachs is doing has the potential to As part of the coursework, attendees investments in companies, spokesman Goldman Sachs, said in the release that the materially impact the lives of Black women, will receive training on the neurological Andrew Williams said in an interview. results of the report “suggests that no their families and communities across the markers of an exemplary leader or Many of the companies Goldman Sachs investment could have a bigger impact than country,” said Melanie Campbell, convener fiduciary. plans to invest in will be Black women unlocking the economic potential of Black of the Black Women’s Roundtable and Mr. Loveland said the coursework will owned, but “the lens through which we women. In the face of significant disparities, president and CEO of The National Coalition not be “compliance check-the-box evaluate these investments is the impact they’ve shown admirable resilience, on Black Civic Participation, in the release. thinking.” Those who receive the training they have to improve the lives of Black especially as they’re starting businesses Goldman Sachs managed $2.15 trillion will have lifelong skills and abilities “to women,” Mr. Williams said. faster than anyone else in the U.S.” as of Dec. 31. provide leadership, stewardship and governance in whatever endeavor they’re Initial investments will be in housing, In addition to partnering with several — CHRISTINE WILLIAMSON engaged,” he added. — BRIAN CROCE Reasons to subscribe to the 1,000 P&I Research Center

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21pi0020.pdf RunDate: 02/08/21 Full Page Color: 4/C 10 | March 22, 2021 Pensions & Investments OPINION

Christopher J. Battaglia VP/Group publisher

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

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

ART Gregg A. Runburg Art director Roger Schillerstrom Editorial cartoonist

DATA/RESEARCH Aaron M. Cunningham Director of research and analytics Anthony Scuderi Directory manager Valerie Ge Research analyst

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

REGIONAL SALES MANAGERS Rich Kiesel West Paul Kissane Midwest Money — but no fixes — for multiemployer plans Anna Koules New York Steve Middleton EMEA +44-(0)77-1012-8464 Hideo Nakayama Asia (Tokyo) +81-3-3479-6131; nactment of the $1.9 trillion American Rescue Plan in the latest stimulus bill is a fix — some call it a bailout — for [email protected] offered some good news for the participants in strug- troubled plans, and provides only a temporary reprieve for the Eduardo de Alcantara Machado Sao Paulo, gling multiemployer pension funds, primarily in the form Pension Benefit Guaranty Corp. Brazil +55-11-3167-0821; [email protected] of $86 billion in assistance. Tossing money at the problem allows Congress to sidestep any CONFERENCES/MARKETING Usha James Group director of conferences As many as 200 plans that are deemed critical and action to avert future plan insolvencies. Kimberly Jackson Director of conference sales Edeclining, less than 40% funded or have more inactive than active Last year’s Heroes Act contained reform measures that called Diane Pastore Director of conference programming participants could be eligible for the financial help. for stricter discount rates and new composite plans combining Joshua Scott Director of conference programming Now for the bad news: While $86 billion sounds like a big defined benefit and defined contribution features. While it passed Kathleen Stevens Investor relations director Gerry O’Hara Investor relations manager number, it’s only a drop in the bucket. The biggest plan, the $12.3 the House, it was never taken up by the Senate. Michelle DeMarco Director of relationship billion Teamsters Central States, Southeast & Southwest Areas A plan to provide federally backed loans to underfunded marketing Assel Chanlatte Conference marketing manager Pension Fund alone faces $31 billion in unfunded liabilities, its multiemployer pension plans, that was included in another Mirjam Guldemond Conference manager, latest filings show. House-passed bill in 2020, also was not included. WorldPensionSummit +31-6-2333-2464 But more critically, the package sidesteps action on needed The problem isn’t going to go away. Without reforms, Con- Kristal Santos Client services project manager Ashley Perrucci Associate manager, client structural reforms that, to date, have been impossible to enact gress bought itself a modicum of time. But time isn’t what’s partnerships through a bipartisan approach. In essence, the money contained needed. n Rachel Lopez Conference administrative assistant CUSTOM CONTENT/CLIENT SOLUTIONS Gauri Goyal Director of content solutions Corina Lewis Client solutions senior program manager OTHER VIEWS DAVID ZELLNER I believe the transition to this MORE INDUSTRY David Joseph Research analyst sustainable future can create mean- VIEWPOINTS Tetyana Saucedo Digital campaign manager ingful systemic benefits such as Deanna Speziale Senior marketing associate healthier global markets and more ■ Karen Ng: How SUBSCRIPTIONS/SITE LICENSES resilient companies. We seek these institutions can play Corporate engagement is key Elayne Glick Director of audience marketing and improved market outcomes so that we a role in tackling acquisition can achieve the investment return U.K. homelessness. David Bomberger Director, enterprise licensing expectations of our participants and Ed Gorman Director, EMEA/international site ■ Nick Maynard and to sustainable global economy institutional clients. licensing +44-(0)20-3823-9891 Catherine Wright: Achieving success in this collab- RFP/RECRUITMENT Record keepers offer orative endeavor will largely depend Erin Smith Sales manager opportunity to f all the news out of on a supportive public policy environ- David Zellner advance worker REPRINTS Washington in the past ment — be it Paris-aligned policies, is chief financial security. Laura Picariello Sales manager domestic regulatory changes or year, President Joe Biden’s investment further international coalition ■ David S. ADVERTISING PRODUCTION February decision to bring officer of the U.S. back into the Paris building. The companies we at Blitzstein: Without a Robert T. Hedrick Media services manager Wespath 312-649-7836; [email protected] Agreement may end up having the Wespath engage on sustainability- national retirement O Benefits and Subscription information - single copy related issues echo the importance of policy, Americans sales: 877-812-1586 most direct investment implications Investments. over the long term. supportive policy. face a future of Its importance is why, as the chief Company support of public policy pension crises. investment officer at Wespath initiatives makes sense. In some See pionline.com/ Benefits and Investments, I have cases, companies are reluctant to industry-voices worked with my team over the last implement sustainability-related

several years to engage with our international policy initiatives like the changes to internal policies and To submit an Other Views peers from The United Methodist Paris Agreement are imperative to operational practices that exceed the commentary, email Associate Editor Meaghan Offerman at Church, as well as fellow institutional generate the support required to standards set by existing regulation. meaghan.offerman@pionline. investors, urging policymakers and promote a more sustainable global They believe the cost of doing so may com. corporations to embrace the goals of economy — one that advances result in a near-term competitive the Paris Agreement. economic prosperity for all, social disadvantage. Accordingly, supporting I am absolutely convinced that cohesion and environmental health. SEE ZELLNER ON NEXT PAGE Pensions & Investments March 22, 2021 | 11 OPINION

as well. Companies respond to the the tools employed here. expectations of asset managers, If asset owners want real Zellner which re ect the expectations of change — if they want companies Glass Lewis sold by 2 Canadian funds asset owners. Right now, asset to adopt sustainable long-term Peloton Capital Management pand into new markets and pro- CONTINUED FROM OPPOSITE PAGE owners are overly concerned with business practices and avoid the and Canadian businessman Ste- vide additional services and ca- public policy changes that “level short-term benchmark compara- market’s continuous focus on phen Smith acquired indepen- pabilities, according to a news the playing eld,” by seeking to tive performance from their active near-term pro t maximization dent global governance solutions release announcing the deal. promote more universal sustain- asset managers. Accordingly, asset — they must critically evaluate provider Glass Lewis from the “Glass Lewis has built a vener- ability standards and reporting, managers reward companies that their own expectations of their C$204.7 billion ($161.7 billion) able brand and we look forward will generate market-wide, produce positive short-term asset managers. Only then will Ontario Teachers’ Pension Plan, to helping them deliver impor- long-term support for a sustain- results. asset managers adjust their Toronto, and C$119 billion Alber- tant governance solutions to the able economy. This counterproductive cycle expectations of companies held in ta Investment Management marketplace,” Mr. Smith said in While we are encouraged to see results in companies prioritizing their strategies. I am optimistic Corp., a spokeswoman for the the release. some companies supporting public the maximization of near-term that ongoing conversations about private equity rm con rmed. Mr. Smith is the chairman, co- policies by aligning their lobbying outcomes instead of sustainable climate lobbying disclosure will be Terms of the deal were not founder and chief executive of - efforts with a low-carbon transi- policies with longer-term value the spark needed to ignite real disclosed. cer of mortgage lender First Na- tion, we are increasingly concerned creation. Lobbying against public behavior change by investors and Peloton Capital and Mr. Smith tional Financial Corp., which is about the disconnect between what policy that may jeopardize subsequently, the broader will enable Glass Lewis to ex- based in Toronto.  some companies publicly state near-term performance is one of corporate community.  regarding the need for fair public policy, and their continued funding of corporate lobbying efforts that aggressively oppose essential public policy changes. Wespath’s vision for a sustain- able economy, as well as the environmental, social and MARKETING OPPORTUNITIES governance best practices accepted by many of our peers, leave little room for lobbying that preserves near-term pro t maximization and sacri ces long-term sustainable company pro tability. As investors, we 2021 Sponsored expect greater transparency from companies regarding their rationale supporting climate- related lobbying activities. Many investors are starting to Roundtable Calendar address this issue. Wespath recently joined several large institutional investors, all mem- bers of Climate Action 100+ and An excellent way to highlight your firm’s investment expertise. the Ceres Investor Network on Climate Risk and Sustainability, in Sponsor one of the upcoming Roundtables in Pensions & Investments. asking 47 of the largest U.S.-based corporate greenhouse gas emitters to disclose their climate lobbying practices. I rmly believe transparency and disclosure of climate-related Investing in China | Publishing: May 17 lobbying activities are important Over the past year, China has often been in the headlines and not always for the best of reasons. But institutional rst steps. We want to know if the investors able to cut through the din of all the noise still found plenty of opportunity. This roundtable will help lobbying activities of the compa- investors focus on the key economic and social issues that continue to drive change – and investment opportunity – nies in which we invest align with in China, while putting all the other issues in their proper perspective. the companies’ statements supporting climate policy. Absent such disclosures, investors may be unable to assess the extent to which a company is seriously Private Markets | Publishing: July 12 considering the risks associated The search for uncorrelated return never really ends but in today’s world of low interest rates, high volatility and with failure to achieve Paris a healthy dose of uncertainty, it’s become more critical for institutional investors seeking to meet return targets, alignment. improve funded status or have an income stream. This roundtable discussion will break down the private market I also think the investment asset class into its components and provide insight into which areas are most appealing. community itself must pursue meaningful reform on this issue. For instance, we urge other asset owners to critically examine the way they appraise their external Target-Date Funds | Publishing: September 20 asset managers by evaluating how Target-date funds are always a hot topic of discussion among defined contribution plan sponsors and their partners. managers are considering ESG Are they delivering as promised? Are plan participants using them correctly? Can they be used e†ectively in retire- factors in investment decision- ment income solutions? Meantime, target-date funds remain the most popular QDIA. This roundtable will provide an making. It is clear that holistic ESG integration, including the update on all things target date: from new innovations to the latest in glidepath development. consideration of how asset managers consider climate lobbying practices in security selection, should be a core component of long-term invest- ment programs. There is a need for better For more information on this multi-platform sponsorship opportunity, expectation setting in this asset contact Julie Parten at 952.495.0422 or [email protected]. owner-asset manager relationship

Subscribe to P&I Daily. www.pionline.com 12 | March 22, 2021 Pensions & Investments DC ROUNDUP

GAO urges DOL to issue cybersecurity framework for DC plans

The Government Accountability Agents Progress-Sharing Invest- Of ce has recommended the De- ment Plan. The former had assets partment of Labor make clear of $3.5 billion and the latter had Is stable value ripe for a comeback? whether a duciary is responsible assets of $846 million, both as of Over the past decade, target-date strategies have continued to grow rapidly and now make up almost for mitigating cybersecurity risks in Dec. 31, 2019. a quarter of defined contribution assets. Stable value, while once a common default option — and The complaint also accused the de ned contribution plans and to still hovering near an all-time high of about $900 billion in assets — continues to decline as a establish minimum expectations defendants of offering proprietary for addressing cybersecurity risks products “earning New York Life percentage of overall assets. Given the continuing low-interest-rate environment in the U.S., it is an in those plans. and its af liates windfall pro ts at area where more plan sponsors could include it in target-date strategies, or where participants could The sharing and storing of par- the expense of the retirement sav- shift out of his core fixed-income options into stable value. ticipant’s personally identi able in- ings of New York Life employees formation, or PII, like names, Social and its agents.” Asset category as a % of all DC assets Risk vs. return, 1998-2020 Security numbers, dates of birth, The complaint said participants 28% 6.0% addresses and usernames/pass- “were invested by default, without 26% Target date 5.5% words, can lead to signi cant cyber- their consent and in contravention 24% Stable value security risks for plan sponsors and of applicable regulations, in a New 22% Fixed income 5.0% Barclays Intermediate their service providers, as well as York Life general account insur- Gov’t/Credit Bond index plan participants, the GAO said in ance fund called the Fixed Dollar 20% 4.5% its report, which was published last Account.” Mr. Krohnengold’s law- 18% Hypothetical stable value account month and made public March 15. suit alleged that this fund is “undi- 16% 4.0% “A single cyberattack at any point versi ed and not a permissible 14% in the complex web of entities ‘quali ed default investment al- 12% 3.5% iMoneyNet MFR Money working together to administer a ternative.’” Funds index 10% retirement plan could cause enor- Kevin B. Maher, a spokesman for 3.0%

mous losses of both PII and plan New York Life, said the company 8% RETURNS ANNUALIZED assets, which could lead to identity will “vigorously defend” the lawsuit. 6% 2.5% theft or severe nancial and other “We have a robust process in place 4% rami cations for plan participants,” for selecting investment options to 2.0% 2% the GAO said. include on the platform, including 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% “Accordingly, it has become im- the use of an independent consul- 0% RISK 2011 20132012 2014 2015 2016 2017 20192018 2020 (annualized standard deviation of monthly returns) perative that industry and govern- tant,” Mr. Maher wrote in an email. ment prevention and mitigation ef- “We are in full compliance with our Sources: Stable Value Industry Association, Pensions & Investments forts evolve to keep pace with these obligations to our retirement plan threats,” the GAO report said. participants.” Though federal requirements the leader in total annual in ows have said caused ovarian cancer or The merged investment options exist for entities that directly en- Target-date assets climb (mutual funds plus CITs). Vanguard mesothelioma. lineup will consist of a target-date gage in nancial activities involving had $19.5 billion, while BlackRock The resulting controversy de- fund lineup managed by Vanguard DC plans, not all entities involved in in 2020 despite pandemic LifePath Index, placed rst with pressed Johnson & Johnson’s stock Group, a core lineup of four Fidelity DC plans are considered to have di- Assets in target-date funds rose $21.8 billion and Fidelity Freedom price. domestic equity and xed-income rect engagement, the GAO said. to an estimated $2.8 trillion last Index was second with $19.8 billion. On Feb. 26, Chief U.S. District index funds and a Vanguard Group Moreover, other cybersecurity miti- year vs. $2.3 trillion in 2019, even Judge Freda L. Wolfson dismissed a international equity index fund, an gation guidance is voluntary. though participant contributions Warburg takes stake in lawsuit representing a consolida- extended lineup of 16 actively man- Although federal law requires dropped sharply, according to a tion of several baby power-related aged investment options, and a self- plan duciaries to act prudently Morningstar report. Edelman Financial Engines stock drop complaints. directed brokerage account. when administering plans, the La- Market appreciation drove about Private equity rm Warburg Pin- The judge noted that she had The DePaul University 403(b) bor Department has not clari ed 90% of the target-date growth, said cus will purchase a minority stake dismissed an original lawsuit in Plan had $995 million in assets as of duciary responsibility for miti- Morningstar’s annual target-date in managed account provider Edel- April, but had given plaintiffs the Dec. 31, 2019. gating cybersecurity risks, the series report. man Financial Engines. opportunity to le an amended GAO said. “We estimate investors contrib- The terms of the deal, which is complaint to the initial lawsuit that Fidelity parent FMR gets Of the 22 stakeholders the GAO uted a net $52.3 billion to target- expected to close in the second had been led in January 2019. interviewed for its report, 21 said date strategies, with CITs taking in quarter, are not being disclosed, a Referencing her rst dismissal, good news in ERISA case that cybersecurity is a duciary approximately $59 billion and mu- Edelman Financial Engines spokes- the judge wrote again that plain- A federal appeals court in Bos- duty. tual funds experiencing net out- woman said. tiffs’ proposals for duciaries’ re- ton upheld a District Court’s dis- “DOL of cials told GAO that the  ows of $6.7 billion,” said the re- A news release noted the invest- sponse to the baby-powder issue missal of a complaint by several agency intends to issue guidance port, which combines assets of ment values the company at $7.3 failed to meet the standards set by plaintiffs that FMR LLC, the parent addressing cybersecurity-related collective investment trusts plus billion. the U.S. Supreme Court in 2014. of Fidelity Investments, and sever- issues, but they were unsure when of cial mutual funds. Michael Martin, managing direc- The judge also reiterated her al FMR af liates violated their it would be issued,” the GAO said. Net in ows represented a 59% tor at Warburg Pincus, will join reasons for the earlier dismissal. ERISA duties. “Until DOL clari es responsibilities drop from 2019. Edelman Financial Services’ board “I nd, as I did on the prior mo- They contended that Fidelity for duciaries and provides mini- The pandemic “weighed on in- of directors, the release said. tion to dismiss, that issuing a cor- breached its duciary duties by mum cybersecurity expectations, vestors and retirement savers’ con- The amount of the stake was not rective SEC disclosure revealing charging certain fees for invest- participants’ data and assets will re- tributions over the course of 2020,” being disclosed, the spokeswoman the alleged truth about the over ments offered in the Fidelity Fund- main at risk.” Jason Kephart, strategist for the said. in ation of J&J stock and/or the as- sNetwork, an open architecture in- multiasset and alternative strate- Hellman & Friedman remains bestos in the company’s talc prod- vestment platform. New York Life sued over gies manager research team at the majority owner, having acquired ucts, is not a viable alternative ac- Fidelity responded that it isn’t a Morningstar, said in a news release. Financial Engines in a $2.8 billion tion because it is not one which duciary. 401(k) ERISA complaint “We saw total net in ows to tar- deal in 2018. could be taken in a duciary ca- “We see nothing here that calls A participant in a 401(k) plan run get-date strategies fall, employers Edelman Financial Engines has pacity, but only in a corporate one,” for treating Fidelity’s charging of by New York Life Insurance Co. has suspending 401(k) matches, and an more than $260 billion in assets un- she wrote. fees to some funds as an exercise of sued the company and plan ducia- increase in investor withdrawal der management. However, the judge gave the authority or control over any plan ries alleging violations of their rates,” he added. plaintiffs 30 days to le another assets, management, or administra- ERISA responsibilities for two Assets invested in CITs account- Johnson & Johnson prevails amended complaint. tion,” said the March 5 ruling by a company retirement plans. ed for about $1.2 trillion, or 43%, of in duciary breach suit three-judge panel for the 1st U.S. “This suit is about corporate self- total target-date series assets last DePaul University enlists Circuit Court of Appeals in Boston. dealing and the prohibited transfer year, up from 40% in 2019 and 29% A U.S. District Court in Newark, “Nothing in this arrangement of employees’ retirement assets to ve years ago. N.J., dismissed a complaint by par- Fidelity as record keeper suggests that Fidelity must auto- defendants at the expense of the Although CITs had net in ows in ticipants in three Johnson & John- DePaul University, Chicago, is matically be treated as if it were retirement savings of company em- 2020, “target-date mutual funds ex- son 401(k) plans, who alleged that consolidating its 403(b) plan to Fi- also a duciary advising which op- ployees and its agents,” said the perienced net out ows for the rst plan duciaries failed to protect delity Investments as its sole re- tions to select,” the judges wrote in March 2 complaint led in a U.S. calendar year since Morningstar their investments in company stock cord keeper. the case of In Re: Fidelity ERISA District Court in New York in the began tracking the data in 2004,” offered as a plan investment option. According to a memo on the uni- Fee Litigation, a consolidation of case of Stuart Krohnengold vs. New the report said. The participants argued that versity’s retirement plan website, several similar lawsuits by partici- York Life Insurance Co. et al. The overall average asset- Johnson & Johnson duciaries the university’s investment and pants in several plans. Mr. Krohnengold is a participant weighted fee for target-date series should have acted following allega- plan administrative committee They accused Fidelity of charg- in the New York Life Insurance Co. was 52 basis points last year vs. 58 tions that talc and asbestos had evaluated Fidelity’s ability to meet ing “secret fees” and offering a Employee Progress-Sharing In- basis points in 2019 and 73 basis been found in some company prod- the needs of the plan’s participants “kickback” to managers of compet- vestment Plan, and he also is suing points ve years ago.For the rst ucts, most notably baby powder, since closing new enrollments with ing rms whose investments are as part of a class action claim to time since 2008, the Vanguard Tar- which plaintiffs in product liability other record keeper TIAA-CREF in available through the Fidelity represent the New York Life get Retirement series failed to be cases against Johnson & Johnson October 2017. 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SAVE THE DATE P&I’s Defined Contribution Fall Conference | October 2021

DCE NEW.pdf RunDate: 3/22/21 Full Page Color: 4/C 14 | March 22, 2021 Pensions & Investments 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 February 2021: 93.3% Total trans- Other ■ AXA U.K. Group Pension March 18 $4,100 95% Total trans- actions: Scheme $70 actions: 79 54 ■ Civil Aviation Authority March 10 $152 Lump-sum Pension Scheme 90% $60 acceptance ■ Reach March 1 $168 ■ Greif March 1 $100 85% $50 Lump-sum offer ■ Nexstar Media Group March 1 $96 Total trans- actions: ■ Arconic Feb. 24 $240 80% $40 49 Longevity ■ Kellogg Feb. 23 $268 Total trans- swap ■ Eastman Chemical Feb. 23 $110 75% $30 actions: 49 ■ DTE Energy Feb. 19 $60 Buyout Baxter International Feb. 11 $252 70% $20 Total trans- ■ actions: ■ Mowlem (1993) Pension Feb. 9 $206 23 Scheme 65% $10 Buy-in ■ Dow Feb. 8 $700

$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 March April May June July August September October November December January February March April May June July August September October November December January February

Real Real Real BB U.S. Real Real BB U.S. BB U.S. BB U.S. BB U.S. Russell Russell Russell Estate S&P 500 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 12.4% 13.5% 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%

Real BB U.S. Real BB U.S. Real BB U.S. Real Global ex- BB U.S. BB U.S. BB U.S. S&P 500 Estate 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 9.5% 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% 9.2% 6.4% 9.0% 8.1% 8.4% 10.3% 15.6% 2.6% 9.4% 10.1% 6.2%

High High High BB U.S. High High Russell Real High Global ex- MSCI ACWI BB U.S. Global ex- Russell Yield Yield 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 8.0% 12.6% 13.7% income 2.1% 5.4% 2.1% 7.2% income 16.3% 17.2% 31.3% 5.9% 6.7% 5.5% 7.9% 6.6% 6.4% 25.5% 11.1% 6.1% 0.7% 8.3% 7.0% 5.0% 13.6%

BB U.S. BB U.S. 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 Agg Agg 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. 3.8% income income % income 1.8% income 1.7% income income 4.9% 4.5% 5.3% 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%

Global ex- Global ex- Global ex- Global ex- Global ex- MSCI ACWI BB U.S. MSCI ACWI BB U.S. High Russell High High U.S High MSCI EM MSCI EM 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 . fixed U.S. fixed Yield income ex-U.S. Agg ex-U.S. Agg income Yield 2000 Yield Yield income income income 2.6% 5.1% 2.3% 5.7% 2.9% 4.3% 3.9% -7.0% -4.3% 1.9% 9.4% 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%

Russell Global ex- Global ex- High High High High Real High High High High MSCI ACWI BB U.S. BB U.S. High Global ex- Cash 2000 U.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 2.1% income income 2.9% 2.4% 2.4% -11.3% 1.5% 0.9% income 4.6% 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%

Russell 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 2000 Cash 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 2.2% -1.3% 2.3% 2.4% -0.3% 1.4% income 2.2% - income 1.1% 2.0% 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%

Global ex- Global ex- 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. U.S. fixed U.S. fixed 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 income income income income income 1.3% 0.8% 0.7% 0.6% -4.1% -2.5% -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%

MSCI ACWI MSCI ACWI Russell Russell Russell Russell Russell Russell Russell Real Real Real Real Real Real Real Real Real Real ex-U.S. ex-U.S. 2000 2000 2000 2000 2000 Cash Cash Cash Cash 2000 2000 Estate Estate Estate Estate Estate Estate Estate Estate Estate Estate Cash -4.2% -3.2% -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%

CHINA’S ECONOMIC RECOVERY IS ON TRACK Key economic indicators, actual and forecasts 10-year government bond yield Shanghai Shenzhen CSI 300 index

Growth of GDP Government budget de cit as % of GDP 4.0% 5,500

3.9% 5,250 8.4 6.2 3.8% 5.8 5,000 3.7% 4,750 7.0 3.6% 6.8 6.9 6.7 4.9 4,500 3.5% 6.0 4,250 4.3 3.4% 5.5 5.5 4.1 3.3% 4,000 3.8 3.7 3.2% 3,750 3.4 3.5 3.1% 3,500

3.0% 3,250 2.9% 3,000 2.8% 2.3 2,750 2.7% 2,500 2.6%

2.5% 2,250

2.4% 2,000 2015 2016 2017 20192018 2020 2021 20232022 2015 2016 2017 20192018 2020 2021 20232022 2015 2016 2017 2018 2019 2020 2015 2016 2017 20192018 2020

Sources: P&I Research Center; NISA Investment Advisors; Bloomberg LP Pensions & Investments March 22, 2021 | 15 EXCHANGE-TRADED FUNDS Cryptocurrency called next great investing opportunity By ARI I. WEINBERG ments, would be structured as Internet ETF held roughly 8 million custody evolves, from State Street’s coin through corporate treasury. grantor trusts under the Securities shares of GBTC as of March 15.) partnership with Gemini Trust to “At this point, the clients talking Cryptocurrency exchange-trad- Act of 1933, as opposed to mutual Other rumblings in the crypto- homegrown efforts from Fidelity In- the most about cryptocurrency are ed funds are coming to America. funds regulated by the Investment currency world have also helped to vestments and BNY Mellon. endowments and foundations,” While the U.S. Securities and Ex- Company Act of 1940. pump up the ETF hype machine. “Several custodians now have a said Christopher Levell, partner at change Commission has yet to Retail and institutional investors On Feb. 19, the market value of track record of operating with high consultant NEPC. “In particular, weigh in on the March 1 filing from already have many ways to invest in outstanding bitcoin topped $1 tril- standards and without fail,” said Jan some are getting donations in ap- Cboe BZX Exchange to approve or use cryptocurrencies such as bit- lion for the first time, van Eck, CEO of Van preciated bitcoin and other crypto- listing and trading of the VanEck coin and ether (tracked on a block- and the price of an in- Eck Associates Corp. currencies, which they have proce- Bitcoin Trust, the weight of the wa- chain built for smart contracts), but dividual bitcoin has His company first filed dures to sell. But some bequests ter behind the regulatory dam ap- these methods — including direct hovered over $50,000 for a bitcoin ETF in have asked that the crypto be held pears so great at this point that le holding — can include complicated for the past few weeks. 2016 before shelving for a period of years.” deluge is inevitable. security and custody arrangements. On Feb. 25, U.S.-based that initial effort in “Donated crypto is seen as a spec- Even with cryptocurrency ex- The advent of a U.S. ETF and the digital asset brokerage September 2019. ulative investment,” said Mr. Levell, change-traded products already associated investor protections will and custody firm “Since then, a fu- “but clients are interested in its po- available in Europe and Canada, a ultimately “bring more liquidity, Coinbase Global Inc. tures market has de- tential value in a period of fiat cur- U.S.-listed product could send a shock more utility and more adoption to filed for an initial pub- veloped and there are rency weakness. It has similarities to wave through the investing world. crypto,” Mr. Hougan said. lic offering that could tens of millions of gold, but has greater convexity. Bit- “It will be the single most impor- The footsteps of a possible U.S. value the company at owners,” said Mr. van coin could go to zero or $1 million.” tant force in driving down the cost ETF have been so great that shares nearly $100 billion, ac- Eck, “but there’s still a Bitwise’s Mr. Hougan said that of investing in cryptocurrency,” said of the $37 billion Grayscale Bitcoin cording to private lot of room for educa- family offices and hedge funds are Matt Hougan, chief investment of- Trust have recently traded at a dis- transactions cited by WELCOME NEWS: Matt tion with institutional among the primary investors in the ficer at Bitwise Asset Management. count to its bitcoin holdings per Bloomberg News. Hougan said a cryptocur- investors. Our conver- company’s current private place- Mr. Hougan sees the emergence of share after years at a premium. On Feb. 26, the rency ETF based in the sations have really ac- ment products, including the $1 bil- a U.S. bitcoin ETF as a watershed Launched in 2013, GBTC has an an- SEC’s division of ex- U.S. will push down costs. celerated over the last lion Bitwise 10 Crypto Index Fund. moment similar to the 2004 listing nual fee of 2% and takes creations aminations published six months.” But an ETF could open the retail of the SPDR Gold Trust. through periodic private place- a risk alert for investment advisers, In its IPO filing, for example, and intermediary floodgates. According to the World Gold ments. It trades on over-the-counter broker-dealers, national securities Coinbase indicated that it has ap- In a Bitwise/ETF Trends Decem- Council, gold ETFs held $198 bil- markets but has no redemption exchanges and transfer agents on proximately 7,000 institutional cus- ber 2020 survey of nearly 1,000 fi- lion in assets globally through mechanism directly with the trust. the scope of their examinations re- tomers and plans to expand its in- nancial advisers, only 9.4% said March 5, with half of that in U.S.- On March 10, Digital Currency lated to digital assets. And on March stitutional coverage team “to that they allocate to cryptocurrency listed products. And similar to gold Group, the parent of GBTC sponsor 11, a piece of digital art was sold by educate hedge funds, corporate in client accounts. Yet 47% of finan- and other commodity exchange- Grayscale Investments, announced Christie’s for $69.3 million in ether. treasurers, family offices, and other cial advisers surveyed said the traded products, the proposed it would buy up to $250 million of While volatility and hype still mar institutions.” launch of a bitcoin ETF would product from VanEck, as well as GBTC shares. Grayscale has also the reputation of cryptocurrency, the A handful of publicly traded make them more comfortable allo- similar offerings from NYDIG, posted several ETF-related job list- market has shaken off questions of companies, including Tesla and cating to crypto assets, up from 37% Valkyrie, and WisdomTree Invest- ings. (The ARK Next Generation legitimacy as institutional-quality Square, have also purchased bit- the prior year. n

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Detail, quick innovation common winning themes

CONTINUED FROM PAGE 3 The company developed a few choices sity promoted the theme: “Smart Bene ts and asked employees to pick one. The win- Shopping: Find it. Use it. Love it.” Judges for the platform that was less than adequate for our ner: “Generating a brighter retirement to- Not only did the university save money but current business and where we wanted to gether.” Mr. Visconti, noting the play on it also attracted a large audience, she said. In 2021 Eddy Awards go,” said Bob Fieck, vice president of human words because Avangrid is a utility company, a normal year, the university’s bene ts fair resources. said this let people “feel like they were part costs $6,000 to $9,000, she said. Last year’s Pensions & Investments turned to industry The company also wanted to have one re- of the consolidation and kind of have their event cost $624. Print costs were cut by more experts as well as staff members to cord keeper to cover the two de ned contri- voices heard.” than 75%. evaluate the entries. bution plans and one de ned bene t plan. Employees who entered the name-the- Also in a normal year, 500 to 600 people at- “Moving to this new platform The judges for this year’s awards were: would certainly reduce costs,” ■ Gay Lynn Bath, University of Oregon Mr. Fieck said. ■ When the company decided Margarida Correia, Pensions & to switch record keepers to Prin- Investments cipal Financial, it wanted to ■ Christopher Ceder, Goldman Sachs make sure to “eliminate surpris- es, reduce anxiety and generate ■ Annie Diaz, Nestle USA Inc. excitement” for the change, the ■ Jaime Erickson, Abbott Laboratories company’s Eddy Award applica- tion said. That meant contacting ■ Michelle DeMarco, P&I local human resources repre- ■ Annette Grabow, Sonepar USA sentatives to generate employee support and giving key members ■ Scott Gerber, Rocaton Investment of the HR staff a chance to re- Advisors view and provide feedback on ■ Marla Kreindler, Morgan, Lewis and communications strategy. Bockius LLP Mr. Fieck said ND Paper used “every avenue avail- ■ Jennifer Mausolf, Municipal Employees’ able to us” — email, an CAMPAIGNS WITH STYLE: Avangrid, top left, wanted to build a sense Retirement System of Michigan internal communica- of community; Sony, top right, sought to ease the stress over market ■ Amy B. Resnick, P&I tions board, regular volatility; Phifer, below, keyed in on nancial wellness; and UT Dallas, mail sent to employ- left, deftly switched gears to a virtual platform when the pandemic ■ William Ryan, Aon PLC ees’ homes, opportu- forced a change for the traditional bene ts fair. ■ Tina Stamato, P zer Inc nities for employees to speak to supervi- ■ Robert Steyer, P&I sors — to make sure ■ Julie Tatge, P&I employees were well- informed and com- fortable with the pro- during volatile markets. Another email went cess. to people 60 and over with a link to an article As a result, the about facing retirement in a down market. conversion was “a Each group received an invitation to attend a seamless transition webinar on investing fundamentals. with virtually zero questions and concerns,” plan contest were eligible for “We were hearing from participants a lot of he said. one of 10 cash gifts of $50. questions, a lot of anxiety,” said Judy Leung, Eddy Award judges praised the multi-fac- When asked what people Sony’s bene ts manager. They were asking eted effort. It was “very comprehensive and can learn from Avangrid’s ex- “what’s going on with the market and what easy to understand,” one judge wrote. perience, Mr. Visconti said: was happening to their retirement savings.” “It’s crucial to engage your Sony reported that of those who took ac- Avangrid: Building community employees in as creative a tion based on the stable value fund emails, Created in 2015 via acquisition and merg- way as possible. People like to 72% eliminated the fund from future alloca- er, Avangrid Inc., Orange, Conn., was at one receive stuff for participating tions and 89% “shifted away from the fund by time administering 18 retirement plans with and having their voices heard. at least 50%.’’ More than $5 million in plan multiple record keepers and several invest- So I think there’s no harm in giving some tend a live event. Last year, 4,829 entered the assets moved to other allocations from sta- ment menus. small little gifts to people to give their feed- virtual fair platform, Ms. Yancey said. ble value. The company has since chosen one record back and share their thoughts.” The university will offer the virtual mall Sony captured rst place in the ongoing keeper, T. Rowe Price Retirement Plan Ser- this year, but Ms. Yancey hopes for a hybrid investment education category for companies vices, consolidated investment menus, and Texas college creates virtual mall bene ts event — part virtual and part live. with more than 5,000 plan participants. T. revised and consolidated plans. If necessity is the mother of invention, “I thought the messaging was clear and Rowe Price Retirement Plan Services was Part of the process was a campaign to edu- then the pandemic may have been the step- catchy,” one judge wrote. “The idea of a virtual their service provider. cate participants about the consolidation, in- mother of innovation. mall was creative and the design was very “I know sometimes it feels like it’s really troduce the record keeper, and build a greater Making the switch to a virtual online ben- well thought out.” hard to reach out to participants,” Ms. Leung “sense of community” among participants for e ts “mall” from traditional live bene ts fairs said. “But sending out targeted communica- the new plan. “To ensure that we had maxi- earned the University of Texas at Dallas a Sony: Managing volatility tions to them can help bridge that gap with mum engagement and people felt that they rst place special projects award for plans The stock market turmoil during the rst participants and really make them pay at- were part of this change, and it was a positive with 1,000 to 5,000 participants in the not for quarter of 2020 prompted Sony Corporation tention.” change, I rolled out a contest to pick the new pro t/other category. Lincoln Financial of America, New York, to enhance its partici- slogan of the plan,” said Paul Visconti, director Group was their service provider. pant education efforts targeting communica- Phifer keys on wellness of retirement programs and investments. “It was a fun way and a different, creative tions to those who were invested solely in a Financial wellness programs were growing The campaign earned Avangrid a rst place way,” said Marita Yancey, senior director of stable value fund. well before the pandemic struck, and spon- award for plan transitions among corporate bene ts and wellness. One email went to those under age 60 with sors said the value of wellness services inten- plans with more than 5,000 participants. Keeping with the mall concept, the univer- a link to an article about staying invested SEE EDDYS ON PAGE 18 Pensions & Investments March 22, 2021 | 17

2021 Eddy Award winners

NOT FOR PROFIT/OTHER Second place NOT FOR PROFIT/OTHER Conversions/403(b) More than 5,000 participants Fulton County 1,000 to 5,000 participants consolidations First place Service provider: MassMutual First place NYU Langone Health University of Texas at Dallas CORPORATE Service provider: TIAA Service provider: Lincoln Financial Group More than 5,000 participants First place Second place Pre-retirement Second place Nestlé Kaiser Permanente Embry-Riddle Aeronautical University Service provider: Vanguard preparation Service provider: TIAA Second place Crate and Barrel Third place (tie) CORPORATE PUBLIC Service provider: Empower Retirement McLaren Health Care Corp. More than 5,000 participants More than 5,000 participants Service provider: MassMutual First place First place CORPORATE Third place (tie) Illinois Tool Works County of San Bernardino 1,000 to 5,000 participants St. Jude Service provider: ROC Group Service provider: Voya Financial First place Service provider: TIAA ND Paper* NOT FOR PROFIT/OTHER Second place Service provider: Principal PUBLIC First place New York City Health + Hospitals More than 5,000 participants ABA Retirement Funds Service provider: Prudential Retirement Second place Service provider: Voya Financial Dynetics First place Third place (tie) Service provider: John Hancock Virginia Retirement System Second place Wisconsin Department of Employee Service provider: iGrad/Enrich Jefferson Lab Trust Funds Service provider: Empower Retirement NOT FOR PROFIT/OTHER Second place Service provider: TIAA More than 5,000 participants State of California Savings Plus Third place (tie) PUBLIC First place 401(k) Plan and 457(b) Plan State of Michigan Office of More than 5,000 participants Howard University* Service provider: Nationwide Retirement Services Service provider: TIAA First place Service provider: Voya Financial Employees Retirement System of Second place GENERIC Harvard University First place (tie) Texas GENERIC COVID-19 COMMUNICATION Service provider: Empower Retirement Service provider: TIAA BrightPlan First place intellicents Third place First place (tie) UNION Prisma Health CAPTRUST More than 5,000 participants Second place Service provider: Prudential Retirement Second place First place T. Rowe Price Retirement Plan Prudential Financial United Airlines Services PUBLIC Service provider: Schwab Retirement Plan Third place More than 5,000 participants Third place Services MassMutual First place Metlife Illinois State Universities Retirement GENERIC System First place Service provider: Voya Financial Special projects Ongoing investment MassMutual PUBLIC CORPORATE Second place (tie) 1,000 to 5,000 participants education Fewer than 1,000 participants Lincoln Financial Group First place CORPORATE First place Second place (tie) Virginia Retirement System* More than 5,000 participants Red Wing Shoe Co. Vanguard Service provider: Transamerica Service provider: TIAA First place Third place Sony Corporation of America* Second place T. Rowe Price Retirement Plan Service provider: T. Rowe Price Retirement Foth & Van Dyke Services Financial wellness Plan Services Service provider: Francis Investment Counsel PUBLIC CORPORATE *For video interviews with executives behind these winning entries, go to pionline.com/ CORPORATE More than 5,000 participants More than 5,000 participants More than 5,000 participants Eddy2021. First place First place First place Federal Retirement Thrift Investment DTE Energy RELX* Board Service provider: Empower Retirement Service provider: Segal Benz GENERIC Second place (tie) Second place First place (tie) J.P. Morgan Chase ADP TotalSource Service provider: Empower Retirement Service provider: Voya Financial T. Rowe Price Retirement Plan Services Second place (tie) Third place (tie) First place (tie) Thomson Reuters Farm Credit Foundations Millennium Advisory Services Service provider: Voya Service provider: John Hancock Second place Second place (tie) Third place (tie) Betterment for Business North Mississippi Health Services Fluor Corp. Service provider: Lincoln Financial Group Service provider: Voya Financial CORPORATE CORPORATE 1,000 to 5,000 participants 1,000 to 5,000 participants Plan transitions First place First place (tie) CORPORATE Mercedes-Benz U.S. International Seagate More than 5,000 participants Service provider: Voya Financial Service provider: Segal Benz First place Second place First place (tie) Avangrid* Vermeer Corp. Service provider: T. Rowe Price Retirement Phifer* Service provider: intellicents Plan Services Second place Third place (tie) Alliant Energy Corp. Second place (tie) TCF Jordan’s Furniture Service provider: Empower Retirement Service provider: John Hancock Service provider: Transamerica NOT FOR PROFIT/OTHER Third place (tie) Second place (tie) Fewer than 1,000 participants University of Louisville Health Advanced Drainage Systems First place (tie) Systems Service provider: Principal USA Swimming* Service provider: Lincoln Financial Group Service provider: OneAmerica NOT FOR PROFIT/OTHER More than 5,000 participants First place (tie) PUBLIC Foundation for Early Childhood 1,000 to 5,000 participants First place Caltech Education First place Service provider: OneAmerica City of Tucson Service provider: TIAA Service provider: Empower Retirement Second place ABA Retirement Funds Service provider: Voya 18 | March 22, 2021 Pensions & Investments

Women especially harmed in pandemic, panel says Jay Godwin/LBJ Library Retirement savings, gender in 2015, said Joseph Healy, senior vice presi- dent, account manager and DC specialist at diversity efforts hurt by moms Pacific Investment Management Co. LLC in forced to drop out of workforce Summit, N.J. In a panel Mr. Healy moderated, execu- tives of three plan sponsors – General Elec- By MARGARIDA CORREIA tric Co., Oak Ridge National Laboratory and Navistar Inc. – discussed efforts to educate The issues facing women in saving for re- near-retirees about the benefits of keeping tirement dominated discussions at Pensions their assets in the plan vs. rolling them over & Investments’ Defined Contribution Spring into an individual retirement account or an- Virtual Series held March 8-11. nuity. With the pandemic bringing those issues “We still have brokers who reach out to our into sharp relief, talk centered on the “sheces- participants every day trying to get them to sion,” a reference to the COVID-19-triggered take their 401(k) balance out and buy an an- exodus of women from the workforce as they nuity,” said Carissa Dunaway, division direc- wrestled with the lack of child care options. tor of pension and savings at Oak Ridge Na- During a panel discussion on the first day tional Laboratory in Knoxville, Tenn. of the conference, which coincided with In- Many participants don’t appreciate “the ternational Women’s Day, speakers lament- cost saving they get for institutional pricing,” ed the departure of women from the work- added Greg Bouleris, GE’s Norwalk, Conn.- place, which they said not only hurt women’s based senior vice president, pension invest- retirement security but also damaged gen- ment oversight. der diversity efforts at the companies where In a separate panel on lifetime income so- they worked. lutions, speakers stressed the importance of “If we felt the situation was bad for the offering participants both guaranteed and most vulnerable female workers among us non-guaranteed retirement income options. before the pandemic, it is really bad now ‘REALLY BAD NOW’: Victoria M. DeFrancesco Soto said the coronavirus pandemic has magnified the problem. Because some people are going to live to and corrective steps need to be taken to be 100, 101 and 102, “a solution that includes right the ship,” said Victoria M. DeFrancesco create good opportunities to engage partici- ed topic of plan sponsor efforts to bridge ra- both a guaranteed and a non-guaranteed op- Soto, assistant dean in the Lyndon B. John- pants in their efforts to save for retirement, cial disparities in retirement savings. Black tion is the answer for everyone who’s trying son School of Public Affairs at the Univer- said Michael Madowitz, a Washington-based and Hispanic households lag white house- to solve the retirement income challenge,” sity of Texas at Austin. economist with the Center for American holds not only in terms of access to retire- said Kelly Hahn, executive director at J.P. The speakers cited a report from the Cen- Progress who delivered the conference’s ment plans but also in terms of plan partici- Morgan Asset Management in New York. ter for American Progress, a non-partisan opening keynote address. pation and savings rates, said Richard Bynum, think tank, which estimated that women’s to- Simply telling people they need to set the Springfield, Va.-based chief corporate COVID-19 challenges grow tal lost wages would amount to $64.5 billion a money aside for retirement and “not touch responsibility officer at PNC Financial Ser- Other prominent topics of discussion fo- year if the levels of maternal labor force par- it,” he said, is “not really getting through to vices Group Inc. cused on the plan sponsor and participant ticipation and work hours experienced dur- people on the margins.” What plan sponsors Mr. Bynum encouraged plan sponsors to response to COVID-19. Speakers stressed the ing the April 2020 first-wave peak of infec- need to do is connect with people on prob- use data to “identify and prioritize the groups importance of robust financial wellness edu- tions were to persist long term. lems such as child care that are “a little out- that need the most help” and to lean on re- cation programs and communicating virtual- “Four times as many women as men side the standard retirement framework,” cord keepers for the data. “It’s helpful to have ly with participants as the pandemic upended dropped out of the labor force in September he said. a plan record keeper that’s able to provide the economy and people’s lives. alone, roughly 865,000 women compared with Mr. Madowitz introduced an interactive this data so that you can consistently go back Panelists also noted that the pandemic 216,000 men,” said moderator Nikki Pirrello, calculator that could help participants plan and address where you are relative to the provoked increased participant engagement P&I’s chief operating officer, citing the report. for the impact that a break from the work- baseline that you started with,” he said. with their retirement plans and greater inter- The panelists discussed a variety of mea- force to provide child care would have on Mr. Bynum also prompted plan sponsors to est in educational webinars and one-on-one sures that plan sponsors can adopt to help their long-term retirement savings. The cal- select advisers and other vendors with expe- meetings, even when offered digitally rather prevent women from leaving the workforce culator showed that a 29-year-old woman rience in relating to minority groups. “You than in person. The virtual group and one- or to help entice them to return, such as flex- earning $44,000 who took a two-year leave may want to think about the backgrounds of on-one meeting also enticed participants’ ible work arrangements, paid fellowships and from the workforce to care for a child would your educators and your advisers who are in- spouses and partners to attend, according to even sabbaticals. forgo a total of $302,809 in lost wages, wage teracting with those employees,” he said, add- many speakers. Ms. Soto cited the example of a female vice growth and retirement assets over the wom- ing that they should be “representative of the Erika Grace, the Bellingham, Wash.-based president “high up in a well-known compa- an’s entire working life. workforce.” leader of financial wellness and digital strat- ny” who left the workforce in the throes of the If, however, the woman delayed childbirth Another popular topic revolved around the egy at Empower Retirement, said that while pandemic, a decision she said she felt she had and caregiving for five years, her loss would issues facing retirees, a demographic of grow- people historically have logged into their re- to take “if she wanted to stay sane and be fall to $270,287, according to the calculator. ing importance as waves of baby boomers tirement accounts during typical work hours, there for her family.” “We have the tools to help analyze a lot of exit the workforce. since the pandemic began, people are check- “The idea of the sabbatical is especially problems that are well beyond what we’re To help retirees continue to take advan- ing their accounts and accessing financial productive for these women,” Ms. Soto said. used to dealing with,” he said, adding that tage of the low investment and administra- wellness tools at all hours. “You don’t want them to walk away like this such tools can help entice participants to en- tive fees they enjoy as participants in work- “The time during the day during which VP did from this company.” gage with their retirement plans. place retirement plans, many plan sponsors people are accessing those tools has expand- are looking to retain their assets in plan. Two ed,” Ms. Grace said. n Opportunity to engage Closing disparities in 3 sponsors prefer to retain retiree assets The challenge of child care, however, can Panel discussions also turned to the relat- or actively seek to retain them, up from 46% Staff reporter Brian Croce contributed.

“We have resources available for cy at a local community college. “It’s employees to meet their responsi- clear that Phifer is trying to do best Eddys bilities and obligations without po- by its employees,” one judge wrote. CONTINUED FROM PAGE 16 tentially damaging their retirement Asked what financial wellness readiness,” said Mr. DuBose, whose strategy he would recommend to sified as the pandemic took an eco- company makes window and door sponsors, Mr. DuBose responded: nomic and health-care toll. screens. “Be creative. Be spontaneous. Have “It became evident to us that if Phifer’s wellness education effort fun with it.” our employees are going to remain combined in-person interviews and retirement ready, we really need to online technology. This included an RELX touts HSAs reach out to educate,” said Russell app that contained information on RELX Group won first place DuBose, director of human resourc- retirement readiness. “The cam- among corporate plans with more es for Phifer Inc., Tuscaloosa, Ala., paign was about how do we reach than 5,000 participants for the fi- first place winner for financial well- those different generations and nancial wellness category for en- ness among corporate plans with meet their expectations,” Mr. Du- couraging plan participants to use 1,000 to 5,000 participants. Bose said. the health savings account as an Phifer tied for first-place honors Judges noted that Phifer’s well- investment tool as well as a health with Seagate Technology LLC, Cu- ness approach covers more than re- benefit. Segal Benz was the service pertino, Calif. John Hancock Retire- tirement with seminars on long- provider. MAKING CHANGES: RELX, left, wanted ment Plan Services was Phifer’s term care, Medicare, Social Security, “We had a lot of utilization and to put HSAs in a new light; UAL, above, service provider, and Segal Benz credit, budgeting and estate plan- not a lot of savings,” said Christina helped pilots prepare for retirement. was Seagate’s service provider. ning, plus a class on financial litera- Heintz, the New York-based man- Pensions & Investments March 22, 2021 | 19

Survey indicates companies will keep Where’s Eddy? The winners of the 2021 Eddy Awards took up the some strategies used to cope with virus challenge when P&I asked them to send photos capturing how they are sharing and displaying their awards.

By ROBERT STEYER traditional work environment on a pants build savings (32%) and increas- full-time basis. Sixteen percent said ing plan participation (32%). Having made changes in plan man- they expect to return to the office full- Referencing another type of virus agement and participant communica- time during the second quarter of — cyberattacks — Mr. Battaglia said tions because of the COVID-19 out- 2021, and another 36% said they would the survey illustrated why the pan- break, many defined contribution do so by the third quarter. demic “has accelerated the need” for executives say they plan to retain Among the others, responses were more defenses against hackers as some of those strategies in a post- evenly divided among those who plan more employees work remotely. pandemic environment, Pensions & to return to the office full time during In the survey, 85% of respondents J.P. Morgan Chase, Investments reported in a survey re- the fourth quarter of 2021 and those cited phishing attempts targeting the left, took their award leased March 11. who expect to return in the first quar- overall workforce as the biggest prob- to Battery Park, while Ninety-four percent of respondents ter of 2022. lem, while 58% worried about comput- Betterment went one said they are likely to continue greater er hackers going after participants’ ac- stop further and took use of virtual technology for external Not always a match counts, sensitive data and resources. theirs to the Statue of meetings and 80% said they are likely The survey noted that DC plan ex- When asked if their employers had Liberty. to increase their use of virtual tech- ecutives’ return-to-work plans don’t experienced a cyberattack in the last nology for internal meetings. always match what all workers in their 12 months, 50% of respondents cited Vermeer The results were unveiled during companies or organizations will do. phishing, 18% were hit by malware, employees the 2021 Defined Contribution Spring Forty-five percent of respondents said 4% were affected by ransomware and gave their Virtual Series, held March 8-11, a their scheduled return to the office 4% experienced denial of service, the award a tour pandemic-inspired pivot from P&I’s was the same as that of all workers, survey said. of one of the Defined Contribution East Coast Con- but 23% said it wasn’t. Thirty-two per- industrial and ference, traditionally held each spring cent said they did not know other Cybersecurity training agricultural in Florida. workers’ schedule for full-time office- To guard against hackers, 78% of re- equipment The pandemic has caused “a pro- based work. spondents said they are expanding manufac- found change” in how employers view Despite the health and economic employee cybersecurity training turer’s traditional work settings, said Chris ravages of the pandemic, 46% of throughout their companies and orga- factories. Battaglia, vice president and group sponsors said they saw no change in nizations; 44% are reinforcing the im- publisher of Pensions & Investments, the percentage of plan participation portance of managers engaging with during a video conference describing while 40% saw a “slight to moderate staff to discuss and identify cyberse- the survey’s results. Greater use of vir- increase” in participation. Another curity risks; and 37% are increasing tual technology and more remote 14% of respondents detected a “slight their technology budgets to improve work “are here to stay.” to moderate decrease” in plan par- their defenses against hackers. The post-pandemic DC world also ticipation. “Training is certainly on the in- will feature more flexibility in how, “Consistent efforts of communica- crease,” Mr. Battaglia said. when and where people work. tion” and auto enrollment helped Among the respondents, 59% rep- The survey said 75% of respondents most participants stay focused on resented corporate plans; 22% were “expect the adoption of a work-from- long-term retirement goals, Mr. from government plans; 13% were anywhere approach,” allowing for “al- Battaglia said. from non-profit organizations; and 6% ternative work arrangements.” Seven- Beyond making pandemic-pro- represented educational institutions, ty-six percent expect to have more voked changes, the survey cited a list unions, foundations and pension as- flexible schedules and work hours, of future top business priorities for sociations. The online survey was con- Dynetics’s Eddy, left, looks to said the survey of 102 asset owners, the surveyed DC executives: ducted during two weeks in February. be ready for a long ride, while ■ primarily top executives and senior Seventy-seven percent said they Nine percent of respondents repre- Foth & Van Dyke’s is enjoying a human resources officials, as well as would focus on employee well-being sented plans with assets of $25 billion more relaxing trip. benefits and retirement officials. and engagement as key components or more; 13% were executives in plans For now, 71% said they work exclu- of business performance. with assets of $10 billion to $24.9 bil- sively from home, 20% split work time ■ Seventy-four percent said they lion; and 29% represented plans with between home and office, and 9% would update business continuation assets of $3 billion to $9.9 billion; and work at their offices. plans to include effective work ar- 20% were from plans with assets of $1 However, the survey results show rangements that will be long-term or billion to $2.9 billion. The other 29% “it’s clear that companies and em- permanent. were members of plans with less than ployees are uncertain about return- ■ Fifty-five percent said they need $1 billion in assets. ing” to the pre-pandemic work envi- to understand the new economic re- Also, 44% of respondents repre- ronment, said Mr. Battaglia, who also alities of COVID-19 and try to antici- sented employers with 15,000 or more is chief executive officer of the World- pate how unpredictable revenues and employees; 18% work for employers Embry-Riddle’s Eddy, PensionSummit. expenses will be. with 5,000 to 14,999 employees; 16% top, got a ride from the Future formal return-to-work Among the sponsors’ top retire- were executives of employers with school’s mascot, while plans are varied, the survey said. ment priorities, extending financial 1,000 to 4,999 employees; and 22% Empower treated theirs Twenty-eight percent of respondents wellness education was the clear lead- were from employers with fewer than to a pool party. said they don’t expect to return to a er (72%), followed by helping partici- 1,000 employees. n ager of benefits communica- ALL IN THE DETAILS: ITW sought pare pilots for retirement, leading to a cam- thing-you-wanted-to-know-about-retire- tion and employee engage- to ensure participants were paign that offered a detailed checklist. ment booklet that also is available on the ment. “We felt that it was an ready for retirement. The common theme: “Your pre-retire- company’s internet portal. ROC Group was important time to grow sav- ment checklist —a step-by-step countdown the service provider. ings (and) to really highlight fun and not like stodgy.” to retirement.” The company starts sending the booklets the benefits of it as a retire- The information was organized in four age to people when they reach age 55 – the aver- ment tool.” UAL: Helping pilots groups, from the almost-ready-to-retire (ages age retirement age at the company is 60 to 62 The RELX campaign in- prepare 63.5 to 65) to the still-with-many-years-left – “to get them to start thinking,’’ said Kelly cluded an infographic mail- United Airlines won first (ages 50 to 57). Dunmore, director of U.S. retirement plans. er, an interactive quiz about place in the pre-retirement The segmentation approach started last “This is one-stop shopping for all things the use of an HSA, targeted preparation category for year, said Joan Smith, the Houston-based retirement,” she said. “We wanted to make emails and web-based con- union plans with more than manager of benefits for retirement plans. sure the document was written in a simple tent to reinforce the mes- 5,000 participants. Schwab United offers a checklist for all employees way so that anyone can read it and under- sage, said the RELX appli- Retirement Plan Services “but the pilots have special information” be- stand it.” cation. was the service provider. cause they have different benefits, she ex- The booklet provides a visual timeline for “The quiz is really won- Pilots know they must re- plained. what employees should do before and after derful and so effective,” one tire at 65, according to Fed- retirement, and it contains information about Eddy award judge wrote. “It was visually ap- eral Aviation Administration requirements, ITW: One-stop shopping issues such as health care, estate planning, pealing and well done.” but because the pandemic played havoc with Illinois Tool Works Inc., Glenview, Ill., took life insurance, Medicare and Social Security. Ms. Heintz added that her goal, in addition the airline, nearly 500 pilots accepted a buy- first place in the pre-retirement preparation “This was a comprehensive guide for those to encouraging greater savings, was to make out at age 62. category for corporate plans with more than nearing retirement,” wrote one Eddy judge, the HSA as a retirement vehicle “seem a little Still, it was important for the airline to pre- 5,000 participants, thanks to a detailed every- echoing other judges’ comments. n SPONSORED ROUNDTABLE

Fixed income 2021: Finding opportunities in a challenging market VIEW ONLINE AT www.pionline.com/fixedincome2021rt

ith the end of the pandemic possibly in sight — but seemingly no end to the liquidity W flooding markets — what are the implications for fixed-income investors? To learn about the many risks and opportunities ahead, Pensions & Investments spoke with Henry Song, fixed-income portfolio manager, Diamond Hill Capital Management; Rob Waldner, chief strategist and head of macro research for Invesco fixed income; and Dan Janis, senior managing director, head of global multisector bonds, at Manulife Investment Management.

Henry Song Fixed-Income Portfolio Manager Diamond Hill Capital Management

Pensions & Investments: What’s your 50,000-foot amounts of liquidity put into the system to improve view of fixed-income markets today? How much has growth. So while fixed income does offer yield, and the pandemic driven that view, and are you revising there is a place to get return, valuations are tight. it, given the glimmers of the end in sight? Those types of valuations will be a challenge for inves- tors for the next six months to a year, but they will be HENRY SONG: The pandemic and the Fed’s ensuing supported by very strong liquidity, developed market response have given investors a solid year of returns central banks and growth. We’re well above growth in 2020. But looking at the fixed-income market now, expectations for 2021. We’d agree there are oppor- our view is that bonds are priced at or near perfection, tunities in certain pockets, particularly in emerging with little upside both from an interest rate perspective markets, but we’re cautious on overall fixed income. and a spread perspective. We are in a low-yield and low-spread environment. Bonds still generate income, P&I: Are central banks on the right track? They but not much in absolute-return terms. In our view, have been flooding the markets with liquidity, Rob Waldner there are more downside risks, given the strong recov- fueling the recovery from the pandemic-induced Chief Strategist ery post-pandemic. recession. What are the long-term implications of and Head of Macro Research the continued buildup of the Fed’s balance sheet? Invesco DAN JANIS: As the broad distribution of the vaccine gains traction and restrictions on the global economy WALDNER: We have to acknowledge that central are lifted, economic growth should pick up and inter- banks have done an extraordinary job of managing est rates on high-quality assets will likely go higher. So through the pandemic so [that] an economic shutdown I want to have a lower-duration bias to those. Within did not become a credit crisis. They had a trial run with credit markets, valuations are through their long-term the global financial crisis where they developed tools averages, but there is still some value in select high- that they used and they did a phenomenal job. Going yield corporates and emerging markets, and we see forward, the trick is going to be to keep the stimulus opportunities on the currency side as well. When in the system to reach their targets of getting inflation you’re looking at total-return opportunities in foreign up above 2%. The hard part for them is going to be to bonds, you can take on some [foreign exchange] keep their messaging consistent so that the market risk. In the developed markets, you may see 2% to 3% doesn’t tighten too soon. appreciation against the U.S. dollar, while on the EM side, potentially 5% to 7%. So there are some opportu- SONG: Their response early last year was necessary, nities to glean from global markets, but you have to be and it was bold. Many parts of the fixed-income market really selective on how you look at the world. had severe liquidity issues at that time. There is the Dan Janis greater issue of too much debt on the Fed’s balance Senior Managing Director, ROB WALDNER: The 50,000-foot view in fixed income sheet, but low borrowing costs right now will alleviate Head of Global Multisector Bonds is that we have a valuation issue, driven by vast some of this concern. Manulife Investment Management

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It’s important how we spend the debt. assets could come under pressure, and If the central banks simply continue to you have to be careful. This means we support the market, the market will work have to position the portfolio to thwart itself out but will remain distorted and on the impact of duration in a rising-rate life support for a long time. We’ve seen environment. So that could be currency the imbalance in the supply and demand or credit elements that can help improve right now in the fixed-income market. There are some opportunities to glean from your return to offset some of the negative Investors continue to pour more money impact of duration. in, yet the Fed is reluctant to have the global markets, but you have to be really tapering talk right now. WALDNER: In 2020 inflation was quite selective on how you look at the world. low due to the pandemic. It will go up Our view is they should, at this point, in 2021. The challenge for the Fed is to start talking about tapering and guid- — DAN JANIS get inflation expectations durably up to ing the market. Maybe that means some 2% or above. The market is going to be short-term volatility, but the Fed no hypersensitive to any communication the longer has to support some of these mar- Fed gives that they are going to pull stim- kets. For example, let’s look at the Fed’s ulus out of the market. The big risk we agency mortgage purchases. It certainly see in the market in 2021 is a taper tan- helps keep the primary mortgage rates trum-type event where the market starts low, which helps homeowners, but at the same time tions] people to make sure that it is not a surprise to see inflation go up, but the Fed is unable to con- it’s driving up home prices and creating some of the when they taper down. I don’t see tapering until in vince us that they’re going to stay the line and keep inequality in this country. So there are areas where the 2022. However, those three issues could lead to policy easy — then you would get a taper tantrum. central banks can start tapering their support. excessive volatility down the road. SONG: I agree with both Rob and Dan. The Fed really JANIS: Three points. One, when you look at the long- P&I: What’s your view on inflation and rates for 2021? wants to get inflation up above 2%. We think the bigger term implications of the Fed and other central banks What does this mean for fixed-income investors? risk is that inflation goes up dramatically, a surprise on building up their balance sheets, that could crowd out the upside that goes well above their target. There’s bank lending. Two, it could lead to overvaluation. The JANIS: We think the Fed is willing to run the econ- certainly some anecdotal evidence already supporting average investor is probably reaching a bit too much. omy a little bit hot, even if that means letting inflation this view. Housing prices are running hot, which has a Three, the Fed has to figure out when they’re going to run above 2% for some time. What does it mean for direct impact on rent. Outside of the two coasts, rent scale this down. They have to be good [public rela- fixed-income investors? High-quality long-duration has gone up in most parts of the country. That’s a big

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portion of inflation measurement. Another anecdote market. A lot of the Fed’s programs didn’t directly emerging markets now, so that means buying emerg- is about supply chain disruption. Microchips could impact those markets, and they lagged in terms of ing markets in their own currency. Within that, we like really run the price up for a lot of consumer goods recovery. Because investors didn’t get the full benefits broad exposure. I would highlight again one particular from cars to iPhones. This disruption may not get of the central bank actions, the spreads present a lot opportunity that is very substantial, and that is China. fixed in the near term, since it needs global coop- of value compared with other sectors. We focus on The Chinese market is very large and offers a lot of eration. There are a lot of hidden risks. I definitely high quality assets that are shorter in duration and liquidity, strong credit quality, strong government back- would be wary of long-duration assets in the current offer a relatively attractive yield. ing and good policymaking. It gives you positive real environment, especially high-quality assets that don’t yields and diversification from developed markets. We have a lot of spread. Securitized products are often under-allocated in think that’s a great opportunity for a core allocation in investors’ portfolios because they are heavily tilted portfolios. P&I: What are the trade-offs in seeking yield and toward consumer risk. Most people own equity or taking on more risk in this environment? Where are fixed income that is heavily exposed to government JANIS: In fixed-income investing, sometimes what the best opportunities for income? and corporate risk. Securitized products are a nice you don’t own can be as important as what you do diversification away from that risk. own. Today, Argentina and Venezuela are off the JANIS: Our advice to institutional investors, because table. Russia, Ukraine, Turkey and South Africa are a a lot of them have high-quality core or core-plus WALDNER: You have to be careful about the risks little bit too volatile right now, but there are opportu- mandates, is to complement that. Global multisector that you’re taking looking for yield because spreads nities in Brazil, Columbia, Mexico, Indonesia, China, fixed-income strategies give you the flexibility to invest are quite tight. We do think that the economy is going Malaysia and [the] Philippines. You can buy them in anywhere around the globe. We do like the China mar- to surprise to the upside this year. While that’s good U.S. dollars or in local currencies, but with our view ket. It has stability in the currency, which is probably for credit and supports credit risk, it means being a for a weaker U.S. dollar in 2021, we expect local EM getting stronger. You're getting competitive yields in a little more cautious on duration. Typically, investors to outperform. market that, over time, is getting more liquid, and as might look to go out the yield curve. In 2020, it was liquidity grows, you can be more comfortable taking a a great idea. We think in 2021 it’s going to involve On the developed markets side, my favorite is Canada. bigger position. being in other asset classes that are less dependent The economy there should do well. They have over 30 on U.S. yields. Some of the Asia emerging markets, in dollars and in local currencies, present yield opportunities ranging We’re encouraging institutional inves- between 4.5 and 7%. There are opportunities when you tors to think about opportunities outside look at Indonesia, Malaysia and the Philippines. Those of the core fixed-income asset classes. economies are less prone to government spending, That would be private credit and bank so they’re not going to have that overhang of crowding loans. A stronger growth outlook is out. They have the potential for some currency kick good for all corporate credit, so we and yield enhancement. Some of the Latin American like both of those asset classes. For [emerging markets], whether it be Brazil and Mexico, institutional investors, global debt — in are not as well run on the COVID side, but there could particular, local [emerging market debt] We’re encouraging institutional investors be some yield and currency plays there. You want to — is very attractive. Local China offers have that global focus to take advantage of some of a nice mix of positive real yields and a to think about opportunities outside of the EM parts of the markets. big liquid market — it’s attractive in that it is uncorrelated with risky assets in the the core fixed-income asset classes. That SONG: We find a lot of attractive options in the United States. securitized product space, especially in asset- would be private credit and bank loans. backed securities and some selective commercial P&I: Tell us more about the specific mortgage-backed securities. The primary reason is opportunities in emerging markets — ROB WALDNER because most bonds in those spaces tend to have that you are watching. fairly short duration, which goes with the theme of avoiding longer-duration assets. It is also a smaller WALDNER: We like local currency

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million people and the COVID situation is going to get lar assets. So we think investors should consider you need to have a diversified credit portfolio, which better. The currency is still undervalued, and I think migrating to non-dollar assets. includes some of the things I talked about surround- there is potential for a 3% to 5% move there. You're ing bank loans. And we would point to a place where getting less yield than in the US, but with the currency P&I: What other guidance are you giving your cli- you may still have some preservation of capital in your kick, there is a potential for a greater total return. ents? What are the greatest challenges you’re fixed-income portfolio, which, again, is China. So, a hearing in terms of investing in fixed income today? diversified credit portfolio with an allocation to Asian P&I: What is your view on the U.S. dollar? fixed income, particularly China, and some emerging JANIS: The question is, Where are you going to get markets, is our answer. JANIS: Last year we had the beginning stages of the yield without increasing volatility too much? The key is dollar decline. This year, it will probably not be as position size. EM presents an opportunity, but you’re P&I: How would you rank the opportunities and aggressive on the developed markets side, maybe a not going to overweight the EM side too much. You risks you are seeing? 2% to 3.5% potential when you are looking at the euro have to balance EM with some high-quality markets like or sterling, maybe a little bit more in Canada, Australia Canada, Singapore, etc., and then I think U.S. dollar SONG: The securitized product sectors would be our or New Zealand. But on the emerging markets side weakness can offset some of that duration risk. We look first pick for opportunities followed by agency mort- there could be a 5% to 7% move. That could offset at four risks: interest rate, credit, currency and liquidity. gages — select [collateralized mortgage obligations] some of that duration risk that we talked about earlier If you can balance those, you’re going to get a compet- specifically — and corporates. One of the biggest risks and gives you a positive return that hopefully is better itive return with controlled volatility as we go forward. is grabbing yields blindly in this environment. A lot of than high-quality indices. companies are being propped up by the Fed response On the credit side, you really have to be careful where and shouldn’t be trading where they are. It’s hard to WALDNER: In recent years we’ve been in a dollar-ap- you tread. We’re being careful on how we select indus- pick between investment grade and high yield on a preciating environment. That’s changing. The primary tries, issuers and credit qualities while also ensuring macro level; it will come down to how each manager reason is that we’re going to get a big pickup in global that we allocate and diversify our credit risk appropri- approaches this space. growth as we get past this virus. And very strong ately. A focus on liquidity has also hopefully calmed global growth combined with a very easy Fed is a rec- investors’ fears as we go forward in this environment. P&I: How can active management best add value ipe for a weaker dollar. now? What about in terms of environmental, social WALDNER: The biggest question we get is, What and governance investing? The Fed is making valuations very tight in U.S. fixed do I do about negative real yields? Most developed income, but they’re giving you an opportunity: non-dol- markets are significantly negative. And our answer is SONG: We have always been a proponent of active

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We find a lot of attractive options in the securitized product space, especially in asset-backed securities and some selective commercial mortgage-backed securities.

DIAMOND HILL CAPITAL — HENRY SONG MANAGEMENT, INC. 325 John H. McConnell Boulevard, Suite 200 Columbus, Ohio 43215 www.diamond-hill.com

James Smith Managing Director – Institutional Relationships 614 641 2775 management because as we look at the investable age your [foreign exchange] risk, manage duration and [email protected] fixed-income universe in the U.S., a t hird of that add value by tactical trades, are all part of active man- universe is not included in the index. That’s a huge agement that static portfolios don’t employ [that] can underrepresentation of some highly valuable assets. add value to our clients’ portfolios. Our philosophy and process has always been about bottom-up security selection. We have exposures to P&I: Many DC investment menus have only one assets outside of the index that have a substantial fixed-income option outside of stable value, typ- spread advantage to those included in it. There is a ically a core or a passive option. What might trade-off on liquidity, but it has proven to work over participants be missing out on? long periods of time. WALDNER: We think the right strategy now, as I’ve In regard to ESG, while we don’t have a formalized mentioned, is a diversified credit strategy — and you’re process, it is something we look at. The market appre- just not getting that in a core fixed-income option. Core ciates ESG-focused assets, and they are trading at a options tends to be heavy on duration and light on better valuation. That’s something we take into con- credit. We think the risk-return profile going forward INVESCO sideration as we make investments and assess the should be the reverse: heavier on credit and lighter 1555 Peachtree Street NE, Atlanta, GA 30309 total-return profile of a bond. Quite frankly, we have on duration. www.invesco.com/institutional had exposure to the environmental front for a long time, before ESG was even en vogue. JANIS: Global multi sector fixed-income strategies give Ben Utt them the opportunity to take advantage of the breadth Head of US Institutional Sales Many asset-backed securities involve clean energy, and depth of global markets across countries, sectors, 404 439 3450 which is a sector we favor and usually have exposure to. yield curves and currencies. They’re missing out on [email protected] that opportunity set. I agree with Rob. Duration should WALDNER: We think there are two ways that active be shunned, and currency and credit risk should be management can really help you in a portfolio. One, embraced. when you have such tight valuations, getting the credit part — the fundamentals — right is extremely important. SONG: Investors need more diversified options to And two, we’re finding that more and more, having a round out their core. Certainly, there’s a need to have fully formed ESG capability gives you a big leg up on more short-duration options on the table at this time, index investing. You’re able to help the client achieve and securitized products can work well. their goals by being able to fully integrate some of these risks — whether it be environmental, social or P&I: What is it about the securitized market that governance issues — into your portfolio. you believe provides you with an edge in building a well-diversified portfolio that may deliver consistent JANIS: ESG is an integrated part of our investment returns? MANULIFE INVESTMENT process, from analysts’ bottom-up perspectives to portfolio managers’ top-down views. As we go forward, SONG: There are structural advantages to the secu- MANAGEMENT that has to be a key part of your investment process, ritized market that are often overlooked. A lot of 197 Clarendon Street to understand if companies are actually doing what investors don’t have a great understanding of that Boston, MA 02116 they tell you. We think of ESG analysis as being part part of the market, but we think it can add protection www.manulifeim.com/institutional of our active investment process that can add value for bondholders. In 2020, the securitized market per- to our clients’ portfolios as companies improve their formed well during the pandemic. Some securitized Todd Cassler ESG metrics. bonds have very short durations. They were paying off Head of Institutional Distribution, U.S. and Europe or greatly reducing their leverage. You can make the 617 646 9719 As far as being an active manager, the ability to pivot argument these bonds held up well without the Fed’s [email protected] when things change is also very important relative to assistance. a static portfolio. Last year, March was the pivot point to go into credit, to take duration down and also to Ever since the pandemic, we’re seeing a rebound in take advantage of the volatility in currency markets. new issuance. New issues in the securitized space The ability to trade around your credit bucket, man- are even more enhanced than previously. Some of the

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2020 vintage are actually the best bonds we have seen inherently inefficient because they’re built around the JANIS: Historically, core and the core-plus domestic over the last few decades. I think this space has gotten amount of debt that is issued by the issuers. You can strategies have worked out pretty well as a key compo- a bad reputation for its role leading up to 2008. The use factors to reweight those benchmarks and come nent of a broader asset allocation. But we’re in a new space has evolved quite a bit since the global financial up with a better-performing benchmark. environment where, with all the stimulus, there’s going crisis. When we look at it from a credit perspective, to be some traction on the economy. Rates are going to with the structural advantages and better covenants, This smart beta or factor-driven systematic investing in gravitate higher. So taking a more diversified approach it’s a lot more investor friendly than a lot of corporates. fixed income is clearly superior to a passive strategy. away from the domestic core and taking advantage of To the extent that you want to have passive and then currencies, short duration [and] credit, and also pivot- P&I: Do you see an increasing role for factors in use your active budget for satellites, you should be ing at certain times, can become very, very important to fixed income? Is this analogous to smart beta prod- using factors to drive your core allocations. generate attractive returns going forward. ucts for equities?

P&I: What are your key takeaways for investors WALDNER: I would build on what Dan said. Core WALDNER: Yes, it is analogous to smart beta. We’ve from our discussion on fixed income? done a lot of research on factors. Factors are directly strategies now have very low yields. They have a real applicable to fixed income. The advantage of using fac- SONG: Investors really need to reevaluate their port- valuation problem, and so although they’ve done well tors in fixed income is that investors who are primarily folio and ask themselves what role fixed income is for decades, they’re probably not going to do as well concentrated on fees can look to smart beta driven by playing, whether it’s there for defensive purposes or if in the coming decades. So you have to look outside of factors to improve their returns for very little fee effort. they’re looking for income generation. They can look the core. We would highlight credit such as bank loans This is a compelling space for anybody who’s looking at strategies like securitized products, for example, to and local emerging markets. And don’t underestimate to reduce their fees yet get better returns on a bench- diversify their portfolio and generate extra income in China. Just because it’s a political foe doesn’t mean it mark. We all know that fixed-income benchmarks are this low-rate environment. shouldn’t be in your portfolio. ■

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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.

21pi0039.pdf RunDate: 03/22/21 Full Page Color: 4/C 26 | March 22, 2021 Pensions & Investments HIRINGS

„ CalPERS committed $5.7 billion to ing of the $937 million pension fund’s „ Nebraska Investment Council, alternative investment strategies, the domestic equity allocation, which Lincoln, committed $50 million to $439.5 billion pension plan reported. includes the terminations of three WISCONSIN HIRES FOR PRIVATE EQUITY private equity fund Genstar Capital The California Public Employ- active domestic smidcap equity State of Wisconsin Investment Board, Madison, disclosed private Partners X at its board meeting March ees’ Retirement System, managers, which ran about $46 million equity commitments during the fourth quarter totaling $736 million, 11, Michael Walden-Newman, state Sacramento, committed $1.1 billion to each: Riverbridge (growth), Vulcan according to materials for its March 16-17 board meeting. investment officer, said in an email. Ares Capital Europe V, a European (core) and WEDGE Capital Manage- The council, which oversees $34 The board, which manages $143.9 billion in assets, including the direct lending fund; $1 billion to ment (value). billion, made the commitment on Blackstone Real Estate Debt Strate- $120.2 billion Wisconsin Retirement System, committed $125 behalf of its five defined benefit plans, gies IV, a real estate direct lending „ El Paso (Texas) Firemen & million to buyout fund GTCR Fund XIII; $100 million to Arbor Invest- which have a total of $15 billion in fund; and $600 million to Thoma Bravo Policemen Pension Fund ments V and $50 million to Arbor Debt Opportunities Fund II, both assets, and its cash balance benefit XIV, a buyout fund that targets large committed $14 million to TerraCap private equity funds managed by Arbor Private Investment Co.; and plans totaling $2.6 billion. equity investments in software Partners V, a value-added real estate $100 million to Blackstone COF IV Co-Investment Fund, a private companies and technology enabled fund, said Tyler Grossman, executive „ Nevada Public Employees’ equity co-investment fund. businesses. director of the $1.8 billion fund. Deferred Compensation Pro- CalPERS committed $500 million The board also committed $75 million to FountainVest China gram, Carson City, will add the each to West Street Strategic „ Enerpac Tool Group Corp., Capital Partners Fund IV, a growth equity and middle-market buyout Sterling Capital Total Return Fund to Solutions I (C), a distressed debt fund Menomonee Falls, Wis., hired Fidelity fund; €60 million ($71 million) to Waterland Private Equity Fund VIII, the investment options lineup of its $1 and West Street Co-Investment Investments as record keeper of its a buyout fund; $50 million each to growth equity fund Avenir Growth billion 457 plan. Partners (C), both managed by 401(k) plan, according to a March 8 Partners III, growth equity fund Denali Growth Partners Fund and The program’s committee approved Goldman Sachs Group. It also 8-K filing with the SEC. the addition of the active intermediate- Hughes Growth Equity Fund I, a growth equity fund; $40 million to committed $500 million each to Top As of Dec. 31, 2019, the Enerpac term fixed-income fund managed by Castle Sidecar VII managed by Tool Group Corp. 401(k) Plan had middle-market private equity fund Staple Street Capital III; and $25 Sterling Capital Management at its Carlyle’s AlpInvest; TCC Opportunities, $160 million in assets, according to million to Coyote 2020, a middle-market buyout fund managed by The March 2 meeting, said Rob Boehmer, managed by TCC Capital; and Nordic the company’s most recent Form 5500 Jordan Co. executive director. Bear SCSp, managed by EQT. filing. As of that date, the filing says Pension officials committed $300 the record keeper was Wells Fargo. „ New Orleans Sewerage & million to TCV XI, a technology venture Principal Financial Group purchased investing in U.S. health-care compa- Vanguard Group to its 401(a) and Water Board hired Marquette capital fund, and $239 Wells Fargo’s nies. 403(b) plans. Associates as investment consultant of million to Samson HAVE SOME NEWS? record-keeping The university’s retirement advisory its $235 million defined benefit plan. Partners, a private business earlier that „ Maine Public Employees committee recommended adding the Marquette replaces FFC Investment equity fund. Please submit news of year. Retirement System, Augusta, investment options after a review of Advisors of Raymond James. changes to David Schepp, made four commitments totaling up to fund offerings, according to an update news editor, at dschepp@ „ Two U.K. local „ Fairfax County $257 million, James Bennett, CIO of posted on the plans’ website. „ Ohio State Teachers’ Retire- pionline.com authority pension Educational the $16.6 billion pension fund, said in For participants with record keepers ment System, Columbus, committed funds committed £95 Employees’ an email March 12. AIG Retirement Services, Equitable $10 million to Moonrise Venture million ($131 million) to a new fund Supplementary Retirement It committed up to €85 million and Voya Financial, the plans — which Partners III. launched by M&G Investments. System, Springfield, Va., made two ($101.2 million) each to Meridiam have identical lineups — will add six The $86.6 billion pension fund’s Cambridgeshire County new private equity commitments Sustainable Infrastructure Europe IV passive domestic equity funds commitment to the venture capital Council Pension Fund, Cam- totaling $12.5 million. and Cube Infrastructure Fund III for up managed by Fidelity. fund managed by Moonrise Capital is bridgeshire, committed £50 million to The $3 billion pension fund to €85 million to a European infra- For participants within record its fifth to the manager, said Nick the M&G Shared Ownership Fund, committed $7.5 million to Charlesbank structure fund; up to $40 million to keeper TIAA-CREF’s lineup, the plans Treneff, pension fund spokesman. while Northamptonshire County Equity Fund X, a middle-market buyout Technology Impact Fund II, managed by will add six similar index funds Council Pension Fund committed fund and $5 million to growth equity Capricorn Investment Group; and up to managed by Vanguard. „ The Open University, Milton £45 million, spokesmen confirmed. fund JMI Equity Fund X. $15 million to Bain Capital Venture Current asset sizes of the plans Keynes, England, hired Newton In partnership with housing Co-Investment Fund III. were not available. According to a July Investment Management to set up and association the Hyde Group, M&G’s „ Greater Washington Commu- 2018 RFP for investment consulting run a new long-term investment fund. strategy will fund £500 million of new nity Foundation hired SEI to serve „ University of Maine System, services, the 401(a) plan had $203 The new £50 million ($69 million) sustainably designed affordable as outsourced CIO for a portion of its Bangor, hired Baird Advisors to manage million in assets and the 403(b) plan fund will complement the university’s homes, a news release said. assets. $7 million in an active domestic core had $164 million at that time. existing long-term investment Cambridgeshire had £3.6 billion SEI will manage $197 million in the fixed-income portfolio for the univer- portfolio. Details on the existing and Northamptonshire had £3 billion foundation’s Combined Investment sity’s $26 million pension fund. „ National Employment Savings portfolio were not available. in assets as of Dec. 31. Fund and provide oversight and The university’s investment Trust, London, appointed Octopus The new fund will be managed integration of data and reporting committee approved the hiring at its Renewables to manage an initial £250 under one or more styles — index, „ Colorado Fire & Police across all of the foundation’s $300 March 4 meeting as a result of million ($346 million) allocation to ESG, thematic and value, said a notice Pension Association, Greenwood million in investment assets. investment consultant NEPC’s unlisted infrastructure equity, a posted on European procurement Village, committed $70 million to four SEI said in a joint news release recommendation to move the spokesman confirmed. website Tenders Electronic Daily. alternatives funds, said CIO Scott March 8 that the two organizations will fixed-income portfolio to active Octopus Renewables will manage The university also hired Troy Asset Simon. collaborate on considering new asset management from a passive Vanguard direct investments in renewable Management to run its £40 million to The $6.2 billion pension fund classes and incorporating environmen- portfolio, confirmed Tracy Elliott, the infrastructure projects, such as solar £45 million wealth preservation fund. committed $20 million each to CORE tal, social and diversity-related university’s director of finance and and offshore wind farms in the U.K. Industrial Partners Fund II, a buyout considerations across the portfolio. controller. and in Europe, on NEST's behalf. „ Orange County Employees fund; Crosspoint Capital Partners Fund NEST’s investments with Octopus Retirement System, Santa Ana, I, another buyout fund; and Crestline „ Kentucky Teachers’ Retire- „ Manchester (N.H.) Employees’ are expected to increase to £1.4 Calif., invested or committed $525 Opportunity Fund IV, a credit fund. ment System, Frankfort, made two Contributory Retirement billion over the next decade. The new million to four funds. It also committed $10 million to new commitments to funds managed System hired Aristotle Capital investments will be funded from new The $19.3 billion plan invested Alta Partners NextGen Fund III, a by Carlyle Group totaling up to $130 Management to run $29 million in contributions. $200 million each in Artisan Interna- venture capital fund. million. active domestic equities. The £16 billion defined contribution tional Value Fund and GQG Partners The $23.9 billion pension fund The $234 million pension fund multiemployer plan currently has International Equity Fund. OCERS „ Dallas-Fort Worth Internation- committed up to $80 million to conducted a shortlist search for a around 5% of its investments allocated made the investments to build out its al Airport Board Retirement opportunistic real estate fund Carlyle manager to replace Pzena Investment to private credit, which includes an international equity portfolio as a Trust committed $23 million to three Realty Partners IX and up to $50 Management, which ran a large-cap exposure to infrastructure projects. result of a new asset allocation alternatives funds, documents from million to open-end infrastructure fund value equity portfolio and was adopted by the board in April that the $811 million pension fund show. Carlyle Renewable & Sustainable terminated on the recommendation of „ Five custodians have been selected increased the pension plan’s global The board committed €6.5 million Energy Fund, said Robert B. Barnes, investment consultant NEPC, said for the updated National LGPS equity target to 47% from 35%. ($8 million) to BC Partners Fund XI, a deputy executive secretary and general William Shea, executive director of the framework for global custody services. Pension fund officials also European private equity fund; and $7.5 counsel. system. Bank of New York Mellon, Caceis committed $75 million to opportunistic million each to Tenex Capital Partners Investor Services, HSBC Securities real estate fund Oaktree Real Estate III, a private equity fund; and Torchlight „ Los Angeles County Employ- „ Merced County (Calif.) Services, Northern Trust and State Opportunities Fund VIII and invested Debt Opportunity Fund VII, a real ees Retirement Association, Employees’ Retirement Asso- Street were chosen for the framework $50 million in Waterfront CP Master estate debt fund. Pasadena, Calif., committed up to ciation made a direct hedge fund panel, said a news release from Fund, an equity market-neutral fund The board also agreed to terminate about $220 million to two alternative investment of $10 million in Caxton National LGPS Frameworks. focused on publicly traded real estate a $34 million core fixed-income funds, the $65.5 billion pension fund Global Investments. Other funds may choose custodians and infrastructure securities. The fund strategy managed by Smith Graham & reported. The $1.1 billion pension fund’s from the pre-selected panel. is managed by Waterfront Capital Co. Investment Advisors for perfor- The board committed up to €100 board approved the investment in the Norfolk County Council Pension Partners. mance issues. million ($119 million) to Antin Mid Cap flagship hedge fund managed by Fund, Norwich, England, led the search Fund I, a real assets fund focusing on Caxton Associates at its meeting in September. The pension fund had „ Oregon Investment Council „ El Paso (Texas) Employees’ middle-market opportunistic infrastruc- March 11, said Kristen Santos, £3.6 billion ($4.5 billion) of assets as committed $200 million to Whitehorse Retirement Trust hired AllianceBer- ture investments mostly in Europe with retirement administrator. of March 31, 2020. Liquidity Partners IV, CIO Rex Kim nstein and Wellington Management to some investments in North America. National frameworks are available reported at the council’s most recent run about $54 million each in active LACERA also committed up to $100 „ Miami University, Oxford, Ohio, to all local government pension meeting. domestic smidcap core equities. million to Excellere Capital Fund IV, a is adding passive investment options schemes, LGPS pools, administering The secondary fund is expected to The hirings are part of a restructur- lower-middle-market buyout fund managed by Fidelity Investments and authorities and the wider public sector. offer preferred equity to general Pensions & Investments March 22, 2021 | 27 HIRINGS

partners and limited partners. American Core Realty Fund. Both funds will focus on early-stage unnamed private equity co-investment. America (Y) Fund and Victory Munder The council oversees the $82 billion The $249 million pension fund’s and growth-stage Chinese technology Separately, Texas ERS made Mid-Cap Core Growth (Y). Oregon Public Employees Retirement board approved the investment in the companies. changes to the investment lineup for Separately, the Davis New York Fund, Tigard. core real estate fund managed by its $3.1 billion defined contribution Venture A Fund was terminated and American Realty Advisors at its Jan. 21 „ Texas Employees Retirement and $1.1 billion 457 plans. assets were transferred to Vanguard „ Pennsylvania Public School meeting, recently released meeting System, Austin, committed $130 During the meeting, trustees Institutional Index Fund, an existing Employees’ Retirement System, minutes show. million to three private market approved adding the Fidelity Interna- plan offering, meeting materials said. Harrisburg, committed $375 million to strategies in February, a transaction tional Index Fund to the Texa$aver two alternatives funds, documents „ Texas County & District report from the $30.9 billion fund retirement plan program, spokeswom- „ West Palm Beach (Fla.) Police from the $64.2 billion pension fund Retirement System, Austin, showed. an Mary Jane Wardlow confirmed in an Pension Fund hired Barrow Hanley show. committed $40 million to two The largest commitment was $80 email. Mewhinney & Strauss to run about $19 At its March 5 meeting, the board China-focused private equity/venture million to Ardian Americas Infrastruc- Two other new funds ­— BlackRock million in active domestic small-cap committed $200 million to Carlyle capital funds, a transaction report ture Fund V. Mid Capitalization Equity Index F Fund value equities. Realty Partners IX, an opportunistic from the $35.7 billion pension fund In private equity, $40 million was and Wellington Management’s WTC-CIF The $451 million pension fund real estate fund; and $175 million to showed. committed to Avista Capital Partners V II Mid-Cap Opportunities Series 1, an conducted a shortlist search to Apax Digital II, a growth buyout fund It committed $23 million to Source for investment in middle-market, actively managed fund — were added replace incumbent small-cap value that targets midmarket technology Code Growth Fund II and $17 million to growth-oriented health-care companies to the Texa$aver plans. manager Wellington Management, companies. Source Code Venture Fund V, managed primarily in the U.S. Texas Employees They replace two midcap funds that which is being terminated for by Source Code Capital. also committed $10 million to an were terminated: First Eagle Fund of underperformance. „ Philadelphia Board of Pen- sions and Retirement selected Capital Group to run $88 million in an active developed market international large-cap core equity strategy, said Christopher R. DiFusco, CIO for the $6.4 billion pension fund. The search was launched in January 2020 to balance the plan’s current international large-cap value equity manager, Causeway Capital Manage- ment. The two managers will manage the same amount of capital.

„ Rhode Island State Invest- ment Commission, Providence, approved two new commitments totaling up to $60 million for the $9.5 billion Rhode Island Employees’ Retirement System. The commission approved commitments of up to $30 million each to Atalaya Asset Income Fund V, a private credit fund, and IPI Partners II-A, an infrastructure fund investing in data centers managed by a joint venture of ICONIQ Capital and Iron Are you (or someone you know) doing Point Partners, at its Jan. 27 meeting, board minutes show. something innovative to improve retirement „ Sacramento County (Calif.) income security for plan participants? Employees’ Retirement System committed $35 million to Digital Colony Partners II, an infrastructure fund that concentrates on data Pensions & Investments and the Defined Contribution centers, cell towers and digital Institutional Investment Association are once again billboards, confirmed Steve Davis, chief investment officer of the $11.6 co-sponsoring an awards program for excellence and billion pension fund. innovation by defined contribution plan executives.

„ San Mateo County Employ- ees’ Retirement Association, We want to recognize out-of-the-box thinking by those DC plan executives Redwood City, Calif., committed a total and their employers who are making new and unusual changes to help of $65 million to four alternatives improve participants’ retirement income security. funds, according to an announcement on the $5.5 billion fund’s website. At its meeting March 8, the board The possibilities are endless; there are no categories. A prominent theme committed $20 million each to Vision among last year, four of the seven winners centered their campaigns on Ridge Sustainable Asset Fund III, an people nearing retirement, addressing topics such as drawndown strategies, infrastructure fund that invests in managed accounts and guaranteed retirement income that won’t run out. sustainable projects and ventures; and Genstar Capital Partners X, a middle- market buyout fund. WWhatever the innovation is in design and/or excellence in execution, it The board also committed $15 uundoubtedly is something others are just now considering. Help your million to Strategic Value Special peers by sharing your innovation and receive recognition for your ingenuity. Situations Fund V, a special situations fund focused on the debt and assets of middle-market companies; and $10 million to Eclipse Fund IV, a venture NOMINATION capital fund managed by Eclipse Ventures. DEADLINE Full details and nomination form are available at May 28 „ Seattle Voluntary Deferred pionline.com/innovationawards2021 Compensation Plan hired Hyas Group as investment consultant, said Michelle Ell, deferred compensation manager. The $1.2 billion 457 plan issued an RFP in September due to the pending expiration of incumbent SageView Advisory Group’s contract. Any questions, please contact Ashley Perrucci „ Sterling Heights (Mich.) at [email protected] Police & Fire Retirement System invested $4 million in the 28 | March 22, 2021 Pensions & Investments

CAREERS RFPs

Independent Trustee THE GOVERNMENT OF GUAM RETIREMENT FUND National Railroad Retirement SEEKS INVESTMENT MANAGEMENT SERVICES Investment Trust The Board of Trustees of the Government of Guam Retirement Fund (GGRF) seeks proposals from investment firms qualified to provide: National Railroad Retirement Investment Trust (NRRIT) is seeking an Independent RFP No. GGRF-001-21: Professional Services related to providing Investment Trustee. Management Services specifically in Global Listed Infrastructure Securities.

For more information, visit https://www.pionline.com/careers. RFPs will be issued on Monday, March 22, 2021. Potential offerors may submit written questions on or before Friday, April 9, 2021. Responses to the written questions will be made on or before Monday, April 19, 2021. Submission of Advertise your RFP in proposals will be due by 4:00 p.m. (Chamorro Standard Time) on or before Monday, April 26, 2021. Pensions & Investments, RFPs All interested persons, firms or corporations are requested to download copies of RFPs from the GGRF web-site at www.ggrf.com. RFP copies may also be obtained reach the top investment managers at the Administrative Services Division of the Government of Guam Retirement NOTICE Fund, 424 Route 8, Maite, Guam 96910, between 8:00 a.m. and 5:00 p.m., Monday and service providers through Friday, with the exception of official Government of Guam holidays. THE TEACHERS’ RETIREMENT Proposals must be received by GGRF on or before the due date to be considered SYSTEM OF LOUISIANA in the money management industry. SOLICITS GENERAL INVESTMENT for evaluation. CONSULTANT SERVICES Optimize your returns. Actuarial Services The Board of Tr ustees of the Teach- ers’ Retirement System of Louisiana, The Illinois Firefighters’ Pension Investment Fund (FPIF) is soliciting proposals from Enrolled Meet your next investment services with assets of approximately $23 bil- Actuaries interested in providing actuarial services related to FPIF’s statutory duties under the lion, solicits proposals for General DB/ Illinois Pension Code [40 ILCS 5/1, 40 ILCS 5/1A and 40 ILCS 22C]. DC Investment Consultant. To obtain a partner in P&I. copy of the SFP go to www.trsl.org. The Starting on March 22, 2021, the RFP can be found on FPIF’s website: deadline for receipt of responses is no www.ifpif.org/employment-procurement/. later than 4:30 p.m., CDT, April 5, 2021. Proposals must be submitted by 3:00 p.m. CST on April 19, 2021 to: Illinois Firefighters’ Pension Investment Fund Steve Zahn, Chief Operating Officer – [email protected] AND [email protected] Active Extended Global Credit Manager Search

The Water and Power Employees’ Re- Your company’s best tirement Plan is seeking qualified in- investment strategy! vestment firms to apply for an Active Extended Global Credit mandate man- ager search. The Request for Proposal Place your ad today! (RFP) is available at www.pionline.com/careers http://retirement.ladwp.com. 212-210-0719

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For these huge technology stocks, technology stocks is “outrageously around … and it’s the one where across a number of strategies and it could be antitrust regulation, cy- large, larger even (than) in the dot- you see there’s a catalyst with the paying between 80 basis points and Passive clical changes that turn tailwinds com boom back in the early Paris accord and various govern- 100 basis points for the service, into headwinds or unwelcome noughties/late ’90s,” he said. ments signing up, (as well as) regu- went passive in 2013 and 2014. CONTINUED FROM PAGE 1 changes in the tax code. “It may be It’s not just a U.S. equities issue. lation and shareholder pressure on The plan considered a smart be- “The reason we’ll transition only that a lot of these were ‘stay-at- As of Sept. 30, the MSCI World in- companies.” ta-type allocation, but the trustees in part (at first) is we recognize home’ stocks that did well, but as we dex returned 5.2% for the year. Ap- Plus, it’s the most obvious area, “quite reasonably didn’t feel the there are a lot of different ESG in- see countries … go back (to physi- ple, Microsoft, Amazon, Facebook he said. “There’s no doubt that the added complication was appropri- dices in the market and a lot are cal places of work, that could) lead and Alphabet, which accounted for public equity markets have got ate” given the pension fund is fro- quite nascent and being developed. to a reversal. I’m not saying any of about 13% of the index, gained more quite a few companies with legacy zen and on a slow derisking path, So let’s move part to something these things are going to happen … than 60% on average. issues on that basis — high carbon Mr. Hedges said. that’s up and running — it’ll proba- (but) do you want 20% of your equi- “It was not a broad-based recov- emitters and the like.” But the problem has not gone bly still have some exposure to ties invested in five companies?” ery at all — a number of companies It’s easier for an active manager away “and more recently we have things like oil and gas, but lower ex- Mr. Baker said. were almost tailor-made for the cir- to build less carbon-intensive port- seen growth of (FAAMG) stocks as posure, and then we’ll spend the However, being in passive equi- cumstances (of the COV- a percentage of the portfolio next 12 to 18 months researching in ties did deliver returns last year. ID-19 pandemic and its eco- — but more importantly a detail the other indices that take a The S&P 500 net total return was nomic impacts) … and move to focus on ESG fac- much more active approach, see 17.75% in 2020. benefited massively,” Mr. tors. In terms of the passive how they have developed and (we The conversations about con- Peach said. equity portfolio, we realized will) have a better understanding,” centration concern are leading to As such, Aon is talking to it does have these risks, it said Mark Hedges, CIO at the pen- “more clients … taking action than clients and helping them to isn’t really dealing with ESG sion fund. I’ve seen historically,” said Mika realize that risk is there. “If on a market-weighted basis, Malone, Portland, Ore.-based man- you want to stay passive in a and we need to do something Concentration issue not new aging principal/consultant at Me- market-cap index, by all about that,” Mr. Hedges said. While addressing ESG concerns keta Investment Group. “To me, the means do, but understand Additional pressure comes is a relatively new concept, sources conversation is a little different (the risks) and make active from requirements to align said the issue of company concen- (from the past) as it has lasted lon- decisions to reaffirm that you with the Task Force on Cli- tration in passive portfolios is not ger and maybe it’s time to figure want to stay in it,” he said. mate-related Financial Dis- new — it was discussed during the out” how to address concentration Some clients are “motivat- closures standards next year, dot-com boom for technology and ESG risks, Ms. Malone said, ei- ed to do something about it,” more awareness around the stocks and also ahead of the global ther by identifying “active manag- with more than 20 clients world and the need to take financial crisis in terms of financial ers with a chance of performing moving to multifactor portfo- more action on ESG. stocks. better … or enhanced indexes.” lios since the launch of Aon’s If trustees approve the But there is a new intensity to capability in 2018, and the proposal to shift some assets conversations. On the ESG side, it’s Clients recognize risks firm had “a large move last to an ESG index, moving due to increasing regulatory and Aon’s Mr. Peach agreed that year — AUM that moved last some now means “at least client pressure to move to low-car- changes are being made once cli- year was the highest we’ve we’re signaling in the right bon portfolios. And on the company ents realize the inherent risks un- had,” Mr. Peach said. direction, and ahead of TCFD concentration side, it’s because just derlying some passive equity in- THIS TIME, IT’S DIFFERENT: Mika Malone is seeing next year. It’s very important five stocks accounted for about 22% dexes currently. If clients are ESG tilts more Meketa clients acting on concentration issues. for us to be good stewards of of the entire S&P 500 index at the looking for low-cost, low-gover- Aon has also started the assets we hold. We’ve al- end of 2020 — Facebook Inc., Ama- nance equity allocations, “then peo- screening out the worst carbon pol- folios, he said. “So if you have any ways challenged our manager, (Le- zon.com Inc., Apple Inc., Microsoft ple default to just a passive market- luters and banned coal from its beliefs at all that this is going to be gal & General Investment Manage- Corp. and Alphabet Inc., the parent cap (index), and it does those things multifactor strategies. a financial factor over the medium ment), on how they’ve voted. But company of Google. Together, these quite nicely.” However, the consul- While ESG isn’t necessarily seen to long term, there are good argu- clearly we’re going to need to move stocks delivered 54% of the entire tant is talking to clients about mul- as being on par with other return ments to thinking about whether that from not just a governance ap- absolute return of the U.S. stock tifactor investing as a way of avoid- drivers, reducing exposure vs. an global market cap is necessarily the proach but to an environmental and market last year, sources said, add- ing the concentration issue in index “certainly is a remover of risk right starting point,” Mr. Baker said. social perspective as well,” he said. ing that the 22% concentration is particular. that we don’t want to be exposed But that doesn’t mean an imme- Pension fund executives are also also the highest level in history for Passive investors “may not be to,” Mr. Peach said. diate jump to active management, still “mindful of the way equities are just five stocks. aware of the concentrations they’re Regarding avoiding ESG risks, he added. Better smart beta may be … imbalanced” in terms of concen- The danger, too, is that if history running, and it just so happens WTW’s Mr. Baker said “climate an option, or some asset owners are tration risk. “A concern of ours is it’s is anything to go by, “something those concentrations have got big- change is probably the one that we looking at low-carbon indexes. an overall position, it does look comes along to break” the concen- ger in the last 18 months,” Mr. Peach talk about most within sustainabil- The Nationwide Pension Fund, overheated, and to some extent it is tration issue, Mr. Baker said in an said. ity, but purely because it’s the easi- which after 15 years of poor perfor- driven by those large stocks at the interview. The concentration of certain est to model and get your hands mance from active management top,” Mr. Hedges added. n

predictability,” Mr. Simmons said. way out in the future, counterintui- guarantee program was also head- can only invest the grant money in tively it means they can derisk soon- ed toward insolvency with the im- investment-grade bonds, unless the Rescue Funding flexibility er,” Mr. McLaughlin said. “They can pending collapse of many plans, PBGC authorizes something else. A 2020 American Benefits Coun- move much more into cash-flow most notably the $12.3 billion Even for healthy plans, “the mes- CONTINUED FROM PAGE 1 cil study of the pandemic’s impact matching, more fixed income and Teamsters Central States, South- sage is pretty clear. You better start mittee on Investment of Employee on the defined benefit plan system LDI. The better-funded plans can al- east & Southwest Areas Pension moving toward that. Let’s get your Benefit Assets in Washington, found that of the 703 companies most move to hibernation. Effective- Fund, Rosemont, Ill., with $31 bil- funding right,” Mr. Murphy said. whose 111 members are asset own- surveyed, average funding obliga- ly, you can design a new strategy, a lion in unfunded liabilities. The That will start a trend “toward ers with more than $2 trillion of de- tions were projected to double in new glidepath. You have a longer new law gives the PBGC program a less risky investing,” said Gene Kal- fined benefit and defined contribu- 2021, before the new law. time horizon to close the gap. That’s reprieve from its once-looming def- warski, CEO of actuarial consulting tion plan assets. “I think Congress did the system 100% of the conversations we are icit. To offset the legislative cost of firm Cheiron Inc. in McLean, Va. Benefits come from two welcome as a whole a favor by al- having now,” he said. the grants, multiemployer premi- PBGC officials can now build up pieces of the new law. One perma- lowing this kind of flex- ums will rise to $52 per participant a reserve, which “will dramatically nently extends the amortization pe- ibility,” Mr. Simmons Multiemployer help beginning in 2031. change the next report,” said Mr. riod for calculating unfunded liabil- said. For multiemployer The agency has 120 days to come Kalwarski. And healthy plans “are ities to 15 years instead of the seven More predictability pension funds, the up with ground rules for receiving happy about what isn’t in this years that were one of the core re- and flexibility with American Rescue Plan the grant money. The PBGC did not plan,” since previous reform pro- maining features of 2006’s Pension funding obligations brings immediate relief respond to a request for comment. posals included one in the Heroes Protection Act. Plan sponsors can could also help spon- to as many as 200 plans Act passed by the House in Octo- even go back as far as 2019 with the sors make decisions that are deemed to be 200 eligible — so far ber called for stricter discount longer amortization periods. about pension derisk- “critical and declining,” Teamsters International Vice rates and allowed for new compos- Another provision extends ing and drive changes as defined by less than President John Murphy estimates ite plans combining defined bene- smoothing rules for interest rates to pension plan asset NEEDED HELP: John 40% funded, or with a that at least 200 plans are eligible fit and defined contribution fea- used to calculate pension liabilities allocations over time, Murphy said 200 plans higher ratio of inactive for the grants, “and we suspect that tures. that would have started phasing out including more shifting are eligible for grants, to active participants. number is going go up because The American Rescue Plan also this year. The new rules can now be to fixed income and al- and it might be more. The $86 billion in grant some plans are right on the cusp.” had a brief mention of public plans used beginning in 2022. ternatives, said Kevin money can also be “This is the most significant step — sort of. It called for $350 billion in Extending and enhancing inter- McLaughlin, head of liability risk spent fulfilling the new law’s man- in addressing the underfunding direct aid to state and local govern- est rate smoothing to avoid creating management North America for In- date to restore benefits reduced by problem in the multiemployer sys- ments but said that funds “cannot inflated plan funding obligations is sight Investment Management Ltd. plans through the Multiemployer tem,” Mr. Murphy said. It belonged be deposited into a public pension a critical change in a low-interest- in New York. Pension Reform Actof 2014. in the COVID-19 relief package be- fund” or used to offset taxes. With rate environment now facing plan “It’s almost as significant as PPA While Republicans criticized the cause so many participants were state and local government reve- sponsors, particularly those im- in terms of changes to funding. For grant program as a bailout for laid off “and all the plans were ad- nues now up $3.2 billion, thanks to pacted by the pandemic, sponsor many plan sponsors, there will be no union plans with no strings at- versely impacted,” he said. robust gains in financial markets advocates said. contributions for a period of time,” tached, the American Rescue Plan Although it was not a multiem- and federal assistance, the non- “It is something that our mem- he said. While a sponsor’s previous multiemployer provisions also pro- ployer reform package, there is one profit Tax Foundation in Washing- bers have been talking to policy- objective was to minimize contribu- vide immediate relief to the Pen- change: for interest rate assump- ton said, the latest cash infusion makers about for quite a while. It’s tions, “now because the contribu- sion Benefit Guaranty Corp. tions. plans applying for grants “has become a solution in search of more stabilization, flexibility and tions are much lower and they are The PBGC’s multiemployer must use corporate bond rates and a problem.” n 30 | March 22, 2021 Pensions & Investments

RIAs in “a seamless crossover” to Asset Management to include more UPCOMING WEBINARS | REGISTER TODAY serve North American clients on alternatives is another priority, Mr. CI Financial both sides of the border. MacAlpine said. CI is finding that its reputation CI’s money management unit of- CONTINUED FROM PAGE 4 contributes to “the incredible mo- fers a variety of liquid alternative The acquisition of Segall Bryant mentum we are experiencing be- investment strategies but many & Hamill will help to jump-start cause we have the ability to buy high-net-worth investors are in- CI’s institutional growth since very high-quality managers,” Mr. creasingly interested in illiquid al- about 73% of assets the firm man- MacAlpine said. ternative approaches, he said. aged as of Jan. 31 were for institu- “CI has made a huge splash buy- CI Asset Management has been tions, with the balance managed for ing a high number of RIAs in a working with alternative managers ESG Capabilities and Climate Impact RIAs. short time to gain access to the U.S. to develop “a framework of deeper CI managed about C$13 billion wealth management market,” said relationships. They think of us as a Investing: Making portfolio decisions for institutional inves- Brian R. Lauzon, a Phil- single institutional client,” he said, tors as of the same date. adelphia-based man- stressing again that CI’s “reputation and climate engagement consistent That said, CI is best aging director at InCap helps in creating partnerships” Live, Wednesday, March 24 • 2:00 p.m. - 3:00 p.m. ET known as Canada’s larg- Group Inc., an invest- with private market managers, Mr. est wealth manager with ment banking firm that MacAlpine said. How can institutional investors translate their climate objectives into C$67.6 billion in wealth specializes in wealth In January, CI Global Asset Man- investment decisions in very practical terms? By avoiding traditional cli- assets as of Jan. 31, Mr. management mergers agement launched a private equity mate benchmarks’ mix-up between financial and non-financial criteria, MacAlpine said, stress- and acquisitions. fund for Canadian high-net-worth Scientific Beta’s Climate Impact Consistent Index does just that. This ing that the firm needs One reason Mr. Lau- investors, managed by Chicago- webinar will provide a deep dive into the o“ering, including: to broaden its North zon said RIA firms may based Adams Street Partners LLC. American investor base. be open to an offer The fund is Adams Street’s first • Climate Impact Consistent Index as a solution to the transition “When I joined CI, CAN’T COMPETE: Brian from CI and other in- offering for the high-net-worth question 99.9% of assets were R. Lauzon sees growth of vestment managers channel. • Application of the net-zero framework from Canadian inves- wirehouses as a reason rather than merging In a Jan. 6 news release about the • The importance of the consistence of portfolio construction tors. When I was think- behind the acquisitions. with other RIAs is the new private equity fund, Mr. Ma- decision with climate objectives ing about increasing tremendous growth of cAlpine said: “In partnering with • Avoiding the risk of green-washing our global footprint, my question wirehouses. Adams Street we’re expanding the was ‘where do we go from here?’” “The wirehouse model now is so availability of an entire investing He said “the U.S. was the obvious big that there aren’t really any advi- category to high-net-worth inves- Register Now: pionline.com/ScientificBetaWebinar answer. It’s bigger and less compli- sory firms like RIAs that can com- tors that was previously accessible cated to operate in than Europe and pete effectively with them, even if only to institutional investors.” Sponsored by: there already is a natural connec- they did merge together,” Mr. Lau- He added that the Adams Street tion because lots of Canadians are zon said. fund “reflects our innovation and spending more time in the U.S. and responsiveness to the evolving are taking their wealth with them.” Expanding offerings needs of investors as we modern- He said that for some clients, CI Broadening and modernizing the ize our wealth management plat- is pairing up U.S. and Canadian investment strategies of CI Global form.” n Looking Beneath the Headlines – ternative investment firm Sound reliance on bonds, mortgages and and Below Investment Grade – for Point Capital Management LP to other public securities that had Alpha Potential Insurance form a new real estate credit man- provided sufficient returns in the ager, committing an initial $1.5 bil- past, he said. CONTINUED FROM PAGE 1 Live, Wednesday, March 31 • 2:00 p.m. - 3:00 p.m. ET lion to the new business. “The two industries are on a Marc Rowan, New York-based ■ Sun Life Financial Inc. com- crash course,” as insurance compa- The recent upswing in US Treasury rates and expectations for low but co-founder and senior managing pleted its acquisition of a 51% stake nies continue to move into alterna- rising rates have dominated headlines and created turbulence, par- director at Apollo, said during an in credit manager Crescent Capital tive investments, Mr. Gooden said. ticularly in fixed income markets. While a low but rising interest rate investor call after the deal was an- Group LP, adding to its money man- “For a long time insurance com- environment can be challenging for bonds, it may benefit higher-yield- nounced that the merger will en- agement business, Sun Life Capital panies were overweight safe in- ing assets, such as high yield bonds and leveraged loans. And the very hance the $455.5 billion manager’s Management. vestments, and even though they factors causing interest rates to climb – an improving economic outlook ability to generate excess returns “There are definitely different generated a lot of cash, they are and support from strong credit fundamentals – will help mitigate risks. across the risk-reward spectrum — approaches to the opportunity and falling behind relative to private Join a panel of fixed income experts as they discuss the current state of “something that is very difficult to you will see the spectrum of differ- equity firms, which have surpassed the markets and solutions beyond core to help investors tap opportuni- find in today’s marketplace” for all ent collaborations, partnerships, them in value,” leading to mergers ties. of its investors, not just Athene. acquisitions,” Ms. Lieskovska said. and acquisitions, he said. And for insurers, they get access Apollo formed Athene in 2009, Combining with an alternative Register Now: pionline.com/PineBridgeWebinar to private assets that carry the helped take it public in 2016 and investment firm also gives the in- promise of higher returns. eventually boosted its stake to surance company a “real window” Sponsored by: There is “truly a structural about 30% by purchas- into how their portfolio change in the industry between in- ing Athene shares. is managed, giving surance players and asset manag- Athene currently them more insight than ers” that has been evolving over the makes up 40% of Apol- a typical limited part- last three years, said Elena Lies- lo’s AUM. ner would receive, he kovska, partner and head of insur- Successes of early said. The relationship ance worldwide for private equity investors such as Apol- also ensures that the firm Varde Partners LP. lo are encouraging oth- alternative investment 2021: A Fixed Income Odyssey While these combinations can er alternative firms to manager “is completely provide existing limited partners partner with insurance vested in their interest,” Given the dynamics at play in 2021, can your fixed income portfolio with access to new investment companies, which is in- Mr. Gooden said. actually work harder? Join us as we explore key investment themes strategies, they can also raise con- creasing competition, NO GROWTH: Ted J. “There are more in today’s fixed income landscape, how institutional investors are ap- flict-of-interest issues, industry in- she said. Gooden said stagnation (mergers and acquisi- proaching fixed income and the practical opportunities that exist across siders say. Given the size of the of defined benefit plans tions) conversations public and private markets. Gain greater insight into: insurance industry, plays into the mergers. going on now and in the Other deals “there should be op- past year than in histo- • Where can investors expect growth in the global economy? In addition to Apollo’s $11 billion portunity for all the players to ex- ry,” Mr. Gooden said. • How will the new administration impact monetary policy? deal with Athene, announced press themselves in their own way,” What’s more, other alternative • What kind of inflationary environment can we expect? March 8, to buy the roughly 65% of Ms. Lieskovska said. investment managers noted Apol- the insurance company it did not lo’s successful relationship with Replay available: pionline.com/Webinar-Invesco already own, other big 2021 devel- Looking elsewhere for capital Athene, he said. “The private mar- opments include: Alternative investment firms are kets business, to some degree, looks ■ Blackstone Group Inc. an- looking for new capital sources, in for innovation from others and has Sponsored by: nounced it would buy Allstate part, because defined benefit plans a tendency to mimic, build on or Corp.’s life insurance business for — which have been the lifeblood in copy successful strategies,” Mr. $2.8 billion. the development and growth of pri- Gooden said. ■ KKR & Co. closed its $4.7 bil- vate equity — are not growing, said There are more deals now be- lion acquisition of Global Atlantic Ted J. Gooden, New York-based part- cause it is more accepted for the Financial Group Ltd. ner and head of private markets at two industries to come together, he ■ Adams Street Partners LLC Berkshire Global Advisors, a mergers added. announced a $2 billion strategic and acquisitions adviser in the in- Other limited partners get access partnership with American Equity vestment management industry. to investment returns and new Investment Life Insurance. In a prolonged low-interest-rate strategies, but they also have to deal ■ Aflac Global Investments, the environment, insurance companies with possible conflict-of interest- For a full list of webinars, go to pionline.com/webinars asset management subsidiary of in- also need to diversify their portfo- issues, said Michael Siegel, a man- surer Aflac Inc., partnered with al- lios beyond their traditional heavy aging director and global head of Pensions & Investments March 22, 2021 | 31

Money Management Credit Suisse separates its asset management unit New CEO also coming; ternational wealth management management, as well as in business gation, disputes or other actions,” division and run as a separate transformation. I am very much the report said. Though the ultimate moves made as part of unit. This move emphasizes “the looking forward to working with cost of resolving the Greensill-re- Greensill Capital fallout strategic importance of the asset Ueli on the executive board, and I lated issues may be material to management business for the am confident that he can greatly Credit Suisse’s operating results, bank and its clients,” a news re- contribute to the work to be done in the bank also warned that it “might By SOPHIE BAKER lease said. Mr. Korner will report the current situation and will lead also suffer reputational harm asso- directly to Credit Suisse CEO the new asset management division ciated with these matters that might Credit Suisse Group will split its Thomas Gottstein. to future success.” cause client departures or loss of asset management division into a Mr. Korner replaces Eric Varvel, The move follows a number of assets under management,” the re- separate unit with a new CEO, fol- global head asset management, changes for the money manage- port said. lowing the fallout of its relationship who will work through a transition ment division as a result of its rela- Credit Suisse’s compensation with collapsed firm Greensill Capi- period and then focus on his other tionship with Greensill. The firm committee is monitoring develop- tal. roles as CEO Credit Suisse Hold- has already suspended three exec- ments related to the supply chain The bank also warned of possi- ings (USA) and chairman of the in- utives, including the head of asset finance funds closely and will de- ble financial hits, reputational dam- vestment bank. Philipp Wehle will management for Switzerland and termine whether to use clawback age and loss of clients and assets continue to lead the international EMEA, following news that it would provisions on various compensa- under management related to the wealth management division. liquidate four supply chain finance tion awards, the group’s compensa- situation. Mr. Korner was senior adviser to funds. HE’S THE BOSS NOW: Ulrich Korner will tion report said. The firm’s money management the CEO of UBS Group. Details The parent bank has also already be the new CEO of asset management; “The payout and vesting of vari- division, Credit Suisse Asset Man- about any replacement were not said it expects to incur a charge re- he also will sit on the executive board. able compensation of a number of agement, is in the process of liqui- immediately available. Mr. Korner’s lated to Greensill’s failure and that senior employees involved in dating about $10 billion in supply appointment means he rejoins it has recovered $50 million of a experts. The board of directors has these matters, up to and including chain finance funds, for which as- Credit Suisse — he was CEO Swit- $140 million bridge loan provided also initiated an investigation of executive board members, has sets were originated and structured zerland between 2006 and 2008 and to Greensill last year. these matters,” the report said. been suspended as a measure to by Greensill Capital. first joined the bank in 1998. However, the annual report and It noted that a number of regula- ensure that we can reconsider the The bank announced March 17 “Ulrich Korner is an excellent a separate compensation document tory investigations and actions have variable compensation for 2020 alongside its annual report that, addition to our leadership team, re- by Credit Suisse, also published been initiated or are being consid- and are able to apply malus or effective April 1, Ulrich Korner inforcing its values and perfor- March 17, detailed further informa- ered, including by the Swiss Finan- clawback, if appropriate,” the doc- will become CEO asset manage- mance culture,” Mr. Gottstein said tion on the fallout of Greensill’s col- cial Market Supervisory Authority, ument said. ment and a member of the execu- in the news release. “Ueli is a strong lapse. known as FINMA. Further, “certain Credit Suisse had 440.3 billion tive board of Credit Suisse Group. leader and strategic thinker with “We continue to analyze these investors have already threatened Swiss francs ($498.6 billion) in as- The asset management business proven ability in business develop- matters, including with the assis- litigation and, as this matter devel- sets under management as of Dec. will also be separated from the in- ment and profitable growth in asset tance of external counsel and other ops, we may become subject to liti- 31. n

Kevork Djansezian/Reuters Adams Street’s strategic partner- Apollo’s LPs provided juice ship is a reflection of the broader phenomenon in the market. The new relationships fill a need in in- for expansion of Athene surance companies’ general ac- counts to find assets that matches Apollo Global Management Inc. Apollo formed MidCap, in part, their liabilities, Mr. Sacher said. has leaned heavily on its limited to satisfy Athene’s need for yield, “Over time, alternative credit partners as it expanded its said Marc Rowan, New York-based products have become more impor- relationship with its soon-to-be Apollo co-founder and senior tant,” he said. wholly owned insurance company, managing director in a conference Alternative investment firms like Athene Holding Ltd. call after its merger with Athene Adams Street get more assets to manage, which in many instances Apollo’s limited partners have was announced. enhances the manager’s ability to invested more than $2.5 billion in Apollo’s limited partners and originate loans. “More scale makes Athene, from its formation in 2009 strategic accounts own about 70% us more competitive in the market,” to its initial public offering in 2016, of MidCap, which has also provided Mr. Sacher said. Apollo noted in a March 8 LP letter yield for Apollo’s other limited about the companies’ pending partners. Strategic partnership merger. That investment generated Athene was also “useful” in Last year, American Equity In- two-to-four times their investment, Apollo’s acquisition of General vestment Life Insurance also ap- proached private equity shop Pre- the letter said. Electric Co.’s infrastructure PROVIDING CAPITAL: Marc Rowan said MidCap filled Athene’s need for yield. Apollo’s limited partners also business, “which is important to tium Partners LLC to create a strategic partnership, which Ted have provided the capital for our LPs and strategic accounts,” capitalization, making it eligible for causing stock analysts to raise Huffman, Pretium’s New York- Mr. Rowan said. Apollo’s acquisition of a minority inclusion in the S&P 500 index. concerns with instability and based senior managing director stake in European insurance Apollo’s executives declined to Apollo reported $455.5 billion in dependence of both companies on and chief strategy officer, said in- company Athora. be interviewed because the merger assets under management as of each other, Mr. Rowan said. cludes American Equity taking a And Apollo limited partner and is still pending. The deal is Dec. 31. Athene currently makes Apollo already owned about 35% stake in the money manager . strategic account capital also expected to close in January 2022. up 40% of Apollo’s AUM and of Athene and the merger will The deal includes AEL increas- fueled Apollo’s formation of MidCap Apollo’s combination with generates 30% of its fee-related result in Apollo owning the rest of ing its prior commitments with Pre- Financial, which lends to small- and Athene is expected to create a earnings. At the same time, Apollo the company, Mr. Rowan said. tium to $2.25 billion, from $1 billion, to invest in residential credit assets medium-sized businesses. company with a $29 billion market manages 100% of Athene’s assets, — ARLEEN JACOBIUS sourced and managed by Pretium. There is a huge opportunity set to access real estate loans rather than insurance asset management and other limited partners, he said. A “The larger asset managers we partner and head of credit at alter- real estate securities such as resi- liquidity solutions businesses at question also arises with co-invest- know well have very robust compli- native investment fund-of-funds dential mortgage-backed securities Goldman Sachs Asset Management ments and whether the manager’s ance, oversight and very robust al- and direct investment manager Ad- and commercial mortgage-backed based in New York. In some of the insurance company will be offered location rules,” he said. ams Street Partners, said there is securities, which is how many insur- recent deals, alternative investment a particular co-investment oppor- However, alternative investment nothing about its narrow arrange- ance companies invested in real es- firms have used their own money tunity before other LPs. managers have not always used ment with insurance company tate debt in the past, Mr. Huffman rather than limited partner capital Conflicts of interest can also their own money to create these in- American Equity Investment Life said. Competition for real estate for the insurance company transac- arise if the alternative investment surance company strategic rela- that is inherently conflicted. debt securities and other fixed in- tions, he noted. firm invests in the insurance com- tionships. Apollo created Athene The narrow focus on private come has caused insurers to partner pany with capital from one of its with $2.5 billion from its other lim- credit avoids any potential conflicts with alternative investment manag- Perception and reality investment funds, Mr. Siegel said. ited partners and strategic ac- of interests, he said. Adams Street ers to get access to the loans under- “This tells me, in part, they want In that case, the alternative invest- counts, Apollo’s Mr. Rowan said will originate loans for middle- lying these securities. to avoid the perception and reality ment manager has a vested interest during the investor call. market companies through its pri- The size of the market opportu- of conflict,” Mr. Siegel said. in the success of one of the invest- Those investments have been vate credit business with American nity for insurance companies seek- Conflicts can arise regarding ments in the fund rather than all of fully exited with limited partners Equity committing up to $2 billion ing to allocate to real estate assets is funds and questions of whether the the investments in the fund, he ex- and strategic accounts earning ap- to the investment strategy. between $1.5 trillion and $2 trillion, in-house insurance company will plained. proximately two-to-four times their “We think that the scale of the according to Pretium’s estimates get the first shot at desired funds or Most managers take steps to pre- investment, Mr. Rowan said. opportunity set is immense,” Mr. based on data from S&P Global be allowed to commit more than vent such conflicts, he said. Bill Sacher, New York-based Sacher said. Market Intelligence. n 32 | March 22, 2021 Pensions & Investments AT DEADLINE Credit Managers keen on short- to core real estate was reduced to Blackstone gets $4.5B CONTINUED FROM PAGE 2 7% from 8% and the target to term bonds as yields climb Blackstone Group closed its private equity remains unchanged Christian Hantel, Zurich-based se- inaugural growth equity fund, Growing interest rate risk is managers said. These bonds are at 7%. nior portfolio manager. Blackstone Growth, at $4.5 “It was a disaster last year be- turning high-yield managers’ known as fallen angels. The current actual allocation is billion, the alternative money cause EBITDA was falling off a cliff focus to short-duration high-yield Due to rates sensitivity, 23.7% core fixed income, 19.9% manager said in a March 19 news ... credit numbers deteriorated corporate bonds and could soon Andrzej Skiba, head of U.S. credit international equities, 19.1% release. sharply,” and the result was some prompt these managers to part at BlueBay Asset Management domestic large-cap equities, 8.7% The fund was oversubscribed companies were downgraded, he with longer-dated paper. LLP in Stamford, Conn., said domestic smidcap equities, 8.6% and closed at its hard cap. said. Sources said that increasing fallen angels could have lost the emerging markets equities, 6.9% But as the global economy is Blackstone said in the news government bond yields, which charm they had in the second core real estate, 4.7% emerging moving into the recovery period, it hit 1.66% March 17 up from less half of 2020 when rates were release it is the largest inaugural is “all about healing and repairing markets debt (local currency), 4% than 1% at the start of 2021, are lower. growth equity fund in history. balance sheets and restoring credit private equity, 3.5% high yield and But high-yield managers aren’t Blackstone launched its growth metrics,” with signs already point- a sign of increasing rates, which the rest in hedge funds. equity business, known as BXG, in ing in that direction, Mr. Hantel is making longer-dated high-yield yet selling fallen angels back to 2019 and focuses on “providing said, citing fourth-quarter earnings bonds weak links in high-yield investment-grade managers that capital to entrepreneurs seeking J.P. Morgan in China deal coming in “quite solidly across the portfolios. Lower-quality credits are also able to hold junk paper, to minimize the execution risks J.P. Morgan Asset Management globe.” Vontobel ran 48 billion Swiss such as high-yield bonds, which even though some of these associated with high-growth has agreed to acquire a 10% francs ($54.4 billion) in fixed-in- tend to be shorter duration, will managers are looking for yield by come assets under management as environments,” the news release stake in CMB Wealth Manage- perform better in periods of riding an expected upgrades of Dec. 31, according to its 2020 an- said. ment Co., an asset management increasing rates. Conversely, wave in 2021 and 2022. nual results. longer-duration bonds will see That’s because the upgrade Investors include the $114.1 subsidiary of Shenzhen-based Companies such as Kraft Heinz prices drop as interest rates wave is expected to stretch out billion Minnesota State Board of China Merchants Bank, the two Co. are credits in which investors in time. Investment, St. Paul. firms announced March 19. are taking positions in anticipation increase. Blackstone Group has $619 Subject to regulatory approvals, of upgrades this year or next, sourc- Among long-duration high-yield Sunita Kara, high-yield billion in assets under manage- JPMAM will make a “strategic es said. bonds are those that were portfolio manager at Aviva ment. investment” of about 2.67 billion And though there are no specific downgraded to junk status — or Investors Global Services Ltd. in yuan ($410.6 million) in CMB sectors from which managers ex- BB — from investment-grade, London, said: “It’s a bit of a Wealth Management, expanding a pect upgrades to originate, Mr. Brill Alameda County commits described three “buckets” of com- partnership forged in 2019 that The $8.7 billion Alameda panies that are on the potential up- focused on product development County Employees’ Retirement grade list: fallen angels, which were high-yield names that are BB and were downgraded from invest- and investor education, according Association made three new downgraded to junk status in 2020 we think will stay that for a long ment-grade status in 2020 due to to a joint news release. commitments totaling up to $82 but are expected to return this year time, but for specific upgrade can- the COVID-19 crisis may offer in- Under the agreement, the two million at its remote meeting or next; companies that have lan- didates,” Invesco’s Mr. Brill said. “I vestors a significant return oppor- firms will design asset manage- guished in the high-yield category would point out that a lot of these tunity to capture the spread tight- March 18. ment products — including fixed for years, such as some of the deals are fairly liquid, too — you ening that occurs as a result of the The pension fund’s board income, multiasset and target- homebuilders downgraded in the can find these bonds. They’re gen- re-rating back to investment-grade approved commitments of up to date funds — for Chinese aftermath of the global financial erally not things that are just nee- status, said Brian Kloss, portfolio $30 million to buyout fund crisis that have benefited from de- dle in a haystack, (but) relatively manager on the global fixed-in- investors. Genstar Capital Partners X, up to levering and a better housing mar- large, liquid deals.” come team at Brandywine Global $27 million to Strategic Value ket; and newer companies such as But managers waiting to capture Investment Management LLC, an Special Situations Fund V, a Accenture takes stake technology firms that have not yet recent fallen angels may need to be affiliate of Franklin Templeton in special situations fund managed Accenture has invested in ESG built up mature credit structures to patient. “We are not going to see the Philadelphia. by Strategic Value Partners, and data and insights firm Arabesque be admitted to invest- same velocity on the way Mr. Kloss noted that due to the in- up to $25 million to Sustainable S-Ray, through its strategic ment-grade. up,” said Henrietta Pac- terest rate risk that is evident through In that final set of quement, senior portfolio increasing yields in the Treasury Asset Fund III, an infrastructure investment unit Accenture firms, managers named manager and head of in- market, his firm is reducing exposure fund that invests in sustainable Ventures. companies such as Netf- vestment-grade for the to long-dated investment-grade cor- projects and ventures, managed The agreement gives Accenture lix Inc. among candi- European credit team at porate bonds to 5% to 10% from a by Vision Ridge Partners, a full access to Arabesque S-Ray’s dates for an upgrade. Wells Fargo Asset Man- high of 25% to 30%, and replacing it webcast of the meeting showed. solutions and analysis of agement in London. She with both shorter-dated investment- As of Sept. 30, the actual transparent, nonfinancial and Lower default risk said the firm is consider- grade corporate bonds and high- allocations to private equity and sustainability performance The accommodative ing adding high-yield yield corporate credit. real assets were 7.5% and 4.7%, metrics. Arabesque S-Ray uses actions provided by cen- bonds that could be up- “We started to move out of longer- respectively. big data and machine learning tral banks in 2020 as part ANTICIPATION: graded to investment- dated investment-grade corporate of an effort to reduce the Sabrina Jacobs said grade later this year as credit exposure as spreads retraced models to draw on more than 4 impact of the pandemic her firm is trying to the firm has the flexibili- the pandemic widening, leaving very million ESG data points daily, from La. fund sets new target has helped drive down stay ahead of ratings ty to hold them. “Sectors little cushion to absorb an increase in more than 30,000 sources of The $2.6 billion Louisiana the default risk, forming agencies . that are more of interest, interest rates,” he said. information. Municipal Police Employees strong demand for high- for example, are cyclicals And managers continue to add Terms of the deal were not Retirement System created a new yield bonds. Because of that, man- that have gone down and we might potential rising stars. Last month Jon disclosed. The two companies will agers said they are interested in be expecting them to get back to Mawby, head of investment-grade target to diversified multisector also develop new tools and adding both fallen angels and high- investment-grade,” she said. credit at Pictet Asset Management in fixed income, raised its overall yield bonds that were never in the London, said for its unconstrained target allocation to equities, and methods for capturing, analyzing and reporting ESG data, the investment-grade category because More flexibility strategies, the firm launched a strate- reduced targets to core fixed the spread between the highest- Some managers have increased gic trade to short some of the overle- release said. income and core real estate. rated junk bonds that are BB-rated flexibility to hold high-yield bonds. vered cyclical sectors/companies Within its overall equity and investment-grade bonds that Ms. Jacobs said Insight increased the allocations, the pension fund Class actions stay steady are at least BBB-rated, has been allowance to hold high-yield bonds increased targets to domestic Settlements in securities class- quite attractive. on a portfolio level by about 1% or large-cap equities to 20% from action cases in 2020 were in line “(We) can be picking up bonds 2% due to spreads on relative basis. 17%, domestic smidcap equities with previous years, despite the that have never been investment- Adding companies that are ex- CalPERS grade that (are) probably going to pected to be upgraded is a good to 10% from 8% and emerging COVID-19 pandemic disruption, CONTINUED FROM PAGE 6 be upgraded. ... We are trying to be source of alpha — so long as you markets equities to 9.5% from according to a report released ahead of the rating agencies’ deci- buy the bond early enough in the term incentive program, but a board 8.5%, while the target to interna- March 17 by Cornerstone sions (in) both directions by looking process, said Andreas Michalitsia- committee wanted more informa- tional equities was reduced to Research. at company cash flow and debt lev- nos, portfolio manager with the tion, a committee meeting tran- 16% from 18%. The report, Securities Class els,” said Sabrina Jacobs, fixed-in- global investment-grade corporate script shows. CalPERS has since Within fixed income, the Action Settlements: 2020 Review come investment specialist at In- credit team at J.P. Morgan Asset replaced Grant Thornton with pension fund created a new and Analysis, found that courts sight Investment Management Ltd. Management in London. “It was a Global Governance Advisors, which 11.5% target to diversified approved 77 settlements totaling She said about $1 billion of newly trade you needed to position early signed its contract in December. multisector fixed income and $4.2 billion in 2020, up from the upgraded bonds became available for to extract the most value and we Ms. Frost said the board decided to investment-grade managers in feel we did that,” he said. to wait on making a decision about reduced the target to core fixed 74 settlements totaling $2.1 January alone. Insight had £753 bil- But that opportunity is getting the long-term incentive program income to 11.5% from 25% and billion the previous year. The lion ($1.02 trillion) in assets under smaller as upgrades are now immi- until it heard its new consultant’s the target to emerging markets median settlement value in 2020 management as of Dec. 31. nent. “If I look at a BB and BBB- opinion and wanted more informa- debt (local currency) to 4.5% from — $10.1 million — was down But just looking like they might (bond), they are not a million miles tion about what other institutions 5.5%. The target to high yield 13% from 2019 but was still 19% be upgraded will not automatically away (in terms of spread). We are are doing regarding long-term in- remains unchanged at 3%. higher than the prior nine-year get high-yield companies into in- talking 25 basis points,” he said. centives. Within alternatives, the target median. vestment-grade portfolios. “We’re Some of the manufacturing com- In addition to the challenge of not looking for muddling-along panies and stressed credits that recruiting an executive with expe- Pensions & Investments March 22, 2021 | 33

ESG Legislation 2 U.S. representatives Kentucky lawmakers approve hybrid plan for teachers fund

ask money managers to By ROB KOZLOWSKI would be contributed to the sup- plemental plan, which Mr. Barnes The Kentucky General Assem- said would be a new 403(b) plan. disclose diversity data bly voted March 16 to approve a Mr. Barnes said the current Andrew Harrer/Bloomberg bill that would move new partici- contribution formula involves Lawmakers request info pants in the Kentucky Teachers’ variable costs for the common- Retirement System, Frankfort, to wealth of Kentucky, which must back to 2016 in a bid to a hybrid plan. make variable contributions based TRICKY SITUATION: Sunita Kara said the prospect of higher corporate earnings hold firms accountable State Rep. C. Ed Massey said in on pension plan funding. The new has been muddled by rate volatility. February following the House’s tier is funded above 100%, and any passage of the original bill that he savings in costs will go to a stabili- By HAZEL BRADFORD sponsored the bill because of the zation reserve account, from which tricky situation.” The prospect of $23.9 billion pension fund’s “huge the board can draw from if the corporate earnings improvement Large U.S. investment firms unfunded legacy.” According to funding ratio for the tier falls be- has been muddled by rate volatility, should disclose their diversity data Cavanaugh Macdonald’s most re- low 100%, Mr. Barnes said. she said. “Therefore, identifying and policies, Rep. Maxine Waters, cent actuarial valuation of the re- Mr. Massey said the only sig- companies and playing 10-year D-Calif., and Rep. Joyce Beatty, D- tirement system, the funding ra- nificant change in the bill from (bonds) on that curve once that Ohio, said in a letter sent to 31 firms tio as of June 30 was 58.4%. the version originally approved by March 18. The bill creates a new tier for the House in February was the upgrade is through would lead to Ms. Waters chairs the House Fi- DATA DIVE: Maxine Waters said the effort teachers hired after Jan. 1, 2022. switch to age 57 from age 55 as the spread compression,” she added. nancial Services Committee, and is to measure performance on the issue. Beau Barnes, deputy executive earliest potential retirement age. “Up until then we could have Ms. Beatty chairs the Diversity and director and general counsel of He also added that while Gov. raising rates going against us,” she Inclusion Subcommittee. The letter “Pressure on institutional inves- the pension fund, said in an email Andy Beshear had said early in added. Aviva has £366 billion to firms with $400 billion or more in tors to do better is mounting from all that under the new tier, a total of the process of the bill’s drafting ($506 billion) in assets. assets under management is part of sides — from legislators, corpora- 17% in employer and employee he would veto it if passed, that — PAULINA PIELICHATA an effort “to ensure a comprehen- tions, civil rights leaders, clients and contributions would go to the de- was before the Kentucky Educa- sive understanding of diversity and more. And many investors are finally fined benefit side of the hybrid tion Association took an official inclusion performance in the finan- responding to the pressure, releas- plan, and 4% (split evenly be- position on the bill, which it has cial services industry,” and the firms ing data and taking steps to address tween employers and employees) since said is neutral. n rated BBB and to go long on BB-rat- should disclose the information to our diversity dearth,” he said. n ed bonds expected to be rising stars. the SEC’s Office of Minority and “We feel (the) outlook and ratings Women Inclusion, Congress and pressure will continue to build as rat- the public, the letter said. ing agencies don’t want to be seen (to The firms were asked to disclose be) behind the curve as they did in diversity and inclusion data and pol- the last financial crisis.” icies from 2016 through the present, including workforce and board di- High yield vs. long dated versity, use of diverse asset manage- Join us in welcoming Other managers are also increas- ment firms and other suppliers, and ing their high-yield exposures at any challenges implementing diver- the expense of long-dated corpo- sity and inclusion policies. two new members to thethe rate bonds. “With these data requests to For example, Stephan Ertz, head America’s largest investment firms, of credits at Union Investment we are continuing to hold the finan- Pensions & Investmentss team.team. Holding AG in Frankfurt, also add- cial services industry accountable ed a mix of high-yield bonds into for diversity and inclusion,” Ms. Wa- investment-grade portfolios reach- ters said in a statement criticizing ing the maximum 10% bucket about investment firms for “failing to pri- two weeks ago, from 5% in Novem- oritize” diversity and inclusion on ber. The firm sold long-dated in- boards and staff, or working with vestment-grade corporate bonds. diverse-owned asset managers. “Balance sheets of companies Ms. Beatty is planning to intro- are improving ... it is enough to sta- duce legislation that would require bilize your credit metrics, we expect all regulated entities to share diver- growth, that should help high-yield sity data with regulators, she said at Gauri Goyal companies. You should then already a subcommittee hearing on asset buy them; not wait until there is a management industry diversity. Director, Content Solutions possibility (that) there will be an The planned Diversity Data Ac- upgrade,” he said. countability Act “is precisely the [email protected] | 917.495.9206 Mr. Ertz said he preferred a high- kind of leadership we need from yield position over investment- Washington right now to continue grade currently. “It is a better place the growing momentum to bolster to have low duration, high-spread diversity in the asset management high-yield bonds than high-dura- industry,” said Robert Raben, Di- tion, low-spread investment-grade verse Asset Managers Initiative bonds.” n founder, in a separate statement. rience investing a large and com- CalPERS’ 7% expected rate of re- plex portfolio in a public environ- turn, Ms. Frost said. CalPERS re- Usha James, CMP ment, the CIO needs to be able to ported a net return of 12.4% for retain the confidence of all the 2020. Director, Conferences stakeholders, including the benefi- “There’s not a large group of can- ciaries, she said. didates that would meet all the cri- [email protected] | 212.210.0244 Ms. Frost the board expect to re- teria,” she said. launch the search in June. Ms. Frost added that internal In the meantime, Ms. Frost said candidates could also be consid- that the full board at its April 19-20 ered for the CIO role. meeting will also be asked to vali- Also at the April meeting, the date the current criteria in place board is expected to decide wheth- used to assess candidates, which er it will keep the same search pro- includes being an experienced and cess. The current process involved respected institutional investment two panels of three board members, professional with knowledge of which came together in a joint sub- managing investments in-house committee to vet potential candi- and through external managers. dates. The board is expected to de- pionline.com The individual’s expertise in in- cide whether the search should be vesting growth assets is going to be conducted by its seven-member “a very important consideration” performance, compensation and due to the challenge of attaining talent management committee. n 34 | March 22, 2021 Pensions & Investments

Pay Act; gender, disability and pay tors PIMCO named in a March 16 PIMCO spokeswoman said at the an email statement that PIMCO is discrimination; and instances of news release was a woman: Sonali time that the matter had been re- engaging with investment clients PIMCO sexual harassment, stalking and re- Shah Pier, a portfolio manager fo- solved “amicably.” reiterating the company’s commit- taliation by male employees. cused on high-yield and multicredit Ms. Schaus did not return an ment to “providing employees with CONTINUED FROM PAGE 1 The two former PIMCO employ- strategies. email request for comment on PIM- an inclusive workplace that is free of Dec. 31. ees who are part of the lawsuit were PIMCO spokeswoman Agnes CO’s most recent discrimination of discrimination, harassment and Investment consultant NEPC in administrative or executive as- Crane referred questions to the lawsuit. retaliation of any kind.” LLC, Boston, declined to comment sistant positions while the titles news release, which didn’t address In October 2019, Andrea Martin Asset owners said they are doing about PIMCO in response to P&I’s among the three who still work for a question about why just one fe- Inokon, senior vice president and their own due diligence. request but said in a due diligence PIMCO are administrative assis- male employee was promoted. She senior counsel at PIMCO, sued Investment officers of the $65.5 report to clients obtained by P&I tant, vice president and project declined to provide further details. PIMCO for alleged gender discrim- billion Los Angeles County Em- that the firm has placed PIMCO on manager. ination and because she was un- ployees Retirement Association, watch because of the plaintiffs’ law- In its legal filing, PIMCO said the Women in senior ranks fairly bypassed for promotions. Pasadena, Calif., are “aware of the suit. sources of disputes between the PIMCO noted in its court filing Ms. Martin Inokon’s case still is allegations raised at PIMCO. Diver- NEPC said in the report that it firm and the plaintiffs were perfor- that within the firm’s senior leader- making its way through the court, sity, equity and inclusion are inte- “will monitor the (lawsuit) for reso- mance-related rather than about ship group, including managing di- confirmed Ms. Abrolat, lead attor- gral aspects of our ongoing scrutiny lution and any findings or other in- discrimination or other employ- rector, executive vice president and ney on the case, in an email. and multidimensional evaluation of formation pertaining to the issue. ment issues. senior vice president positions, 25% all external managers,” said CIO NEPC will engage with PIMCO on “As the court filing … shows, are women (up from 11% in 2010); On the watchlist Jonathan Grabel in an email. their specific efforts relating to di- when the language the plaintiffs 70% are over 40 years old; and 27% Asset owners said they are con- “LACERA is engaging PIMCO — versity, equity and inclusion, as well used to create a false image of a are minorities (up from 9% in 2010), sidering putting the firm on their and all asset managers — to gauge as metrics relating to the topic.” workplace is stripped away, what PIMCO said in the filing. manager watchlist. their track records and commit- A pension fund CIO who knows remains are five separate and unre- In addition, 36% of PIMCO’s ex- A pension fund CIO who asked ments to ensure equitable and in- PIMCO well and whose fund in- lated instances of disputes over ecutive committee are women, the not to be named agreed that putting clusive workplace cultures and (to) vests with the firm said on condi- performance, pace of advancement PIMCO court document said. PIMCO on watch is reasonable, but use our evaluation to inform invest- tion of anonymity that “the concern and workplace logistics,” said Mi- PIMCO and its parent company, said, “Given that PIMCO is a stal- ment decisions,” he added. about PIMCO and these allegations chael Reid, a PIMCO spokesman, in Allianz Group, Munich, do “not tol- wart in the investment industry and LACERA has $1.3 billion invest- is whether there is a systemic prob- an email. erate any kind of discrimination or provides good money management ed with PIMCO in investment- lem there. I’ve spoken with senior PIMCO said in the court docu- harassment in the working envi- strategies, are you going to fire grade bonds, commodities and female executives at PIMCO about ments that it has anti-discrimina- ronment. This is anchored in our them over allegations?” credit, according to materials on the discrimination issues and they said tion, harassment and retaliation code of conduct. We advocate diver- The CIO, whose fund also invests associations’ website. they don’t see it, that it isn’t hap- policies in place and urges employ- sity and inclusion as well as gender with PIMCO, added that “it would The $34.8 billion Indiana Public pening.” ees to report incidents violating the equality as part of our commit- be imprudent to take action and fire Retirement System, Indianapolis, “My takeaway is that this is a se- policies, noting that complaints are ment,” Allianz spokeswoman Auri- PIMCO now. You need to wait and “continues to monitor the (PIMCO) rious issue for PIMCO, but you have immediately investigated and ac- ka von Nauman said in an email. see how the situation develops situation and events regarding cur- to let the facts play out,” the CIO tion is taken if warranted. Allianz Group managed a total of whether PIMCO is found guilty or rent and potential investments. IN- said. Plaintiffs’ attorney Nancy Abro- $2.94 trillion as of Dec. 31, including settles with plaintiffs.” PRS relies on qualitative and quan- The fund has not placed PIMCO lat, head of Abrolat Law PC, El Se- PIMCO’s AUM. The fund has not placed PIMCO titative factors with regard to any on its watchlist. gundo, Calif., said in an email reac- That said, the current complaint on its watchlist. investment decision. Our evalua- tion to PIMCO’s court filing that “it is not the first discrimination suit Like NEPC, other investment tion of the situation is ongoing,” Expanded in February is absurd (that) the company is filed by a PIMCO female employee. consultants have declined to dis- said Dimitri P. Kyser, the system’s The original complaint against spending so much effort employing On April 4, 2018, Stacy Schaus, cuss their advice to clients, citing spokesman, in an email. PIMCO was filed in California Su- delay tactics to stop these women executive vice president and the policies forbidding discussion of in- INPRS invested a total of $313 in perior Court in Santa Ana on Nov. from seeking justice while doing defined contribution practice lead- dividual managers. But they are a quantitative emerging market 17 on behalf of two plaintiffs and absolutely nothing to address sys- er, filed an age and sex discrimina- said to be meeting with the firm. debt strategy managed by PIMCO was expanded on Feb. 18 to include temic issues of harassment, abuse tion case against PIMCO regarding Industry sources said PIMCO in December. three additional plaintiffs. and discrimination under their own a demotion and significant cut in has been inundated with requests Including the new allocation, The charges in the amended roof.” compensation. from consultants and asset owners PIMCO managed a total of $3.8 bil- complaint allege violations of the With regard to promotion of fe- She retired from PIMCO on Nov. to discuss the plaintiffs’ lawsuit lion for INPRS as of Jan. 31, accord- California Fair Employment and male employees, only one of seven 21, 2018, after her attorney request- with the firm’s executives. ing to meeting materials for the Housing Act and the federal Equal newly appointed managing direc- ed that the suit be dismissed. A PIMCO’s Mr. Reid confirmed in system’s Feb. 26 board meeting. n

technology powerhouse Ant, over- Market veterans said while the this time, Vanguard can bring more Vanguard has the patience to stay seeing portfolios tailored to the portfolio advisory services joint value to more investors through the the course because increasingly it’s Vanguard needs of individual Chinese inves- venture represents an intriguing JV rather than by launching funds,” shrinking footprint in Asia would tors. Vanguard and Ant Group’s business proposition, its potential the spokeswoman said. mean China will not be a needle- CONTINUED FROM PAGE 2 portfolio advisory services joint pales in contrast to what a fund mover for this behemoth,” said the lenges Vanguard would face on the venture last week said it has at- management company on the Joint venture Hong Kong-based money manage- mainland — from the dominance tracted more than 1 million users in mainland could offer. Potentially, the joint venture ment executive. And “if it is not a there of intermediated distribution less than a year, with the firm’s cli- Portfolio advisory remains “an could prove a better value proposi- needle-mover, than why bother in- that would prove inhospitable for ent base more than doubling over untested market ... without hard in- tion for Vanguard as well by not vesting for the long run,” he said. the firm’s offerings of index strate- the past 11 weeks alone. vestment data from which we can taxing the firm’s resources as much, Still, at 50 basis points for advi- gies and exchange-traded funds to “We have taken the decision to extrapolate,” noted Z-Ben’s Mr. considering the significant costs of sory services, the potential for the the strong ingrained preference focus our resources in China on Omondi. But in absolute terms, a joint venture to grow into a signifi- Chinese individual investors have growing the JV advisory service and fund management business is cant contributor for the money for actively managed products. pause our application for a (fund clearly the larger opportunity and ‘Our hope is that manager’s global business can’t be Even so, as recently as five or six management company) license,” one that Vanguard may yet come through the JV ruled out, the executive added. months ago, Vanguard executives Vanguard said in an emailed state- around and pursue at a later date, Whether Vanguard will dust off appeared confident they could ment. he said. advisory we’re its plan to seek a fund management overcome those obstacles. If the portfolio advisory business company license over the mid to Scott Conking, head of Vanguard Stretched thinner is a consolation prize, the March 18 preparing the long term “is to be determined,” ac- Asia, said in an Oct. 16 interview The firm’s resources could be business update by the joint ven- ground for the cording to the Vanguard spokes- that the continued opening of Chi- stretched thinner now than they ture suggested it’s one that never- woman. na’s market had made the main- were at the end of August, when theless “could move the needle” for future.’ But she said the success of the land’s individual investor segment Vanguard was managing roughly Vanguard, said a Hong Kong-based joint venture could move the day VANGUARD SPOKESWOMAN Vanguard’s biggest opportunity to $190 billion for clients based in the money management executive who forward when Vanguard would have have a “positive impact on the way region. declined to be named. better prospects to build a fund the world invests.” Around that time, Vanguard de- The Vanguard spokeswoman establishing and staffing a local business in China. “Our hope is that It could take considerable time to cided to walk away from tens of bil- said the primary factor in Van- fund management company. through the JV advisory we’re pre- gain traction but with Vanguard ul- lions of dollars of institutional sep- guard’s business decisions on With a fee of 50 basis points on paring the ground for the future” - timately owned by investors in its arately managed accounts the firm where and how to invest is their those 1 million or more accounts of nurturing an environment where mutual funds, the firm was well had garnered over the previous ability to have a positive impact on at least 800 yuan ($123) each, even fee-conscious individual investors placed to take the long-term ap- eight years, to bring Vanguard’s individual investors. For now, “we’re with a claim on only about half its invest for the long term, she said. proach needed to crack the market, Asia-Pacific business in line with adding tremendous value to inves- revenues, the joint venture will de- For now, Dengpan Luo, the mon- Mr. Conking said. its global focus on individual inves- tors through the JV advisory,” pro- liver margins far in excess of the 7 ey management veteran Vanguard Vanguard would take the first gi- tors and their advisers, Mr. Conking viding them with long-term, diver- basis points Vanguard highlights hired last year to oversee its ant step in pursuit of that opportu- said. sified portfolios, she said. for its $4 trillion book of index fund planned fund management compa- nity — applying for a license to set A spokeswoman for Vanguard “As for launching individual and ETF business in the U.S. ny business, will continue to head up a fund management company said last year’s “decision around in- funds, investors’ current preferenc- One market source, who declined the firm’s wholly foreign-owned on the mainland — in early 2021, he stitutional assets,” which helped es for trading actively managed to be named, said the joint venture’s enterprise in Shanghai, providing said. trim the firm’s Asia-Pacific AUM to funds and purchasing through in- assets under advisement stand now support for the firm’s JV with Ant Five months later, those plans $163 billion as of Jan. 31, had noth- termediaries rather than direct is a at just less than 7 billion yuan, or Group; conducting policy research; have evaporated, with Vanguard ing to do with its decisions to stop challenge to our preferred business about $1.1 billion. That total would and continuing to evaluate busi- moving instead to focus its efforts pursuing a fund management com- approach, coupled with a large ex- generate annual fees of almost 35 ness opportunities and partner- on the 49%-51% joint venture it pany license and focus instead on isting field of local funds,” she said. million yuan. ships in China, the spokeswoman launched last April with digital its joint venture. “Our decision recognizes that at “The issue for me is whether said. n Pensions & Investments March 22, 2021 | 35 CHANGES AHEAD implications of the rule,” Mr. berg added. “Those things seemed Berkowitz said. “We believe the fi- hard to apply as a practical manner ESG rules nal rule would make the invest- and so would make it challenging Ohio Public Employees’ Retirement System, Columbus, is seeking ment selection process for plan for plan sponsor fiduciaries to im- CONTINUED FROM PAGE 2 one or more active domestic small-cap core equity managers to run $100 sponsors much more complicated plement,” she said. million to $200 million. The $103.5 billion retirement system is also factors in the financial evaluation and burdensome than is necessary searching for emerging equity managers. It issued a request for information of plan investments, and that they to effectively protect plan partici- Cautious approach because it wants to increase its exposure to emerging women- and may need to have special justifica- pants.” The Labor Department’s an- minority-owned managers, spokesman Michael Pramik said. OPERS is tions for even ordinary exercises of Kary Moore, Pittsburgh-based nouncement is exactly what many interested in information from managers of emerging women- and minority- shareholder rights,” said Ali Kha- senior corporate counsel and se- stakeholders were asking for, said owned managers of active international developed markets, emerging war, principal deputy assistant sec- nior vice president at Federated Michael P. Kreps, a Washington- markets and domestic small-cap equities. The RFIs are available on the retary for the Employee Benefits Hermes Inc., said the final rule’s based principal at Groom Law website of the $103.5 billion retirement system, which includes $90.1 Security Administration, in a news main problem at the moment is the Group, in an email. “I am hopeful billion in defined benefit assets. Responses to the small-cap search are release. “We intend to conduct sig- messaging around it. that the administration can thread due at 3 p.m. EDT on March 26; responses to the emerging manager nificantly more stakeholder out- “I think the proposed rule had so the needle in such a way that it per- search are due at noon ET on April 2. reach to determine how to craft many problems that it didn’t matter manently ends the cycle of chang- rules that better recognize the im- almost what the final rule had to ing the rules every time a new pres- San Bernardino County (Calif.) Employ- portant role that environmental, so- say; I think the damage was done in ident takes office,” he said. HAVE SOME NEWS? ees’ Retirement Association is seeking cial and governance integration can the messaging,” she said. “And even Preston Rutledge, who stepped Please submit news emerging markets debt and equity managers. play in the evaluation and manage- though the final rule was what we down as the assistant secretary of of changes to David NEPC, investment consultant to the $12 billion ment of plan investments, while considered an improvement over labor for EBSA shortly before the Schepp, news editor, at pension plan, is assisting with the searches. continuing to uphold fundamental the proposed rule, I think some of rules were proposed last year, said dschepp@pionline. The retirement plan has an 8% allocation to fiduciary obligations.” the harsh focus on ESG in the pro- in an email that EBSA has a long- com emerging market debt, or roughly $960 Until the Biden administration posed rule sort of tainted the per- standing practice of utilizing non- million, and a 6% allocation to emerging acts further, fiducia- Joseph Cancellare enforcement poli- market equities, or roughly $720 million. The RFPs are on NEPC’s website. ries are unlikely to cies when it revisits Proposals for both searches are due by 3 p.m. EDT March 26. change their plan an area of guidance lineups, sources critical to the regu- Nashville (Tenn.) & Davidson County Metropolitan Government said. lated community. Employee Benefit Trust Fund is searching for a custodian. The $3.4 “The market is “Preserving the sta- billion pension fund is seeking a firm to provide global custody, securities going to want that tus quo while new lending, commission recapture and other services, according to the RFP clarity from the DOL guidance is devel- posted on the city and county’s procurement website. Proposals are due at before it continues oped is sound regu- 2 p.m. CDT on March 31. to move forward,” latory practice,” he said Sarah Bratton said. Fairfax County Public Schools, Falls Church, Va., is searching for Hughes, New York- But while the record keepers for its 403(b) plan and 457 plan. The 457 plan has $297 based head of sus- non-enforcement million in assets; the size of the 403(b) could not be learned. The RFP is tainability, North policy is welcomed available on the school district’s procurement website. Registration is America at Schrod- news for many, the required. Proposals are due at 2 p.m. EDT on April 1. ers PLC, adding that rules are still on the there’s “pent-up” books and fiducia- Louisiana Teachers’ Retirement System, Baton Rouge, is searching participant demand ries must still abide for general investment consultants for its $23 billion defined benefit plan for ESG options. The by them, sources and $2.4 billion 401(a) plan. TRSL has issued a solicitation for proposals latest global investor said. “You can’t pull due to the impending contract expirations of current DB plan consultant Aon survey from Schrod- back a rule by doing Investments USA and DC plan consultant Mercer on June 30. The SFP is ers, which was re- a press release,” said available on TRSL’s website. Proposals are due at 4:30 p.m. CDT on April 5. leased in September, Kevin Walsh, a fel- found that 47% of low Washington- Chicago Park Employees’ Annuity & Benefit Fund is searching for individual investors ‘You can’t pull back a rule by doing a based principal at an active domestic core fixed-income manager to run about $19 million. frequently invest in press release.’ Groom Law Group, The RFP is available on the $318 million pension fund’s website. Proposals sustainable invest- during Pensions & are due at 3 p.m. CDT on April 5. ment funds rather GROOM LAW GROUP’S KEVIN WALSH Investments’ De- than those that don’t fined Contribution Los Angeles Water & Power Employees’ Retirement Plan is consider sustainability factors, up ception of the final rule.” Spring Virtual Series earlier this searching for an active extended global credit manager to run $750 million for from 42% in 2018. Because the initial proposal was month. its $15.3 billion defined benefit plan. The RFP is scheduled to be posted on the “anti-ESG,” the Biden administra- With the rules still in effect, the plan’s website on March 22. Proposals will be due at 4 p.m. PDT on April 9. Revisions ahead tion has the opportunity to promul- risk of private ligation looms. “If you The final version of the financial gate a rule of its own that’s similar in have a plan participant who’s un- Oklahoma Law Enforcement Retirement System, Oklahoma City, is factors rule does not prohibit fidu- substance to the final rule, but takes happy that a plan is making deci- searching for an opportunistic core-plus/multisector fixed-income manager ciaries from incorporating ESG in- a more positive ESG tone and pleas- sions that are costing them invest- to run $30 million to $50 million. The RFP is available on the $1.2 billion vestments in plan lineups, but it es stakeholders, Ms. Moore added. ment return or are causing them to pension fund’s website. Proposals are due at 4 p.m. CDT on April 9. still made them hesitant to do so, The Labor Department under take on more investment risk, a sources said. the Biden administration is likely to non-enforcement policy is helpful Chicago Board of Education is searching for a single record keeper for Notably, the rule excludes a fund recognize that applying ESG fac- in that it provides some comfort for Chicago Public Schools’ 403(b) and 457 plans. The board launched the from being a qualified default in- tors in investment decision-making this interim period, but it’s not a search with the goal of consolidating the plans to a single vendor from the vestment alternative if its invest- is standard, Ms. Goldberg said. get-out-of-jail-free card because three record keepers the plans currently offer, spokesman Michael ment objectives, goals or principal Will Hansen, Arlington, Va.- the law is the law, the regulations Passman confirmed. As of Sept. 30, the plans had combined assets of investment strategy include or con- based executive director of the Plan are the regulations, they went $1.7 billion. The RFP is available on CPS’ procurement website. Registra- sider the use of one or more non- Sponsor Council of America and through notice and comment, so tion is required. Proposals are due at 2 p.m. CDT on April 9. pecuniary factors. chief government affairs officer at private litigants are still a real risk Jason Berkowitz, chief legal and the American Retirement Associa- there,” Mr. Walsh said. New Mexico Education Trust Board, Santa Fe, is searching for an regulatory affairs officer at the In- tion, said he’d like the Labor De- Mr. Hansen said plan sponsors investment consultant for the New Mexico 529 College Savings Program. sured Retirement Institute in partment “to ensure that it’s crystal appreciate the new non-enforce- The program consists of two 529 college savings plans: the $1.9 billion Washington, said in a statement clear that this does not have any ment policy but hope the Labor De- adviser-sold Scholar’s Edge Plan and the $643 million direct-sold Education that the rule would significantly im- impact on QDIAs in particular. We partment acts “with great speed” in Plan. The RFP is available on the board’s website. Proposals are due at 5 pair plan sponsors’ ability to con- want it known that you could have revising the financial factors rule. p.m. MDT on April 14. sider ESG factors. ESG factors in QDIAs.” Due to the private litigation “The final rule reflected the With respect to the proxy voting threat, Mr. Hansen said plan spon- For a comprehensive database of search and hiring activity, visit P&IQ at PIonline. Trump administration’s posture re- rule, the new administration could sors will likely wait until a new rule com/piq. garding ESG investments without scale back the reporting require- is issue before making any ESG- adequately considering the broader ments for voting proxies, Ms. Gold- related investments. n

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