March 8, 2021 PIonline.com $16 an issue / $350 a year The International Newspaper of Money Management Money Management Wells Fargo unit sale hailed as opportunity Purchase by private announced Feb. 23 it was selling its played a central role HELP WANTED: Nicolaas Invesco Ltd. acquiring Oppen- money management business with in deciding on the Marais said the money heimerFunds for $5.7 billion or equity firms a good sign $603 billion in assets under man- firm’s new owners management unit needs Franklin Resources Inc.’s $4.5 bil- agement in a $2.1 billion deal to pri- throughout the six- investment to thrive. lion acquisition of Legg Mason Inc. for future of manager vate equity firms GTCR LLC and month process, he “This signals that there’s proba- By SOPHIE BAKER and Reverence Capital Partners. The said in an interview. The important thing, bly some challenges in the busi- JAMES COMTOIS split between the two firms was not Mr. Marais also high- Mr. Marais said, was ness,” said Dan Erichson, vice pres- disclosed. The deal followed months lighted how being sep- that the sale “was not ident of the New York-based Wells Fargo Asset Management’s of speculation over whether the arated from Wells Far- imposed on us.” investment bank Park Sutton Advi- new private equity owners may be unit would be sold and to whom, go will benefit the firm. The one surprise in sors LLC. He was also surprised just what the business needs to with Goldman Sachs Group Inc. “Either we are central the news of the sale was that the transaction wasn’t a strate- help it achieve scale and compete and J.P. Morgan Chase & Co. previ- to your value proposi- the relatively low price gic acquisition. “I think the price in the $1 trillion AUM club, indus- ously named as potential suitors. tion, or ... you should compared to similar that was paid here and that it went try players say. The sale came as no surprise to cut us loose ... because we will need M&A deals, such as Morgan Stanley to private equity indicates that flow Parent company Wells Fargo & Co. WFAM CEO Nicolaas Marais, who investment, we’ll need time.” buying Eaton Vance for $7 billion, SEE WELLS FARGO ON PAGE 27 SPECIAL REPORT COVID-19: ONE YEAR IN Vaccines keeping risk on table — for now Short-term outlook bright, EARLY ADOPTER: Bob Jacksha said the New but longer-term effects Mexico pension fund already had ‘decent could throw water on party exposure’ to the pharmaceutical By DOUGLAS APPELL industry before the pandemic. A year into the coronavirus crisis, there’s NO JOKE: Eli Kasargod-Staub thinks investors are broad consensus among asset owners that vac- Luis Sánchez Saturno/The Mexican New starting to take climate change risk seriously. cination programs will give risk assets a further lease on life this year but less agreement about Investing the pandemic’s longer-term effects on port- folio construction. MORE ON THE The short-term pic- Proxy season action CORONAVIRUS ture appears bright. CRISIS Continued mo- mentum on vaccines nOutsourced trading on climate change should help the a side effect for managers. Page 3 global economy re- bound strongly mid- will be hard to avoid nConnectivity can’t year as households be found on those in the U.S. and Eu- Zoom calls. Page 14 By HAZEL BRADFORD rope emerge from nLogistics becomes lockdown, predicted It will be hard for corporate directors to a shining star for Rupert Watson, not take climate change personally this proxy investors. Page 14 London-based head season, as institutional investors and regula- nPrivate equity of asset allocation tors ramp up pressure for them to take going big into life with Mercer Invest- meaningful action — or get out of the way. sciences. Page 16 ments. “Everybody I Investors falling head over heels Investors are armed with a new metric for know wants to go measuring a company’s progress on climate and do stuff, whether it’s go on holiday, go to change and a more collaborative approach for a bar, catch up with friends, see relatives. And for the pharmaceutical industry holding corporate directors and senior man- with the massive buildup in savings over the agement directly responsible through proxy past year, “people have the cash to do it,” Mr. By ARLEEN JACOBIUS have invested $9 billion in 297 biotechnology voting. And they are getting critical backup Watson said. and pharmaceutical companies worldwide as from regulators like the Securities and Ex- That’s not to say the horizon lacks clouds The pandemic has heightened investor of Feb. 26, according to PitchBook Data. change Commission, where climate risk is — such as a potential sustained uptick in in- interest in the pharmaceuticals industry, Venture capital firms invested a record starting to feature prominently in both corpo- flationary pressures — but for now they re- spurring more capital commitments to spe- $47 billion in 2,014 biotechnology and rate reporting and enforcement priorities. main distant. cialized private equity and biomedical pharmaceutical transactions in 2020 glob- “Investors are really starting to wake up to “We’re a little worried about valuations but property funds while managers have gone ally compared with $28 billion invested in the systemic nature of these risks. The way to the recovery and (monetary and fiscal) poli- wild boosting investment in what they view 1,790 companies a year earlier, PitchBook protect their portfolios is to hold boards ac- cy support will dominate this year and as a as a growing sector. Data shows. countable. You are seeing leading investors SEE REBOUND ON PAGE 14 So far this year, venture capital firms alone SEE PHARMA ON PAGE 14 SEE CLIMATE ON PAGE 23 Tradewatch has data for Q4 SOUND BITE For fourth-quarter broker rankings from State OLIVER WYMAN’S ADAM SCHNEIDER: Street’s Elkins/McSherry ‘You can’t just willy-nilly change a unit and trading analytics from Virtu Financial, point contract.’ Page 2 your mouse to PIonline. com/tradewatch. 2 | March 8, 2021 Pensions & Investments IN THIS ISSUE Investing VOLUME 49, NUMBER 5 Defined contribution The end of LIBOR to be anything but simple Morningstar researchers typically, but not always, had a relatively easy A host of headaches predicted rates,” said Adam Schneider, a currencies, including the U.S. New York-based partner in dollar, British pound sterling time determining the gender of plan in phasing out benchmark for Oliver Wyman’s digital and and euro. New LIBOR-based administrators. Page 25 fixed income, derivatives deals banking practices in the contracts will cease at the Money management Americas. end of 2021, but in Novem- “There’s an enormous ber, the Intercontinental Ex- Melbourne’s Channel Capital teamed up By BRIAN CROCE amount of work just to under- change Inc. announced that with ex-Mellon CEO Des Mac Intyre to set stand what’s going on and the ICE Benchmark Admin- up New York-based investment manager No one ever said replacing LIBOR, the then once you know what you istration, which administers incubator Eolas. Page 6 predominant derivatives and fixed-income have to do, there’s a tremen- LIBOR, would explore ceas- Thasunda Brown Duckett was named valuation benchmark supporting hun- dous amount of work which ing the most utilized U.S. dol- president and CEO of TIAA-CREF, effective dreds of trillions of dollars in contracts, would start when the actual lar LIBOR tenors in June May 1. Page 6 would be easy. LIBOR publication ends,” he TREAD LIGHTLY: Chris Killian 2023 instead of late 2021. On With millions of investments tied to the added. “You can’t just willy- said great care is being taken March 5, Britain’s Financial Pension funds London interbank offered rate, such as in- nilly change a contract.” to avoid creating ‘winners and Conduct Authority con- terest-rate swaps and long-duration fixed In the U.S., the Federal Re- losers’ in the transition. firmed the 2021 and 2023 Mark Machin resigned as CEO of Canada income, investors and their service provid- serve’s recommended alter- cessation dates for LIBOR, Pension Plan Investment Board after getting ers could have to renegotiate with counter- native reference rate is the Secured Over- although it retains the option for a synthet- the COVID-19 vaccination while on a trip to parties on a new benchmark, but coming to night Financing Rate, or SOFR. The ic calculation if needed. the UAE. Page 6 an agreement isn’t so simple, sources said. transition to SOFR is being led by the Alter- The extension to June 2023 would allow “I have read hundreds of these (con- native Reference Rate Committee, an in- more time for outstanding contracts to ma- Retirement plans tracts) and many are terrible because no dustry group established by the Fed. ture, thereby reducing the chance of poten- U.K. plan sponsors are one step closer one expected LIBOR to end and until re- LIBOR, which has been plagued by cas- tial disruptions, U.S. regulators said in a to being able to offer collective defined cently there weren’t even replacement es of bank manipulation, is set at different SEE LIBOR ON PAGE 24 contribution arrangements to their employees. Page 4 Defined Contribution Dow Inc. will freeze the benefit accruals of its U.S. pension plans at the end of 2023 and will contribute $1 billion to the pension Morningstar says women build better DC plans plans in the first quarter. Page 6 New laws in the U.K. and in the Study suggests plans with better practices Netherlands are paving the way to tackle growing longevity risks.