Crain_PI_20240113

Employers seeing value in in-house plan advisers

and some 170,000 other workers use to save for retirement.

And, he adds, he contributes to the very plan that they do: the $11 billion Adventist Healthcare Retirement Plans, a multiple employer plan that covers the employees of three sprawling hospital systems.

When Jared Heitzman sits down with employees enrolled in his organization’s workplace retirement savings plan, they often have one burning question on their minds — and it’s not about retirement.

“Hey,” they ask, “who do you work for?”

Heitzman, a certi ed nancial planner, explains that he works for the retirement savings plan that they

IN THIS ISSUE

D ef i ned Contribution

M icro 401(k)s bringing changes to the industr y. Page 27

Economy

Mana g ers expect a pause in Fed rate-cutting. Page 29

M on ey Management

Wellington’s path to globalizing is slow and stead y Page 4

B est Places winners are a ddin g wellness programs. Page 6

Pen s ion Funds

C alSTRS’ Scott Chan sees vola tility ahead. Page 31

Wa shington

PE-owned healthcare i s un der sc rutiny by Congress. Page 28

Once they realize that he’s not a vendor but an employee of the same plan, participants relax, knowing that they’re not “going to feel any kind of pressure to purchase something at the end,” Heitzman said.

They realize “this guy’s not going to try to sell me an annuity. He’s not going to try to sell me life insurance. He’s not going to try to gather any of my outside assets,” Heitzman said.

Heitzman is one of 10 in-house nancial educators at AHRP whose sole focus is to help participants understand how their plan works and the investment options available. They also help with retirement income planning.  The educators are paid a xed salary and don’t receive commissions or other sales incentives.

“It’s really nice to be able to be in a position where we can provide unbiased, objective advice and take on the role of an educator versus the prototypical salesman role that a lot of nancial advisers take on,” Heitzman said.

Heitzman knows from rst-hand experience. In his previous job at a

Two of the Employee Bene ts Security Administration’s most impactful rulemakings under the Biden administration — one that stipulates that retirement plan duciaries can consider ESG factors when selecting investments, and another that makes it so one-time advice, such as rollovers to individual retirement accounts, must be in the investor’s best interest — are prudent and necessary, according to Ali Khawar, EBSA’s principal deputy assistant secretary.

Khawar, who’s held many roles at the Department of Labor’s EBSA across multiple administrations, including EBSA investigator, chief of staff and counselor to former Labor Secretary Thomas E. Perez, led EBSA at the start of the Biden administration on an acting basis until September 2022. After Lisa M. Gomez’s Senate con rmation, he moved into the EBSA’s No. 2 role.

As a political appointee, he will leave the agency on Jan. 20 when President-elect Donald Trump is sworn in for a second term. Khawar told Pensions & Investments he doesn’t yet know his next career move.

But he did have much to say on two key rules that EBSA issued in the Biden administration.

ESG consideration rule

EBSA in 2022 nalized a rule specifying that retirement plan duciaries could consider ESG factors when making

Eight private equity, private credit and other nancial services rms representing close to $635 billion in assets under management and administration committed to setting up shop in Abu Dhabi, joining a raft of global rms ocking to the region.

The moves were announced at the Abu Dhabi Finance Week, Dec. 9-12, according to Abu Dhabi Global Market, the capital’s international nancial center.

The total AUM and AUA of the recently announced rms surpass the $450 billion represented by rms that said at 2023’s nance week event that they would set up in the city.

Among alternatives rms announcing their intention to open of ces in ADGM were private equity rms Lone Star Funds, which has total capital commitments of about

boutique brokerage rm, Heitzman was under pressure to sell the rm’s nancial products to retail nancial professionals.

“I was basically faced with the prospect of ‘I’m either going to sell something or I don’t get a paycheck’,” he recalled of his previous role.

Kelli Bennett and Jane Shouppe, AHRP nancial educators who formerly worked for the Variable Annuity Life Insurance Co., a prior third-party vendor to AHRP, also reported greater satisfaction with their new role, saying they can now serve participants more equitably.

While VALIC expected nancial advisers to serve all AHRP participants requesting help, it also en-

couraged the advisers to collect as many investment dollars from participants as possible and work with people with the most assets, they said.

Split focus

VALIC had what Bennett described as a “split focus.”  It pushed its advisers to not just get everyone enrolled in the plan but to also gather assets from their individual retirement accounts and old 401(k) accounts and roll them over into VALIC IRAs, Bennett said.   Corebridge Financial, which now owns VALIC, declined to comment. AHRP began building its team of

$95 billion, and Investindustrial, a roughly $14 billion European midmarket manager, ADGM said in a news release. General Atlantic, with $100 billion, also con rmed its plans for an Abu Dhabi of ce.

New asset and insurance manager Eldridge, which will have $74 billion in assets under manage-

ment, said it will have an Abu Dhabi of ce.

Those rms add to private credit rms Golub Capital, with about $70 billion, and the roughly $63 billion Polen Capital; and $69 billion hedge fund manager Marshall Wace, which announced their plans last week.

Also setting up in the capital is private capital equity management platform Carta, which ADGM said administers more $150 billion for clients.

Abu Dhabi has been a target for money managers of late, with giants BlackRock, PGIM and Nuveen planning to set up in the United Arab Emirates’ capital city.

The $11.48 trillion BlackRock was granted its commercial license to operate in Abu Dhabi — with plans to seek regulatory approval to operate in ADGM, according to Bloomberg. In April, BlackRock said it was establishing a Riyadh-based multi-

asset-class platform investing across public and private markets, with an initial up to $5 billion anchor investment from Saudi Arabia’s sovereign wealth fund, Public Investment Fund, which has about $925 billion in assets.

“These milestones re ect the heart of what makes Abu Dhabi so special — a shared vision of progress, partnership and possibility,” said Ahmed Jasim Al Zaabi, member of Abu Dhabi’s executive council and chair of the Abu Dhabi Department of Economic Development and ADGM, in the news release.

“The growing number of global nancial leaders and innovators choosing ADGM is a testament to the trust they place in our infrastructure, robust regulations, commitment to excellence and Abu Dhabi’s reputation as the world’s safest and most dynamic jurisdiction for asset and wealth management.”

OASIS: Abu Dhabi, U.A.E.

OF ESG: EBSA’s Ali Khawar

Outlook Defined Contribution

y B Robert Steyer

As 2025 portends to be lled with political, legislative and regulatory uncertainty, de ned contribution plan executives are focusing on what they can do and should do — rather than what might happen.

“Uncertainty creates inaction,” said Mikaylee O’Connor, head of de ned contribution solutions at NEPC.

That’s why consultants are reminding clients to implement mandatory requirements for SECURE 2.0; decide what — and if — retirement income products are best suited for their employees; and review plan documents to determine how sponsors can reduce litigation risk.

"There's no real clarity about retirement plan policies" when a new president, new Congress and new regulators take of ce in 2025, said Michael Volo, principal and nancial adviser for CAPTRUST Financial Advisers.

"This doesn't appear to be creating concern for plan sponsors at this time," he said. "Many clients have seen it pays not to be too proactive about potential changes in regulations."

For Volo's clients, one top priority is implementing the expanded catch-up contributions for people ages 60 to 63, which takes effect in

Outlook Washington

y B Brian Croce

Many major Biden-era policies are likely to be walked back by Trump deregulation forces

Exercising control:

Hershey Trust Co. controls nearly 79% of Hershey’s voting power through its ownership of Class B shares. These shares have 10 votes vs. 1 vote for the common shares.

Control of outstanding Hershey shares

The second Trump administration is likely to bring big changes to both the Department of Labor and Securities and Exchange Commission as major Biden administration rules could be overruled in courts, walked back, or replaced entirely given Republicans’ penchant for deregulation, sources said. Separately, among the new dynamics within the incoming administration is the Department of Government Ef ciency, or DOGE, which Trump said in a November statement will “provide advice and guidance from outside of government.” DOGE will be run by billionaires Elon Musk and Vivek

2025. Beginning Jan. 1, individuals ages 60 to 63 can contribute more to 401(k) plans, as well as most 403(b) and 457(b) plans. The current catch-up contribution for people over 50 is $7,500. For people ages 60 to 63, the limit goes

SECURE 2.0, retirement income and litigation risk lead the menu for 2025

up to $11,250 in 2025, but it will return to $7,500 when someone turns 64. For everyone else, individual contributions will rise to $23,500 in 2025, up $500 from 2024.

New administration means change at SEC, DOL

Ramaswamy, both of whom have said they’re aiming to slash federal spending and reshape government agencies.

Both Musk and Ramaswamy have criticized the SEC and current Chair Gary Gensler.

After a federal appeals court on Dec. 11 struck down the SEC’s approval of Nasdaq's board diversity rule, Ramaswamy posted on Musk’s X platform, “When an

Share control may thwart Hershey takeover

agency like the SEC is so repeatedly & thoroughly embarrassed in federal court for outing the law, it loses its legitimacy as a law enforcement body.”

Musk on Dec. 12 responded with a post of his own saying, “The SEC is just another weaponized institution doing political dirty work.”

That same day, Musk posted a letter from his attorney to Gensler

Outlook Emerging Markets

Trump’s U.S.centric ethos casting pall

Despite threat of tariffs, managers say there is reason for optimism

y B Natalie Koh

Asian economies, particularly China, are expected to take a hit in 2025 as domestic-centric policies are implemented in the U.S., but institutional investors are better prepared this time, and China has countermeasures up its sleeve, fund managers said.

U.S. President-elect Donald Trump has promised to impose as much as 60% tariffs on imports from China and up to 20% tariffs on goods from other countries. In November, he said he would add 10% tariffs on imports from China and 25% on items from Mexico and Canada.

Money managers agreed that the tariffs, along with his anti-immigration policies, will likely have an in ationary effect in the U.S. and a stronger dollar against Asia’s currencies, which will affect trade and lead to poor equity performance in the region.

At the same time, some of Trump’s other policies, such as lower corporate tax rates, could lead to stronger corporate performance in the U.S. and likely boost the stock market, driving investors to U.S. equities.

Already, institutional investors such as BlackRock have an overweight to U.S. equities for 2025, and ows into U.S. stocks have risen $109.4 billion in the month since Trump was announced the winner in the election, while emerging markets saw out ows of $15.9 billion, Bloomberg reported on Dec. 2. That said, Trump may not

Hershey has reportedly been the subject of a takeover bid from Mondelez International, but the deal’s fate rests with Hershey Trust Co., which controls the super-voting Class B shares. The trust, which funds the Milton Hershey School and other charities, thwarted previous takeover offers. However, with returns lagging, other investors’ nancial interests may not be best served by the current ownership structure.

No sale: The trust sold Class B shares in 2022 and 2023, reducing its combined ownership to 56.7 million shares from 60.7 million at the end of 2021. It hasn’t made any subsequent sales during the rst nine months of 2024.

Hershey shares owned by Hershey Trust, 2021-2024*

Returns lag: Hershey’s common shares have lagged the S&P 500 and S&P 500 Consumer Staples indexes, returning -6.5% in 2024 vs. 25% for the S&P 500 and 14.9% for the S&P 500 Consumer Staples index. The shares returned 7.4% over the last decade, about 570 and 100 basis points below the S&P 500 and consumer discretionary benchmarks, respectively. Hershey stock returns as of Dec. 31

Institutional owners:

Institutional investors that own Hershey common shares include CalPERS, with over 680,000 shares, and CalSTRS, with more than 269,000 shares.

Institutional holders of Hershey common stock**

Wellington taking the steady long-term path to globalizing

trillion privately owned fund manager has 25%-30% of its 906 investment professionals in Europe and Asia. That 906 gure, as of Sept. 30, represents a 167% increase from 20 years ago.

Nearly two decades ago, Wellington Management had almost all of its investment staff seated in the U.S.  But the rm embarked on a global push in 2006, and now, the $1.2

“We’re on a long-term path to keep globalizing, and we continue to do so,” said Boston-based Steve Klar, president and one of three managing partners of Wellington Management in an interview during a recent visit to Singapore.

That globalization of investment staff has followed the globalization of its client base, which is roughly 70% U.S. vs. 30% Europe and APAC. However, the manager has not set a xed target on how much it plans to grow its international of ces, particularly since working arrangements have become more exible since the COVID-19 pandemic.

Wellington CEO Jean Hynes said in an interview last year that the rm plans to be more global in the next ve to 10 years.

Regarding how much Wellington plans to grow its international of ces and business, it’s “steady as she goes,” Klar said.

“The pandemic changed the ow of where some of our people are, so we’re very exible if we want to make sure we get the right talent

Caryl Anne Francia named reporter in new beat for P&I

Caryl Anne Francia has been named a reporter in a new, stand-alone beat for Pensions & Investments.

In this position, Francia will cover institutional investing within endowments and foundations. She will also write about emerging and diverse asset management rms.

Initially joining P&I in 2023 as an intern, Francia wrote pro les and longform features for the annual Best Places to Work in Money Management and In uential Women in Institutional Investing programs.

Francia is based in New York.  Prior to P&I, Francia worked as a freelance writer and editorial intern for Morningstar. She focused on stock trends, economic reports and corporate news.

Francia holds a bachelor’s degree in journalism from Baruch College, where she is a founding member of the journalism department’s alumni advisory committee.

As an undergraduate student, Francia notably served as the longest-running female business editor of The Ticker, Baruch’s independent student-run newspaper. She was also the founding secretary of the collegiate chapter of the Society of Professional Journalists.

Originally from the Philippines, Francia has spent most of her life in the diverse New York borough of Queens. Her interest in storytelling was developed at Francis Lewis High School’s journalism program.

Francia can be reached at caryl. francia@pionline.com . Her inbox is open for story tips and ideas.

Caryl Anne Francia

‘STEADY AS SHE GOES’: Wellington Management’s Steve Klar

DEFINED CONTRIBUTION EAST

KEYNOTE PANEL | What does Provider Consolidation and Scale Mean for DC Plans of the Future?

As provider consolidation continues to reshape the landscape of defined contribution plans, new opportunities and challenges are emerging for plan sponsors. This panel will explore the impact of consolidation on the future of DC plans, focusing on the growing interest in full and partial OCIO (outsourced chief investment officer) services, as well as how these models are evolving to meet the changing needs of participants.

We’ll also dive into the convergence in the wealth and retirement plan advisory channels, and what all these intersecting shifts imply for the retirement industry of the future, including:

•Growth in OCIOs acting in ERISA 3(38) and/or 3(16) capacity: priorities for the investment menu; interest in alternatives and private markets

•Delivering greater customization to DC plans via OCIO on the one hand versus the growth in pooled plan assets on the other

•Growth in interest by private wealth advisors to provide their corporate clients with retirement asset management capabilities.

•Convergence of wealth management and retirement plan advisory businesses

Jennifer Doss Defined Contribution Practice Leader

CAPTRUST

Richard H. Linton Jr. President and Chief Operating Officer

Empower

Michael Manning Managing Partner

NEPC

Bob Oros

Chairman and Chief Executive Officer

Hightower

MODERATOR: Nikki Pirrello

President and Publisher

Pensions & Investments

Wellness, development among managers’ workplace priorities

At employers named to Pensions & Investments’ 2024 Best Places to Work in Money Management program, many focused on health, wellness and mentorship for the benets, programs and workplace perks they have added — or will start offering next year — for staff.

To attain excellence in an ever-evolving industry, money managers have to constantly improve their offerings — not just for clients but employees as well.

Even as repeat winners of the program, some rms said there’s always room for improvement — and it’s apparent in conversations with staff and results from engagement

surveys. As part of the Best Places program, employees anonymously ll out a feedback survey, in which they may share areas they think need improvement.

As part of his job as chief human resources of cer at StepStone Group, Rich Kasnia has traveled to the rm’s of ces around the world to engage with staff in person. To make the workplace even better, employees are encouraged to “give us more feedback because we’re going to go

x this,” he said.

“We’re about to make it better and actually be able to do it,” he added.

“That’s been fun, and some of our bene t offerings will change in the coming year because of that.”

One thing StepStone employees

worldwide can look forward to in 2025 is the ability to buy their organization’s stock at a 50% discount.

The La Jolla, Calif.-headquartered rm is also one of the employers that said it will roll out access to digital health platforms such as Carrot Fertility and Maven Clinic, both of which provide assistance and service for family planning, fertility and menopause.

Ranked No. 5 among Best Places winners with 500 to 999 employees, StepStone managed $169 billion in assets as of June 30.

At First Eagle Investments, employees are increasingly volunteering for a spot on the New York-headquartered manager’s Engagement and Inclusion Council, which expanded at the start of 2024. The 35-member council promotes connectivity at the rm through events and initiatives, such as a new speaker series where employees listen to leaders such as CEO Mehdi Mahmud talk about themselves and what’s going on at the company.

“People are continually asking to join because they want to be part of creating this positive impact on the organization, both internally as well as externally,” said Sakkara Pama, head of talent development at First Eagle.

Ranked No. 1 among winners with 500 to 999 employees, First Eagle managed $138 billion in assets as of June 30.

Similarly, NISA Investment Advisors started its own series hosted by CEO David Eichhorn, who welcomes attendees to share feedback related to the business and submit anonymous questions he will answer.

But in a festive twist, these monthly meetings come in the form of informal birthday breakfasts where celebrants enjoy a gourmet buffet, get to know each other and receive a gift “that is be tting of a company proud of its community — St. Louis swag,” noted Susan Gerard, head of marketing and communications at NISA.

“When we kicked off this particular program this year, it was with the knowledge that birthdays are inherently random, thus practically ensuring we would have a diverse group of attendees who may or may not know each other to interact in other forums,” she added.

Named a Best Places to Work winner ve times, the St. Louis-based investment manager managed $438 billion as of June 30.

Welcoming employees back  Nearly ve years after the COVID-19 pandemic forced many employers to work from home, some winners have made moves to upgrade or relocate into new facilities.

In New Jersey, Lord Abbett, Newark, said it redesigned a new workspace over the past year, while Jacobs Levy Equity Management, Florham Park, welcomed staff into a

of

Jimmy Carter’s retirement policies inspiring efforts to remediate current crisis

President Jimmy Carter will go down in history as the nation’s 39th president and a Nobel Peace Prize winner, but his legacy also includes something else: concern for U.S. workers’ retirement security.

Carter, who died at age 100 on Dec. 29, signed an executive order dated July 12, 1978, establishing the President’s Commission on Pension Policy.

The order tasked the commission with developing policies to ensure the U.S. had “effective and equitable retirement, survivor and disability programs which take into account available resources and demographic changes that are expected into the middle of the next century.”

The commission's idea regarding universal coverage has inspired present-day legislation known as the Retirement Savings for Americans Act, according to Teresa Ghilarducci, a labor

economist and nationally recognized retirement security expert.

While Carter's order was signed decades ago, a recent mention of the commission drew an excited response from Ghilarducci.

“Wrote my dissertation on that commission and used the data!!,” Ghilarducci, who holds the Irene and Bernard L. Schwartz Chair in economic policy analysis in the economics department at the New School for Social Research, said in a Dec. 30 email. “Retirement security would be so much better if MUPS had passed.”

The commission recommended that a “Minimum Universal Pension System (MUPS)” be set up for all workers, according to an executive summary of the commission’s nal report, which was reproduced in a May 1981 Social Security Bulletin.

Had MUPs been implemented, the American retirement landscape would be different, accord-

ing to Ghilarducci,.

“Everyone would have a nancial retirement account supplementing Social Security,” Ghilarducci said, adding that currently 83 million Americans are unable to save for retirement via workplace retirement plans because their employers won’t sponsor such plans.

“MUPS would have substantially improved retirement prospects,’’ she said.

While the commission’s

The legendary dancer Arthur Murray died more than three decades ago, but his name remains synonymous with ballroom dancing and dance instruction.

Clarion Capital Partners, a private equity/ structured credit rm, recently acquired a controlling stake in Arthur Murray International, the global franchisor of dance studios, in partnership with renowned ballroom dancer Gary Edwards who assumed the role of CEO of Arthur Murray.

Terms of the transaction were not disclosed.

Edwards will eventually acquire a stake in Arthur Murray, said Eric Kogan, a partner at Clarion.

Kogan said as an investment theme, Arthur Murray falls under the categories of both “health and wellness” as well as “media and entertainment.”

“It is a growing business and they teach not only ballroom dancing, but also such diverse dance styles as merengue, salsa and others,” he said. The company currently boasts some 300 dance studios around the world, with more planned.

Kogan estimated that some 25% to 30% of students at Arthur Murray studios want to learn how to dance for their weddings, suggesting many clients are in their late 20s and 30s.

Kogan also noted that in 2023, more than 26 million people in the U.S alone participated in formal dance lessons, a 22% surge over the prior decade.

As CEO, Edwards succeeded the late Philip S. Masters, who had owned Arthur Murray for more than 60 years and grew the company into a global franchise.  While the name Arthur Murray may not be familiar to most young people, Kogan nonetheless said that based on market research his rm has done, the name is the gold standard in the world of ballroom dancing.

Clarion’s portfolio also includes diverse rms such as Eco Style, a manufacturer and marketer of multicultural hair care products; Imax, the entertainment technology company; and The Oceanaire, which owns and operates seafood restaurants.

PALASH GHOSH

11) and Sewell (D-AL-7) and in the Senate by Sens. Hickenlooper (D-CO) and Tillis (R-NC), continues to gain strong support,” an Oct. 26, 2023 news release from Rep. Lloyd Smucker’s of ce said.

However, not everyone thinks RSAA is a good idea.

In their Nov. 7, 2024, article titled “Will the Retirement Savings for Americans Act Save Retirement?” Spencer Look, associate director, and Jack VanDerhei, director of retirement studies, for The Morningstar Center for Retirement & Policy Studies, noted that many Americans don’t have access to a retirement plan via their employer.

recommendation regarding MUPS wasn’t implemented, there is still reason for optimism, she said.

“A version of MUPS is now in Congress based on that idea,” she said in the December email, citing the RSAA.

The RSAA is expected to be reintroduced in the current Congress.

“The bipartisan and bicameral Retirement Savings for Americans Act (RSAA), introduced in the House by Reps. Smucker (R-PA-

SUSTAINABLE TECH

The RSAA would create a federal retirement plan, automatically enrolling workers lacking access to an employer-sponsored plan at a 3% savings rate, the article said. It would also provide a federal match tax credit for lowand moderate-income workers, the article said.

“While the proposal may sound promising, our research shows that most Americans would be better off under the current system,” the article said.

“Why? In short, the RSAA would likely change both investor savings behavior and retirement plan sponsor behavior, resulting in lower net savings rates.”

KATHIE O’DONNELL

Northern Trust partnership aims to color the blockchain green

Asset servicing provider Northern Trust signed a partnership with the National University of Singapore to explore the implementation of blockchain technology on green nance frameworks and credentials.

The partnership aims to bring the green credentials of bonds on-chain through the Matrix Zenith platform, Northern Trust’s solution for digital asset management and tokenization, according to a joint statement.

One example of credentials is environmental data from the university campus’ refurbishment projects funded by a bond, said Alvin Chia, Northern Trust's Singapore-based head of digital assets innovation for Asia-Paci c, in emailed comments.

has issued three bonds, with the third issuance raising S$340 million ($253 million) to nance green buildings or precincts, renewable and energy ef cient infrastructure and systems, and pollution prevention and control,

“The solution that we’re developing will allow the data to be refreshed in a more timely manner, and stored on an immutable ledger,” he said.

The partnership aims to create a solution that leverages an existing sustainability framework for testing on the blockchain that will eventually be adopted as part of the industry’s standard, Chia said.

“The solution will be reusable for the future green bonds and other assets with similar reporting needs,” he added.Since 2021, NUS

among other initiatives.The range and complexity of methods issuers use to catalog the impact of their green investments is one of the biggest challenges in the green bond market, noted the Of cial Monetary and Financial Institutions Forum in a 2022 report.“Even the term sheet — one of the most ubiquitous pieces of documentation in the conventional bond market — still does not have a standard format, and ESG data is far more complex and varied,” the OMFIF report wrote.

Northern Trust had $17.4 trillion in assets under custody and administration as of Sept. 30.

AHEAD OF HIS TIME: President Jimmy Carter addresses the nation from the White House Oval Office in 1977.

CONFERENCE CALENDAR 2025

UK Pension Fund Tour

London | June 10-11, 2025

Fixed Income & Credit

Dallas | September 9-10, 2025

Influential Women In Institutional Investing

Chicago | September 18, 2025

New York | April 29, 2025

New York | June 10-11, 2025 Endowment & Foundation

Pension Derisking

Chicago | October 7-8, 2025

Defined Contribution West Pasadena | October 26-28, 2025

New York | May 20, 2025 WorldPensionSummit

The Hague | November 4-6, 2025

Public Funds

Austin | November 19-20, 2025

OPINION

OTHER VIEWS DAVE SMITH

When can investors expect bene ts of much-hyped AI applications to appear?

LLMs. Co-pilots. Agents. Two years after ChatGPT took the world by storm, the hype behind arti cial intelligence remains palpable. Major tech companies are pouring billions into sparkling new infrastructure for AI workloads. Utility companies in areas with dense data centers are seeing revenues and power consumption soar. Yet, outside of semiconductor and infrastructure players, few companies have seen signi cant revenue from AI products. Investors are increasingly left asking: When will these massive capital investments start bene ting software companies? What’s causing the delay?

Where AI is showing up today

across its product catalog,” completing the project with just 1% of the typical headcount.

Amazon’s CEO Andy Jassy shared a similar datapoint when he disclosed that the use of Amazon’s GenAI assistant saved 7,500 “developer-years” of programming time in a recent major software update.

Perhaps the most salient example of AI generating value is hiding under our collective noses in social media, where algorithmic matching on posts like Instagram and TikTok optimizes the content and ads we see. This area has seen tremendous gains in recent years and has helped leading AI adopters in social media improve ad returns and gain market share.

tries, why hasn’t the software sector seen the uptick in growth that investors expected? New revenue streams for software rms haven’t met the hype, leading to stark underperformance for the software industry with a few notable exceptions.

We believe this partly re ects Amara’s law: We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run. The rapid adoption of ChatGPT, and the sense of magic many of us experienced when rst using it, may have exacerbated elevated expectations.  The reality is that product development and adoption take time. AI development and testing alone can take months, if not years, before a project is ready for deployment.

First, let’s be clear: AI has been around in many industries for years, including nancial services. Quantitative traders long ago embraced techniques that are now classi ed as “AI” including non-linear regressions and advanced optimization techniques. What excites us now are the rapid advancements in new areas like Generative AI, pattern recognition and deep learning.

You’ve likely noticed early use cases of GenAI like Microsoft’s Copilot or Adobe’s AI Assistant. These tools are being integrated into software platforms across industries with new use cases emerging at a rapid clip.

Across other industries, anecdotal datapoints of GenAI value creation are starting to stack up. Walmart recently shared that large language models helped them to “create or improve more than 850 million pieces of data

At our rm, we’ve adopted AI with care, led initially by eager adoption of various AI copilots and coding assistants. We have also explored alpha-generating use cases like pattern recognition and sentiment analysis. Looking further out, we are excited about developing custom assistants to superpower our investment and client teams. We believe this is just the tip of the iceberg. Much more is yet to come.

We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.

The delay in benefits of AI for software investors

So, if AI is being leveraged across indus-

This timeline is further elongated by data governance challenges. As anyone who has worked at a massive conglomerate can likely attest, many large rms have poorly structured and poorly governed data policies, rife with operational silos and inconsistent rules. This complicates development. Compliance and cybersecurity can further stretch timelines.

While many rms are seeing real and tangible bene ts from AI, getting these projects into production is taking longer than anticipated, creating a mismatch between investor expectations and reality. While this delay has certainly led to disappointment among

Dave Smith is head of technology investing at Bailard. He is based in San Francisco.

LETTER FROM THE PUBLISHER

New year, new initiatives at Pensions & Investments

While I don’t do resolutions, I am determined that 2025 will be a year of inspiration for me. My hope is that I can discover new ways to be inspired, nd inspiration in places I may have missed and possibly provide some inspiration for others as the year unfolds. Less resolution and more mantra, perhaps.

Nikki Pirrello is president and publisher of Pensions & Investments.

At P&I, “inspire” is one of our goals alongside inform, engage and connect with our audience throughout the year. To kick off the new year, I’d like to share some highlights from 2024 as well as some of the great initiatives we have planned for 2025.

Inspire

We honored some amazing people and initiatives last year, spanning our Eddy Awards, which recognize de ned contribution participant engagement, communication and education, the P&I WorldPensionSummit’s Excellence and Innovation Awards, recognizing plan sponsors from around the globe, and the Best Places to Work in Money Management program. We added a new component to our In uential Women in Institutional Investing awards and conference, selecting our rst cohort of Rising Stars. I am in awe of the great work being done by some truly amazing people across our industry.

In 2025, look for continued coverage in

software investors, it has not been the only issue. The rapid pace of breakthrough innovation in AI has also sucked the proverbial oxygen out of the room for other technology projects. Some companies have paused major technology initiatives, hesitating to commit to multi\year contracts while still developing their AI strategy. All of this has elongated sales cycles and created a temporary slowdown in software demand.

A window of opportunity for longer-term investors

Surveys have shown that corporations are seeing real, tangible value creation from AI, especially in cost reduction. But AI isn’t just about optimizing existing business models — it’s driving innovation in areas like autonomous cars, healthcare, clean energy, and even entertainment and media. These advancements have the potential to reshape industries and open up new markets.

For long-term investors, this makes AI more than a short-term play — it’s a foundation for future growth. Again, like many transformative technologies, AI’s

these areas and consider nominating that person or project deserving some special recognition. You have to play to win, and we’re counting on you to share some of the wonderful and inspiring things happening across the industry so we can shine a spotlight and share best practices.

Inform

Our team produced more than 5,000 stories in 2024. That included more than 2,200 searches and hires, which totaled $385 billion in stated mandate size. We also updated 187,000 data points in our Research Center. We launched our This Week in Washington newsletter from the desk of Washington Bureau Chief Brian Croce, as well as P&I Don’t Miss and P&I Daily Wrap news products. We revamped P&IDaily to provide insights from the top stories of the day in a narrative-driven premium format directly in the newsletter along with links to other important coverage for our subscribers.

In 2025, we’ll stay focused on audience obsession and you’ll see us lean into coverage areas that we see resonating with readers. That includes expanded coverage of private markets, endowments and foundations (with a new roundtable in April), focused coverage on emerging and diverse managers (including a new partnership with the National Association of Investment Companies) and continued coverage of chief investment of cers

impact may have been overestimated in the short term, but its long-term potential will likely have been underestimated.

We believe the current market anxiety in software creates an opportunity for long-term investors. The project delays are largely temporary in nature and should be resolved as rms update their technological road map and set AI priorities.

Recently, we’ve noticed renewed enthusiasm in the software demand environment. As demand normalizes, we expect industry growth to re-accelerate, which should remove the wet blanket from valuations.

The bottom line

A Gartner survey earlier this year found that 90% of CFOs expected increased AI budgets in 2024, with none planning cuts. Yet, it has been clear that many projects have faced delays due to complexity, data governance issues, security concerns, and a scarcity of talent. This has created an air pocket in an industry that is usually known more for “eating the world” than for booms and busts.

Just as the internet didn’t take off overnight, AI still has some development before it starts to deliver signi cant results for investors. We believe those

across the industry.

Engage

We are proud that our journalism brought record- breaking traf c to pionline.com in 2024!  We had record readership growth, and you engaged with stories covering a broad array of topics. Some of our best-read content included our revived Face-to-Face series bringing you deep-dive interviews with titans in the asset management and allocator realm.

In 2025, you’ll see us continue to experiment with new formats and channels to bring you insights from thought leaders throughout the industry.

As part of our ongoing commitment to deliver premium content across the channels that serve you best, we will be transitioning the Pensions & Investments print publication to a monthly magazine. Print doesn’t lend itself to news in our fast-paced world, but we will continue to deliver hard-hitting breaking news and daily insights via the website and our

returns are coming, and the impact is on the horizon if investors can remain patient.

Now is the time for investors to position themselves for the shift from hype to impact. As AI projects move from development to deployment, those who stay the course or increase their exposure to the right opportunities are likely to see meaningful returns ahead. 

This content represents the views of the author. It was submitted and edited under Pensions & Investments guidelines but is not a product of P&I’s editorial team.

newsletters, which you’ll see continue to evolve over the course of the year. The print publication will focus on in-depth interviews and pro les along with our unique data and special reports delivered each month.

Connect

In 2024, we created new opportunities for global asset owners to connect face-toface and share insights and ideas. We launched a private markets conference with a focus on the LP perspective, a new insurance allocator roundtable, and we hosted four VIP pension fund tours and 10 other conferences across the U.S., Canada and Europe.

In 2025, we’re bringing our highly successful pension fund tour model to Canada visiting OMERS, CAAT and HOOPP.  We’ll host our rst Endowment & Foundation Assets roundtable and our rst event in Sweden. We have 14-plus conferences lined up to provide connection and collaboration with key allocators across the investment and retirement landscape. Join us to be part of the community and the conversation.

From all of us at P&I to all of you, here’s to a healthy, happy, prosperous and inspiring 2025! Thank you for being part of our universe, and we hope you will continue to engage with Pensions & Investments across all our platforms. Feel free to share your 2025 mantra (or resolution) with me and any inspiring ideas for how we can continue to serve you in the year ahead.

Wishing you an inspiring 2025. 

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EXCHANGE-TRADED FUNDS

ETFs gaining traction under model portfolio umbrella

ARI I. WEINBERG

Model portfolios have become a key to success for exchange-traded funds. Entry into a model or an allocation shift can send assets surging into individual ETFs, critical for gaining traction in a market that saw nearly 750 new products launched in 2024.

With net in ows of $1.1 trillion last year, total U.S. ETF assets under management topped $10.5 trillion across nearly 4,000 funds, according to data from FactSet Research Systems. While most of the assets and ows rest with long-tenured equity index funds and broad-based bond funds, a handful of newer offerings found their footing thanks to model inclusion.

The $13.7 billion iShares U.S. Equity Factor Rotation Active ETF from BlackRock added $11.7 billion in assets in 2024 after being included in the rm's model portfolios in January 2024. Models are most often accessed by nancial intermediaries building individual client portfolios in both taxable and non-taxable accounts.

Now cryptocurrency investors are waiting eagerly to see how and when BlackRock may add the $54 billion iShares Bitcoin Trust ETF to its published models. (The company

dropped hints about potential model inclusion throughout the year, including in a mid-December market commentary titled “Diversifying our portfolio diversi ers.”)

ETF model portfolios may have helped fuel recent ETF asset growth at J.P Morgan Asset Management, Capital Group, BNY Mellon and Dimensional Fund Advisors, among others. Capital Group, for example, began including ETFs in its American Funds tax-aware model portfolios in September 2023, and added additional ETFs in July 2024. The Capital Group Active-Passive Retirement Income models have also shifted more to ETFs in the past two years.

Coming up on three years in the ETF business, Capital Group ETFs added $25.9 billion in net in ows in 2024 to close the year at just under $50 billion in ETF assets, according to FactSet.

J.P. Morgan added $44.4 billion to end 2024 with $184 billion in AUM, while Dimensional added $38.4 billion in net ows to close with $170 billion in ETF assets.

Targeting risk

ETF models tend to target risk levels across asset classes, but are also used for speci c objectives and exposures, as well as target-date re-

tirement portfolios.

Many large asset managers with a signi cant ETF product set now publish the components of ETF-only and blended ETF and mutual fund portfolio models on their own websites, at third-party data aggregators such as FactSet, Morningstar, and Bloomberg, and for use on wirehouse platforms, broker-dealers, and adviser technology systems. And it’s not just home cooking; models published by asset managers often include ETFs from other providers where appropriate.

Broadridge Financial Solutions has sized the U.S model portfolio market at $6.9 trillion as of Sept. 30, with roughly 52% of assets in ETFs, up from 48.7% at the end of 2022, and expects the U.S model portfolios market will grow to $11.8 trillion by the end of 2028, with the largest growth continuing in ETFs. Broadridge notes that ETFs account for 52% of all model assets, while the broader U.S. market share is 30.6% of the total $36.5 trillion industrywide '40 Act funds.

“Since the end of 2022, ETF assets have surged 50.5%, indicating growing interest from long-term investors who value ETFs for their diversi cation, high liquidity and cost-effectiveness,” said a spokesperson for Broadridge, which tracks

$3.2 trillion in model portfolio assets. “This trend re ects a shift towards investment options that balance risk and return.”

According to Broadridge, the number of model portfolios built purely from ETFs currently sits at 38% of all model portfolios, up 20% since the end of 2022. In contrast, mutual fund-only models fell by 20% over the same time period.

Forty-nine percent of U.S. nancial advisers surveyed in 2024 by State Street Global Advisors Research Center said they either use model portfolios or build custom portfolios for clients, compared to 25% in 2019. Only 4% said they use “standard model portfolios,” essentially off-the-shelf models without any customization, compared to 10% in 2019.

This dynamic of customization is what makes model proliferation so dif cult to track, as well as how they may be reaching ultra-high-networth investors and small to medium foundations and endowments.

Hilary Corman, head of U.S. institutional for SPDR ETFs at State Street Global Advisors, said that SSGA is seeing increased usage in these markets as well as single-family of ces.

“Single-family of ces utilize the model wrapper to leverage top asset

manager capabilities and create a diversi ed portfolio suited to their desired outcomes and benchmarks,” said Corman, adding that ETF models are often used alongside less-liquid exposures such as private equity.

Tim Holland, chief investment of cer at wealth-management technology rm Orion, said he’s also observed the “barbelling” of low-cost, liquid ETF portfolios with riskier, less-liquid exposures.

Orion currently services over $90 billion of assets within its broader wealth business, including approximately $17 billion in assets on its “Tier One” wealth management platform, Orion Portfolio Solutions. On the platform, Orion provides high touch, deep due diligence on third-party strategies as well as additional investment support to adviser clients.

Of that $17 billion, approximately $11 billion resides in mutual funds, with about $9 billion in mutual fund model portfolios. About $4 billion resides in ETFs with nearly all of it in model portfolios, according to Holland.

“It’s a notably growing segment within Orion’s wealth offering,” Holland said. “Advisers view it as a comprehensive solution that aligns risk and return with liquidity and transparency,” said Holland.

Outlook Real Estate

y B Arleen Jacobius

Real estate has been bent and broken over the past few years.

But whether the industry’s great expectations for 2025 are dashed — or realized — could depend on how well it comes to terms with end of a decade-long period of near zero interest rates.

Real estate executives said the asset class hit bottom in 2024 and that returns are on their way up. Even the hardest hit sector, of ce, is expected to begin its recovery journey.

However, for the industry to adjust to this new reality, managers will have to accept a higher cost of capital for the foreseeable future. While interest rates have been cut, most industry executives expect rates to remain higher than their former rock-bottom rates for quite a while. And a wild card is the incoming Trump administration, whose policies could hurt or further the asset class’s fortunes, industry insiders said.

At Blackstone, executives said real estate is recovering because they expect recent rate cuts to lead to a new real estate cycle of increasing property values and improving investor sentiment toward the sector, said Stephen A. Schwarzman, chairman, chief executive of cer and co-founder.

“In January, we made the call that values in the sector were bottoming,” Jonathan Gray, Blackstone’s president and chief operating of cer, said during the $1.1 trillion manager’s third quarter earnings call in October.

“While the recovery will play out over time, the combination of lower base rates, lower borrowing spreads, and lower new supply makes the direction of travel quite positive for our real estate business,” he said.

Where will rates go in 2025?

“The real estate industry is entering its next chapter where the alchemy of steadily falling cap rates and very lowcost debt is a thing of the past,” said Nancy I. Lashine, founder and managing partner of real asset placement rm Park Madison Partners.

Firm executives expect the Federal Reserve will “proceed cautiously with further rate cuts after December, which likely means commercial real estate should not expect a material decrease in borrowing costs in the near term,” she said.

“The impact of higher rates for longer is nuanced,” she added. For instance, higher borrowing costs likely means there will be fewer new construction projects, resulting in less competition in 2026 and 2027, Lashine said. However, less supply should ultimately bene t landlords’

Despite higher capital costs, real estate is primed for a recovery

ability to push up rents, she said. Interest rates’ direction of travel in 2025 is an essential metric for real estate investors.

“The reason interest rates are important is because they dictate the nancing costs of real estate, which are a key driver for real estate asset values and returns of private and publicly listed real estate, said Rich Hill, senior vice president and head of real estate strategy and research at Cohen & Steers.

Cohen & Steers had $91.8 billion in assets under management as of Sept.30.

For real estate investment trusts, “lower rates are a welcome release valve over the near term given the headwinds the sector faced as the Fed embarked on their interest rate hiking campaign,” Hill said.

“We believe the market cycle is turning in favor of listed REITs as the Fed cuts interest rates and engineers a soft landing,” he said. “On the private real estate front, lower interest rates will make it easier to secure nancing and increase the likelihood of the transaction market starting to rebound.”

Still, not all real estate executives expect interest rates to decline next year

“We are of the view that interest rates will stay where they are or perhaps go up,” said Warren Wachsberger, chief executive of cer of real estate rm Eldridge Acre Partners,

which spun off from AECOM Capital in May.

The reason is that the 10-year Treasury went up 75 basis points since the rst interest rate cut, Wachsberger said. One reason for that rise is that some people are concerned with the $1.9 trillion U.S. de cit, which could lead to rein ation, he said.

“People are looking at the long end of the yield curve (the part of the curve representing longer term bonds) and saying that you may need to increase rates,” Wachsberger said.

Rather than rate cuts, there could be rein ation, he said.

“You have to trust where the curve is showing you and 10-year Treasuries are showing that rates are going up, he said

Even so, Wachsberger said there could be more transactions, but mostly in industrial and multifamily sectors.

‘The real estate industry is entering its next chapter where the alchemy of steadily falling cap rates and very low-cost debt is a thing of the past.’

“I think people were waiting to see what would happen in the markets ... and there was uncertainty around the elections,” he said.

The impact of the higher cost of capital from the elevated interest rates on real estate money managers’ businesses will vary depending on the manager’s business model and the property, said Ben Adams, CEO and founder of $672.3 million real estate manager Ten Capital Management,.

“For sure the large asset gathering behemoths will continue to roam the planet and be just ne,” Adams said.

“It’s the smaller to middle-market investment management community that is under more existential pressure in the face of low transaction volumes and a really challenging fundraising environment.”

Indeed, Park Madison Partners’ Lashine said her team expects “the real estate investment management industry to continue its consolidation through M&A, particularly among middle-market managers seeking to achieve growth and scale.”

The average time from rst tonal close on a closed-end fund remains elevated at 23 months in 2024, Park Madison said in its 2025 real estate outlook, citing Preqin data. Investors are either investing with mega-funds offering diversi ed portfolios or “”sharpshooter” managers specializing in a single geography, property sector, or some other niche,” Park Madison said.

“What we’re hearing from clients is access to capital is up,” leading the way to more transactions in 2025, said Bryan C. Connolly, co-chairman of the U.S. real estate practice of law rm DLA Piper. Redemption queues of open-end funds are shortening or have been redeemed and those managers now have room to transact, he said.

“For the largest players pricing has bottomed out” and dry powder is exceptionally high, Connolly said.

Overall, private real estate investors expect the NCREIF Property Index return to jump to 6.6% in 2025, from an expected return of 1.1% for calendar year 2024, according to the most recent Pension Real Estate As-

sociation Consensus Forecast Survey released Dec. 11. By comparison, the NCREIF Property Index reported -3.5% for the 12 months ended Sept. 30.

The results of the consensus, which was derived from a survey of PREA members in November, “seems in line with my interpretation of the zeitgeist in the market right now,” said Greg MacKinnon, PREA’s director of research in an emailed response to questions.

Office on the upswing

“There is a growing sense that we have hit the nadir of the current cycle, and that (this) year will be a better one for real estate,” MacKinnon said. “Certainly, no sign of a sharp turnaround ... but better than recent times.”

Even for the much-maligned ofce sector, the market expectation is for further depreciation in values in 2025 but much milder reductions than in 2024, MacKinnon said.

Of ce is expected to return 2.6% in 2025, up from -6.3% in 2024, the PREA consensus forecast shows.

The expectation is that write downs in the of ce sector are almost complete, he said.

Even so, challenges will remain for the of ce sector, “where persistent headwinds are expected to create distressed sales opportunities for value-add and opportunistic strategies,” said John Berg, global head of private real estate, Principal Asset Management, in a written statement.

Consensus survey respondents anticipate that retail will be the best performing of the four traditional real estate property types, which also includes industrial and residential.

“That may surprise some people, but retail has actually been the best performer the last couple of years,” MacKinnon said.

“Continued good performance of retail, especially strip centers, is really based on almost no new supply over the past several years, and the fact that a lot of the bad news for retail regarding e-commerce was already baked into prices even

Arnold Adler

Outlook Sustainability and ESG

Despite the possibility of federal anti-ESG policies, some still ghting the ght

y B Christopher Marchant

It would be hard to say that 2024 ended on a high note for sustainability and ESG.

Where there was once a feeling of optimism, driven by climate change agreements and pledges, sources now say pessimism has become pervasive in the sector.

The shift gaining the most headlines is the imminent return of Donald Trump to the White House. Sources said this political reversal from a Biden administration looks likely to see a return of climate skepticism, with the U.S. having pulled out of the Paris Agreement during Trump’s rst term.

Outright anti-ESG policies enacted in Republican-governed states such as Texas and South Carolina may well become federal policy during the next administration as well, with Biden using his presidential veto to preserve a newly enacted ESG regulation in 2023, sources said.

“Obviously, there is this continuous politicization of the ESG topic, particularly in the U.S.,” said Eugenia Unanyants-Jackson, global head of ESG at PGIM, which had approximately $1.3 trillion in AUM as of Sep. 30. “There is also growing alarm from investors who really are worried and want to address systemic issues such as climate change.”

On the world stage, the COP29 climate conference hosted in Baku, Azerbaijan, proved disappointing for many. Ultimately, attending countries agreed to supply $300 billion a year in climate mitigation payments to developing countries, well shy of the $1.3 trillion requested by international organizations such as the Small Islands Developing States. This amount was described as “not nearly enough” at COP29 by Tina Stege, climate envoy for the Marshall

Climate outflows

Facing headwinds on ESG, asset owners remain undeterred

Islands, a SIDS member state, who made headlines during the conference by at one point walking out in the middle of negotiations.

A growing sense of apathy and even outright hostility toward climate considerations in the world of policy is also starting to affect how some industry players are approaching investment.

“I was at the (October) U.N. Principles for Responsible Investment event in Toronto and sat on a panel on stability and alpha, which received a huge amount of attention,” said Laura Nishikawa, global head of ESG research at nancial data rm MSCI. “There was a period of time in around 2021 where those who are really deep in the ESG space thought, ‘it’s done, we’ve proved the nancial materiality of this investing, wow let’s go change the world.’ I think we’re back to thinking there’s still a lot more to prove. There’s still a lot more to understand.”

Morningstar data showed net out ows from climate funds in the rst nine months of 2024, with the funds shedding approximately $24 billion. By comparison, there were net in ows in these funds of $40 billion during the rst nine months of 2023.

“There have been headwinds (against these funds) in the macro environment with rising interest rates, and there’s also greenwashing accusations that have contributed to reduced investor trust in these strategies,” said Hortense Bioy, global head of sustainability research at Morningstar Sustainalytics.

Sustainability-linked bond issuances have also fallen sharply this year, according to Bloomberg data. As of Dec. 11, companies and government bodies had raised $37.6 billion via SLBs, 46% lower than in all of 2023.

Sticking to ESG?

Nevertheless, sources still had hope for climate and ESG-conscious investing among asset owners in the sustainability space, par-

ESG

A code of conduct designed to bring transparency and stymie greenwashing in the ESG ratings space has been largely appreciated by the ratings providers themselves, even if some had to put aside their initial misgivings.

ticularly on the European side.

For Patrick O’Hara, director of responsible investment and engagement at LGPS Central, Wolverhampton, England, which had £30 billion in assets as of Dec. 1, all of the outside in uences of the past 12 months are no excuse to stop focusing on internal climate targets.

“We remain committed to our net-zero strategy and pushing it forward through voting and engagement. Ultimately, we don’t want to just decarbonize our portfolio and see our portfolio looking better from a Scope 1 (direct emissions) or Scope 2 (indirect emissions) perspective. We really want to see a real-world decarbonization,” he said.

In October, LGPS Central became a signatory to a blueprint developed by IFM Investors, which highlighted the need for pension funds to work within the right policy framework to prioritize the interests of participants while contributing to the U.K.’s clean energy future. Also signatories to the letter were the Universities Superannuation Scheme, London, which had £78 billion in assets as of March 31. Since 2021, USS has had a £500 million sustainable growth portfolio, which has made investments included in electric-powered aircraft and carbon capture and storage technology.

“For us the transition to a low-carbon world is a fundamental investment issue and it’s

data providers’ code of conduct brings welcome transparency to the industry

the U.K.’s Financial Conduct Authority, the code focuses on promoting transparency, good governance, management of con icts of interest and strengthening systems and controls in the sector.

Reforms to the ESG ratings space may have proved too late for some, with Moody's having closed its own ESG ratings business in July in favor of a partnership with MSCI.

In December 2023, the International Capital Market Association and the International Regulatory Strategy Group launched the voluntary code of conduct for ESG ratings and data products providers.

Welcomed by national bodies such as

In November, U.K. Chancellor of the Exchequer Rachel Reeves announced that legislation will be introduced in 2025 to bring the regulation of ESG ratings providers within the remit of the FCA.

“ESG ratings are hugely important for sustainable nance, and we believe that guidance from the FCA in their operation will be an aid to interoperability and the good functioning of our industry,” said

James Alexander, CEO of the U.K. Sustainable Investment and Finance Association.

The code of conduct was rst developed from recommendations by the International Organization Of Securities Commissions in November 2021, asserting in a report that the lack of standards in this area may present the risk of “greenwashing or misallocation of assets,” and could lead to a lack of trust in ESG ratings or in the robustness or relevance of ESG data products.

The 28 signatories to the ESG code of conduct include ratings providers MSCI, Bloomberg, EcoVadis and Morningstar Sustainalytics.

Regarding the contents and rollout of the code of conduct, Laura Nishikawa, managing director and head of ESG research at ratings agency and nancial data rm MSCI,

Gary Waters/The iSpot

therefore business as usual as part of the day job,” said Sandra Carlisle, head of responsible investment. “We integrate nancially material ESG factors into our investment decisions and engage with the companies we invest in to encourage positive change.”

Some observers in the sustainability space are however seeing a divergence developing within institutional investment, between those pension funds taking the broader approach to ESG as seen with LGPS Central and USS, and others not.

“There’s bifurcation in the (investment) community,” said Robert Sawbridge, head of responsible investment at Insight Investment, an asset manager with £665 billion in AUM as of Sep. 30.

“There are investors in certain jurisdictions that only want to understand risks that have a direct impact on a portfolio, and only over the time horizon of the investment itself. You’ve also got a different way of thinking in the community, which looks at sustainability holistically and the longterm pro le of these businesses,” he said.

Governance

Surrounding the sustainability discussion is how best to address the governance of a rm a pension fund has invested in, either supporting or challenging ESG decisions that will impact the perceived long-term nancial health of a company or investment.

Holding companies to account, particularly in the climate space, did take a hit in January when a decarbonization resolution at Exxon Mobil, led by activist investors Follow This and Arjuna Capital, was met with a lawsuit from the oil and gas giant, pursued even after the resolution had been withdrawn.

Aeisha Mastagni, senior portfolio manager in the $346.5 billion California State Teachers’ Retirement System, West Sacramento, also condemned the lawsuit, and the pension fund went on to vote against the appointment of two of Exxon Mobil’s board members in May.

Beyond the actions of one oil and gas giant, asset owners remain keen to press rms on the need to maintain open and reliable governance structures.

Adam Gillett, senior investment manager and climate lead at Railpen, which runs the assets of the £34 billion Railways Pension Scheme, London, remains undeterred: “We see good governance as central to the creation of sustainable nancial value,” he said. “We are also witnessing a resurgence in in-

said: “What we were most worried about when this trend towards greater regulation started was losing the independence of rating agencies to set their own and design their own methodologies. That was most important to us, that these policymakers not try to dictate how a rating is created or what factors need to be looked at, as we thought that would be hugely damaging to the industry and to our clients.”

“This fear has not yet come to pass, and the freedom to have divergent ESG ratings between providers is something that I think is valuable.”

MSCI is also a signatory to ESG codes of conduct established in separate jurisdictions, including Japan and Singapore.

Morningstar acquired Sustainalytics in April 2020, part of a wave of consolidation that swept across the ESG data provider arena, such as S&P acquiring TruCost in 2016, and the ratings arm of RobecoSAM in

vestor activity and activism at companies to improve their corporate governance and protect important shareholder rights at a time when policymakers in the U.K., European Union and elsewhere are rolling back corporate governance standards in the search for post-COVID economic growth. Railpen believes these policy developments fail to recognize the extent to which robust shareholder protections lead to better and more sustainable value creation for companies and investors.”

In an update to its global voting policy for 2025, Railpen committed to vote against any move by a company to reincorporate in a domicile that it considers to have signi cantly fewer protections for shareholders, unless a “compelling rationale” is provided.

The policy also decried “moves to weaken shareholder rights in the U.K. and elsewhere,”

‘For us the transition to a low-carbon world is a fundamental investment issue and it’s therefore business as usual as part of the day job.’

UNIVERSITIES SUPERANNUATION SCHEME’S SANDRA CARLISLE

in part a reference to the introduction of dual-class listings on the London Stock Exchange, something Railpen Senior Investment Manager Caroline Escott has been vocally opposed to.

The sharper counter of the engagement approach taken by asset owners is an exclusion approach to rms that do not meet the ESG standards of an institutional investor, sources said. Some pension funds exclude broadly, such as Pensioenfonds Zorg en Welzijn, Zeist, Netherlands, selling its stakes in 310 oil and gas companies in February, while others take a more particular approach.

There can also be a less broad approach to exclusion, as explained by Sindhu Krishna, chief sustainable investment of cer at Standard Life, Edinburgh, a pensions and insurance rm which runs a master trust with £10 billion in assets as of June 19.

“Broadly across the investment strategy, we have a very narrow exclusion policy,” she said. “As we completely acknowledge that it’s a blunt tool, and is only used in extreme scenarios where it doesn’t meet our principles.” 

2019, Deutsche Bourse acquiring ISS in 2021, and the aforementioned partnership between MSCI and Moody's this year.

Of the international ESG code of conduct, Hortense Bioy, global head of sustainable investing research at Morningstar Sustainalytics, said: “We are in favor of that, and it’s in line with the movement towards more transparency. We're asking companies to be more transparent and disclose ESG, so of course rating agencies should also be more transparent about how they collect data and how they make estimations.”

Bioy referred to endeavors in the corporate space such as the Corporate Sustainability Reporting Directive, which will come into force in the European Union on Jan. 1, and will mean a broader set of large companies, as well as listed small- and medium-size enterprises, will now be required to report on sustainability.

CHRISTOPHER MARCHANT

Outlook Money Management

Optimism tempered by geopolitics, new Trump regime in ’25

Fee compression, tech investment likely to drive continued consolidation

y B Palash Ghosh

After two years of a bull market, money managers remain generally optimistic about prospects for the industry, but concerned about global geopolitical issues and the rami cations of the next presidential administration in the U.S.

The year 2024 featured some major M&A deals in the asset management industry, including BlackRock’s plan to acquire HPS Investment Partners for $12 billion as well as its $12.5 billion deal to acquire Global Infrastructure Partners. Most sources believe consolidation will continue next year, as rms face growing pressure to achieve scale.

“Increasing fee compression, combined with the rising need for technology and infrastructure investment, will highlight the need for further consolidation and economies of scale,” said Donald Sanya, CEO of RBC Global Asset Management’s U.S. business.

Keith Cahill, head of North America Institutional asset management at J.P. Morgan Asset Management, also expects to see continued consolidation, as some smaller niche players will nd it hard to compete and could become takeover targets by larger rms.

Robert D. Kendall, president of Raymond James Investment Management, also expects to see M&A deals. “For boutique managers to compete in this environment, it is important to think about how you can operate with some level of scale,” he said. “Future success will require signicant investments in technology, distribution, and portfolio management tools and data.”

of PGIM also believes there will be continued robust M&A activity.

“This is because clients increasingly want to do more with fewer managers across both public and private markets,” he explained. “In addition, minimum ef cient scale in our industry has risen rapidly with the investments required in brand, technology including AI, and regulatory compliance across multiple jurisdictions; which also drives consolidation.”

Money managers are also focused on a number of other issues in 2025.

Cahill at J.P. Morgan Asset Management said what his rm is most focused on for 2025 is increasing “client engagement,” which includes coordinating with clients on the plethora of macroeconomic and geopolitical issues — including in ation, monetary policy decisions by the Federal Reserve, the impending

arrival of the second Trump administration, increasing tensions between U.S. and China and the ongoing wars in Gaza and Ukraine — that have been roiling the markets and will likely continue to do so in 2025.

Kendall also said he does not see the demand for private markets rms slowing down, and that is likely to drive asset management M&A. “Private credit, real estate and secondaries private equity will all be in demand going forward as traditional public markets-focused asset managers look to expand their capabilities and provide investors with a wider range of investment strategies,” he added.

M&A to continue

Taimur Hyat, chief operating of cer at PGIM, the asset management arm of Prudential Financial, said his rm will continue to invest in further building out their alternatives franchise, “continuing to globalize our client relationships, crafting tailored new investment strategies for our de ned contribution and high-net-worth clients and scaling our institutional multiasset solutions platforms, all underpinned by investment in technology, signi cantly including AI.” Absent any major market disruptions, Hyat

Cahill is also telling clients that the stock market rally is likely to continue, but leadership should broaden out beyond the concentrated Magni cent Seven stocks, thereby presenting attractive opportunities for active managers. JPMAM has more than $3.3 trillion in assets under management.

Hyat said from a macro perspective his rm is especially focused on heightened geopolitical risks, as well as the macroeconomic implications of the incoming Trump administration’s policy agenda, including the impact of tariffs, domestic tax cuts, immigration policy and a sweeping deregulation agenda. Hyat noted that, aside from Trump’s victory, there were elections in nearly 70 other countries in 2024, with a similarly “strong anti-incumbent and protectionist zeitgeist, against a backdrop of two major wars.” In terms of investment strategies, Hyat said a main focus will be on private alternatives as client demand for private credit and private equity secondaries “remains robust.”

MORE ALTS: PGIM’s Taimur Hyat

Outlook Exchange-Traded Funds

y B Kathie O'Donnell

The year 2024 began with approval of the rst U.S. spot bitcoin ETFs and ended amid multiple incinerated industry records.

Last year will be a tough act to follow, but there’ll be plenty of topics to watch in 2025, experts say, including active ETFs, share class relief and efforts to wrap private assets in ETFs.

Nate Geraci, president of The ETF Store, an investment advisory rm specializing in ETFs, said “2024 was the year of the bitcoin ETF. Period.”

“We’re talking about the single-most successful product category launch in industry history,” said Geraci, who prior to the January 2024 launch of the rst U.S. spot bitcoin ETFs had predicted the category’s success. Geraci added that 2024 also marked “the rst time that the (U.S. ETF) industry has eclipsed a trillion dollars in in ows in a calendar year.”

Net in ows into the U.S. ETF industry in 2024 through the end of November totaled a record $1.03 trillion, according to ETFGI, a research and consultancy rm. That beat the previous record set in 2021, when $803.4 billion owed in during the rst 11 months, ETFGI said.

Bloomberg Intelligence Senior ETF Analyst Eric Balchunas and Rony Abboud, chief marketing ofcer at Trackinsight, a Pensions & Investments partner that provides a global ETF selection and analysis platform, concurred with Geraci that spot bitcoin ETFs grabbed the spotlight in 2024.

“It took over all of our brains,” Balchunas said.

As for 2025, Geraci, Abboud and Balchunas cited a variety of contenders for the spotlight. They include the active ETF juggernaut as well as whether the Securities and Exchange Commission will grant applications for exemptive relief that would allow funds to offer both ETF and mutual fund share classes.

pre-COVID,” he said.

With construction costs way up, there is little indication of a substantial amount of new retail projects in the works, “meaning that asset owners will continue to have pricing power, which is good news for returns in the sector going forward,” MacKinnon said.

“That being said, these are only expectations and only time will tell how things actually turn out,” he added.

Logistics, data centers hot Industry insiders expect logistics and data centers to be the big winners in 2025 driven in part by needs of the growing AI sector.

“Asset valuations have stabilized,

Active ETF juggernaut

Real Estate

Currently, Vanguard is the only rm that has relief to offer funds with such a structure. A Vanguard patent expired in May 2023. Filings related to new types of cryptocurrency ETFs are also likely to be in focus, they said. In addition, efforts to wrap private assets in an ETF are also likely to be the 2025 spotlight, according to Geraci and Balchunas.

The rise of active ETFs isn’t a new story, “but what’s amazing is it seems to be accelerating,” Geraci said, adding that he expects that in 2025 active ETFs will continue to account for the lions’ share of new ETF launches and “continue to substantially out-punch their weight” when it comes to net in ows.

creating a solid foundation for renewed transaction activity, particularly in areas such as logistics, residential and data centers,” Berg said.

There is “intense demand” for data centers due to the rise of AI and supply of data centers is limited by the required power supply, DLA Piper’s Connolly said. Mulfamily properties are also signi cantly in demand while retail and industrial are performing well, he said.

“We’re seeing a situation where buyers and sellers of real estate are now understanding we’re going to be in a higher interest rate environment for an extended period of time,” Connolly said.

In an interview last year, Douglas W. Lyons, managing principal of real estate rm Pearlmark, said he is “op-

Active ETFs, dual share classes and wrapping private assets in focus

Intelligence’s Eric Balchunas

“The driver is that traditional active fund companies aren’t tiptoeing around ETFs anymore,” he said. “They’re now offering their best portfolio managers and agship investment strategies in an ETF wrapper.”

Assets under management in active ETFs globally totaled more than $1.1 trillion as of Dec. 9, according to Trackinsight data. In the U.S., active ETF AUM totaled $879.2 billion as of Dec. 9, up from $536.4 billion as of Dec. 31, 2023.

“I think that we’re going to reach $1 trillion in AUM in the states alone by early Q1 2025,” Trackinsight’s Abboud said. Net in ows into active ETFs in the U.S. totaled $270.3 billion this year through Dec.9, nearly double the $140.8 billion U.S. active ETFs took in for all of 2023, Trackin-

timistic about an increase in transaction activity heading into 2025.”

He said the industry was impacted by the rise in interest rates and now after the election, interest rate volatility appears to be “settling down.”

“We believe there is a signi cant wall of debt maturities needing to be addressed and capital to be deployed for real estate private credit, understanding that the banks are on sidelines,” Lyons said.

Overall there will be about $1.6 trillion in real estate debt maturities over the next three or so years, with about 25% or 30% of those loans being extended, he said.

For the remaining percentage that aren’t extended, a number will qualify for re nancing, which will be an investment opportunity for real estate debt managers.

Principal Asset Management’s Berg also expects an increase in re-

share class relief. “The ETF share class is going to drain the (mutual fund) if this happens.”

Relief relating to a multiclass structure will be a “big story” in 2025, Geraci said, adding that “many of the biggest names in asset management” are now pursuing exemptive relief from the SEC.

“Vanguard is already utilizing this for index-based funds, but now we have the two other largest ETF issuers that are pursuing this,” he said. “In my opinion, rms like that don’t get involved here unless they have genuine optimism that the SEC will approve this structure.”

On Oct. 30, BlackRock, the world’s largest asset manager, joined the parade of rms seeking exemptive relief from the SEC to offer ETF share classes of mutual funds, a ling shows.

On its heels came a ling indicating State Street Global Advisors’ desire for relief that would allow ETFs to offer mutual fund share classes.

Trackinsight’s Abboud also expressed optimism regarding the potential for the SEC in 2025 to grant the share class relief issuers are seeking.

“I’m optimistic considering there are over three dozen ETF issuers, including big names, that have led for this, alongside the more ‘open minded’ stance of the incoming administration,” he said.

sight data shows.

A friendlier SEC

“A big catalyst to watch … is whether the SEC approves ETF share classes to be bolted onto mutual funds,” Balchunas said during Bloomberg’s ETFs in Depth event, held Dec. 12. “We think they’ll probably approve it,” he said, especially given the fact that there will be a new SEC chair.

Paul Atkins, President-elect Donald Trump’s choice to lead the SEC, is likely to be friendlier to the regulated nancial industry, sources told P&I

“To us, we think this is going to be huge for ETFs, because who wouldn’t switch if you can switch without a tax implication,” Balchunas said regarding the potential

‘Near term, tariffs may lead to goods stockpiling, which would be positive for warehousing demand. But higher tariffs will almost certainly increase construction costs.’

TEN CAPITAL MANAGEMENT’S BEN ADAMS

capitalizations in 2025.

“Given the volume of loan maturities, coupled with improved transparency in asset pricing, it is likely to drive recapitalizations and creative repositioning of assets,” Berg said. Investors who focus on sectors sup-

Abboud added that many expected approval of U.S.-listed spot bitcoin ETFs once BlackRock led for such a product given BlackRock’s “strong approval track record and the rm’s signi cant weight and status in the industry.”

As of Dec. 19, BlackRock’s iShares Bitcoin Trust ETF had $53.4 billion in net assets.

Among rms keeping an eye on potential share class relief is MFS Investment Management, which established the rst U.S. open-end mutual fund more than 100 years ago.

“We have not led at the moment,” said Vivian Tung, senior managing director and investment product specialist for ETF products at MFS, adding, however, that MFS is watching developments regarding share class relief closely.

MFS entered the ETF market with the Dec. 5 launch of its rst ve actively managed ETFs.

Wrap it up

Efforts to wrap private assets into

ported by secular trends and demographic shifts such as logistics, residential, and data centers “will be best positioned to navigate these complexities and capitalize on emerging opportunities” in 2025, he said.

A wild card

Still, at any moment there could be a twist of fate for the real estate sector brought on by policies of the Trump administration, industry executives say.

Ten Capital Management’s Adams is “torn” on the new administration’s policies on real estate “in part because Trump’s policies are in some ways at odds with normative conservative policy positions — particularly on the issue of tariffs,” he said.

“The obsession over tariffs makes me a bit queasy. Near term, tariffs may lead to goods stockpiling, which would be positive for warehousing

ETFs likely “will be one of the most closely followed stories in the industry next year,” Geraci said, adding that “issuers are working overtime” trying to gure out how to wrap private assets — such as private credit, private equity and private real estate investment trusts — into an ETF.

“I think this will be the next frontier of ETF innovation,” he said.

Balchunas also cited private assets as an area to watch.

“This is like the Holy Grail,” he said during the ETFs in Depth event. “Can you put something illiquid into something liquid? Well junk bonds kind of did it, but this is (an) earthquake ling from State Street and Apollo.”

Balchunas was referencing a Sept. 10 ling for the SPDR SSGA Apollo IG Public & Private Credit ETF.

Typically, at least 80% of the fund’s net assets would be invested in a portfolio of investment grade debt securities, “including a combination of (i) public credit related investments and (ii) private credit investments sourced by Apollo Global Securities, LLC,” the ling said.

Some, however, have raised concerns regarding the proposed ETF. For example, in an Oct. 4 letter to the SEC, Micah Hauptman, director of investor protection at the Consumer Federation of America, said the ling “raises signi cant issues related to liquidity, valuation, and con icts of interest.”

Crypto products

“There are currently lings for ETFs that would hold Solana, XRP, Litecoin and HBAR along with crypto index ETF lings from Grayscale and Bitwise,” Geraci said, adding that “the crypto regulatory winds have clearly shifted” following President-elect Donald Trump’s win.

The Trump administration is expected to take a much friendlier approach to crypto, “which would obviously bene t the ETF space,” he added.

“My expectation is that ETF issuers are going to push the envelope here, and they’re going to test the limits of the SEC under the Trump administration because there’s really no downside to doing so,” Geraci said.

“We’re going to continue to see just a wave of lings around crypto-related ETFs.”

demand,” Adams said. “But higher tariffs will almost certainly increase construction costs on the material side of the equation, and, coupled with proposed restrictions on immigration, we could exacerbate labor shortages in the construction industry, leading to increased costs and project delays.”

This would likely impact the supply of new commercial properties and affect transaction volumes, Adams said.

However, deregulation and new tax cuts could “provide stronger than anticipated GDP performance, which could drive improved occupier performance, boost investor con dence and reduce barriers for businesses, potentially leading to increased property values and transaction volumes, “ Adams said. Looser scal policy is likely to stimulate economic growth, bene ting commercial real estate as well, he added.

CONTINUED FROM PAGE 17

Managers

Managers

There are also “early signs of a recovery in some of the quieter corners” of real estate as transaction activity picks up and clients begin to re-engage in that asset class, Hyat noted.

In addition, with interest rates staying “higher for longer,” along with an aging population and corporate pension funds looking at derisking strategies, Hyat believes xed income will be a key component in investor allocations in 2025.

Finally, Hyat is seeing an increasing ow of capital from insurers into private alternatives, particularly private credit and asset-backed nance.

“We are well-positioned across assets and liabilities to support our clients in this space,” he added.

PGIM has $1.4 trillion in AUM, including $859 billion in xed income and $332 billion in alternatives.

Jean M. Hynes, CEO of Wellington Management, said as the interest-rate environment is shifting, “we are working with clients to address their xed-income needs in areas like core bond plus, intermediate credit, and rotational strategies.” On the equity side, she noted they are “working with clients to address rising equity market concentration, with potential solutions like extended (140/40) strategies.”

Wellington has more than $1 trillion in assets.

Emerging focus

Sanya, CEO of RBC Global Asset Management’s U.S. business, said his rm is focusing on three key areas in 2025: emerging markets, xed income and alternatives. RBC-GAM has more than $503 billion in AUM, including $278 billion in xed income, $38.5 billion in emerging markets (both equity and debt), and $23.8 billion in alternatives.

“The long-term growth rate for emerging markets economies is expected to outpace developed market economies due to favorable demographic trends, increased domestic consumption and other secular trends,” he said.

With respect to xed income, Sanya noted that with the U.S. presidential election over with, “we anticipate meaningful potential to deliver attractive returns through active management across xed-income sectors.” As for alternatives, Sanya said his rm is seeing “increased interest in our alternative credit strategies, which have generated strong performance by taking advantage of volatility and dislocation across developed and emerging markets.”

William Huffman, CEO of Nuveen, said his rm will continue to build out its platforms in real estate, real assets and private capital in 2025. “To create the scale we need to serve clients around the world, we’ll continue to expand our presence internationally, invest in our technology, data and operating models, and develop new products and solutions that are resilient throughout market cycles,” he added.

In terms of investing strategies, Huffman said demand for private credit remains high, and “we’re excited about the opportunities in real assets, ranging from listed REITs and farmland to private infrastruc-

ture and real estate debt.”

this will be another area of focus.”

Raymond James IM has about $102.7 billion in AUM.

It could also be a big year for energy infrastructure, Huffman noted, as “we anticipate demand will grow for nuclear energy, new electric local transmission facilities and natural gas-related investments.” That could also drive new opportunities in energy-related nancing investments necessary to fund commercial building energy upgrades, he added.

Nuveen has $1.3 trillion in AUM.

Tariffs inflationary?

Armen Panossian, co-chief executive of cer and head of performing credit at alternative manager Oaktree Capital Management, said one of the major issues his rm is looking at in 2025 is risks related to the incoming Trump administration.

“Some of President Trump’s primary campaign promises are potentially in ationary, including tariffs, tax cuts and immigration controls,” he said. “In addition, Trump wants to preside over a vigorous economy and is therefore likely to push for lower interest rates to stimulate growth, despite the risk of inciting further in ation. This, coupled with the decit, may put upward pressure on longer-dated rates as investors demand a higher term premium.”

Panossian also said his rm will explore private credit investments around the world. “While we continue to see private credit opportunities globally, India, in particular, will be a region of focus for us in 2025,” he said. “We are seeing opportunities to invest in India given the strengthening economy and legal protections, which have made this market attractive for foreign investment.”

Ognjen “Oggie” Sosa, CEO at xed-income manager Breckinridge Capital Advisors, said with the shift in the balance of power in Washington, his rm “will be focused on the implications of the emerging themes of the new administration and unied congressional alignment with emphasis on in ation, immigration, income taxes and regulatory reform.”

In addition, Breckinridge will be “closely watching the Fed to better understand its path forward on its interest rate-cutting cycle in 2025.”

Breckinridge has $51 billion in AUM.

Active investing

With respect to the eternal battle between active and passive investment strategies, most managers think “active” will be prominent.

Sanya of RBC said he is very optimistic about “opportunities for active investing into 2025, particularly

fundamental economic picture in the U.S. and around the world looking more optimistic, there is increasing breadth across earnings which is now translating into an increased breadth of price appreciation across different sectors, industries, and market capitalizations,” he said.

“This increase in breadth is supportive of the current bull market broadly, but there has also been increasing dispersion in stock performance. Correlations across the market are near multiyear lows, and dispersion has picked up as investors become more discerning and focus on fundamentals across the market.”

In the wake of the U.S. election, active management — particularly through sector and security selection — will be increasingly important, said Panossian of Oaktree.

“Some industries may be more impacted by Trump’s proposed policies than others, but it’s hard to speak with any certainty,” Panossian noted. “For example, the tariff proposals described may hurt some U.S. retailers with products that rely on Chinese components, but others with little to no reliance on China stand to bene t. Tariffs may also reduce American consumers’ spending power and thus change their purchasing patterns, potentially bene ting lower-cost retailers, though many of these retailers have historically relied on China for low-cost manufacturing.”

Help wanted

Oaktree has $205 billion in AUM.

Jordan Irving, portfolio manager at boutique asset manager Glenmede Investment Management, said a big theme for the upcoming year will be on whether the dominance of megacap growth-oriented stocksnally gives way. “A broadening equity market leadership would have signi cant impacts on overall asset allocation as areas that are widely underrepresented would see outperformance,” he said. “It is likely, however, that markets will remain choppy as investors digest various sentiment indicators and get more clarity on the economic policies of the new Trump administration.”

Glenmede has about $7.5 billion in AUM.

Kendall, president of Raymond James Investment Management, said in 2025, his rm plans to “unveil a new ETF platform and enter private markets through an interval fund structure, as well as continue building additional capabilities.”

Kendall also noted that signi cant capital has moved to the alternatives space, sometimes at the expense of small-cap equities. “We are starting to see clients re-evaluating asset allocations in public markets, and in some cases looking at (small caps) again,” he added. “With enthusiasm growing around the potential for this part of the market to perform well,

within the less ef cient segments of the market like xed income, emerging markets and small caps.”

However, Nuveen’s Huffman said that the continued popularity and growth of private assets and the way that the asset management industry is rethinking portfolio construction makes the “active vs. passive” question less relevant by the day. “Investors should think beyond the binary choice between active vs. passive,” he added.

“Each (strategy) play important roles in a client’s portfolio, and each investor’s need to nd that balance is why the guidance of investment professionals will always be at the forefront of the asset management industry.”

Casey Clark, president and chief investment of cer of Rockefeller Asset Management, said a con uence of macro factors are expected to continue market volatility, including risks that in ation reaccelerates and the potential for new tariffs, policies and other regulatory actions, all of which may have an impact on select asset classes, sectors, geographies and companies.

“We believe this underscores the importance of both a well-diversi ed asset allocation and value of active management to identify best relative value,” he added. Rockefeller has $16.3 billion in assets under supervision.

Kendall of Raymond James “absolutely” thinks active investing will outperform in 2025. “As we see the

Wellington expects to add roles in “many key areas where we are investing, such as global research, privates, and wealth; and we will continue to have replacement hires in roles across the entire rm, as employees move to new internal or external roles in the regular course of business,” Hynes said.

Citing that talent is his rm’s most important asset, Hyat said PGIM is “always looking for top talent across our industry, on a global basis.” PGIM is actively hiring across a range of areas including technology, distribution, private credit and asset-backed nance, and institutional multiasset solutions, he added.

JPMAM, Cahill said, will continue to invest in technology in 2025 and could potentially hire more people in this area, as well as AI, cybersecurity and portfolio management.

Hepsen Uzcan, the newly appointed CEO of DWS Group-Americas, said a core part of her rm’s 2025 strategy will be to continue investing in junior talent.

“We have hired 14 top graduates this year and will continue to build a pipeline of future leaders who will help drive our growth and success in the region and beyond in 2025,” she said. The new hires will be focused on the company’s alternatives and Xtrackers ETF teams, to support expansion in those areas.

DWS Americas has about $225 billion in AUM.

As Nuveen seeks to expand internationally, Huffman said, the rm is “growing our technology and operations teams. Further, to meet client demand, our responsible Investing team will also grow in 2025.”

‘CLOSELY WATCHING THE FED’: Breckinridge Capital Advisors’ Ognjen “Oggie” Sosa

Outlook Retirement Policy

y B Courtney Degen

In a new, Republican-controlled Congress, retirement policy will likely take a back seat to other party priorities, such as implementing tax cuts and con rming cabinet nominations, though lawmakers will continue their focus on cryptocurrency and investment restrictions in China, sources said.

A key focus for Republicans this year is extending provisions from the 2017 Tax Cuts and Jobs Act, which President-elect Donald Trump signed into law during his rst term. The legislation’s provisions expiring at the end of 2025 mostly impact individuals, such as increasing the standard deduction and child tax credit, though Trump also called for further reducing the corporate tax rate to 15%, from 21%, during his campaign.

Working to extend those tax cuts is “going to take a lot of oxygen out of the room,” and limit the ability for other legislative activity, said Melissa Kahn, managing director of retirement policy for the de ned contribution team at State Street Global Advisors.

Kahn also noted that Republicans will focus on con rming Trump’s cabinet nominations early this year, which would take up further time, in

implement the full 60% tariffs on Chinese goods and could instead use the threats of increased tariffs as a bargaining chip, sources agreed.

“There’s the constant discussion around rhetoric vs. reality,” said Nick Wilcox, London-based managing director for discretionary equities at the $174.9 billion Man Group. “What we saw back in 2016 was a difference between Trump’s pre-election rhetoric and enacted policy.”

There is a general consensus around the potential for a stronger dollar, higher yields and a shallower cutting cycle that investors are digesting at the moment, allayed with a pro-business stance, he said in an interview during a recent visit to Singapore.

Asia’s opportunities

Despite the threat of tariffs, some Asian markets are well positioned to withstand the headwinds, money managers said.

“We see Southeast Asian economies, along with China and India, as potential bene ciaries as the performance gap between Asia ex-Japan and global markets starts to narrow.

Extending Trump tax cuts will be job one; Cabinet con rmations, funding also priority

Working to extend those tax cuts is ‘going to take a lot of oxygen out of the room.’

addition to the fact that lawmakers will need to address government funding. Cabinet picks coming from Congress are expected to further damage the small margin for House Republicans, who won 220 seats in

Within the region, we think Indonesia and Malaysia present more opportunities than others but — as ever — we look to build our portfolio from the bottom up and assess each company on its individual merits,” Wilcox said.

Economies that are more insular and reliant on internal demand will be more sheltered from the tariffs and geopolitical risks, said Ecaterina Bigos, Hong Kong-based CIO of core investments for Asia ex-Japan at AXA Investment Managers.

“India is one of those economies, and I would say probably Taiwan has scope to fare better, because of the (global) unwinding and decoupling of some of the supply chains,” she said.

“It’s a desire of the U.S. to diversify, but it’s going to take time, and some of it probably is going to be quite impossible to do. And Taiwan sits in that line of strategic position where, of course, a large part of the chip manufacturing, particularly the advanced chip manufacturing, is still being built in Taiwan,” she added.

Bigos also acknowledged that the CHIPS and Science Act, signed into law in 2022, has sought to bring the chip supply chains back to the U.S.,

On tap for a Republican Congress: less retirement, more crypto, China

the November election compared to Democrats’ 215.

Congress in December passed a temporary government funding bill, which will keep the government funded until March.

Some were hoping for the funding bill to serve as a vehicle for attaching legislation addressing technical errors in SECURE 2.0, the retirement security package Congress passed in 2022, noted Kendra Isaacson, principal at Mindset, a Washington-based public policy consulting rm.

However, the legislation addressing errors — such as the omission of a subparagraph about catch-up contributions — didn’t end up being included in the funding bill, meaning it will likely be one of the rst priorities for retirement legislation in 2025, according to Isaacson, who previously worked as the pensions policy director and senior tax counsel for Sen. Patty Murray, D-Wash., when Murray chaired the Senate Committee on Health, Education, Labor and Pensions.

Late last year, the American Retirement Association launched a publicity and lobbying campaign asking Congress to approve legislation allowing 403(b) plans to offer collective investment trusts to participants, known as the Retirement Fairness for Charities and Educational Institutions Act. That didn’t make it through Congress in 2024, either, though Kahn said she

and semiconductor factories have opened in other countries such as Japan. But it will take time for these manufacturing facilities to scale.

She added that increased tariffs on Asian imports into the U.S. will create downward pressure on local currencies, so export-oriented countries like South Korea and those in Southeast Asia will be most affected.

In addition, recent political turmoil have contributed to headwinds in South Korea, she said.

South Korea’s Constitutional Court is now deliberating on parliament’s recent impeachment motion against President Yoon Suk Yeol after he declared martial law in early December, before lifting it within hours. If he’s ultimately ousted, South Korea must hold an election within 60 days.

“These now add to increased internal uncertainty, diverting policymakers (from their) focus on addressing growth headwinds. Growth is expected to be impacted by the continued cyclical weakness in the global manufacturing sector, semiconductor exports growth moderation, downside risks to auto exports, and the uncertain outcome of the likely U.S. tariffs,” she said.

Impact on China

Among Asian countries, China is expected to suffer the brunt of

planned to “make a renewed push’’ for it.

SECURE 3.0 and other policy

While conversations surrounding “SECURE 3.0” will continue, sources agreed it’s unlikely that such a bill would be ready to pass by the end of 2025.

“It’s my understanding (that) staff has been collecting ideas and ne-tuning things that didn’t make it to SECURE 2.0,” Isaacson said, though she said 2025 will be focused on shaping those ideas and getting feedback on them, rather than nalizing legislation.

Similarly, Kahn said 2025 “will be a building year for SECURE 3.0,” though she added it’s likely “we will see more incremental steps on (retirement) access and coverage.”

Those include working on making transfers easier between retirement plans and between plans and IRAs, as well as working on lifetime income, she said.

Last year, Rep. Richard Neal, D-Mass., who serves as ranking member of the House Ways and Means Committee, reintroduced legislation building on state automatic IRA programs. The bill would require businesses with 10 or more employees not currently offering a retirement plan to automatically enroll their workers in IRAs or 401(k)type plans, though Republicans have historically not supported the bill because of concerns over a mandate.

If the election had gone differently and Neal had become chair of the committee, he probably would have pushed for that bill “as the centerpiece of SECURE 3.0,” according to Kahn. While his bill “will be part of the conversation,” it likely won’t be at the center, she added.

“I think mandates are very, very dif cult for Republicans to really consider seriously,” Kahn said.

A spokesperson for Neal did not respond to an inquiry on whether the congressman plans to reintro-

and the property market being very subdued, she said.

China’s consumer price index rose 0.2% year-on-year in November, and fell 0.3% month-on-month, while its producer price index fell 2.5% year-on-year and rose 0.1% month-on-month.

Bigos expects exports and manufacturing to be positive toward the end of 2024 as global partners “frontload” orders in anticipation of the upcoming tariffs, but 2025 will likely be met with challenges.

Trump’s policies, plus the country is facing cyclical headwinds that have slowed growth. However, investors should not underestimate China’s countermeasures to U.S. tariffs and scal stimulus that Beijing has yet to roll out, sources said.

“I think we have to break down a little bit in terms of where China is in the growth trajectory. And ultimately, it’s that its growth is trending lower.

It’s still going to be positive on a relative basis to developed markets, but it’s trending lower,” Bigos said.

The cyclical headwinds that China is facing include de ation both on consumer and producer price indexes, “substantial imbalances” related to leverage in parts of the economy,

Additionally, the real estate market, which has driven growth in China over the past few decades, will unlikely have as big a part to play in the Chinese economy in the future, further dampening China’s growth trajectory.

“Certainly, we know the challenges with real estate and developers, the leverage, misallocation, and then, of course, the yield on some of the infrastructure projects is not as it used to be in the past,” Bigos said.

The real estate market will play a different role to China’s growth, particularly as the population ages and the government has been rm on its stance that property is for living, not for speculation, Christy Tan, Singapore-based investment strategist with Franklin Templeton Institute, said in an interview.

But there have been signs of sta-

FLOWS STABILIZING: Vontobel’s Andrew Jackson.

duce that bill this Congress.

While Trump promised to protect Social Security during his campaign, sources agreed it’s not something Congress is likely to tackle this year, since lawmakers often wait to address issues until they’re imminent. Social Security’s combined trust fund reserves are projected to face depletion in 2035, though the trust fund for retirees and their families faces a depletion date of 2033, according to the Social Security Board of Trustees’ an-

bilization, she pointed out. “The year-on-year decline in total sales by oor space has slowed. And I think that’s quite encouraging. The November data also looks promising, especially in tier-one cities,” she said.

Another positive sign is the cut in mortgage rates and down payment requirements that the government rolled out as part of its stimulus measures in September, she said.

“Now, whether or not this will be sustained, I think that remains to be seen ... I think we will look at the property sector as probably on a slow L-shaped recovery path,” she added.

Sentiment among investors was also boosted after China in early December signaled a shift to looser monetary policy in 2025 to drive consumption and pledged to stabilize the stock market and property sector.

China’s countermeasures

The 60% tariffs that Trump has threatened on China, if enacted, will not have as big an impact as people anticipate, Tan said. “We do think that China is not going to just sit there and allow tariffs to be imposed and implemented just like that,” she said.

The magnitude of China’s response will be dependent on the extent of tariffs imposed, she said. “One of the policy responses will de nite-

nual report.

Crypto and China

While Republicans will maintain control of the House, House Financial Services Committee Chair Patrick McHenry, R-N.C., left Congress at the end of 2024, creating an opportunity for new GOP leadership in the committee.

Rep. French Hill, R-Ark. took McHenry’s place after the House Republican Steering Committee chose him to chair the committee on

ly be of, essentially, a similar amount, right? But, of course, I think that is the worst-case scenario, and also that might not be suf cient to offset (the impact) because the number of goods that are traded between the U.S. and China are essentially not of the same balance.”

“On top of response in terms of tariffs on U.S. goods, other things could include more stimulus into the Chinese economy such as more export rebates for Chinese exporters. It will be a multi-ministry effort,” she said.

“We could see the Ministry of Finance introducing more scal stimulus and we do expect the People’s Bank of China to perhaps eventually allow the currency to weaken to offset some of this tariff’s impact. We saw this during the 2018 and 2019 trade tensions,” she explained.

Tan added that China has diversi ed its export partners, so it is less reliant on the U.S. as it used to be.

“Between 2018 to October 2024, exports to Mexico from China rose 141% and exports to India rose 61%, exports to Vietnam 88%, and exports to U.S., 24% ... And if you look at ows of payments, there has been a significant rise, notably in terms of ow of payments, of dollars between China and Latin America,” she said, citing data provider Macrobond Financial.

“It de nitely shows that we are

Dec. 12.

Most of what the new chair does in his position will “be shaped by the administration’s priorities,” according to Scott Shewcraft, principal at Mindset and former chief of staff and legislative director to Rep. Bill Foster, D-Ill.

One of the issues the committee is sure to work on is crypto, Shewcraft added.

In May, the House passed a bill that aims to establish regulatory clarity for digital assets, known as the Financial Innovation and Technology for the 21st Century Act, or FIT 21 Act. The bill rst advanced out of the House Financial Services Committee and House Agriculture Committee in July 2023, after senior Republican members of both committees introduced it, including Hill, the future chair of the House Financial Services Committee.

The bill would give the Commodity Futures Trading Commission new oversight of the digital commodities market, while designating the SEC as the regulator of the digital securities market. It also calls on the agencies to propose joint rule-makings on digital assets and allows digital asset intermediaries to dually register with the SEC and CFTC.

“With French Hill at the helm, Republicans will build on our work from this Congress to nally enact a clear regulatory framework and robust consumer protections for the digital asset ecosystem,” McHenry said in a Dec. 12 statement.

Shewcraft said it’s likely that the House reintroduces that bill again this year, and “with a Republican trifecta, there’s no reason that (passing that bill) couldn’t happen pretty expeditiously.”

With the recent announcements that Trump plans to nominate Paul Atkins as chair of the SEC and appoint David Sacks as arti cial intel-

looking at growth in peripheral trades between China and the rest of the world. So, in fact, the trade de cit between U.S. and China is now smaller than that of China and the rest of the world, right? So that gives us some comfort that some of these tariff impacts could be offset,” she added.

Asia credit

Even though the China portion of Asian credit portfolios has reduced signi cantly — partly because loans have been removed from the benchmark — Asia credit had a decent year, said Louis Luo, Hong Kong-based senior investment director at the £506 billion ($644.5 billion) abrdn.

In 2021, index providers such as S&P Dow Jones Indices removed several Chinese companies from their benchmarks after the Trump administration in late 2020 banned U.S. investors from trading Chinese companies accused of having ties to the military.

China’s weighting in the JP Morgan Asia Credit Index (USD) has also fallen to 32% as of September from 52% in 2019.

“The interest rate component has been volatile, but the credit spread has tightened, so the total return is decent,” he explained. “Looking ahead for next year, the base cases were for Asia credit in general to be

ligence and crypto czar, it’s clear the new administration “will take a very different, more positive view toward digital assets and crypto,” said Ryan Carney, government affairs adviser and a member of the public policy and law practice at K&L Gates.

Ultimately, the industry still needs “regulatory clarity” on how securities laws apply to digital assets, which regulators should have oversight of such assets and more, contended Nathan McCauley, co-founder and CEO of Anchorage Digital, a crypto platform for institutional investors.

Another issue that Republicans will likely continue to focus on is restricting outbound investments in China, according to Shewcraft.

“I do think that, even if it’s (just) rhetoric, China is just a really, really attractive punching bag” for Congress, Shewcraft said.

Less oversight, slim margins

While Republicans have been critical of the SEC, Labor Department and other federal agencies during the Biden administration, sources agreed that congressional oversight of the agencies will lessen with a Republican House, Senate and White House.

“When one party has control, the role of Congress tends to shift a little bit from oversight to how best to support the initiatives of (the) president,” Mindset’s Isaacson said.

“A lot of what was done in Biden administration … is going to be just undone,” according to State Street’s Kahn, so that may lead to less oversight if federal agencies essentially do what congressional Republicans want.

That could include taking a step back from cryptocurrency enforcement at the SEC and pulling back on environmental, social and governance investing at both the SEC

more of a carry asset. But we don’t expect further signi cant tightening of the spread from current levels.”

“However, if that interest rate component continues to drift lower because of the Fed cuts, you will still have that capital gain from the yield component. So your all-in yield can still drift lower than the carry, plus that small capital gain from the U.S. Treasury component, means it’s still a decent carry asset to own,” he said.

He noted that the extent of tariffs imposed on Chinese imports to the U.S. and concerns over recession are risks to Asian credit. A weakened labor market in the U.S. suggests recession risk, which would affect demand for Asia imports, for instance.

Andrew Jackson, head of xed-income boutique at the 225.9 billion Swiss francs ($257 billion) Vontobel, added that emerging markets xed income has done well in 2024 but ows have not re ected the performance.

For instance, the J.P. Morgan EMBI Global Diversi ed index rose 8.05% year-to-date as of Nov. 29, and the J.P. Morgan CEMBI Broad Diversi ed Core index increased 8.22%. Comparatively, the Bloomberg Global-Aggregate Total Return index (hedged to the U.S. dollar), which is used as a benchmark for developed market xed income securities, had a year-to-date performance of 4.2%.

and DOL Trump’s pick to run the Labor Department, Rep. Lori ChavezDeRemer, R-Ore., previously supported a Congressional Review Act resolution to overturn the DOL rule allowing plan duciaries to consider climate change and other ESG factors when selecting investments. The CRA allows Congress to disapprove a nal rule issued by a federal agency, with a simple majority vote, if the rule has not been in effect for more than 60 legislative days.

“I do anticipate the CRA being used less and less,” K&L Gates’ Carney said, noting that the Biden administration “sped up a lot of their rule-making to make sure that it was outside of the 60-day legislative day calendar.”

For both CRA resolutions and other legislative activity, the House will have tight margins this year. While the election resulted in a 220215 margin for Republicans, that majority is expected to shrink further, given a few of Trump’s cabinet picks will leave the chamber.

Rep. Mike Waltz of Florida will resign Jan. 20, since Trump named him national security adviser; Rep. Matt Gaetz, another Florida Republican, won’t return to the House, after initially being chosen as Trump’s pick for attorney general, though he has since withdrawn from consideration. Their seats will remain empty until special elections that are set for April 1, and Rep. Elise Stefanik of New York, who Trump selected as U.N. ambassador, is expected to resign as well, which could result in a 217-215 majority for Republicans, according to Bloomberg.

Such a slim margin will likely result in “less bills coming to a oor vote,” and for the bills that do, they’ll likely be loaded with more provisions, Carney said.

Returns are roughly double compared to developed market xed income, “and yet, ows have been strongly into developed markets and at out of emerging market xed income,” Jackson said in an interview from London.

Flows into global bonds have risen 7.8% year-to-date as of October, while ows to emerging market bonds have fallen 5.2%, according to data from Broadridge Financial.

However, ows to the asset class have shown signs of stabilizing. In September, there were “real ows into EM xed income … and now we start to see some modest ows into EM again,” he said.

“We are entering a period in which it’s hard to nd value in developed markets in xed income, even in high yield, for example, and people have to start to look at emerging markets,” he said.

Investors are now showing interest in emerging markets partly because of value, and partly to diversify their portfolios, particularly as they start to realize their overexposure to the Magni cent Seven.

“It’s a huge asset class, incredibly liquid, huge (and) much more diverse than it was 20 years ago. And actually, I think it will see ows next year. It might not see massive ows, but I think we’re already starting to see the turn of the tide,” he said.

Steve Thomson/Getty

Global Economy

Global Economy

CONTINUED FROM PAGE 1

perhaps carry a few more risks.”

When Trump took of ce in 2016, the U.S. was running a de cit of just over 3%. The U.S. de cit now represents over 6% of GDP, “so doing a big tax break across the economy, which was hugely bene cial for the economy and markets (in Trump’s previous term) doesn’t seem like an option,” Ward said. Going down a route of signi cant tax cuts — beyond extending what’s already in place — “could be more risky,” she added. JPMAM has $3.5 trillion in assets under management.

It's also an economy on a comedown from high in ation, and that has, in his four years since being in of ce, seen interest rates rise from zero to a top target of 5.5%, and now coming back down to a range of 4.5% to 4.75%. The Fed has forecast a drop in the funds rate to 3.4% at the end of 2025, and 2.9% at the end of 2026.

Devil is in the details

“From a macro standpoint, we worry most about a resurgence in in ation should aggressive tariffs be implemented,” said Simona Mocuta, chief economist at the $4.73 trillion State Street Global Advisors. “But we also worry about what tariffs and deportations may do to economic growth. The truth is that, for many policy areas, the devil will be in the implementation details. And we worry about the unsustainable scal trajectory that so many economies, including the U.S., are in,” she added.

For Martin Moryson, chief economist for Europe at DWS Group, political uncertainty is “what you get if

Washington

CONTINUED FROM PAGE 3

stating that the SEC is preparing “numerous counts” against Musk following a multiyear investigation. The letter didn’t include any speci cs.

With Musk and Ramaswamy in charge of DOGE, they will soon wield uncertain power in Washington. What impact that will have on the SEC and DOL is an open question, sources said.

“There is de nitely a gravity toward streamlining and making the government smaller,” said Igor Rozenblit, managing partner at Iron Road Partners and former SEC staffer from 2010-2021, noting that in Trump’s rst term he signed an executive order stating that for every new rule an agency issues it must repeal two others.

For the DOL and particularly its Employee Bene ts Security Administration, DOGE could further restrict its already tight budget, said Andrew Oringer, who heads the Wagner Law Group's New York of ce and serves as its general counsel.

“Having lesser resources could make the department less able to come out with new regulations, new interpretations, new authority,” he said. “I think there’s a potential tamping down on their ability to do enforcement.”

Washington

you elect Trump. For the U.S., you have very high uncertainty regarding the outlook — because on the one hand, everybody at the moment is quite positive on his policies because he wants to cut red tape, get done with regulation, cut taxes,” he said, adding that the “market is almost priced for perfection in the U.S.” Moryson and other economists expect Trump not to cut taxes, but rather prevent automatic tax increases that would come when the Tax Cuts and Jobs Act of 2017 expire in 2025.

While markets seem positive, Moryson said it cannot be ruled out that Trump’s policies — increased tariffs, a pledge to seal the border, and to cut regulatory red tape and taxes — are “long-term negative for the economy” because of their in ationary impacts.

Tariffs also are “distorting — protecting your industry prevents them from being more productive. Less productivity (means) you have lower potential growth,” and that may lead to a stagnation scenario, Moryson said.

An anti-immigration policy pushes up in ation and brings down growth, he added. “That is not a very good idea … and with that, you are back again with this very high uncertainty” amid the fact that the administration’s “two most favorite policies are in ationary.” DWS Group has €963 billion ($1.02 trillion) in assets under management.

Other economists are thinking about the uncertainty over policy.

“The risk to market expectations for short-term rates in the U.S. comes from the potentially in ationary impact of the new Trump admin-

Oringer added, “There’s a concern that a general initiative to reduce the size in government could impact the way in which the DOL is oriented.”

Lisa M. Gomez, who leads EBSA as assistant secretary for employee bene ts security in the Biden administration and will be out her job come Jan. 20, said it’s imperative EBSA’s resources aren’t cut because it is a small agency with a lot of responsibility.

Any reduction in EBSA’s budget would affect “our ability to be able to service all participants in both retirement and health areas,” Gomez said, referencing a December spending bill lawmakers were considering.

New agency leaders

“So we are trying to make sure that folks in Congress are aware of this.”

Among his cabinet picks to date, Trump has selected Paul Atkins, a former SEC commissioner and CEO of a nancial sector consultancy rm Patomak Global Partners, to lead the SEC, and Rep. Lori ChavezDeRemer, R-Ore., a one-term congresswoman who lost her bid for reelection in November, to take over the DOL.

Both picks, sources said, are interesting for different reasons.

“What’s somewhat striking about an Atkins appointment is Trump has

istration’s policies,” said Daniel Morris, chief market strategist and co-head of the Investment Insight Centre at BNP Paribas Asset Management, which has €591 billion in AUM. “At this point, however, one can only speculate on what will actually be implemented.”

He agreed that any extension or expansion of tax cuts “would only lead to a further deterioration in the scal outlook,” and Treasury yields over the longer term “could rise to re ect the uncertainty about the outlook for in ation, to say nothing of the U.S. budget de cit,” Morris added.

While Andrew Pease, chief investment strategist and managing director at the $327.5 billion Russell Investments, dislikes agreeing with the crowd, he does on the general outlook for markets.

“Everyone is saying the same thing — U.S. rst, dollar strength, hate Europe, hate China. All those things make a fair bit of logical

shown a tendency to appoint outsiders into key positions,” said Lance Dial, a partner at K&L Gates. “Atkins is not an outsider. If anything, he’s an establishment person within the industry for a while.”

Rozenblit referred to Atkins as the “godfather of conservative securities regulation,” adding that he will likely offer a lighter enforcement approach and more of a willingness to provide guidance on a range of issues opposed to of cial rule-makings.

For the Chavez-DeRemer pick at DOL, some of her positions in Congress were outside the Republican mainstream, making it dif cult to predict what her tenure as labor secretary could mean for retirement plan regulation and oversight, sources said.

“She was a surprising pick,” said Kevin Walsh, a principal at Groom Law Group, noting these positions.

“To some extent, she seems like a substantially more pro-union pick than one would expect from a Republican administration, but the Trump administration has signaled some willingness to buck what would have been expected from Republican administrations more historically,” Walsh added.

Chavez-DeRemer was one of three Republicans to co-sponsor the Protecting the Right to Organize Act, or Pro Act, a bill aimed at making labor organizing easier. Despite her support, the bill didn’t advance in the Republican-controlled House.

ously forecast — and for the Bank of Japan to diverge and hike.

“True, the pace of decline may be somewhat slower than once envisioned due to resilient growth and balky in ation numbers, but the key point is that monetary policy is still substantially restrictive by any reasonable de nition, and there is scope to make it less restrictive without seriously overheating the economy,” said Eric Lascelles, chief economist at RBC Global Asset Management, which has a total $503 billion in AUM.

sense. It’s always a cliché to say ‘uncertainty is high’ … but normally that’s about the business cycle outlook. It’s hard enough working out where you are, let alone where you’re going,” he said.

And he also agreed that this time, things are different. “The challenge in 2025 is we have an additional layer this year: policy uncertainty.”

One way to deal with that is to think in scenarios, he said. Russell’s central scenario is 1.5% to 2% GDP growth for the U.S., the Fed takes policy down to neutral, in ation gets back to target, and Trump’s “stance on immigration, deportations, tariffs all turn out to be noise,” Pease said.

Focusing on central banks

Sources were unanimous in expecting the Federal Reserve, European Central Bank and Bank of England to continue on their interest-rate cutting paths — albeit potentially at a slower pace than in 2024 and previ-

Fiduciary rule

When it comes to retirement issues overseen by the DOL’s EBSA, exactly what Chavez-DeRemer and the Trump administration will do remains to be seen, sources said.

Trump has yet to announce his pick to lead EBSA.

Chavez-DeRemer in July split with most Republicans on the House Education and the Workforce Committee when she voted against a resolution to overturn the Labor Department’s duciary investment advice rule.

Under the Biden administration, the DOL in April nalized the Retirement Security Rule, which, among other things, changed the ve-part test so that one-time advice, such as rollovers to IRAs or annuity purchases, must be in an investor’s best interest.

Insurance and annuity groups have challenged the rule and after two District Court judges in July halted the rule’s implementation, the lawsuits are now before the 5th U.S. Circuit Court of Appeals in New Orleans.

The 5th Circuit in 2018 struck down a broader Obama-era duciary rule and the Trump administration elected not to appeal the decision.

But in 2020, the department under the Trump administration issued PTE 2020-02, an exemption that permits investment advice duciaries to receive compensation for

The uncertainty related to U.S. policy will also keep central bank decisions and monetary policy on the center stage in 2025. Should Trump’s policies prove in ationary, the Fed will nd itself with less room to maneuver. “The Fed has less room than most due to greater economic resilience plus the presumed growth-enhancing and in ation-enhancing effects of a Trump presidency,” Lascelles said. “But even there, some additional easing is likely.”

Melanie Baker, senior economist at Royal London Asset Management, added: “At current policy rates, the bar to rate hikes is high, but as 2025 progresses, that bar looks set to fall.” RLAM has £170.3 billion ($216.9 billion) in AUM.

Target on China

As signposted by Trump over the years, China is expected to remain the key target for tariffs, sources said. But it’s not just the U.S. that JPMAM’s Ward expects to cause tariff-related bother for China. She thinks actions “will happen organically from other countries increasing borders toward China. Europe is increasingly struggling to compete with the excess supply that’s coming out of China — I think we will see

more types of guidance that are otherwise prohibited under the Employee Retirement Income Security Act, such as rollover recommendations, so long as they comply with the exemption's conditions, which include care and loyalty obligations and con ict-of-interest mitigation.

“With this particular secretary, predicting what’s going to happen is hard,” Oringer said. “The last time that the amended duciary rule was rejected by the courts, the Trump administration did not appeal to the (U.S.) Supreme Court, but then they went and reinterpreted the rule in a way that was averse to nancial institutions,” he said, noting PTE 202002.

Ali Khawar, principal deputy assistant secretary at EBSA under the Biden administration who will be out of his job once Trump is sworn in, said it’s unclear what the Trump administration will do concerning duciary investment advice because a rule such as the Retirement Security Rule is needed to prevent con icts of interest.

“In the universe where the court strikes it down, I’m not sure that the next administration is … going to be able to not do anything here and leave it as it is,” Khawar said. “Because there are a lot of reasons why further action is needed. And in the same way that we saw in the Trump administration, an effort to address this problem in not dissimilar ways once you focus on the core of it, it

DIFFERENT ECONOMY: J.P. Morgan Asset Management’s Karen Ward

increasing protectionism in the West towards China — the question then is how does China respond?”

Authorities in the country need to recognize that China “is now too big to have export-driven growth — the rest of the world is not willing to continue absorbing — so they have got to… focus on their domestic consumer. I suspect we will see a sizable scal package there … focused on trying to make sure products are bought domestically,” Ward added.

RBC GAM is assuming a 10% tariff on China for its forecasts, with Lascelles adding that China “remains deeply intermeshed with the rest of the world, including profound trading relationships with the rest of Asia, South America, Africa, Europe and Australasia. These are unlikely to go away,” he said.

However, China’s trading routes may be impacted, potentially nding “that its capacity to tranship through such markets as Mexico and Vietnam into the U.S. becomes more constrained due to American pressure on those third parties.”

The specter of tariffs does present “a burden on growth,” DWS’ Moryson said, dampening positive measures by the Chinese authorities to stimulate the economy. “We normally would have revised upwards our forecast on China, from 4.4% to something like 4.7% or so. But with all these tariffs looming, we are going for a downgrade to 4.2%,” he said. The downward revision is not more because while tariffs will have an impact, the policy “won’t bring China trade with the U.S. to a standstill,” Moryson said.

Geopolitical risk

With Trump back in the White House, and tariffs and protectionism back on the table, geopolitical risk also

actually is quite consistent administration to administration. It’s a very market-driven solution rather than a top-down government solution.”

ESG considerations

Elsewhere at EBSA, the Trump administration will weigh what, if anything, to do on the consideration of environmental, social and governance factors when selecting investments.

Under the Biden administration, the DOL in 2022 nalized a rule that permits such consideration. In the rst Trump administration, the department issued a rule that said re-

remains high on the list of worries.

“Aside from the impact on trade tensions, it appears the Trump administration will also look to take a more interventionist approach in global con icts to bring about resolutions,” said Alex Joiner, chief economist at IFM Investors. “This is particularly true on Russia-Ukraine and the Middle East,” he said.

“The unpredictability of these ash points will be key for markets, particularly in the energy space where a deterioration (of geopolitics) may again prompt volatility and in ation,” Joiner said. IFM Investors has $114 billion in AUM across infrastructure and other strategies.

Ironically, Pease added, Trump’s return to the world’s political stage may actually reduce geopolitical tensions.

“Consensus is that geopolitics get worse next year. One thing Donald Trump is quite good at — not a conscious thing — is bringing down the geopolitical temperature gauge,” he said, citing the Geopolitical Risk Index — a measure of adverse geopolitical events and associated risks that’s based on wording in newspaper articles. The index was created by the Federal Reserve Board’s Dario Caldara and Matteo Iacoviello.

That index shows clear spikes around 9/11 and throughout George Bush’s presidency from 2001 to 2009, for example. However, it “trended lower in Trump Mark I,” Pease said — and was higher under President Joe Biden. Pease attributed the lower index numbers under Trump to his unpredictability, with others less likely to test him as they’re unsure of what may come back to them. “So Trump’s presidency, even though it might be a lot of noise, might be a period of geopolitical calm,” he added.

tirement plan duciaries could not invest in "non-pecuniary" vehicles that sacri ce investment returns or take on additional risk.

Biden administration of cials maintain that their rule is neutral and maintains the department's position that duciaries may not sacrice investment returns or assume greater investment risks as a means of promoting collateral social policy goals.

In February 2023, ChavezDeRemer supported a resolution to overturn the Biden administration’s ESG rule but the resolution was later vetoed by President Joe Biden.

y B Sophie Baker

Economists see bright spots in Europe, Japan and AI

While things may not look too great for Europe right now — with politics in disarray in certain countries and another year of less-than-inspiring growth — the bloc remains on economists' minds and there is some optimism for the future.

“For Europe, (our) expectations are very low,” said Karen Ward, managing director and chief market strategist for Europe, Middle East and Africa at J.P. Morgan Asset Management. “We’ve had a few years, if not a decade, of underperformance — it’s a very unloved part of the world in investment,” with valuations demonstrating that.

One reason, she said, was that Europe — including the U.K. — hasn’t seen its domestic consumer “come back to life after the (COVID-19) pandemic.” Savers are still cautious on spending, and manufacturing has been weak.

But on the scal front, Ward expects the European Central Bank to “move pretty rapidly” in further cutting rates.

“I’ve always said Europe is best in a crisis — often it needs a crisis … to galvanize Europe to take big steps. Maybe we’re underestimating what steps they might take,” Ward said.

Indeed, at its December meeting, the ECB’s governing council voted to cut interest rates by 25 basis points, bringing the main rate down to 3% in its fourth reduction in 2024.

“In light of her vote on the ESG resolution, and in the light of the idea that I think every change of control of the White House has led to changes in the ESG rule or sub-regulatory guidance, the next Trump administration is very likely to redo the ESG rule,” Walsh said. “To me, that’s the low-hanging fruit.”

The Trump administration will also take a look at the department’s quali ed professional asset manager exemption, or QPAM exemption, which allows institutions to engage in transactions involving U.S. retirement assets from 401(k) plans, individual retirement accounts and corporate pension plans that are otherwise prohibited under ERISA.

In April, the Biden administration nalized a rule to expand the types of misconduct that disqualify nancial institutions from qualifying for the QPAM exemption, in stark contrast to a piece of guidance the department issued late in the Trump administration. In November 2020, the DOL issued an opinion letter that said foreign convictions weren't disqualifying to obtain a QPAM exemption.

"It would be unsurprising for the Trump administration to go back and at least tweak QPAM again,” Walsh said.

Crypto

At the SEC, sources expect an Atkins-led agency to be more friendly to the regulated nancial industry

“Here in Europe, if anything, our problem is we’ve been good global citizens,” with a focus on saving the planet and keeping taxes low for future generations, for example. “We’re so worried about the hangover, we haven’t even gone to the party,” Ward said. “There’s a realization in Europe that maybe we’re missing out — it’s not a sustainable strategy.”

DWS Group’s Martin Moryson, chief economist for Europe, thinks there is potential for U.S. policies on tariffs to be complicated for Europe due to a lack of clarity. “And so you postpone your decisions time after time, postpone investment (and then there’s) less growth in Europe. It’s not the height of the tariff but the uncertainty that leads to less investment,” he said.

Andrew Pease, managing director and chief investment strategist at Russell Investments, also thinks that Europe surprising on the upside is “plausible.”

His starting point — “a strongly held consensus view, which is uncomfortable” — is that Europe has structural headwinds. Germany, in particular, has suffered, posting zero GDP growth since the end of 2019, vs. 11.5% growth in the U.S. and 8% in Netherlands, which he said was a comparable market. “Germany has genuine problems,” he added.

But there is potential. The MSCI European Economic and Monetary Union index is on a 12.5 times multiple, while the U.S. index is on 22 or 23 times — the biggest differential

and advocate a less hostile approach to cryptocurrency rms.

Since 2017, Atkins has led industry efforts to develop best practices for digital asset issuances and trading platforms as co-chair of the Token Alliance, according to his Patomak Global Partners biography.

“His involvement in the crypto (space) certainly sends a message that this is going to be a different SEC than the anti-crypto Gensler agency,” said Jay A. Dubow, a partner who co-leads Troutman Pepper Hamilton Sanders' securities investigations and enforcement practice group.

Crypto stakeholders have accused the Gensler SEC of taking a “regulation-by-enforcement” approach to the industry and have clamored for years for regulatory clarity. Gensler has maintained a position that there are already suf cient regulations in place under laws governing securities, commodities, money laundering and sanctions.

Sources are unsure exactly how Atkins will try and regulate the crypto market, but Dial said the difference between Atkins and Gensler will be stark.

“It’s certainly not going to be, ‘Let’s sue all the crypto rms and try and keep crypto out of the U.S. markets,’” Dial said.

Iron Road’s Rozenblit said Atkins may aim to exempt crypto assets from the SEC’s custody rule, which requires registered investment ad-

since the eurozone was formed, he said. “Europe is trading on its biggest discount. That’s good,” Pease added.   Melanie Baker, senior economist at Royal London Asset Management, agreed that sentiment around the European economy may have become too downbeat, and cited the upcoming federal election in Germany as a potential turning point. “A political shift in Germany toward reform of the debt brake could boost prospects for European growth, too,” she said.

Japan is a potential bright spot for Tessa Mann, director of macro strategy at Willis Towers Watson.

“We remain constructive on the fundamental outlook in Japan given corporate governance improvements," she said.

India is another potential bright spot, with Robert Lind, chief economist at Capital Group, noting that the country should grow by 6.5% in 2025, "driven by a young workforce and strong domestic spending."

Capital Group has more than $2.7 trillion in AUM.

Arti cial intelligence will also remain a top theme for 2025, said Simona Mocuta, chief economist at State Street Global Advisors. The year will feature “more discussion around the power requirements associated with broad AI deployment,” she said.

The Trump administration’s lighter regulatory approach in the AI arena may also be “bene cial to the economy,” she added.

visers to park client assets with quali ed custodians.

“I think changing the custody rule would be a massive change because I do think there is some desire by some managers to invest in crypto and they can’t because of the custody requirement,” Rozenblit said.

Climate disclosure

One of the major rules nalized under Gensler was the public company climate disclosure rule. Finalized in March, the rule requires public companies to disclose a host of climate-related information in their periodic reports and registration statements.

Following court challenges, the rule has been halted and the lawsuits, which have been consolidated, are now the before 8th U.S. Circuit Court of Appeals in St. Louis. Atkins has been an outspoken critic of the climate disclosure rule and in a 2022 op-ed asserted that the rule wouldn’t hold up in court. If the rule did survive the court challenge, an Atkins-led SEC could opt not to enforce it or write its own rule.

Beyond climate disclosure, sources expect Atkins to have a lighter regulatory touch than Gensler. Under Atkins, the SEC “won’t be pushing the envelope in the way Gensler tried to do,” Dubow said. “I think they will also be more responsive to comments and concerns from (the) industry before enacting nal rules.”

UNKNOWN QUANTITY: DOL nominee Lori Chavez-DeRemer.

Jabin Botsford/The Washington Post

Asset Owners

Asset Owners

Public School Employees’ Retirement System, Harrisburg, in a Dec. 6 interview. “We’ll need to see how the rest of the world reacts to the posture that America takes. The way we approach the rest of the world drives a lot of economic activity in the world. It’s fairly important that we keep a close eye on that.”

Cotton said, however, the markets have been highly resilient in the face of a lot of uncertainty. He cited the Dec. 3 declaration of martial law by South Korean President Yoon Suk Yeol and the collapse of the French government the very next day following the ouster of Prime Minster Michel Barnier in a no-con dence vote as events requiring immediate attention.

“My rst reaction was to get the team on standby because we might need to go into a kind of what we would call a heightened position of monitoring to make sure that we’re continuing to report things that are going on, and what that might mean to the portfolio,” Cotton said, “but you witnessed this last week, the markets kind of swallowed that. Quite well, and they’re moving along quite well.”

Indeed, for the year-to-date ended Dec. 13, the Russell 3000 index and MSCI EAFE index returned 27.8% and 6.4%, respectively, comparable with the impressive positive returns seen in the prior year ended Dec. 31, 2022, when the indexes returned a respective 26% and 18.9%.

Will AI’s promise materialize?

Much of the public equity rally of the last two years has been driven by

In the rst three quarters of 2024, there were 5,571 private equity deals worldwide, worth a combined $350 billion. That was well below the last ve-year annual average of 8,378 private equity-backed transactions totaling $610 billion, Preqin data shows.

“Looking forward, there is optimism around broader recovery in deal size and quality, with anecdotal evidence pointing to increased deal ow across the entire spectrum of private markets (private equity, private credit, private real estate and infrastructure),” Brandmeyer said.

“The anticipated reopening of the IPO market in 2025 is another positive signal, offering much-needed liquidity pathways for GPs and LPs.”

Exits improve

Private equity exits improved slightly between the second and third quarters of 2024, but still paled compared to the prior year, Preqin data shows. There were 570 exits in the third quarter worth $96 billion and 550 exits totaling a combined $97 billion in the second quarter. However, in the rst three quarters of 2024, the total number of exits reached 80% of the 2023 total, but only 54% of the 2023 aggregate

the promise of arti cial intelligence and big tech, and how that develops will be something to watch in 2025, said Sriram Lakshminarayanan, CIO of the $45.3 billion Iowa Public Employees’ Retirement System, Des Moines, in a Dec. 4 interview.

“The growth numbers that these companies have put up, the pace of innovation does make an investor look at them seriously,” Lakshminarayanan said. “You can’t just dismiss it as a fad. It de nitely does not feel like the dot-com era. There seems to be a bit more substance behind it.”

He said one of the more important things to watch in 2025 will be the further peeling of the onion of AI, whether these promises of new technology will raise productivity and increase earnings.

“So I think the AI story is promising, but it remains to be seen how the markets behave based off that,” he said.

Also top of mind among asset owners CIOs is the continued surprising resiliency of the U.S. economy, and how the impending return of Donald Trump and his familiar policies to the Oval Of ce will affect that.

Private Equity

transaction value.

“If I was 99% convinced, I’m now 100% convinced we don’t have an edge here at calling and making a big portfolio position based on in ation or anything like that,” said Marcus Frampton, CIO of the $79 billion Alaska Permanent Fund Corp., Juneau.

“It seems like we’re in a 2.5% world, on both 2.5% in ation, 2.5% real GDP growth,” he said. “I don’t think in ation is getting down to where Jerome Powell once said, but we're going to live with it being a little high. Everyone would prefer the

At the same time, nancing conditions have improved substantially, Brandmeyer said.

“For instance, borrowing costs for a typical leveraged buyout deal, which were as high as 12% in 2023, have now fallen below 10%,” he added.

Driving growth will be sectors including AI, life sciences and biotech and the energy transition, Brandmeyer said.

“However, risks such potential tariffs, ongoing geopolitical tensions (e.g., U.S.-China relations, Middle East con icts), and regulatory changes could introduce headwinds,” he said.

GSAM executives expect U.S. interest rates will decline in 2025, driven by a more accommodative monetary policy as in ation continues to ease.

However, should interest rates rise, private markets would face a more challenging environment with higher borrowing costs for leveraged buyouts, downward pressure on valuations and LPs shifting allocations “away from private markets and toward safer, higher-yield alternatives” such as xed income, Brandmeyer said.

Matt Stockstill, partner and co-chairman of the private equity practice of law rm Winston & Strawn, expects a slow uptick of private equity-backed M&A in the rst

economy to go 3% but it’s kind of 2.5%. So it seems like in spite of all the threats out there — tariffs and different things — it seems like the base case is the kind of soft landing everyone was hoping for. But then you’ve got the overlay of the risk that gets presented by tariffs and a new administration that doesn’t seem shy about shaking things up.”

“So I don’t know,” Frampton said. “I’m convinced that what we should do is focus on just executing well and picking top-quartile managers instead of second-quartile managers and sharpening our pencils on (challenges, like) does this real estate investment continue to make sense?”

A close eye one policy

Lakshminarayanan said that investors, once their initial euphoria or disappointment regarding the election results fades away, are watching to see what actual policy changes are

couple of quarters of 2025, helped along by the incoming Trump administration’s deregulation efforts.

“By the end of the year there will be signi cantly more volume,” Stockstill said. “It will take a little more time for changes in the system to pick up.

”There’s pent-up demand for transactions, capital to put to work, and “deals that are long in the tooth,” but interest rates will need to continue to fall, and sellers will have to adjust their expectations, Stockstill said.

“People are looking for lower interest rates, lower taxes and less regulation,” as well as less anti-trust reviews that will make it easier for clients to get deals done, he said. But as was seen in the rst Trump administration, things can change quickly leading to “a decent amount of uncertainty” around policies that could drive higher in ation such as tariffs, he said.

“I don’t see interest rates going back down to zero. I don’t know what the magic number is,” he said.

Still, transactions should pick up in 2025 and some of those deals will be exits, leading to more distributions to investors, Stockstill said.

Valuations

realignment of near-shoring and bringing manufacturing in house, creating jobs in house.”

Regarding Trump’s vow to create new tariffs, Lakshminarayanan said there is going to be a retaliation among the U.S.’s trading partners and a bit of rewiring of the global trade network, at least at the beginning.

Andrew Junkin, CIO of the $117 billion Virginia Retirement System, Richmond, said in a Dec. 6 interview that the end of 2024 feels a lot like the end of the prior year, with the economy remaining strong despite interest rates still high, even after the recent rate cuts.

made.

“Elections are when promises are made. Governance is when promises are kept, and policy changes that need to be made to keep those election promises usually takes a really long time and a lot more deliberation during that time,” Lakshminarayanan said. “Cynics might call it a dilution of election promises, but a realist might perhaps call it a more thoughtful implementation of election promises.”

What he said, however, that as a team, his of ce de nitely feels that the U.S. going forward is going to have a lot of geopolitical and policy divergence from other developed nations.

“I don’t know if that’s a good or a bad thing,” he said. “I just know there is going to be a difference in terms of how major economies think about how to construct their businesses. We’ve already seen beginning of the

One reason is that Winston & Strawn’s GP clients are looking to raise new funds but need to exit a few deals before they can do that, he said.

”Valuations have played a big role in that,” Stockstill said.

Many middle market private equity rms’ source of exit is selling their portfolio companies to larger private equity rms.

“It’s hard to get those deals done,” he said. “Fundraising has been lackluster and much of that is a need to exit,” Stockstill said.

In its Future of Alternatives 2029 report, Preqin forecasts that global private equity fundraising may not start to recover until 2027. Private equity fundraising worldwide is forecasted to be $622.1 billion in 2025, down from an anticipated $631.3 billion in 2024.

At the same time, Preqin expects that dry powder will continue to tick up, with unspent capital growing to $1.8 trillion in 2025, up from an expected $1.6 trillion in 2024. By 2029, unspent capital is expected to reach $2.8 trillion.

Most middle market rms will continue to do what they have done in the last few quarters:  focus on add-on acquisitions that do not require much nancing and are expected to make portfolio companies more attractive to be sold to larger buyout rms when those rms acquiring companies outright again, Stockstill said.

These add-on deals for companies GPs already own will continue into 2025, Stockstill said. There have

“The new administration, with the plans they they have in terms of renewing tax cuts, adding tariffs (and) deregulating, I would say some of those have mixed economic share packs, but net, it’s probably not enough to derail the economy,” Junkin said. “The tariffs are kind of a one-time resetting of price levels, so it is in ationary, for sure, but it’s not a consistent and persistent tailwind so much as a kind of one-time thing.”

Lakshminarayanan said the Federal Reserve’s recent rate cuts and tacit promise of more cuts in 2025 has proven to create a tailwind on certain assets, those that “are heavily dependent on reissuing debt or that are not very cash- ow strong, whether it’s in the equities market or the bonds market.”

He expects a few opportunities occurring as a result, although he said it’s more dif cult to identify those opportunities.

“We went through a period this year where we had an inverted yield curve and there was a lot of talk about how a recession is coming and this is portending a recession,” Lakshminarayanan said. “I don’t know if we’ve avoided that 100% — nothing can be

been fewer platform deals, meaning private equity rms’ initial investment in companies,  he added. Most of the increase in transactions in 2024 were existing portfolio companies acquiring to get larger and increase their valuation, Stockstill said.

Continuation funds

To provide liquidity for investors, Stockstill said that private equity GPs will likely turn to continuation funds to provide investors liquidity in 2025. The continuation fund strategy separates a portfolio company into a new fund, giving LPs the choice to cash out or roll their investment into the new fund. Fund managers argue

‘LIONS IN SHEEP’S CLOTHING’: Houlihan Lokey’s Matthew Swain

DIFFERENT ENVIRONMENT: Illinois Municipal Retirement Fund’s Angela Miller-May

Robert Tjalondo

avoided 100% — but it seems like that that tuned out defaults, given how growth was positioned or risk assets were positioned.”

With the steepening of yield curves, he said, there is more normalization going on, although he said that normalization is more something that resembles a duck.

“You’re very calm up top, but there’s a lot of battling going on underneath,” Lakshminarayanan said. “That’s how I frame the economy. All along it looks calm from up top, but there are a lot of pieces which could essentially put it into risk, events that are yet to be seen.”

Private, public market reviews

All CIOs said changes may be ahead in both public and private markets.

Miller-May said that IMRF will be conducting structural studies of one asset class at a time this year beginning with an international equity structural study to see how the pension fund’s overall portfolio will function under the new macro environment.

“We’re trying to understand if we have the strategies, if we have the managers for this new environment, because we've had these managers for a while, and maybe it was great for the environment of the last two years, but this one is very different,” she said.

One of those differences that may have a positive impact, she said, is the expectation for deregulation in the nancial markets.

“What we are faced with is the environment has been in over the last 18 months where we have just seen our exits slow, our distributions slow, and so (our) unfunded ratio is kind of creeping up. We either have to pull back on our pacing or hope that the deregulation will spur M&A

that the strategy is best for assets that need more time and investment to maximize their values.

“It’s a way to inject new capital ... but it’s not the right strategy for everything,” he said.

Indeed, Mike Bego, co-founder and managing partner, Kline Hill Partners, said that 2024 is going to be a record year, closing in at around $150 billion in deal volume “that will continue the run of secondary fund deals growing about 17% a year.”

And barring any large market crash or recession, “I see 20% growth going into 2025.”

In 2024, half of the transactions were sales of limited partnership stakes “but a good chunk of them were GP-led deals.”

LPs are reluctant to embrace GPled deals including continuation funds because they do not have experience and are concerned about possible con ict of interest issues. Those include the GPs valuation of the companies that were rolled into the continuation funds, Bego said.

GP-led deals are “much more accepted by LPs now,” he said.

Kline Hill is a secondary market rm with $4.4 billion in assets under management.

Jonathan Costello, founder of advisory rm and investment bank Devon Park Advisors, expects energy focused continuation funds, in particular, to take off in 2025.

“A few years ago, there was little

and IPOs.”

Miller-May also expressed hope resulting from small-cap equities beginning to perform well, and is hopeful value stocks can follow in 2025.

Jase Auby, CIO of the $211.6 billion Texas Teacher Retirement System, Austin, said in a Dec. 9 interview that “the investment question for the next year, as well as longer term for public pension funds, will be the large valuation gap between the U.S. and the rest of the world.”

“With Europe trading at a PE (price-to-earnings ratio) of 12, there is substantial opportunity and margin of safety built into those valuation levels that is not present in the U.S.,” Auby said, “so we will really need to see if growth prospects in the U.S. can continue to support that valuation difference.”

Meanwhile, in private markets, PennPSERS’ Cotton is optimistic, saying private market assets are showing signs of upside and that more people believe those assets were well-priced going in 2025.

“Last year, I think the big impact of higher rates was the cost of capital for assets to change hands, and that’s

interest in energy continuation funds. There’s been a ton of activity in energy continuation funds,” Costello said.

He said that the market for GPled is undercapitalized and most buyers “are hyper-focused on recruiting and training new talent to focus on these deals,” he said.

After Labor Day, there were 10 new continuation funds launched every day for the rst 10 days, he said.

“The market can’t absorb all of that content. Let alone have capital for all of it,” Costello said.

What’s more, liquidity has become a central theme for LPs in their investment decision-making, said GSAM’s Brandmeyer.

“Over the past year, many LPs have increasingly prioritized liquidity due to the slower exit environment and extended asset holding period,” Brandmeyer said. With the exit market stalled out, LPs have not been anxious to make new commitments.

Rough patches

“Fundraising timelines have now stretched to average of 18 months, up from 11 months in 2020,” he noted. “LPs are demanding improved distribution-to-contribution ratios from GPs, with particular scrutiny placed on funds that have lagged in generating liquidity.”

Faced with exit and fundraising

particularly relevant in private markets,” Cotton said, “and so we have not seen a lot of write-ups in private markets. Because of that, we’ve seen healthy distributions, but not high distributions.”

While Cotton said that PennPSERS has broken even on its capital calls vs. its distributions, particularly over last year, he said staff expected to see much more in their modeling, so it has made it more challenging to reach private market targets.

Even though models that have previously helped understand pacing aren’t as illustrative as they used to be, Cotton said he believes managers have become more disciplined in valuing their investments.

“While markets have been performing strongly, the underlying businesses tend to be holding their own and doing well, so we expect that divide between buyers and sellers eventually will kind of close out,” Cotton said. “We’ll start seeing more healthy distributions.”

Cotton said the pension fund’s recent $822 million sale on the private equity secondary market was illustrative of how assets are becoming more well-priced.

“We structured (the deal) in a way to where we sold a higher proportion of vintages 10 years or older than was represented in our book,” he said. “More broadly, we didn’t see it as a ‘must-sell.’ We saw it as a good opportunity to freshen the book and we got pretty good pricing.”

While that price is not disclosed publicly, Cotton said it was a very good price and a number of rms offered very strong bids.

“So it gives us an indication that there are others out there who believe those assets are well-priced and provide upside value,” Cotton said. 

challenges, a number of managers are “struggling to keep the lights on,” said Matthew Swain, head of direct placements and secondaries within Houlihan Lokey’s private funds group.

Swain had been global CEO at private equity advisory rm Triago Management Development, which was acquired by investment bank Houlihan Lokey in 2024.

This is giving rise to secondary market managers raising capital to employ an activist strategy — much like some public equity managers have used for years — to take advantage of the situation, he said.

“They are lions in sheep’s clothing,” Swain said. These managers are raising capital for continuation vehicles with limited partnership agreements that give them the ability to remove the manager in the GP-led deal if the continuation fund doesn’t perform, he said.

A dif cult fundraising environment could lead to some managers being open to  a secondary market manager employing an activist strategy for their continuation funds, said Antoine Drean, founder and managing partner of secondary market rm Mantra Investment Partners.

These secondary market managers are angling to end up owning private equity rms with mechanisms such as having the power to move the GP in a continuation fund, he said. 

CONTINUED FROM PAGE 3

The other top priority for sponsors is coordinating with their record keepers to implement the change in DC catch-up contributions for high earners starting Jan. 1, 2026. Participants earning $145,000 or more will be required to make catch-up retirement contributions via Roth rules, which fund accounts with after-tax money, compared to traditional rules that fund accounts with pretax money.

The IRS granted the DC industry a two-year delay in implementing the Roth rules, and consultants said they will need every extra minute.

Record keepers “have dragged their feet,” said Michael J. Francis, president and co-founder of retirement plan consulting rm Francis LLC.  Although SECURE 2.0 was enacted in December 2022, the IRS published guidance in August 2023 while agreeing to a delay in enforcing the law, he said.

“Record keepers say they are still working on the program,” Francis said. His clients are being told their record keepers will have their systems ready by the rst or second quarters of 2025.

Optional provisions

SECURE 2.0 “has kept most sponsors making sure they are compliant with the mandatory provisions,” said Julija Kod, senior investment consultant for Wilshire Advisors. “They are moving more slowly on the optional provisions.”

The key optional elements are linking emergency savings and student loan payments to retirement plans.

SECURE 2.0 allows employers to create emergency savings accounts within their retirement plan. Participants can be automatically enrolled at up to 3% of their pay, and they can opt out. After-tax contributions are capped at $2,500. Participants must be allowed to take at least one withdrawal per month, and the rst four withdrawals per year cannot be subject to fees.

Sponsors are interested, but the SECURE 2.0 rules are suf ciently cumbersome that emergency savings programs offered outside of the retirement plan are more popular, Kod said.

(A December 2024 survey by the Plan Sponsor Council of America said that only 1% of respondents said they are adding the emergency savings feature. The survey covered the 2023 plan year)

Even more complex from an operations and administration standpoint, she added, are the SECURE 2.0 rules linking the paying off student debt to retirement plans. “Our clients haven’t moved on this,” she said.

SECURE 2.0 permits employers with a 401(k), 403(b), governmental 457(b) or SIMPLE IRA plans to provide matching contributions based on student loan payments instead of based only on participants contributions to retirement plans.

(A December 2024 survey by the Plan Sponsor Council of America said that only 2% of 709 respondents said they are adding an employer match on student loan payments. The survey covered the 2023 plan year.)

The law’s student loan provision took effect in 2024, but the IRS issued a notice in August seeking public comment for additional regulations. Until then, the IRS’ 28-page notice will serve as guidance for the additional regulations, which will take effect in 2025. The notice includes eligibility rules such as dollar amounts; guidelines on employee certi cation that the law’s requirements have been met; and procedures that sponsors should follow.

Managed accounts

Managed accounts will come under greater scrutiny by sponsors, predicted NEPC’s O’Connor, noting that participants’ willingness to provide detailed nancial information is crucial to this feature’s success.

“The big focus is on the managed account provider to make sure managed accounts are understood (by participants) and adding value,” she said.

ERISA lawsuits against sponsors offering managed accounts “has caused a cooling effect or an inquiry effect,” she said. The primary complaint is that managed account fees are excessive.

“The main concern of sponsors is the need for participant input,” she added. “If participants aren’t engaging, then they are paying high fees” compared to a target-date fund.

O’Connor said she expected “a lot

VALUATION GAP: Texas Teacher Retirement System’s Jase Auby

Dan Herron

SLOW GOING: Francis LLC’s Michael J. Francis

Micro 401(k) plans will shake up record keeper-adviser relationships

MARGARIDA CORREIA

The number of micro 401(k) plans with less than $5 million in assets will grow to more than 1 million over the next decade, making advisers even more critical to record keepers, according to a new report from Cerulli Associates released Jan. 9.

Record keepers rely heavily on advisers to sell retirement plans, with 57% reporting that 50% to 99% of plans sold in 2023 were sold through advisers, Cerulli said in a new release.

With the expected surge in new micro 401(k) plans from roughly 670,000 in 2022, Cerulli’s expects the role of advisers to become even more prevalent.

Cerulli anticipates that wealth advisers will leverage their relationships with small-business owners to

sell them retirement plans, which advisers see as an opportunity to source new wealth management clients.

Some 1 in 4 participants in 401(k) plans who work with a nancial adviser found their adviser through their 401(k) plan provider, Cerulli said.

Record keepers of 401(k) plans are taking note, with 83% saying that the percentage of wealth advisers who sell their plans will increase over the next three years.

“Record keepers and plan advisers have always had to collaborate to serve plan sponsor clients best,” said Elizabeth Chiffer, a Cerulli research analyst, in the news release.

As evidence of the collaboration between record keepers and plan advisers, Chiffer cited Cerulli research showing that 83% of record

keepers share participant data with advisers.

“The growth of the micro 401(k) market will further the ongoing convergence of the wealth management and DC (de ned contribution) plan markets,” she said.

Chiffer added that while record keepers and plan advisers work together, they nevertheless compete to capture rollover assets and build retail relationships. Nearly half of record keepers (48%) share only some rollover business and participant services with plan advisers, she said.

“We expect that record keepers will continue to develop clearer lines of separation with advisers and execute agreements about data sharing, nancial wellness and rollover business to help navigate this potentially competitive environment,” she said.

DC

CONTINUED FROM PAGE 25

investment decisions and exercising shareholder rights.

The rule was needed, DOL ofcials have said, because late in the Trump administration the department issued a rule stating that plan duciaries could not invest in “non-pecuniary” vehicles that sacrice investment returns or take on additional risk.

Khawar noted that the Biden administration’s rule also makes clear that duciaries cannot sacri ce returns or take on additional risk, but the Trump rule, and especially the proposal on which it was based, established a viewpoint that ESG consideration was improper.

“The atmospherics and the verbiage, particularly in the proposal, really served to tell people that ESG was not OK,” Khawar said on the Trump-era rule.

EBSA under the Biden administration was focused on issuing a rule on ESG consideration that was neutral and would halt the regulatory ping-pong from administration to administration, Khawar said.

“You will not see in that rule if you read it carefully … and you read it in an unbiased way, you will not see promotion of ESG in an inappropriate manner,” Khawar said. “You will see something that says where it makes sense, you can take it into account and you’re not violating your duciary obligations. And the same is true for literally every other investment philosophy. And that’s the lesson you can take from that nal rule, so I think our approach made a lot of sense.”

The political discourse around ESG investing has ramped up in recent years and the DOL’s rule has faced legal pushback from Republican attorneys general.

A federal judge in 2023 upheld the rule, but the attorneys general led an appeal on narrower grounds in January and the case is before the 5th U.S. Circuit Court of Appeals in New Orleans.

The incoming Trump administration is seen as anti-ESG, and sources expect a new rulemaking effort on

the subject. Of note, Rep. Lori Chavez-DeRemer, R-Ore., President-elect Donald Trump’s pick to run the Department of Labor, supported a resolution in February 2023 to overturn the Biden administration’s rule.

President Joe Biden later vetoed that resolution.

But Khawar contends that the rule is neutral and considering ESG factors is part of a prudent duciary process.

“The question isn’t are you proESG or anti-ESG, the question really should be are you pro or against maximizing risk-adjusted net returns?” Khawar said. “And if you are,

‘If people don’t think those institutions are looking out for them, they’re not going to seek advice. And advice is important ; we want people to seek advice.’

EBSA’S ALI KHAWAR

then what we said in our rules is that investors should use whatever tools are going to get them to the best answer that they can.”

He added, “In the same way that I don’t have a crystal ball, investors don’t either. They have to engage in a prudent process that is best positioning them to get to that point.”

Retirement Security Rule

Arguably the most consequential rule issued by EBSA during the Biden administration is its Retirement Security Rule, which was nalized in April and, among other things, made it so one-time advice, such as rollovers to IRAs or annuity purchases, must be in an investor’s best interest.

The Retirement Security Rule is narrower in scope, DOL of cials

have said, than a 2016 Obama-era rule that signi cantly broadened the de nition of a person or entity taking on duciary responsibilities when providing investment advice.

The 2016 rule was struck down in federal court in 2018 and the Trump administration elected not to appeal that decision.

However, in the waning days of the Trump administration, the DOL in 2020 issued PTE 2020-02, an exemption that permits investment advice duciaries to receive compensation for more types of guidance that are otherwise prohibited under ERISA, such as rollover recommendations, so long as they comply with the exemption’s conditions, which include care and loyalty obligations and con ict-of-interest mitigation.

The Retirement Security Rule is needed, Khawar said, to better protect retirement savers and to reduce con ict of interests in the advice space.

“If people don’t think those institutions are looking out for them, they’re not going to seek advice,” Khawar said. “And advice is important; we want people to seek advice.”

Insurance and annuity groups have challenged the rule and after two District Court judges in July halted the rule’s implementation, the lawsuits are now before the 5th U.S. Circuit Court of Appeals in New Orleans.

But regardless of what the courts decide, the Trump administration will need to do something on duciary investment advice, Khawar said.

“In the universe where the court strikes it down,” he said of the Retirement Security Rule, “I’m not sure that the next administration is … going to be able to not do anything here and leave it as it is. Because there are a lot of reasons why further action is needed. And in the same way that we saw in the Trump administration an effort to address this problem in not dissimilar ways once you focus on the core of it, it actually is quite consistent administration to administration. It’s a very market-driven solution rather than a top-down government solution.”

of pressure” on managed account providers to reduce fees.

“If we have our way, we are telling clients to go easy on the managed account product push,” said Francis, a long-time skeptic. “Target-date funds do the job at less cost.”

Retirement income

Target-date funds have emerged as a likely way to inject retirement income solutions into de ned contribution plans, and they will continue to do so depending on sponsors’ evaluation of several factors, said Holly Verdeyen, partner and U.S. dened contribution leader at Mercer.

Sponsors must assess their workforce demographics, the cost sand their ability to keep retirees’ assets in their plans, “Once you have the answer, then choose the products,” she said.

Potential roadblocks include portability — whether a participant’s retirement income investment can be transferred to another sponsor following a job change — and the ever-present fear of litigation, “which can lead to inaction” by sponsors, Verdeyen said.

O’Connor noted that industries with frequent turnover make it hard for those sponsors to plan for lifetime income products. “Employee tenure is a structural challenge,” said O’Connor, agreeing that portability is a big issue.

One hurdle to faster adoption of retirement income solutions in target-date funds will be record keepers’ ability to modify their technology platforms, said Wilshire’s Kod. “It takes a lot of time,” she said. “The industry is removing obstacles along the way.”

Ironically, one source of delay in wider adoption is the recent proliferation of products and their complexity, she said. A few years ago, sponsors cited the absence of products to persuade them to pursue retirement income solutions.

“At this point, we are still in the educational phase for sponsors,” she added. “The momentum for implementation is going to be slow.”

Litigation risks

Litigation will play a role in DC plan management actions in 2025 even for the sponsors who haven’t

been sued because they - and their attorneys - will be monitoring what plaintiffs alleged against other sponsors.

One area is the recent proliferation of forfeiture lawsuits that lack clear trends so far among several judges’ rulings.

“The cases are not uniform (but) there is some movement by sponsors to tighten up their plan documents,” said Andrew Oringer, partner and general counsel for Wagner Law Group.

Tightening up — to Oringer and others — means sponsors deciding if they will use proceeds from forfeitures to reduce corporate contributions to their DC plans or reduce plan expenses.

Forfeitures occur when participants who are eligible for employer matches to their retirement accounts leave before they are fully vested.

Some vesting policies can run as short as two years; others can run ve years. Forfeiture rules don’t affect participants’ contributions to their retirement accounts.

Most of Volo’s clients use the forfeited funds to reduce corporate contributions to the plans. Clients must focus on plan documents that are “explicit and speci c,” he said.

Another looming legal issue for plan management is what constitutes prohibited transactions by service providers in their contracts with sponsors under ERISA. Federal appeals courts have issued differing opinions, prompting the U.S. Supreme Court to hold oral arguments in the closely-watched case of Cunningham et al. vs Cornell University et al.

The complaint by former participants in two Cornell 403(b) allege sponsors charged excessive fees, but more signi cantly claimed the relationship between the sponsor and record keepers violated ERISA.

“The Supreme Court needs to weigh the relationship” between sponsors and providers and whether the burden of proof in ERISA excessive fee cases belongs to the plaintiffs or sponsors, said Francis. A Supreme Court ruling “will help clarify to sponsors and especially to service providers” their responsibilities, he said.

In this 8-year-old lawsuit, which plaintiffs have lost at the federal district court and appeals court levels, the Department of Labor supports the plaintiffs through an amicus brief led in December.

‘STRUCTURAL CHALLENGE’: NEPC’s Mikaylee O’Connor

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On January 15, 2025, at 11AM ET, join a webinar encompassing global themes across fixed income and equities. Hear State Street Global Advisors experts discuss the investment topics that could take center stage in the year ahead, and learn about positioning that could help to manage market uncertainties.

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This webinar will discuss what portfolio strategies are working for public pension plans, and what’s under immediate review, the ways that they are engaging with their asset managers in a more holistic partnership, and how they can pursue a governance structure that allows greater tactical flexibility and decision-making to stay ahead of rapidly moving markets.

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PE-owned healthcare puts ‘pro ts over patients’ — report

Bipartisan Senate report cites underinvestment, nancial extraction

COURTNEY DEGEN

Private equity-owned healthcare entities are putting “pro ts over patients,” leading to negative consequences for hospitals across the country, leaders of the Senate Budget Committee contended in a newly-released bipartisan report.

The 170-page report, issued Jan. 7 by Sens. Chuck Grassley, R-Iowa, and Sheldon Whitehouse, D-R.I., speci cally focuses on Lifepoint Health, a healthcare provider owned by Apollo Global Management, and hospital operator Prospect Medical Holdings, which Leonard Green & Partners previously owned.

The investigation, which is based on over one million pages of documents, “highlights systemic issues with PE investment in health care, including underinvestment in critical hospital infrastructure, understaf ng, and the pursuit of nancial gains through leveraged buyouts and dividend extractions—often to the detriment of patients and hospital operations,” according to the report.

Grassley rst launched an inquiry into Apollo and Lifepoint in March 2023, following revelations that a nurse practitioner sexually assaulted nine patients at one of Lifepoint’s hospitals in Iowa. In December 2023, Whitehouse joined Grassley in the inquiry and expanded the investigation to include Prospect and Leonard Green, according to the report.

The report contends that Lifepoint and its predecessors’ “underinvestment” in the Iowa hospital resulted in “declining conditions and quality of care that allowed egregious events to occur” there.

Leonard Green’s previous ownership of Prospect also led to “multiple health and safety violations as well as understaf ng and the closure of several hospitals,” according to the report.

“Private equity has infected our health care system, putting patients, communities, and providers at risk,” Whitehouse said in a Jan. 7 news release. “As our investigation revealed, these nancial entities are putting their own pro ts over patients, leading to health and safety violations, chronic understaf ng, and hospital closures.”

State, federal scrutiny

The report comes amid scrutiny from regulators and lawmakers on both the state and federal level regarding private equity investment in healthcare.

On Jan. 8, Massachusetts Gov. Maura Healey signed a law that will impose nancial reporting requirements from the state’s Center for Health Information and Analysis on private equity investors, real estate investment trusts and management service organizations as well as increase non-compliance nes, among other things, according to Bloomberg.

In Washington, lawmakers have introduced several bills aimed at PE investments in healthcare, including one that would jail private equity executives who “loot” healthcare entities such as nursing homes and hospitals.

Apollo, Lifepoint, Leonard Green and Prospect all pushed back on the Senate report’s ndings.

Contact Laura Picariello (732) 723-0569 lpicariello@crain.com

An Apollo spokesperson said in a statement that the company’s investments in Lifepoint and its predecessor companies have "been used to improve facilities, expand local healthcare services, recruit care providers, build new centers of care and upgrade technology across Lifepoint’s network.”

“As a result of these investments, quality of care at Lifepoint hospitals has improved, according to third party ratings like Leapfrog as well as CMS Star Ratings,” the spokesperson said. “At a time when many rural

hospitals are under pressure and at risk of closing, Lifepoint has not had to close a single hospital and is committed to providing critical services in underserved areas.”

Lifepoint said that it’s dedicated to providing quality healthcare, and “in the face of many challenging industry and community circumstances, we have worked diligently to expand access to care and bring quality providers, caregivers, and technology to address our patients’ needs,” a spokesperson said in a statement.

“We appreciate the Senate committee’s attention to these issues, and we share the senators’ commitment to ensuring that all American communities have access to the healthcare services they need,” the spokesperson added.

A spokesperson for Leonard Green said they “respectfully disagree with the ndings in the report,” as their investment “enabled Prospect to invest in previously closed or failing hospitals, ensuring healthcare access for the underserved, and to invest over $750 million in its hospitals and provide $900 million in charity care.

At the time of exit, almost four years ago, Prospect was in strongnancial condition with access to over $500 million to support its operations.”

Prospect said it’s “disappointed by the committee report’s false conclusions and apparent omissions of key facts,” as the report doesn’t account for the company’s “many positive contributions to the communities” it serves and does not “accurately re ect the focus on quality of care and patient safety” at its hospitals, according to a company statement.

“Nearly all the hospitals Prospect acquired were cash-starved, neglected, in disrepair and on the verge of closure or bankruptcy,” the statement said, noting the company’s $750 million and $900 million investments in hospitals and charity care to patients, respectively. “That is the exact opposite of putting pro ts above patients,” the statement contends.

SYSTEMIC ISSUES: Senator Chuck Grassley

Fed likely to pause rate cuts after strong jobs report

Economy Managers say it’s likely no action is coming until the Fed’s March meeting

PALASH GHOSH

A stronger than expected December jobs report will likely compel the Federal Reserve to postpone any more rate cuts as the economy ended 2024 with a bang, asset managers said.

“The strength of today’s December jobs report puts to rest lingering chances of a 25 (basis point) cut in January and shifts the focus to the March meeting, where further rate cuts will depend on progress on ination,” said Lindsay Rosner, head of multisector xed-income investing at Goldman Sachs Asset Management, which has $3.1 trillion in assets under supervision.

Josh Jamner, investment strategy analyst at ClearBridge Investments, also said the strong jobs numbers indicates a January rate cut is “all but off the table.” ClearBridge has $193.3

Wellness

CONTINUED FROM PAGE 6

Coast, the California State Teachers’ Retirement System nished the expansion of its West Sacramento headquarters, which features a pedestrian plaza with public amenities.

Jacqueline Ashworth, the Atlanta-based head of human resources for New York-headquartered Voya Investment Management, said her regional of ce has been redone since the pandemic. She said that for employees, the rm has “tried to make the of ce space nice when they come back” — complete with a cafe, too. About 65% of the asset manager’s total 1,021 employees works in the of ce at least once a week on average.

For 2025, Voya will move to a new space in New York, which will have updated technology, collaboration rooms and space for events such as town halls and leadership lunches.

“There are a lot of activities that we can try to do on-site as well when different people are traveling or in town,” noted Ashworth, adding that this gives way for exposure opportunities employees wouldn’t otherwise have at home or elsewhere.

Ranked No. 7 among winners with more than 1,000 employees, Voya managed $333 billion as of June 30.

‘Beyond our walls’

Some Best Places winners are honing in on employees’ wellness.

For 2024, Satori Capital added a bene t of up to $500 to be used for a “building biologist.” This specialist visits employees’ homes and assesses the health of the environment, including for mold.

“And so not only are we nurturing our employees’ well-being in the ofce through things that we have — like catered lunches every day (and) we have a chiropractor and masseuse — but we’re also considering how can we support them and their family beyond our walls,” said Cami Miller, vice president of stakeholder relationships at the rm, which has of ces in the Fort Worth-Dallas metroplex.

billion in AUM.

Jack McIntyre, portfolio manager at Brandywine Global Investment Management, which has $63 billion in AUM, expects no rate cuts by the Fed for the rst half of 2025. The central bank, he noted, is “becoming more cautious about executing future rate cuts. The longer the Fed is on pause the more likely the next move will be to start increasing policy rates.”

However, McIntyre observed that as important as the labor market is, the most critical variable for the Fed and markets is in ation.

“Next week’s in ation data will be more important,” he said.

The U.S. economy created 256,000 jobs in December, above November’s downwardly revised gure of 212,000 and well above economists’ expectations, the U.S. Bureau of Labor Statistics reported on Jan. 10.

The unemployment rate clocked in at 4.1%, just below the 4.2% gure from the prior month. Economists had expected an increase of 153,000 jobs in December and a jobless rate of 4.2%, according to a survey by

In 2025, Satori will also be opening a new of ce in Fort Worth that will feature an immersive “recharge room” with a night sky on the ceiling, a built-in tree on the wall and a vibrational sound bed. Employees can “take 20 minutes and just recharge, relax their mind and feel like they’re stepping into a completely different space — but all within our walls,”

Miller added.

Ranked No. 4 among winners with 20 to 49 employees, Satori managed $1.3 billion in assets as of June 30.

Voya employees in 2024 were introduced to Lyra Health, a digital platform that provides access to therapists, psychiatrists and selfcare resources. Ashworth said staffers receive 10 free sessions to support their mental health. Additionally, the investment manager started offering free membership for FOLX Health, which provides healthcare and wellness services for the unique needs of employees in the LGBTQIA+ community.

In Boca Raton, Fla., employees in Polen Capital drove the creation of — and named — the newest employee resource group “Thrive.” The focus is on wellness and is inclusive of physical, mental and nancial aspects, said Chief People Of cer Rachel Trock.

The group organizes 15-minute post-lunch walks near the of ce so employees can get fresh air and move around. Thrive also reminds employees of wellness bene ts that the rm offers but may have forgotten about such as individualized coaching and an annual learning stipend.

“It’s hard to retain all this information” during employee orientation, Trock said. She added that “I’ve noticed such a change where people don’t feel as much or any stigma to talk about mental illness, anxiety and depression. That would have been quite taboo a long time ago.”

Ranked No. 4 among winners with 100 to 499 employees, Polen managed $65 billion in assets as of June 30.

Mentorship programs

Some Best Places to Work win-

FactSet Research Systems, a nancial data rm.

The bureau also noted some revisions to payroll gures from the past two months — the October gure was revised up by 7,000 to 43,000, while the November data was revised down by 15,000 to 212,000. With these revisions, employment in October and November combined was 8,000 lower than previously reported.

In December, job gains were especially pronounced in the healthcare, government, social assistance and retail sectors, the bureau added in the release.

For the full calendar year, the U.S. economy added 2.2 million jobs, an average monthly gain of 186,000), but that fell well below the 3 million jobs created in 2023, an average monthly gain of 251,000).

Fed futures trading are predicting no rate cut at the next meeting on Jan. 29. As of the morning of Jan. 10, according to CME Group’s FedWatch tool, market participants' pricing of fed fund futures indicated there is a 97.3% probability that

‘This (jobs) report is going to fuel a continuation of higher yields and pushes off the next Fed rate cut even further. We might not see another rate cut until next quarter.’

SIT INVESTMENT ASSOCIATES’ BRYCE DOTY

the central bank will keep rates unchanged and only a 2.7% probability it will cut rates by 25 basis points.

The Fed’s key short-term interest rate is currently in a range of between 4.25% to 4.5%, after the central bank reduced rates by 25 basis points at the Dec. 18 meeting.

“The bond market has been more volatile than usual and looking for reasons to push yields higher,” said Bryce Doty, senior vice president and

ners have unveiled new development-focused initiatives, including formal programs for fostering mentorship.

Launched at the start of 2024, First Eagle’s 12-month mentorship program is open to all employees who want to be a mentee, mentor or both, and people may choose to meet remotely or in person, Pama said. Participants are offered a detailed calendar of topics that can be covered during the program so they don’t feel like they have to come up with topics on their own.

The rm also organizes two workshops — the rst for mentors and mentees to assess how the professional pairing is working, and whether there are additional areas to focus on. The second workshop is for thinking about mentorship outside the professional environment, like giving back to the community.

The program is currently wrapping up with a re ection, giving participants a chance to share what they’ve learned throughout the year and decide if they want to move forward with their current relationship

senior portfolio manager at Sit Investment Associates, which has $17 billion in assets under management.

“This (jobs) report is going to fuel a continuation of higher yields and pushes off the next Fed rate cut even further. We might not see another rate cut until next quarter,” he said.

Jordan Rizzuto, managing partner and CIO at GammaRoad Capital Partners, said the strong jobs report highlights the Fed’s policy dilemma entering 2025 and complicates the picture for forward guidance.

“In ation has remained above the Fed’s stated target while the labor market’s overall strength has proven more persistent than the Fed likely anticipated,” he noted. “Further easing in this economic environment could potentially support a reacceleration of in ationary pressures, which in turn could threaten consumer con dence levels that have recently rebounded.”

GammaRoad is a research rm that develops systematic investment strategies with the goal of improving traditional portfolios.

across our organization, (and) attendees were then able to freely ‘walk the model’ at their leisure,” Gerard noted.

Each department had a table that provided materials that described their work, their roles and required skills. In addition to scanning a QR code for more information, attendees could speak with a representative of the department. Members of the human resources department also presented information on the rm’s philosophy and other resources.

Participants had the option of entering a raf e for development opportunities as well as sign up for a one-on-one conversation with a member of NISA’s management committee.

The fair was attended by about a quarter of the rm’s staff, which rated the event a 4.2 out of 5 in a survey and made creative suggestions for follow-up events, such as a scavenger hunt.

— or switch things up and get to know someone else at First Eagle.

“Some people view this as a way to get to know each other (or) to learn about other departments and parts of the business. Others use it purely for career development,” Pama added. “It’s really what you want to get out of it.”

For 13 years, Artemis Real Estate Partners has facilitated its summer enrichment program to introduce rising college sophomores and juniors to the industry.

But new for participants in 2024 was a service day, noted Amanda Khazem, the program lead for the initiative at the Chevy Chase, Md.-headquartered manager, which managed $10.4 billion as of June 30.

Students engaged in activities with older adults at a senior housing property in Virginia, and assembled personal hygiene kits for the nonpro t Horton’s Kids. New to NISA was a development fair where employees spent an afternoon going through a structured walk through of the rm’s operating model — complete with a map. “Attendees got to learn how work ows

For the onboarding of new staff, Polen Capital’s diversity and inclusion committee created an initiative that also helps employees become more familiar with a different part of the business.

On day one, “there’s a lot to navigate — a lot of bene ts forms you have to ll out, guring out where the restrooms are, guring out the Polen way of doing things” — so the program Polen Pals pairs new hires with someone who carries the values of the rm and has had a long tenure, Trock said. Notably, these partners do not work in the same team to give them exposure to other areas of the business, she added.

New hires may opt out of the program, but those who participate are asked to maintain a six-month commitment.

“We certainly hope that these relationships sustain longer than that, but by six months, it’s logical to assume that you’ve gotten onboarded and acclimated … We do our best to pair people with folks in the same of ce so that they can meet in person, and hopefully it leads to long-standing relationships — but so far, so good,” Trock said.

HELPING EMPLOYEES TO THRIVE: Polen Capital’s Rachel Trock

anchors State Street Global Advisors’ Saudi bonds ETF

SOPHIE BAKER

Public Investment Fund, Riyadh, Saudi Arabia invested $200 million in State Street Global Advisors’ recently launched Saudi bonds ETF.

The sovereign wealth fund, which has an estimated $925 billion in assets, is an anchor investor in the SPDR J.P. Morgan Saudi Arabia Aggregate Bond UCITS ETF, a news release said.

The exchange-traded fund was launched on Dec. 13 and commemorated at the London Stock Exchange on Jan. 8 with a bell ringing ceremony.

The ETF is the rst Saudi Arabia xed-income undertaking for collective investment in transferable securities ETF in Europe, SSGA said. It is listed on the LSE and Deutsche Borse’s Xetra in Frankfurt.

The fund tracks the J.P. Morgan Saudi Arabia Aggregate Index, a new index that provides investors with exposure to Saudi nancial instruments such as liquid, dollar-denominated, Saudi Arabia riyal-denominated government and quasi-government bonds, included sukuk bonds — sharia-compliant instruments.

“PIF continues to create opportunities, open gateways, and enable access to Saudi Arabia’s diverse and dynamic capital market,” Yazeed

Al-Humied, deputy governor and head of Middle East and North Africa investments at PIF, said in the release. “PIF’s investment into the rst internationally listed xed-income Saudi ETF further deepens the Saudi market, while attracting investors and strengthening cross-geography partnerships, increasing international investment in Saudi Arabia.”

PIF’s ETF investments include

those listed in Hong Kong, Shanghai, Shenzhen and Tokyo.

SSGA is “really focused very much on those markets that we see inherent growth,” Yie-Hsin Hung, CEO, said at a brie ng following the ceremony. Saudi Arabia “is a market that we expect is going to be growing at twice the pace of the developed economies around the world.”

State Street has been in the Middle East region for more than 30

years, “and so it’s a long-standing commitment of ours.”

The rm “very much take(s) to heart what our clients are trying to achieve. And so in this case … PIF was very keen to allocate more of their own capital back into the GCC (Gulf Cooperation Council countries) and into Saudi. At the same time, the kingdom itself, with Vision 2030, has been very focused on bringing foreign direct investments

and activating their equity and debt capital markets,” Hung added.

Jennifer Taylor, head of emerging markets debt at SSGA, said at the same brie ng that there were a number of “catalysts” for launching the xed-income ETF right now.

Those are an “index inclusion play, which is a gamechanger for both the kingdom and investors alike,” and a ratings upgrade for Saudi Arabia to Aa3 from A1 by Moody’s late last year. “There aren’t that many countries with a double-A rating in the emerging market universe,” Taylor said.

The ETF is available to investors in Austria, Denmark, Finland, France, Germany, Italy, Luxembourg, the Netherlands, Norway, Spain, Sweden and the U.K.

SSGA’s Hung, Taylor and other executives were joined at the bell ringing ceremony by PIF’s Al-Humied.

PIF’s investment is just the latest in a string of initiatives for the sovereign wealth fund. Announcements last year include its anchor investment partnerships with the Hong Kong Monetary Authority, Mizuho Financial Group, and with Brookeld Asset Management. In April it signed an agreement to anchor BlackRock’s Riyadh-based investment platform.

CONTINUED FROM PAGE 4

and attract them in the right places,” he said. “Right now, most of our investors (in Asia) are in Singapore, Hong Kong and Tokyo.”

There is also uidity in the areas of coverage across each of Wellington’s Asia of ces. For instance, there is an Asia equity team based in Singapore that covers not just Singapore or Southeast Asia but all of Asia. The rm also has China teams based in Hong Kong as well as panAsia teams.

In January, the rm opened a representative of ce Dubai and is always considering options in other parts of Asia such as South Korea. However, there are “no concrete plans at the moment” to open a new of ce in Asia, Klar said.

“Right now, we feel good with a strong local presence in Singapore, Hong Kong, Tokyo, and Sydney,” he said.

Juggling time zones

As the fund manager grows globally, it is careful to keep its culture of collaboration intact. The rm’s organizational structure is built on three pillars: the investment platform, the client platform, and the infrastructure platform.

Over 60 investment teams across asset classes such as long equity, long xed income, and some hedge fund and private market teams, along with central research, fall under the investment umbrella. This allows cross-functional exchanges across teams that “helps everyone be better (investors),” Klar said.

“Our goal is to make every investor who joins our rm a better investor than they could be anywhere else,” Klar said. “If you are an equity investor, you can tap into the xed

income knowledge of that company and the macro research, and then you can see what are the trends in privates that are impacting mega technology companies.”

Going global brought about an added challenge of fostering collaboration across geographies and time zones. “And we took on that challenge,” he said. “The (impact) of globalization is borne most heavily by our Asia-based colleagues, because they tend to be on calls at night, much more than other regions. And so we try to encourage our investors in London and Boston to really make sure that when they’re engaging with a colleague in Asia, to be thoughtful about when you do the call,” he said.

Over the years, the rm also learned to be conscious of booking meetings on a Friday morning in Boston — “you don’t book a meeting on a Friday night in Asia. Find a different day of the week,” he said.

Another change Wellington made was to split their daily meetings into two separate sessions to accommodate Asia, U.S., and European time zones.

“We used to have one investor meeting... Now we have two meetings a day, one that connects London and Asia, and one that connects Boston and London. And once a week, our Asia-based colleagues join the global meeting at 7:30 p.m. their time in Singapore, which is 7:30 a.m. in Boston, 12:30 p.m. in London,” he said.

“Those are some of the techniques we’ve used. Our investors (also) are encouraged and free to travel globally to research companies, but also to work together with others. So we keep pulling all those levers to truly make it a special environment of collaboration so that our investors can have insights that they wouldn’t get if they weren’t part of this connected ecosystem,” he added.

In-house

CONTINUED FROM PAGE 2

nancial educators in 2011, said Raymond Jimenez, AHRP’s president. “By having AHRP reps who themselves were employees and participants in the plan, there would be no questions as to objectivity, bringing reassurance to participants that they were receiving great unbiased education and recommendations with no sales pitches,” he said.

VALIC, for example, employed sales quotas to evaluate the performance of its advisers, including gross dealer concessions, a measure that gauged how much money they rolled over from IRAs and inactive workplace retirement accounts, according to Bennett.

The metric also weighed new contributions they set up through payroll deductions for 529 plans and Roth IRAs that VALIC offered.

Without having to worry about sales quotas, both Bennett and Shouppe now report being able to spend more time with participants needing help the most.

Doctors and other high-wage earners have different concerns from those of “frontline folks” who are cleaning the hospital rooms and checking people in when they arrive for pre-operative testing, Bennett said.

“I wanted to be just as much invested in the employees in the cafeteria and the employees in the landscaping department and the employees in our EVS or environmental services department,” she said, adding that her current role now allows her to “dig down and have deeper conversations with people.”

“Today I nd that I’m able to have much more in-depth conversations that are more enriching for the employee, instead of just, ‘how much

would you like to save? Sign here. We’ll see you next year so you can put more money in,’” Bennett said.

Shouppe also reported being able to help people who might not otherwise be given much time given the level of their wealth.

“I can spend an hour with someone in dietary and then 15 minutes with a physician because it’s based on need,” Shouppe said.  “I don’t have to base my time on ‘How important is this client? What is the potential business? What is the asset level that they can bring in the door?’”

Very few employers use in-house nancial advisers as AHRP does to provide nancial guidance to participants in their workplace retirement savings plans.

The majority, 69%, provide nancial guidance and counseling through their record keepers or other plan service providers, said Shannon Hanko, director of retirement at Willis Towers Watson, citing the rm’s 2024 de ned contribution survey.

About 1 in 3 (35%) employers offer nancial guidance through inde-

pendent providers unrelated to their plans, such as Financial Finesse.

Hanko was not aware of any organizations offering in-house nancial counseling and like other consultants interviewed for this story could not comment on why — and what type of — organizations opt for inhouse advisers.

In-house financial advisers

Utah Retirement Systems is another employer that chose to build its own team of in-house team nancial advisers.

The administrator of pension and retirement savings plans for some 210,000 public employees in Utah created the 15-person team to meet the needs of its participants, said Ryan Ashcraft, URS’ retirement planning director.

Ashcraft explained that URS participants had multiple bene ts options, including a pension plan, a 401(k) plan and traditional and Roth IRAs, and the many choices overwhelmed them.

“They just wanted somebody to tell them what to do,” he said.   Ashcraft also said that some em-

UNBIASED EDUCATION: Adventist Healthcare Retirement Plans’ Raymond Jimenez

CELEBRATION: State Street Global Advisors execs rang the opening bell at the London Stock Exchange.

CalSTRS’ Chan gearing up for volatility, uncertainty

CIO readies tools for 2025, including private markets, xed income

ARLEEN JACOBIUS

In the face of wide market swings and continued uncertainty this year, CalSTRS CIO Scott Chan said pension fund of cials expect to lean into offense and defense: offense such as private market investments in energy transition and “pockets of private credit,” and defense by bringing back to target allocation diversifying assets like xed income.

“The market will be volatile” with a possibility of a markets dropping 10% or 20%, Chan said.

One theme that could impact performance is arti cial intelligence and its potential to drive markets, Chan said.

“Has it gotten ahead of itself?” Chan queried.

CalSTRS of cials expect to see a large amount of spending by companies on AI technology and its use cases and is uncertain how this will impact earnings, which Chan said “is a great risk.”

Recently the CalSTRS investment committee built in liquidity and rebalancing tools — including leverage

ployees were frustrated with providers of 403(b) plans that persuaded them to get into products that were not in their best interest.

“This was something that we thought could really help our members make the right decisions by getting true objective advice,” he said.

URS launched the team in 2015 as part of its retirement planning program, which aimed to help employees understand their retirement plan options.  The team’s role later expanded with the launch of a nancial wellness program in 2020 to help employees with broader topics, such as budgeting and emergency savings.

For Russ Bulloch, a retirement planning adviser with URS, giving objective advice is what makes him tick.

He was previously a private adviser, working in roles that required him to sell products to earn a commission and make a living for his family.

“I like being able to advise people without feeling obligated to sell,” he said.

“In this role, I’m able to help people progress without that kind of inherent con ict of interest that I felt in roles with private nancial rms where I had to meet certain quotas to keep my employment there,” he said.  “I’m a good adviser. I’m not a very good salesman.”

and wider bands around asset class targets — that pension of cials have yet to use, Chan said at the Jan 8 investment committee meeting of the $346.5 billion California State Teachers' Retirement System, West Sacramento.

“This could be the year that we use them,” Chan said.

Offense and defense

Asset prices could fall in volatile markets and CalSTRS could use added liquidity to take advantage of that, he said.

There is much uncertainty in the market for 2025 with other themes including interest rates, arti cial intelligence and policy changes such as tariffs, Chan said.

President-elect Donald Trump’s campaign rhetoric around tariffs could be in ationary and adds uncertainty to the markets. In ationary pressure from Trump tariffs could work its way into interest rates, the economy and private market prices, Chan said.

“This is why it is important keep our dry powder, keep a diversi ed portfolio and be ready to take advantage of opportunities,” he said.

CalSTRS of cials see investment opportunities particularly in private markets, which could “produce some alpha or exceed our benchmarks,”

Chan said.

Some potential offensive plays include investing in energy transition, private credit sectors that are structurally growing and, after a few years of decline, possibly real estate.

“We are underweight that (real estate)...there could be a looming in exion point, although we’re not

calling one,” he said. CalSTRS of cials are also seeing more private equity deal ow as well, Chan said. At the same time, CalSTRS ofcials plan to continue playing defense by bringing diversifying assets such as xed income back to target due to the risks, Chan said.

In 2024, CalSTRS adopted a new asset allocation increasing its xed income target by 1 percentage point to a new 13% target allocation, to fund its private credit direct lending strategy.

Indeed, one of the longer-term mega themes Chan and his team  identi ed is the continued shift of credit from banks to the private sector, he said.

“This is a good thing because in every crisis we see banks going out of business,” because as in the case of Silicon Valley Bank, their assets do not match their liabilities, he said. The movement of debt off of bank balance sheets is a “generational” investment opportunity to invest in the select number of private credit segments where there are opportunities. Chan said.

However, in the short term, Chan said he expects there will be a default cycle whether in the private or public credit markets.

That could be an opportunity because there are some sectors where investors get paid more in a default cycle, he said. There won’t be a big change in defaults if there is a quick decline in the market with a rebound in 2025. Even such a “rough patch” could impact prices, he added. However, a recession will produce a default cycle, Chan said.

Nasdaq won’t appeal after diversity rule struck down

BRIAN CROCE

A federal appeals court struck down the Securities and Exchange Commission’s approval of Nasdaq’s board diversity rule, and Nasdaq has no plans to appeal.

In a 9-8 decision, the 5th U.S. Circuit Court of Appeals in New Orleans on Dec. 11, ruled that the SEC exceeded its authority, writing that “the diversity rules cannot be squared with the Securities Exchange Act of 1934.”

A Nasdaq spokesperson said in a statement, “We maintain that the rule simpli ed and standardized disclosure requirements to the bene t of both corporates and investors. That said, we respect the court’s decision and do not intend to seek further review.”

Nasdaq’s decision not to appeal the decision is unsurprising given that the incoming Trump administration is unlikely to oppose the 5th Circuit’s ruling and that the ruling itself appears consistent with recent U.S. Supreme Court decisions, according to Michael Gold, a partner at law rm Saul Ewing.

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“With little chance of success, Nasdaq probably made the calculation that it was not worth expending more of its resources on this issue and it was better to move on,” Gold said in an email.

Under the Nasdaq rule, which the SEC approved in 2021, companies without two diverse directors must explain why they do not meet the requirement. That includes “at least one director who self-identi es as female and at least one director who self-identi es as LGBTQ+ or an underrepresented minority,” such as Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Paci c Islander, according to an SEC order.

In October 2023, a three-judge panel at the 5th Circuit ruled that the SEC did not violate the Securities Exchange Act or the Administrative Procedure Act when it approved the Nasdaq rule.

Following the decision, the conservative groups that led the lawsuit — the National Center for Public Policy Research and the Alliance for Fair Board Recruitment — each led

petitions requesting that the full court give its lawsuit another look.

The conservative leaning 5th Circuit granted the appeal, and in May the entire court heard oral arguments.

“It is obviously unethical to violate the law or to disregard a contractual promise,” the court’s majority opinion said in the Dec. 11 decision. “It is not unethical for a company to decline to disclose information about the racial, gender, and LGTBQ+ characteristics of its directors. We are not aware of any established rule or custom of the securities trade that saddles companies with an obligation to explain why their boards of directors do not have as much racial, gender, or sexual orientation diversity as Nasdaq would prefer.”

On the other side, the eight judges who voted to uphold the SEC’s approval wrote in their opinion that Nasdaq is a private company that updates its rules regularly, competing with other exchanges for listings.

“The Exchange Act requires that the SEC approve these exchange-proposed rules but encourages self-regulation by sharply lim-

iting SEC review such that the SEC must approve rules if certain requirements are met,” the dissenting judges wrote. “Consistent with Congress’s scheme, the SEC’s authority to impose its own judgment on exchanges and the companies that list on them is, unlike that of the exchanges themselves, extremely limited.”

Sheng Li, litigation counsel at the New Civil Liberties Alliance, the group that represented the National Center for Public Policy Research in the lawsuit, welcomed the court’s decision and said in a statement that Nasdaq’s diversity rule strips “people of their individuality and force(s) companies to classify them based on gender, race, ethnicity and sexuality.”

The majority of the 5th Circuit “correctly recognized that neither SEC nor Nasdaq has any business regulating the composition of corporate boards along these controversial demographic dimensions,” Li added.

An SEC spokesperson said in an email that the agency is “reviewing the decision and will determine next steps as appropriate.”

READY FOR OPPORTUNITIES: CalSTRS’ Scott Chan