April 19, 2021 PIonline.com $16 an issue / $350 a year THE INTERNATIONAL NEWSPAPER OF MONEY MANAGEMENT Alternatives Dave Cutler Dave Private equity’s health-care role draws spotlight Congress hears about studies on detrimental effects for patients By ARLEEN JACOBIUS Health care is too large a part of SPECIAL REPORT CRYPOTOCURRENCY AND DIGITAL ASSETS the economy for private equity in- vestors to ignore, but a burning spot- light on how managers run some hospitals and nursing homes is Investors inching closer to joining the fray prompting a few asset owners that generally prefer to quietly engage Market infrastructure MORE ON CRYPTOCURRECY Fidelity Digital Assets, which was with general partners to speak up. launched in late 2018 by Fidelity Demand for health care is rising: DIFFERENT RESULT: Sabrina T. Howell improvements drive n 2 Virginia funds warm up to Investments as the first major In the U.S., health-care spending said private equity’s positives in other cryptocurrency growth blockchain investments. Page 14 firm in institutional asset servic- grew 4.6% to $3.8 trillion in 2019, industries don’t translate to health care. n Central bank digital currency ing to offer cryptocurrency custody amounting to 17.7% of gross domes- idea gaining traction. Page 15 By BRIAN CROCE and trade execution operations. tic product, according to the Centers Private equity health-care funds n NFTs loom as next digital asset Mr. Jessop said his company for Medicare & Medicaid Services. outperformed the internal rate of If digital assets were a dance class frontier. Page 16 noticed an uptick in interest In an attempt to ride the wave of return of all private equity for funds floor, institutional investors have around the start of the COVID-19 this growth, private equity invest- raised between 2006 and 2017, been mainly sipping punch on the “We continue to see more de- lockdowns in March 2020. The ment in health care has grown, to PitchBook data shows. The median gym bleachers for the last decade. mand, we continue to see diversi- previous fall, Fidelity Digital As- $120.1 billion in 874 deals in 2019 IRR for health-care fund vintages But now, more institutional in- fication of demand across institu- sets was granted a charter from and $95.6 billion in 938 transactions 2006 through 2008 was 10.3% com- vestors are putting on their danc- tional client segments, which is the New York State Department of in 2020, from $58.2 billion in 2007, pared with a 9% IRR for all funds of ing shoes and getting off the bleach- also a healthy indicator of where Financial Services to operate as a according to PitchBook Data Inc. the same vintages. Health-care ers, or at least thinking about tying the industry is going,” said Tom Jes- limited liability trust company. At the end of the first quarter, funds raised from 2015 to 2017 their laces, sources said. sop, New York-based president of CONTINUED ON PAGE 14 private equity firms had invested earned a 16.8% median IRR, out- $20.2 billion in 182 deals. SEE HEALTH CARE ON PAGE 22 Tyler Mallory ESG Regulation Move to link exec pay to Labor Department ESG integration growing clarifies its priorities By HAZEL BRADFORD on investment advice Now in the second year of the COVID-19 pandemic, inves- By BRIAN CROCE tors are raising expectations about companies’ responses to highlighted ESG issues such as diversity and, increasingly, New guidance from the Department of Labor further clari- connecting that to executive compensation. fies that bolstering oversight of rollover recommendations and “Compensation is the ultimate governance mechanism that mitigating financial institutions’ conflicts of interest are top we have to make sure (that) companies are doing things right,” priorities. said Peter Reali, New York-based managing director and head The two pieces of guidance issued April 13 relate to the La- of engagement, responsible investing for Nuveen, with $1.2 bor Department’s investment-advice exemption that took ef- trillion in assets under management. fect in February. The exemption permits investment-advice “ESG issues are making their way into compensation con- fiduciaries to receive compensation for more types of guid- versations because shareholder proponents want it integrated ance, including advice to roll over assets to an individual re- into executive compensation design, to create accountability tirement account from a retirement plan. for executing on ESG commitments” and companies’ respons- While the first piece of guidance details questions a retire- es to COVID-19, Mr. Reali said. SHIFTING ADVICE TARGET: Jennifer Eller thinks the potential for ment investor might ask potential investment advice provid- Robin Ferracone is CEO of | SEE EXEC PAY ON PAGE 21 additional guidance could cause confusion regarding compliance. ers, the second piece is directed | SEE ADVICE ON PAGE 26 SOUND BITE Focus on human rights a challenge in China ICGN’S GEORGE S. DALLAS: ‘It is PRI’s focus on human rights regulatory schizophrenia — they want comes just as that topic has left to give investors power, but not real global retailers facing a back- power.’ Page 2 lash in China’s fast-growing consumer market. Page 2 2 | April 19, 2021 Pensions & Investments IN THIS ISSUE Markets VOLUME 49, NUMBER 8 Defined contribution Debate over changes to listing rules roils U.K. Improving financial wellness programs for smaller defined contribution plans is a top Review looks to maintain to U.K. “premium” listings — com- panies that have the potential to be priority this year. Page 25 governance standards included in the FTSE 100 and FTSE ESG 250 — moving away from the one and still attract capital share, one vote model of what Michael Walter/Troika Although lower-level roles within money sources said was a “gold standard” management firms are the most diverse in By SOPHIE BAKER among global markets. terms of race and gender, board members “At a high level, there’s this real and those with equity ownership stakes are Money managers and market tension,” said Ashley Hamilton the least diverse. Page 4 players are split on whether rec- Claxton, London-based head of re- ommendations to amend U.K. list- sponsible investment at Royal Lon- Exchange-traded funds ing rules are a good idea from a don Asset Management. “We’re big The category-defying, trend-chasing genre of governance point of view and the advocates of good governance … thematic ETFs has taken off this year, with right way to attract more capital to (but) there’s this tension about be- inflows matching 2020 already. Page 13 London. ing able to attract capital to list in The U.K. Listings Review, pub- London” — particularly technology Hedge funds lished last month and chaired by businesses that tend to go to the U.S. Lord Jonathan Hill, was launched or Hong Kong where there might be Bridgewater Associates launched a by the U.K. chancellor of the exche- lower listing standards, she said. sustainable investing group overseen quer in November to ensure the Under dual-class structures, a by Karen Karniol-Tambour and Carsten U.K. could stand up to “stiff compe- company will typically have two Stendevad. Page 6 tition as a financial centre” from the classes of shares — one with the U.S., Asia and elsewhere in Europe, right to one vote per share, while the Money management a document of the review said. Mr. other has a high or “super” vote, usu- Ameriprise Financial and Amundi made Hill is a former European Commis- ally carrying 10 or 20 votes per share. moves earlier this month to bolster their sioner, financial stability, financial In the U.K., premium-listed com- European capabilities. Page 6 services and Capital Markets Union. panies are prevented by the Finan- BALANCING ACT: Ashley Hamilton Claxton said there is tension between One of the suggestions is to in- cial Conduct Authority’s principles Private equity wanting good governance and attracting listings to London exchanges. troduce dual-class share structures SEE LISTING ON PAGE 26 Investors like health care because it’s resilient, but there are risks, such as ESG headline risk, to consider. Page 23 Regulation SEC examiners are seeing unsubstantiated Focus on human rights a challenge in China and “potentially misleading” statements and questionable processes from ESG Retailers highlighting issue products and services, according to a risk of forced labor face backlash alert. Page 4 from Chinese consumers Departments At deadline ....................24 ETFs ..............................13 By DOUGLAS APPELL By the numbers ..............17 Frontlines ........................8 Changes ahead ..............27 Hirings...........................18 Human rights could be poised to chal- Classified ......................20 Letters to the editor ........11 lenge climate change’s lock on the hearts Corrections ......................4 Other views ....................10 DC roundup ...................12 RFPs .............................20 and minds of ESG investors even as that Editorial ........................10 topic has left some global retailers under pressure this year in the world’s fast- Money manager survey est-growing consumer market. Over the past month, name-brand global overdue retailers such as Hennes & Mauritz AB, Pensions & Investments is still accepting Stockholm (H&M), and Nike Inc., Beaverton, late responses to the annual money Ore., have faced a backlash in China’s huge manager survey. Firms managing U.S. consumer market after eschewing cotton institutional, tax-exempt assets are grown in that country’s Xinjiang province eligible. Results will run May 31. over concerns about forced labor involving members of China’s Uyghur minority. To request a survey or obtain further Against that backdrop, Principles for Re- information, please contact Anthony sponsible Investment, the London-based Scuderi at [email protected] or organization that’s helped make environ- 212-210-0140, or visit www.pionline.