CRAIN_PI_20250317

How UPS investment staff moved to GSAM

y B ROB KOZLOWSKI

Ernie Caballero didn’t know how good working for a giant money manager could be. In September, the 35 year UPS veteran and his team of pen-

sion fund investment professionals in Atlanta packed their bags and headed seven miles south to their new of ces at Goldman Sachs Asset Management to complete a historic OCIO deal. Their primary responsibilities didn’t change. Caballero, until September the chief investment of cer of $41.5 billion in de ned bene t plan assets overseen by United Parcel Service Inc., is still overseeing those assets

as a Goldman Sachs employee.

And his team is still working to manage the company’s pension plan assets to their liabilities and ensure the continued distribution of bene t payments for tens of thousands of UPS retirees and bene ciaries for decades to come.

“Leading UPS, I didn’t realize how good it could be, to be honest,” Caballero said. “And I’m not saying that be-

cause I work at Goldman, but it’s just the opportunity set is so much broader, and really, you’re working with a lot of people that think the same way. The possibilities are just broader. They’re global. There’s a lot of support, a lot of research, a lot of everything that you just have at your ngertips that you never had before.”

Caballero’s new position is the re-

Eddy Award winners take a bow for their retirement education, communication efforts

With the common themes of increasing participant engagement, knowledge and preparation for retirement, a variety of education approaches were on display March 11 in Fort Lauderdale, Fla., as Pensions & Investments presented its annual Eddy Awards.

The awards ceremony was part of P&I’s annual De ned Contribution East

conference, recognizing 61 campaigns from employers in the private, public and nonpro t sectors and their service providers for their creativity and comprehensiveness in helping workers plan for and enjoy retirement, and build their nancial wellness. An additional three campaigns received honorable mentions. The campaigns were as diverse as the sponsors’ media strategies — from print and email,  intranet and videos, to live and/or virtual meetings — or all of the above.

There were six awards categories:

conversions/403(b) consolidations; nancial wellness; ongoing investment education, pre-retirement preparation; plan transitions and special projects.

Descriptions of some of the top-winning campaigns are organized by category below:

Responding to employees’ concerns about needing more help as they approached retirement, executives at Costco Wholesale, Issaquah, Wash., decided they needed a speci c education program to reach those who are 55 and older.

Nearly two dozen states across the country have introduced legislation this year to authorize state investments in digital assets — a move that mirrors the Trump administration’s embrace of crypto.

In 2025 thus far, 23 states have introduced legislation to allow public investments in crypto, with some bills speci cally authorizing the state treasurer or state pension funds to invest in the asset class. Other bills focus on the creation of a state bitcoin reserve, often using some version of the name: “Strategic Bitcoin Reserve Act.”

The wave of state legislation comes “on the back end of potential national regulations that could provide some clarity,” said Adam Sporn, head of prime brokerage and U.S. institutional sales at BitGo, a crypto custody rm.

His rst week in of ce, President Donald Trump issued an executive order establishing a working group on digital assets and instructed the group to put forth regulatory and legislative proposals on the issue. The group is led by venture

capitalist David Sacks, who Trump recently named as the White House’s arti cial intelligence and crypto czar, and is working with Congress to ultimately pass two bills: one creating a regulatory framework for digital assets more broadly and one focused on regulating stablecoins.

The president’s executive order also tasks the working group with evaluating “the potential creation and maintenance of a national digital asset stockpile,” and asks the group to propose criteria for establishing a digital asset reserve. Last year, Sen. Cynthia Lummis, R-Wyo., introduced a bill proposing the federal government create a strategic bitcoin reserve, but her legislation never moved.  Sporn said the recent wave of state bills are “a signal that public institutions are recognizing the longterm role of digital assets in diversi ed portfolios.”

However, there are likely a few factors contributing to the uptick in such legislation, according to Mark Hays, associate director of cryptocurrency and nancial technology for the Americans for Financial Re-

JPMAM’S JARED GROSS:

“We often say to clients, you want to do the rebalancing before the

UPS’ Ernie Caballero

Washington

Amid government layoffs, Federal Retirement Thrift to reassure participants they can stay in the plan. Page 4

Investing

J.P. Morgan’s Jared Gross is advising investors that now’s the time to take a good look at rebalancing portfolios after a big bull market run in large cap growth equities. Page 6

Special Report:

Sustainability

Asset managers have cut ties with investor-led climate change coalitions. Pension funds are having a hard think about their relationships. Page 14

Experts say that asset owners and managers will emphasize nancial returns once again but not abandon sustainable investing strategies. Page 15 Investors are grappling with Europe’s sustainability regulations. The question now: Will new reforms lighten the load? Page 16

P&I still accepting money manager surveys

Responses to Pensions & Investments’s annual Money Managers survey are due by March 28. Firms managing U.S. institutional, tax-exempt assets are eligible. Results will run June 16.

To request a survey or obtain further information, please contact Anthony Scuderi at ascuderi@pionline.com or 212-210-0140, or visit pionline.com/section/surveys

Managers hunting for digital infrastructure

Real estate money managers are pinning their expectations for a recovery on mergers and acquisitions, hoping to help them capitalize on an expected infrastructure boom — or simply gain scale to survive.

Managers are looking to merge with infrastructure or other real estate rms to put themselves in a better position to take advantage of the energy transition and its need for cleaner power supplies, a potential real estate upswing and the AI-driven data center infrastructure boom. At the same time, old de nitions are breaking down, with data centers slipping into both real estate and infrastructure portfolios, giving both types of rms access to the blazing hot sector.

These managers expect data center demand to continue, despite the emergence of Chinese AI disrupter DeepSeek, which offers AI requiring less energy and at a lower cost. And for some other real estate rms, a merger or acquisition with a large multi-asset manager or a real asset

manager is seen as a route to survival as they wait for real estate to reemerge.

Between 2022 and 2024, there were 19 announced acquisitions of infrastructure managers or real estate managers, up from ve from 2017 through 2021, according to research by executive search rm Ferguson Partners.   Infrastructure is rapidly growing

in capital raising and deployment while “real estate has been on its back,” said William J. Ferguson, co-chairman and chief executive ofcer. “They can create ef ciencies by having shared abilities for fundraising.” And smaller real estate rms are merging to survive, he said. Real estate returns have been lackluster.

The NCREIF Fund Index –Open End Diversi ed Core Equity return was -2.3% for the year, 1.99% for the ve years and 4.94% for the 10 years ended Dec.31. Meanwhile, managers raised an estimated $140.2 billion and $138.4 in 2024 and 2023, respectively — the worst fundraising years since 2016 when the real estate managers worldwide closed on a

Record keepers rally behind the saver’s match

savings accounts.

Retirement plan record keepers are working behind-the-scenes on the logistics of the anticipated “saver’s match,” a dramatic new nancial incentive that policy experts hope will spur more low- and middle-income workers to save for retirement.

Beginning in 2027, low-wage earners contributing to employer-sponsored retirement savings plans or individual retirement accounts will be eligible for a matching contribution of up to $1,000 from Uncle Sam. The funds will be deposited directly into their retirement

“We very much support this and are very much engaged in making sure that it works ef ciently because we want the system to work for all participants regardless of their income level,” said Tim Rouse, executive director at the SPARK Institute, a trade group representing retirement plan record keepers. “If this is successful in getting lower paid individuals to contribute to their retirement plan and save for retirement, then it's going to be a positive for our industry and for society in general.”

Last year, SPARK organized two large meetings with record keepers and other industry stakeholders to brainstorm how to accomplish the logistically complex task of getting contributions from the federal government into savers' retirement accounts. They explored improving tax

forms, using advanced technologies like blockchain and even enhancing the automated clearinghouse, or ACH, system to make fund transfers more ef cient, Rouse said.

“We had probably 40 or 50 people engaged from across the industry all thinking about how best to make this work,” he said.

Implementing the saver’s match won’t be easy.   Record keepers and other industry stakeholders will need to work with the Treasury Department to gure out how to transfer money from the Treasury to an individual’s account within a retirement plan, a dif cult process given that retirement plan accounts are not individual retail accounts but rather institutional arrangements established by employers for the bene t of their employees.

“The new saver’s match program will create an unprecedented program that will require new levels of coordination among individual taxpayers, plan sponsors, retirement plan record keepers, trustees, custodians, insurers, tax preparers, and the federal government,” Rouse wrote in a comment letter to the Internal Revenue Service on Nov. 4.

Some 22 million low- and middle-income Americans would benet from the saver’s match, according to estimates from the Employee Bene t Research Institute. Under the program, retirement savers would receive a 50% match on up to $2,000 they contribute to their accounts until they hit the maximum modi ed adjusted gross income, which varies by tax ling status.

For individuals making less than

New guidance from the Securities and Exchange Commission will make it easier for public companies to get the greenlight to exclude shareholder proposals on company proxy statements, experts said, but investor and business groups are split on whether that’s a good thing.

“The more you erode shareholder rights, the other options that investors have to get companies’ attention

or get attention to the issue that they’re trying to raise is to do more draconian steps like books and records requests, votes against directors (and) lawsuits — things that are costly to both sides,” said Bryan McGannon, managing director at US SIF: The Sustainable Investment Forum, a nonpro t whose members include institutional investors, asset managers and nancial advisers.

“Having an engagement and a dialogue is a much better process for

both sides than to have a contentious litigation or books and records request or director votes,” McGannon added.

McGannon’s alarm stems from a new piece of guidance issued by the SEC’s division of corporation -

Pension funds are buying up stakes in asset managers

U.K. deal illustrates how such partnerships can bene t both sides

y B SOPHIE BAKER

Pension funds and other asset owners are taking slices of asset managers in deals that both parties tout as being symbiotic in terms of the advantages they bring together for both sides of the arrangement.

A urry of recent agreements in the U.S., U.K., Middle East and Japan neatly demonstrate the key bene ts of asset owners taking equity stakes in asset management rms, and in the private markets space in particular: pension funds are able to precisely allocate long-term capital to an asset manager and strategies that they will in some cases co-design; asset owners are able to negotiate lower fees; and they also are able to gain direct access to expertise in new areas of the markets without the need to build in-house capability.

For the asset managers, long-term capital often comes with such a deal, while the credibility that comes with such a tie-up may prove invaluable for future relationships.

One example of the bene ts to both sides of the coin came on Feb. 4, when the £48 billion ($59.5 billion) National Employment Savings Trust, London, said it was taking a 10% stake in Melbourne-based private markets specialist IFM Investors’ parent company, Industry Super Holdings.  Financial terms of the deal were not disclosed beyond conrming that it comes with a £5 billion commitment for investment in IFM-managed real assets and private markets strategies by 2030, as well as plans to co-design strategies

in infrastructure and private equity.

In taking the stake — which Mark Fawcett, CEO at NEST Invest, said will sit in the de ned contribution master trust’s private equity portfolio — NEST becomes IFM’s rst overseas owner, joining a consortium of 16 Australian super funds.

The direct stake will help NEST on its way to allocating a targeted 30% of its assets to private markets by 2030, up from about 17%, or £8 billion, now. NEST is projecting its total assets will reach £100 billion by that time.

“We have a real deployment challenge, and we’ve got some great managers now,” Fawcett said at a news conference to announce the deal. “But for us, by taking advantage of and leveraging IFM’s expertise in private markets, we are going to accelerate our investments.”

The deal was the second equity stake to be agreed by a U.K. retirement plan within six months, following a September agreement that saw the £20 billion West Yorkshire Pension Fund, Bradford, England take a 25% stake in nature-focused asset manager Rebalance Earth.

West Yorkshire executives see climate mitigation, adaptation and nature-loss among key megatrends, risks and opportunities, so “our interest was instantly piqued in terms of long-term opportunity” when the Rebalance Earth team rst approached about 18 months ago, said Darran Ward, head of alternatives.

Over a few months, WYPF's investment team discussed and analyzed the potential for taking an investment stake in the company. “For us, we gain access to expertise and innovation alongside the ability to be active owners and in uential in a

George Walker — the only CEO Neuberger Berman has known since the rm was reborn in the crucible of the global nancial crisis — cut his money management teeth at Goldman Sachs in 1995 just as Goldman was issuing a report that, in Walker’s telling, has continued to de ne the way a lot of people think about the industry.

A key prediction of that report — "The Coming Evolution of the Investment Management Industry'' — was that mid-sized asset managers would prove vulnerable to com-

BlackRock’s worldwide AUM closing in on $12 trillion

petition from bulge-bracket competitors and boutiques alike, and ultimately face a choice: either grow into “one of the 20-25 large companies that will dominate the industry” or settle for competing over the long term as a niche player.

Thus far, at least, Neuberger Berman has prospered while avoiding both outcomes.

Founded in 1939, the rm recently crossed $500 billion in client assets. That's up from $158 billion at the time of its April 2009 management buyout from a bankrupt Lehman Brothers, and the rm has averaged 4% organic growth —

ex-market gains — over that span, boosted by an expanding array of public and private market capabilities.

In a Jan. 22 Face to Face interview with Pensions & Investments at Neuberger's New York headquarters, Walker insisted the middle ground Neuberger has continued to occupy on the industry’s size spectrum is something to celebrate rather than fear, while the rm’s private ownership and focus on building a culture capable of harnessing the enthusiasm of employees should remain big competitive

Despite facing an anti-ESG backlash from certain states, BlackRock had a strong 2024. The world’s largest money manager grew worldwide assets under management by more than 15% to over $11.5 trillion and had record in ows. Last year, management also completed two large money manager acquisitions, each with over a $12 billion price tag, to make a deeper push into private markets. The efforts come as BlackRock’s institutional AUM trailed Vanguard’s in 2022 and 2023.

Crossing $11 trillion AUM: BlackRock’s worldwide AUM surpassed $11.5 trillion last year, a 55.5% increase since the end of 2019. Equities account for the majority of AUM, 55%; while alternatives represent about 4% of AUM, the gure has grown 137% since 2019 to $421.8 billion from $178.1 billion.

BlackRock AUM growth

Strong 2024 ows: Last year’s net in ows were over $640 billion, the rm’s highest ever. Equity and xed income led the way with positive ows of $225.6 billion and $163.7 billion, respectively.

BlackRock annual ows

Big deals: Among its acquisition activity, management completed two signi cant money management deals last year, expanding BlackRock’s private market offerings. The rm spent nearly $25 billion to purchase infrastructure manager Global Infrastructure Partners and private credit money manager HPS Investment Partners.

Major BlackRock money manager acquisitions

Worldwide institutional AUM: While BlackRock is the largest money manager based on worldwide AUM, its institutional assets of $5.57 trillion lagged Vanguard Group’s $6.06 trillion as of Dec. 31, 2023, based on the latest data collected for Pensions & Investments ’ annual money manager survey.

2023

Face to Face

y B DOUGLAS APPELL

PROSPERING: George Walker, chairman and CEO of Neuberger Berman.

Federal Thrift looking to bolster plan communication

The Federal Retirement Thrift Investment Board, Washington, wants retirement savers to know that they do not have to move their money out of the Thrift Savings Plan when they’re no longer a federal government employee.

About two-thirds of former federal employees retain a balance with the $985 billion Thrift Savings Plan one year after leaving the government workforce, according to a quarterly metrics report presented at the board’s Feb. 25 meeting.

The TSP, the nation's largest retirement plan, is the retirement plan for 7.2 million federal employees and members of the uniformed services.

Board member Dana K. Bilyeu asked how the TSP could boost that percentage and Thomas Brandt, chief risk of cer, said the staff is working on bolstering communication with participants.

He pointed to a withdrawal survey presented to the board at its January meeting in which roughly 10,000 former employees who took full withdrawals from their TSP accounts were asked a series of questions. The survey was conducted from January to September of 2024.

One of the main takeaways, Brandt said Feb. 25, was that about

6% of survey participants took cash withdrawals because they believed they had to withdraw their accounts when leaving government employment.

“That certainly caught our atten-

tion and has been one of the factors why we've been looking at additional opportunities to reinforce that messaging directly with participants when they separate from service, but also through TSP.gov and other mes-

Rithm made waves with Sculptor deal. CEO Nierenberg wants to keep growing.

Rithm Capital made headlines in the alternatives world late in 2023 when it stepped in and acquired hedge fund Sculptor Capital Management, after Sculptor had undergone a period of turmoil.

Now, Rithm's CEO says he wants to bulk up and continue growing.

B LYDIA TOMKIW ‘ I have huge aspirations to take this company, to be known as a world class asset manager, not just from an AUM standpoint, but from a return standpoint.’

Michael Nierenberg, Rithm’s CEO, says he is always on the lookout for merger and acquisition possibilities and is aiming to continue building the asset manager, known for its mortgage servicing roots.

“I have huge aspirations to make Rithm — we’re not going to be Blackstone or Apollo —  but I have huge aspirations to take this company, to be known as a world class asset manager, not just from an AUM standpoint, but from a return standpoint,” said Nierenberg, who also serves as president of the rm, in a recent interview at the Global Alts 2025 conference at Miami Beach.

Combining businesses

Rithm, which was known under the name New Residential until 2022, was founded in 2013 at Fortress Investment Group and focused on acquiring mortgage servicing rights in the wake of the Basel III

RITHM’S MICHAEL NIERENBERG

regulations, a set of internationally agreed on measures aimed at ensuring banks have enough capital and liquidity against losses.

Since then, Rithm has grown into other areas, launching a private capital business in 2022 and asset management (Sculptor is the asset manager of hedge funds, credit and real estate). Rithm counts Newrez, a mortgage origination and servicing rm, and lender Genesis Capital among its several acquisitions since 2013.

Rithm’s combined entities, investment and operating companies at $45 billion and its asset management business at $34 billion, total almost $80 billion in assets.

Rithm drew headlines in the al-

ternatives world when it acquired Sculptor in 2023 for almost $720 million. The move came after a public ght between the rm’s founder Dan Och and his onetime protégé and Sculptor’s current CIO Jimmy Levin that centered around pay and succession.

Nierenberg said there was “a little noise” around the Sculptor acquisition but in the more than year since, “things are really good there,” he said.

Rithm reported in its earnings supplement in February that Sculptor, which is managing $34 billion in assets, had “substantial fundraising” in 2024 with $5 billion in gross inows. Sculptor’s multistrategy composite hedge fund returned 13.5% last year and its tactical credit fund

rolled over into a Roth IRA and 5% transferred to another employer-sponsored retirement plan. Additionally, 43% of participants received a full or partial cash payment.

Job losses

Since the start of the second Trump administration, Elon Musk’s Department of Government Efciency has removed about 30,000 employees from the federal workforce, according to New York Magazine.

Employee layoffs and DOGE were not mentioned at the board's Feb. 25 meeting.

Participants who are no longer working in the federal government cannot take hardship withdrawals or loans from the TSP accounts, according to a fact sheet the TSP issued this month.

“Losing a job is stressful enough without having to make big decisions about retirement savings,” said Holly Tardif, director of retirement at Willis Towers Watson.

The key for TSP participants who have lost their jobs it to “take a step back and take a look at all of their options before making any quick moves that could be impactful down the road,” Tardif added.

saging that goes out to our participants,” Brandt said. The survey found that 50% of participants who took a withdrawal rolled over into a traditional individual retirement account, while 15%

returned 19.4%, according to the supplement.

Nierenberg said the last year involved “a lot of brand building” for both Rithm and Sculptor and “we’re starting to see real in ows” and pointed particularly to Sculptor’s real estate segment.

Pension fund commitment

The $14.1 billion Sacramento County (Calif.) Employees’ Retirement System recently committed $50 million to Sculptor Real Estate Fund V, an opportunistic real estate fund managed by Sculptor, according to P&I data.

“People want to be invested in real estate, but I think they want to be invested with the right managers, because there’s still a lot of people that are left holding the bag,” Nierenberg said.

Sculptor also restarted its CLO platform last year with Rithm making an initial anchor investment.

On the private credit side, Nierenberg sees a lot of attention around asset-based nance, something he describes as a “new coined term.”

“We've been doing asset-based lending, asset-based nance, mortgage nance, commercial real estate nance. That’s how I grew up in the business,” he said, adding that the universe today is “competitive.”

“We originate a loan, we collect a loan, or at some point we’re going to be in a credit cycle where not everything’s rosy, and to have the servicing capability around that space really matters,” he said, adding that the real winners will be mangers that “have the ability to manufacture assets and then service those assets.”

“Absent a signi cant nancial need, that could be leaving your 401(k) savings right where it is and then contemplating, with your new employer, rolling that into a new employer’s quali ed retirement plan to avoid the unnecessary tax consequences and to keep those savings invested.” n

Allocators have room to the grow in the ABF space, he added.

“I think the tide is shifting to more of the so-called ABF nance. Even when you look at the residential mortgage market… it’s a $2 trillion market. Everybody's under invested there. I think globally now everybody wants fteens and wants reasonable returns, but, I think, in this ABF space, you're going to see low double digit returns with the right managers. So I'm really optimistic.”

On the growth front for Rithm, Nierenberg said he’s “always” looking at M&A opportunities.

“I’d like to continue to look at more permanent capital. We’d like to continue to look at more what I would call lending businesses, and op-cos (operating companies), creating more,” he said.

And he’s also thinking of new products that feed into an ecosystem of underwriting, originating and servicing assets.

“We in our mortgage company, we have almost four million customers. So then the question is, are we going to roll out a credit card product at some point?” he said.

Nierenberg said on the rm’s Feb. 6 earnings call that Rithm expects to announce, likely in the next 30 days, a global energy infrastructure platform with Scale Capital Partners. Nierenberg, who got his start in the industry in 1987 at Lehman Brothers, also sees a lot of potential in the insurance segment.

“We need to be in insurance at some point. It's a big deal for us, because we manufacture assets,” he said, adding that the challenge is “valuations are still very high.” n

LAYOFFS: A terminated federal worker leaves the of ces of the U.S. Agency for International Development in Washington.

Bryan Dozier/Middle East Images/AFP via Getty Images

Major global trends powered by technological advances, demographic shifts, the energy transition and other forces are creating structural growth opportunities across economies and markets. Active thematic global equities is a forward-looking investment approach that taps into these long-term megatrends and aims to deliver alpha while providing long-term investors diversification beyond traditional equity allocations. This Guide offers a comprehensive look at thematic equity investing from the asset manager that pioneered this investment style. It includes the megatrends framework used to develop thematic investment strategies and how an active investment approach is used to construct thematic portfolios.

Rebalancing after equity bull market poses challenge

J.P. Morgan strategist says diversi cation opportunities exist

y B ROB KOZLOWSKI

Public equities performed strongly in 2024, driven primarily by U.S. large-cap growth assets. That created some imbalances in portfolios, which requires thoughtful rebalancing, said Jared Gross, managing director and head of institutional portfolio strategy at J.P. Morgan Asset Management.

Simply rebalancing in the traditional manner of pulling money out of equities and into xed income is not as compelling as in the past given the extreme concentration of last year’s equity returns, Gross said in a Feb. 6 interview.

For the year ended Dec. 31, the Russell 3000 index returned 24.5%, an impressive amount, but the differences between Russell's subindexes based on market capitalization and style was signi cant.

The Russell 1000 Index returned

24.5%, well above the Russell 2000 index return of 11.5%, while within the large-cap universe the Russell 1000 Growth index returned 33.4% well above the Russell 1000 Value index return of 14.4%.

Instead, because of that concentration in performance among growth companies, particularly among the largest tech rms, investors should think about reshuf ing the deck within equities in addition to rebalancing into xed income, Gross said.

“Within equities, there are oppor-

tunities to rebalance,” he said. “Given the way 2024 transpired, most investors crossed (the end of the year) overweight large cap and overweight the U.S. relative to the rest of the world. How would you then rebalance from that? One path is simply if you’re in passive cap-weighted equities to go to active because an active manager can diversify away from that very small group of ‘Magni cent Seven’ kind of AI hyper-scalers that had been seeing such a large run-up.”

He said active managers can create that diversi cation without necessarily underweighting technology

companies and others that are poised to bene t from the AI boom.

For those investors with active portfolios, moving to small- and midcap strategies within the U.S. equities portfolio is another option.

“You’re just taking those winnings from 2024 and redistributing them into other parts of the market that are more attractively valued,” Gross said.

“We often say to clients, you want to do the rebalancing before the market does it for you. When you’ve had this large run-up, if you wait for it to x itself, you’re missing an op-

Diversity, equity and inclusion have driven Elizabeth Aidoo’s decisions in her life. Growing up in a “largely homogenous” area in Wisconsin, she said she always wanted to be in a more diverse place, as well as interact and learn about people from different backgrounds — and vice versa.

Cultural competence and awareness of differences “helps us harness the power of what I think makes our country so awesome — which is that we have so much diversity,” Aidoo said. “If we are able to better understand one another, connect with one another and leverage those strengths — it’s just, there’s so much power in that … on a more global kind of view, if we could do that in every which way, there’d be so much more world peace.”

After studying intercultural communications at Seton Hall University — which she said she attended due to the New Jersey-based school ranking high in diversity — and teaching English in countries in Latin America and Africa, she returned to the U.S. seeking her next job. What piqued her interest was a listing for a bilingual educator at Francis Investment Counsel — a role that would make her the nancial wellness services provider’s rst bilingual team member as well, she said.

Since joining eight years ago, Aidoo is now a nancial planner, as well as director of DEI and Spanish language services at the rm’s Brook eld, Wis., headquarters. On top of her work to make nancial wellness accessible for plan participants who do not speak English, she is the founder and chair of Francis’ DEI committee, which looks internally at how it can make its policies more equitable and inclusive and promotes activities such as unconscious bias trainings.

“We just need to all learn together, and I can help with that,” she added. “But what I didn’t realize is that oftentimes, when we are in such bub-

y B CARYL ANNE FRANCIA

Sharpening the Lens on Private Credit

As the private credit market continues to soar on the back of strong institutional demand for the riskadjusted returns and resilience that the asset class has shown, allocators are getting more granular in their allocation considerations. Several segments – from direct lending to growth capital and fund financing to opportunistic finance – are garnering interest. With many new entrants to the space, manager expertise, market scale and origination capabilities are front and center. Advances and best practices in benchmarking, both standard and custom, can help allocators with return data as well as evaluate manager performance. This panel of experts will dive into both the drivers and challenges of private credit – o ering nuanced perspective on several sub-segments. They’ll also share how they are addressing investor needs on structures, liquidity, and lender protections – as investors navigate what some are calling the private credit 2.0 era.

Sponsored by:

THE BISON BILLION

Howard University endowment rst among HBCUs to surpass $1B

Howard University’s endowment has surpassed $1 billion in assets, making the Washington-based higher education institution the rst among historically Black colleges and universities to reach the milestone.

An audited nancial statement for the most recent scal year released Feb. 11 noted the endowment had $1.04 billion in net assets as of June 30. The endowment’s net assets grew 11.9%, from nearly $933 million at the start of the scal year.

Founded in 1867, Howard has graduated notable alumni — including those who have pursued careers in institutional investing, including Laurence Morse, co-founder and managing partner at the $10.8 billion Fairview Capital Partners in West Hartford, Conn., as well as Eddie Brown, founder, executive chair and senior portfolio manager at the $8.1 billion Brown Capital Management in Baltimore.

Based on Howard’s nancial report, Pensions & Investments estimates the endowment returned 9.5% for the 2024 scal year, the median of endowment returns tracked by P&I during that period. The report noted the fund posted a total investment return of more than $94 mil-

LESSONS IN FINANCE

lion, received nearly $40 million in contributions, and spent close to $29 million.

Transfers from other institutional accounts and other changes to the endowment added more than $5 million. The endowment’s net assets also include more than $11 million in claims for payment from the federal government as well as promised commitments from donors.

In terms of market value, Howard’s endowment rose 11.4% to $1.03 billion in 2024, and was the largest among the HBCUs that participated in the 2024 NACUBO-Commonfund Study of Endowments.

The endowment is roughly double that of its next closest peer, Spelman College. The market value for the college’s endowment assets was $507 million as of June 30, up 6.7%.

Like other participants in the 2024 NACUBO-Commonfund study, HBCU endowments “bene ted from positive returns as well as an uptick in gifts to endowments overall,” noted George Suttles, executive director of the Commonfund Institute. “From an asset allocation perspective, especially for smaller endowments that tend to have higher allocations to public markets, they bene ted from strong performance.”

Endowments at HBCUs have smaller endowments compared with their peers in the broader higher education space, according to a 2024 joint study by PGIM and the United Negro College Fund.

Conducted during the third quarter of 2023, the study found that a majority of HBCU endowments have less than $100 million in assets.

In contrast, Harvard University in Cambridge, Mass., has the largest university endowment in the U.S.,

UNLV investing challenge encourages students to enhance nancial literacy

Educating students on the fundamentals of investing is an ongoing effort for the University of Nevada, Las Vegas. It is an institution for learning, after all.

After opening its Institute of Financial Literacy & Wellness to provide classes and credentials innancial wellness during the fall 2023 semester, the university is encouraging students to advance their knowledge by participating in its inaugural President’s Investment Challenge.

For eight weeks, which started Feb. 14, the university-wide competition encourages students to form teams of two to ve members, and manage a $500,000 investment portfolio through an account in a virtual stock trading simulator. Teams are mentored by faculty advisers and local industry experts such as Diane Tuntland, chief investment of cer of the investment manager Endowment Partners.

Competition rules note that eligible assets that may be traded include domestic stocks, bonds, mutual funds, exchange-traded funds, futures, options and cryptocurrencies. While there is still debate on the fundamental value of digital assets, the topic cannot be avoided and encourages “constructive dis-

FINANCIAL

cussion” as students assess cryptocurrencies in the challenge, noted Daniel Chi, a professor and chair of the Department of Finance at the university’s Lee Business School.

Finalists will present their portfolios to a panel of judges on April 28, when the top-performing team’s members will be awarded a total $4,000 scholarship. The second-place winner will receive $3,000, while the third-place winner will receive $2,000.

Scoring criteria is 50% portfolio performance, 20% strategy and rationale, 20% risk management and 10% team collaboration and presentation.

As of March 3 among 84 teams, a group called “The Big Short” is leading the competition with a portfolio with a value of more than $682,000, and a net return of 36.5%. Used as the benchmark for the competition, the S&P 500 index posted a return of -4.6% during the same period.

While it’s too early to tell if the challenge will encourage non-nance students to consider studying and pursuing careers in the eld, Chi said he suspects that a few students may choose to by making informed decisions from what they’ve learned through the period.

CARYL ANNE FRANCIA

with $53.2 billion as of June 30. The PGIM-UNCF study also noted that these endowments tend to have smaller allocations to alternative asset classes vs. their non-HBCU peers. Private HBCUs had an average exposure of 14% to alternatives, vs. 41% for non-HBCUs.

In 2019, Howard launched a veyear strategic plan. One of the university’s goals was to grow its endowment to $1 billion by 2024 in order to increase support for student

scholarships and infrastructural investments.

The university also sought to launch a fundraising campaign that would increase engagement among alumni and private donors. During the ve-year period, the university saw a surge in donations, peaking in the 2021 scal year with $171.9 million contributed by alumni, according to an October 2024 update on the strategic plan.

CARYL ANNE FRANCIA

‘OWN AND ADVOCATE’ New ETF aims to battle antisemitism, advocate for Israel via investments

A newly issued exchange-traded fund seeks to ght antisemitism by investing in companies that both reect the Jewish value of "tikkun olam" (repairing the world) and also advocate for the state of Israel.

The JLens 500 Jewish Advocacy U.S. ETF, which began trading under the ticket TOV on Feb. 27, was launched with the backing of several Jewish organizations, including the Anti-Defamation League, which have committed to invest over $100 million in seed capital.

The ETF was created by JLens, an nonpro t af liate of ADL, and tracks the JLens 500 Jewish Advocacy U.S. index, which allows for exposure to the 500 largest U.S. public companies and screens out those rms “whose activities do not align with Jewish values,” said a Feb. 27 released from JLens.

Ari Hoffnung, managing director at JLens, said the ETF screens out companies that support the boycott, divest and sanctions movement, which calls for boycotts, divestments, and economic sanctions against Israel.

In addition, companies that derive material revenue from tobacco, thermal coal, and oil sands, as well as those that condone anti-Israel activities, are excluded.

Hoffnung said the ETF’s strategy is to "own and advocate." “When we see hate of any kind, in a product, on a platform, or in personal conduct, we will engage with a company in good faith and demand change,” he said. “Then, if need be, we will use our shareholder advocacy tools of proxy voting to vote against certain directors or to introduce shareholder resolutions demanding the company put an end to the hate.”

The introduction of the ETF comes 15 months after Hamas’ attack on Israel on Oct. 7, 2023.

Flickr/Jimmy Emerson, DVM Jlens

As of June 30; Source: 2024 NACUBO-Commonfund Study of Endowments

TIKKUN OLAM: Ari Hoffnung, managing director at JLens

FY 2024 ENDOWMENT ASSESMENTS (millions)

HBCU MILESTONE: The Founders Library at Howard University in Washington, D.C.

Congratulations to the 2024 Leaders and Rising Stars

L E A D E R S

Elizabeth Aidoo Francis LLC

Michael Andeberhan State Street Global Advisors

Karen Biddle Andres Aspen Institute Financial Security Program

Marina Batliwalla Mercer

Tyndale Brickey Allspring

Dianna Carr-Coletta PGIM Private Capital

Christine Collins Allspring

RISING STARS

Ali Ahmed Fidelity

Kristin Brooks Pacific Life

Will Chau Allspring

Je Clark Vanguard

Madhu Das Empower

James Davidson Corebridge Financial

Erika Eill Segal

Rebecca Crockett Franklin Templeton

Rene Eisele Corebridge Financial

Kameka Grady Lincoln Financial

Marci Green Goldman Sachs

Keith Hennessey Bechtel Global Corp.

Marc Howell Principal

Eriko Hozumi Pinebridge

Katuri Kaye Trucker Huss

Jamie Kramer JPMorgan Asset Management

Rich Linton Empower

Alison Lonstein NEPC

Sona Menon Cambridge Associates

Maureen O’Brien Segal Marco Advisors

Beth Pattillo Leidos

Meghan Farrell Allianz Life

Kei Ferguson T. Rowe Price

Ellery Fuliere Micruity

Debra Gates CAPTRUST Financial Advisors

Lauren Giordano Meketa

Edward Jenkins Pinebridge

AJ Johnson Principal Financial Group

Cheryl Pipia T. Rowe Price

Carmen Rive Vanguard

Avery Robinson Callan

Paula Robinson WTW

Alejandro Roman S&P Global

Yemi Rose OfColor

Hannah Schriner Meketa

Lindsay (LJ) Jones Callan

Jenny Logan Ascensus

Rylee McCarthy Edelman Financial Engines

Kasey Miller Francis LLC

Martin Pasillas BlackRock

Brynn Plummer AllianceBernstein

Kimberly Robinson New York Life

Shams Talib Fidelity Investments

Julie Varga Morningstar

Kai Walker Bank of America

Jennifer Wing Pacific Life

Karen Witham DCIIA

Bob Zieser Ascensus

Rachel Zou BlackRock

Michael Sawula Morningstar

Sidney Smith Franklin Templeton

Laura Stibol Bank of America

Carol Sung Bechtel Global Corp.

Maria Surina Cambridge Associates

Emily Watson TIAA Institute

OPINION

OTHER

VIEWS

ERIC

FRIEDMAN AND DANIEL INGRAM

How to avoid ‘impact washing’ so that fund objectives aren’t clouded

Asset owners that care about impact have a problem: “impact washing.” Impact washing in investing is when an asset manager misrepresents the non- nancial bene ts of its investment strategy. It goes well beyond funds misrepresenting their holdings or processes, and asset owners with objectives to have a positive impact need to be savvy to spot impact washing to avoid it. Here’s our take on four telltale signs that an asset manager is likely to be impact washing.

1)Confusing ESG integration and impact investing

These approaches have different objectives, though both fall under the umbrella of responsible investing. ESG integration is about using analysis of material ESG risks and opportunities to pursue the objective of improving long-term risk adjusted returns, whereas impact investing has the objective of generating positive real-world environmental or social impacts beyond risk and return. As an example, an asset manager using ESG integration might anticipate a change to environmental regulations and select which securities or assets they believe will be most pro table from this change. This approach is acceptable by most duciary standards because it is focused on improving nancial performance. While it may result in a portfolio tilted toward more sustainable companies, it doesn’t have to. Investment managers formally claiming in their offering documents or reporting to focus only on ESG integration might claim positive social and environmental bene ts; this may include reporting how investments are contributing to the UN Sustainable Development Goals. Con ating ESG integration and impact can be impact washing by exaggerating non- nancial bene ts from ESG integration, where non- nancial impacts are not an objective, and at best, an unintended byproduct.

2)Not acknowledging there are tradeoffs between impact and returns

We frequently hear proponents of impact investing say that investors do not need to accept tradeoffs between impact and expected risk or returns. We do not agree. If impact investing did not require any tradeoffs

Eric Friedman is on Aon Investments’ Investment Policy Services team, based in Chicago.

Daniel Ingram is Aon Investments’ North American head of responsible investments, based in Los Angeles.

relative to conventional investing, then the portfolios of impact and conventional investors would be identical. Pursuing impact investing almost always results in portfolio changes, and thus there must be a tradeoff with investment characteristics such as risk, expected return, liquidity, or fees from adding the impact objective. This doesn’t mean that investments with attractive prospects for returns cannot have impact, but that the assets with the best return prospects don’t necessarily have the highest impact. Impact investors must nd a balance between seeking returns and impact. Not acknowledging tradeoffs between returns and impact doesn’t mean that such tradeoffs don’t exist. Rather, it means that investors are less aware and intentional about the impact of their decisions, which can result in impact washing.

3)Drawing no distinction between the impact of the investor and the underlying investments

An unsophisticated impact investor might take the approach of identifying companies having a positive impact, then investing in those companies. There is a missing piece in the logic chain: Did the investor cause the company’s impact to increase, or would the company’s impact have occurred regardless? An investor’s impact is the way it changes the actions of the enterprises in which it invests. For example, if you invest in a pharmaceutical company, your impact is not simply the share of the lives saved by the company in propor-

tion to your fractional ownership of the company, but rather, your impact is how many more lives the company saved because of your investment. This is not a universally embraced concept in the world of impact investing, as it is almost impossible to observe the impact for most investments, yet considering impact in this way still provides useful insights. Ignoring the distinction between the impact of the investor and the underlying investments is a sign of impact washing by overstating the investor’s impact.

4)Heavy reliance on faulty metrics to measure and communicate impact

Accurately measuring impact is challenging, and a awed approach is common: heavy reliance on faulty metrics with no acknowledgement of their limitations and nascency.

One example is carbon measurement, which analyzes the carbon dioxide emissions equivalents coming from the companies underlying a portfolio. There is not a strong connection between decarbonizing a portfolio and decarbonizing the real economy. That is, an investor can divest from securities that emit high carbon emissions, but that doesn’t mean the divested securities will emit less.

Another example is issuer-level and aggregated ESG ratings, which are designed to measure the exposures of securities to certain ESG factors. Importantly, ESG ratings are typically not even intended to measure the impact of the investor. ESG ratings provide virtually no information about the investor’s impact. While these two types of measurements can be useful for some objectives, naively using them to assess impact without acknowledging their aws can lead to impact washing.

What asset allocators need to know

Impact washing could severely undermine the credibility of the impact investing industry just at a time when demand is growing, particularly from nonpro ts. To achieve true impact, it is important for asset allocators with impact investment goals to carefully evaluate the claims of asset managers.

OTHER VIEWS ROBERT KOENIGSBERGER

Why not try a better approach to emerging markets debt?

For several years, investors have been disappointed when investing in indexes related to emerging markets, continuing to repeat past mistakes. At the same time, investors have been shifting their approach to investing in developed markets xed income. By adding opportunities in private credit in developed markets, they have managed to unlock more promising returns.

So why hasn’t this same strategy spread to emerging markets debt? Rather than evolve, emerging markets debt has been languishing in an outdated approach that has often failed investors in terms of both returns and risk, casting a negative cloud over the asset class.

It’s time to abandon this old approach and apply successful developed-markets insights and practices to emerging markets debt.

Questions have been swirling around the asset class recently, given wide-ranging tariffs promised by President Donald Trump and the strengthening dollar — factors that have once again negatively impacted the indexes. Yet, the traditional case for emerging markets remains valid. Compared to their developed market counterparts, emerging economies enjoy higher growth, lower debt ratios, and higher spreads relative to leverage.

More importantly, since the turn of this past century, emerging markets debt has offered larger returns, better Sharpe ratios (returns relative to volatility) and higher yields. The disconnect between these higher returns and the experiences of many emerging markets investors are explained by more than oversimpli ed investment approaches that relied on distorted and misleading indexes. They have also involved repeated behavioral mishaps that are akin to taking a myopic, musical chairs approach to emerging markets debt investing instead of establishing a more nuanced investment framework. Passive investing and closet-benchmark-tracking have forced too many investors to own shaky names resulting in unbalanced portfolios that are subject to signi cant downside risks.

When Gramercy Funds Management launched in 1998, Argentina constituted 18% of the emerging markets bond index (EMBI), forcing passive investors and closet index chasers to place a fth of their money in a country that was widely seen as default prone. More recently, in 2022, the same index forced investors to own a considerable amount of Russian and Ukrainian bonds on the eve of the Russian invasion. Emerging markets debt indexed-based investing has done more damage to emerging markets debt investors than any other factor. Rating agencies assigning high ratings to those credits exacerbate the problem by lulling investors into a false sense of security.

No wonder the dedicated asset class saw out ows of almost $20 bil-

Robert Koenigsberger is managing partner and CIO at Gramercy Funds Management. He is based in West Palm Beach, Fla.

lion in 2024, a year of record investments of over $1.2 trillion into xed-income funds globally, according to gures from J.P. Morgan. This phenomenon is even more striking given that, on a standalone and repeated basis, emerging markets bond issuers consistently bene ted from massive over subscription due to crossover funds seeking attractive off-benchmark opportunities in owning emerging markets. Still, even this more opportunistic approach falls short of unleashing the signi cant potential of this asset class.

Higher returns, and less risk, is possible in emerging markets

This “better approach” focuses on capturing the high returns available in emerging markets debt by securing the signi cant upside and materially reducing the threat of non-recoverable mistakes. It explicitly distances itself from the volatility markets have seen recently, and from the missteps that have left investors disillusioned with the emerging markets debt asset class as a whole.

For one thing, dollar-denominated loans can all but eliminate currency risk from the strengthening dollar, while heavily covenanted loans with hard collateral can protect investments against Trump tariff-related pressures. Instead of blanket investments in this complex environment, country-by-country, company-by-company analysis is key to identifying speci c opportunities.

This approach is then anchored by a barbell strategy, where the left side is dominated by carefully structured and secured single best ideas in private and public credit in emerging markets.

In addition to the direct bene t of high-quality yield, this carry also permits investors to hold on allocating to the other side of the barbell, which is more risky credit and special situations exposure, until these opportunities present themselves in a compelling fashion. The overall portfolio strikes the right balance in achieving good upside/downside capture features, allowing investors to combine both strategic and opportunistic exposures in a highly selective manner that emphasizes careful security selection and both correlated and uncorrelated collateral.

What it takes to implement

The implementation of this approach, anchored by strong, active emerging markets debt capabilities, also requires a “special sauce” of private credit in emerging markets. This resembles direct lending in developed markets 15 years ago — that is, offering high, risk-adjusted returns and low leverage. Like developed markets, private credit in emerging markets should serve as a

good complement, and often substitute, for both traditional emerging markets debt and emerging markets equity allocations. The sacri ce

of liquidity that it entails turns out to be more perceived than real. After all, if an investor intends to have a medium to long-term allocation to

emerging markets debt, then why suffer the opportunity cost of 5001000 basis points that comes with the notion that all of the portfolio must be in public market securities, let alone the inferior credit metrics and bespoke structuring?

Emerging markets investors have been stuck with an old investing approach for too long. The alternative hybrid approach, which combines high-conviction private credit and public credit, has seen developed markets investors continue to ock in that direction. It can also work in emerging markets if investors both shed old mindsets and look to expand their horizons and capabilities.

Now is the time for savvy investors to start bene ting from this better approach to emerging markets. n

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.

Getty Images

ETF diversi ers stand up strong amid bouts of volatility

y B ARI I. WEINBERG

The robustness of the exchange-traded product market has been on full display amid the recent bout of policy-induced equity market volatility. With over 4,000 offerings, both new and decades-old offerings are attracting investors adjusting to a changing landscape.

After years of underperformance, international developed markets have come back into view for ETF investors. Several broad-based, lowcost exchange-traded funds from Vanguard Group, BlackRock, State Street Global Advisors and Schwab Asset Management, among others, have seen year-to-date returns around 10% through March 7, accompanied by a surge in both trading and net in ows.

For example, over the past three months through March 7, the $147.6 billion Vanguard FTSE Developed Markets ETF experienced $3.1 billion in net in ows and the $17.9 billion iShares Core MSCI International Developed ETF received $2.1 billion of net in ows, according to CFRA Research.

Even some currency-hedged international exposures are attracting assets, despite their utility being more appropriate in an environment where investors expect the

dollar to strengthen. “We haven’t seen investors in these products for a while,” according to VettaFi Head of Research Todd Rosenbluth. For example, the $7.7 billion iShares Currency Hedged MSCI EAFE ETF added $1.9 billion in net in ows the last three months. Average daily trading volume has also doubled in the last month.

Year-to-date through March 6, iShares unhedged MSCI EAFE ETF had an 11.7% price return compared to a 7.25% for the hedged version, according to Morningstar. According to DataTrek Research, major developed economies currencies were up an average of 3.2% through March 7, while emerging economies currencies were up 2.1%.

In emerging markets, however, performance alone hasn’t been enough to gather assets. Despite year-to-date returns nearing 20% for some China equities-focused ETFs, funds have been in out ows. According to CFRA, for example, the $8.1 billion iShares China LargeCap ETF has seen $633 million in net out ows while it returned 20.8% year-to-date.

“The tariffs are unchartered waters and there’s potential for upending the current world trade order,” said Arjun Divecha, founder of the GMO emerging markets strategy.

While Divecha holds that some of the tariff proposals and discussions for countries such as Canada and Mexico have been negotiating tactics, “I don’t believe that’s true for China,” he said.

GMO recently launched its Beyond China ETF into a marketplace that already includes a handful of ex-China emerging market ETFs, led by the iShares MSCI Emerging Markets ex-China ETF with $15.2 billion in assets.

Arjun Divecha

The persistence of dollar strength has kept broader emerging market returns below those of developed economies so far this year. But GMO’s Mr. Divecha sees the continued surge in gold as an indicator of relative weakness in the dollar. Even amid crypto hype and acceptance, gold has shown itself a more reliable store of value.

Gold funds have scooped up assets this year, adding $6.2 billion for a total of $144 billion in assets as gold continues its surge from 2024.

Other diversi ers remain underdeveloped

Over the past few years, a urry of ETF launches have brought countless actively managed equity

and xed-income funds, numerous “buffered” ETFs that use options to limit downside exposure while capping gains, as well as leveraged and inverse single stock ETFs.

Many of these products, however, don’t t well into broadly distributed models that rely on liquidity and availability of speci c ETFs.

Across the market, strategists are evaluating investment portfolios that have grown heavy with the illiquidity of private equity, private credit and real estate, while bene ting from surging large-cap tech stocks in the U.S.

“Now, if we’re in for a bout of volatility, how do you trade it or protect yourself from it?” asks Jim Carroll, portfolio manager at Ballast Rock Private Wealth.

Carroll chronicles all things related to market volatility at his Vixology Substack, including the CBOE Volatility index, or VIX, which tracks the change in implied volatility on the S&P 500 stock index. Wild swings in volatility nearly put the VIX ETP complex out of business years ago.

“The size of VIX ETF ecosystem doesn’t support institutional allocators who are better off expressing

views in the SPX futures and options market,” Carroll said. Moreover, “ETF products are not well-suited for managing tail risk,” he added.

And while cryptocurrency ETFs, particularly bitcoin funds, have surged in assets and attention, traditional currency pair ETFs have underwhelmed, as have individual ETFs offering access to agricultural and energy commodity markets.

A handful of managed futures ETFs, however, do attempt to access trends in commodity markets. For example, the $791 million Simplify Managed Futures Strategy ETF uses a systematic approach to agriculture and energy futures, designed by Altis Partners. This ETF has added $318 million in net ows since the beginning of the year, according to CFRA.

“There’s a new bull market in diversi cation,” said Paisley Nardini, managing director, portfolio manager and asset allocation specialist at Simplify Asset Management.

That sentiment is underscored by the recent launch of the SPDR Bridgewater All-Weather ETF by SSGA. The original strategy launched nearly 30 years ago is synonymous with “risk parity” and the ability to perform across market conditions, including “economic contractions and elevated in ation,” according to SSGA. n

Special Report SUSTAINABILITY

Asset managers have cut ties with investor-led climate change coalitions. Pension funds are having a hard think about their relationships.

TOUGH CLIMATE CONVERSATIONS

y B SOPHIE BAKER

Institutional investors across Europe are thinking through their next moves and, potentially, future relationships with asset managers as they adjust to high-pro le manager withdrawals from coalitions formed to combat climate change.

Talks are being held at the executive level, with sources telling Pensions & Investments that the pension funds are engaging with their managers to understand whether the moves will impact their contracts.

A number of European pension funds contacted by Pensions & Investments said while withdrawals from climate change-focused coalitions — such as the Net Zero Asset Managers initiative and Climate Action 100+ — are disappointing and signify a setback for the low-carbon transition, they may also carry consequences for asset managers that have chosen to eschew membership. High-pro le withdrawals over the past year or so include by BlackRock, State Street Global Advisors and Northern Trust Asset Management.

“Climate change is still a nancial systemic risk,” said a spokesman for

the 1.44 trillion Swedish kroner ($131.4 billion) AP7, Stockholm. And while AP7 handles voting and engagement internally, “climate ambitions will likely become a more prominent selection criterion in procurements in the future.”

Sources at another multibillion-dollar Europe-based pension fund said the rst check in the case of the departure of a manager that runs money for the fund is whether the rm is still meeting the terms and requirements of its contract.

“When an asset manager decides to leave this kind of initiative, it means that we have to monitor more precisely, more strictly,” the CEO said. The team will also make sure the manager is still complying with investment guidelines under which the original contract to run the pension fund’s assets was awarded. “If they are in the initiative (such as the NZAM or Climate Action 100+), there is a natural con dence that this will be the case.”

The pension fund — like many Europe-based funds — sees incorporating climate risk as part of its duciary duty. “So if we see people putting less effort into it, (it may)

have consequences for us,” he added.

A manager that has pulled out of the initiatives does not “make our lives easier — we know if we appoint a manager that is a member of NZAM, it is a stamp … For us, it is proof that they are committed not only for the portfolio (they’re running for us,) but for the company as a whole. We are more con dent that they will be able to apply (ESG principles) for the mandates that we put on them,” the pension fund's head of ESG head said.

The executives said they have engaged with asset managers and are con dent that they are still working in line with the sustainability-related requirements of their contract.

One pension fund is taking action. The €59.9 billion ($61.8 billion) PME Pensioenfonds, The Hague, Netherlands, is “taking a stance regarding BlackRock’s retreat from responsible and sustainable investing” for reasons including that the pension fund “invests to achieve the best possible returns with the most sustainable portfolio. This goal has been reinforced by PME in recent years, with a close eye on the external managers who contribute to this ob-

jective,” according to an internal document seen by P&I BlackRock runs about €5 billion in money market and index funds for the pension fund.

“BlackRock, however, has moved in the opposite direction. By entrusting a part of our asset management to BlackRock, PME becomes associated with this movement, which is increasingly dif cult to justify and explain,” the document said.

In January, PME wrote to BlackRock in the Netherlands and invited the rm to address its position and rationale behind its departure. “Relocating the mandates elsewhere would not affect returns,” the document added. “PME also anticipates a transition can be cost-neutral.”

As of March 4, there had been no change in the situation or status of PME’s dialogue with BlackRock, a PME spokesman con rmed.

And U.K. master trust The People's Pension, Crawley, England said in February that it was shifting a total £28 billion ($34.7 billion) in passive equity and active xed-income assets to Amundi and Invesco, respectively, from State Street Global Advisors. SSGA will still run the re-

mainder of the assets.

The move followed The People's Pension's strengthened responsible investment policy, put into place last year. The new policy included minimum requirements and stronger expectations of its asset managers, with a warning that relationships would be reviewed if those requirements were not met.

Under review

Until this year, asset manager withdrawals from climate-related coalitions had made headlines because of the weight of the names of the individual managers that were leaving. However, the NZAM said in a Jan. 13 statement that it was suspending activities amid a review following “recent developments in the U.S. and different regulatory and client expectations in investors’ respective jurisdictions.”

The initiative, which “exists to help investors mitigate the material nancial risks of climate change and to realize the enormous bene ts of the economic transition to net zero,” will be reviewed to “ensure (it) remains t for purpose in the new global context.” Signatories — the list

of which was removed from the website — will be consulted throughout the process, it added.

The statement came hot on the heels of a Jan. 9 letter by $11.6 trillion BlackRock to its clients saying that it would be leaving the initiative. The manager had already shifted its membership of the Climate Action 100+ initiative to its international business last year.

The letter to BlackRock's clients — signed by Vice Chair Philipp Hildebrand and Helen Lees-Jones, global head of sustainable and transition solution — explained its decision to withdraw from the NZAM and reassured clients that its approach would not be affected: “Our participation in NZAM did not impact the way we managed client portfolios. Therefore, our departure does not change the way we develop products and solutions for clients or how we manage their portfolios.

BlackRock’s active portfolio managers continue to assess material climate-related risks, alongside other investment risks, in delivering for clients," it said.

Then, on Jan. 21, the $1.6 trillion Northern Trust Asset Management con rmed that it would be dropping out of both the NZAM and Climate Action 100+ — of which the manager was a founding signatory.

Northern Trust shared a similar statement at the time.

"This decision re ects our condence that we can independently and effectively manage material risks and engage with portfolio companies to safeguard and grow our clients’ capital,” the statement said. “We have made and continue to make investments that support our independent stewardship and sustainable investing capabilities.”

Despite reassurances, the moves by asset managers and the NZAM has sparked responses from European pension funds, with some choosing to reiterate their own commitment to climate change policies and moving toward a net-zero world — although adding that they’ll be keeping an eye on any changes managers might make to their approaches to managing climate-related risk.

Among the £49 billion National Employment Savings Trust, London’s external managers are BlackRock and Northern Trust. BlackRock managed about £2.8 billion and Northern Trust about £1.9 billion as of March 31, according to the NEST 2023/24 annual report.

A NEST spokesperson declined to comment on speci c managers, but Diandra Soobiah, director of responsible investment, said in a statement about the departures: “While we understand the pressures asset managers are facing, we remain committed to delivering on our climate change policy and will continue to closely monitor the situation.”

The retirement plan has “been clear about the importance of managing climate change risk and its impacts on our investments and the broader nancial markets.”

She said that’s “why we regularly engage with all our fund managers to ensure their engagement with companies on climate-related risk and opportunities is continuing and they are tracking their progress towards a net-zero world.”

Charity investment manager CCLA Investment Management, which has £15.3 billion ($19 billion) in AUM, said in a Jan. 27 news release that the NZAM’s decision to suspend and review had been “taken reluctantly, against the backdrop of a hostile and changing political environment that was targeting some of the world’s largest asset managers.”

CCLA, a founding signatory of the NZAM, said it was “disappointed with the decision … but after meeting with the NZAM secretariat team, we understand that they had very little other choice.” A CCLA spokesperson declined to comment further.

The manager said it would be participating fully in the NZAM consultation on its future, proposing that the investment management sector “be resolute that climate risk is longterm nancial risk. We cannot cave to pressure to be quiet, instead we should review options together,” the release said.

Due to anticipated changes in U.S. law, CCLA said that may “sadly” result in some asset managers no longer participating in “whatever comes next. But this should not stop those that can,” it said, highlighting that the U.K.’s Competition and Markets Authority has “explicitly signaled that collaboration and coordination on climate change is legal.”

Concern for the future

AP7’s spokesman said while BlackRock’s withdrawal from the NZAM carried “a strong symbolic value … the problem is actually much bigger. In 2024, there has been a stream of asset managers and banks that have left various collaborative initiatives, probably to avoid being drawn into politically driven legal processes in the U.S. If these nancial organizations give up their climate ambitions, it is a major setback for the transition that the world needs to make.”

The NZAM statement of Jan. 13 said: “As a voluntary initiative, NZAM has successfully supported investors globally as they have sought to navigate their own individual paths in the energy transition in line with their duciary duties and clients’ long-term nancial objectives. NZAM looks forward to continuing to play this constructive role with investors around the world.”

On the other hand, though, many of the asset managers departing said their climate ambitions had not changed, just their membership in collaborative initiatives, he noted.

Just one month earlier, that concept of a collaboration was probed by the U.S. Judiciary Committee Chair Jim Jordan, R-Ohio and Thomas Massie, R-Ky., chair of the Subcommittee on the Administrative State, Regulatory Reform, and Antitrust, wrote to more than 60 U.S.based asset managers — including BlackRock and Northern Trust AM — to demand information on their involvement in the NZAM initiative.

A June interim report by the committee “details direct evidence of a ‘climate cartel’ consisting of leftwing activists and major nancial institutions that collude to impose radical environmental, social, and governance goals on American companies,” the release added. The com-

U.S. asset owners, managers to change messaging but stay the course with sustainable investing

y B ROB KOZLOWSKI ESG

With a harsher policy and regulatory ecosystem surrounding sustainable investing, asset owners and money managers are expected to move to placing a greater emphasis on returns over the impact of their investing, experts said.

However, they also said investors that have embraced sustainable investing will stay the course. That's despite the belief that the new Trump administration will take a much tougher stance on ESG investing than the Biden administration.

That belief — and Republicans’ push for a rollback of Biden-era policies — was re ected in a Jan. 28 letter from 22 Republican statenancial of cials to Vince Micone, acting labor secretary, and Acting SEC Chair Mark Uyeda calling on the Securities and Exchange Commission and Department of Labor to issue new guidance and rules to restrict environmental, social and governance investing options for asset owners and money managers.

Kirsten Spalding, vice president, investor network at sustainable investing advocacy organization Ceres, said in an interview that the long-term focus of asset owners means the institutional investing industry will see few

mittee wanted managers that were signatories to the NZAM to “answer for their involvement in prioritizing woke investments over their own duciary duties.”

The AP7 spokesman added that along with the departures from coalitions, “it is clear that the world is entering a new phase with the new leadership in the White House that will affect the world far beyond its borders. What this means will be

changes as a result of current policy and regulatory changes.

“The largest asset owners are invested globally, they’re invested long term, they invest for the interests of their bene ciaries and participants,” Spalding said. “They invest according to their duciary duty, and given all of that, a change in the administration is not the beginning of the end of their investment strategy.”

For investors who haven't yet integrated ESG factors into their investing or are still considering doing so, she said there are compelling reasons to move forward.

“That is a matter of good data, good analytics, (understanding) mega trends, things that are going to impact demand and investors are, of course, really attuned to those things, because that’s where there’s alpha,” Spalding said. “Not only is there risk, but if you’re going to make money, you’ve got to be attuned to where the economy is going, and how you get ahead of it, so that you stand to bene t, and companies you invest in stand to bene t.”

Spalding said the demand for clean energy is real, investors can measure it and they’re going to be looking for those opportunities.

Most asset owners that have embraced sustainable investing plan

something many in the industry will try to nd out in the near future.”

PME’s internal document echoed the concerns, noting that to achieve its climate goals, the fund “relies on the efforts of organizations like Climate Action 100+ and Net Zero initiatives. The departure of rms like BlackRock from these organizations severely weakens them and could potentially lead to the termination of these initiatives,” it said.

to continue to do so, although political pressure has deterred some, according to a survey by Cerulli Associates released in February. Among asset owners that have incorporated ESG considerations into their investment decision-making in the past, about one in 10 will cease to do so, according to Cerulli. Among that population, 34% said responding to the backlash was time-consuming and costly, 24% feared litigation and 14% said they felt pressure from stakeholders.

Michele Giuditta, director, institutional at Cerulli Associates and lead author of the research report, said in an interview that no money managers currently incorporating ESG considerations planned to stop doing so, but messaging is a considerable concern given political pressure.

“A lot of them — 42% — said that they were going to be more cautious around the messaging for these activities, and a small percentage — 4% — said they would stop offering product now,” Giuditta said.

'Container approach'

Maulik Doshi, managing director at Steward Redqueen USA, a sustainability and impact consult-

The anonymous pension fund CEO agreed that the departures put “in danger the existence or relevance of these initiatives.”

And what it means for the wider ESG movement is also of concern for him. “The main concern is not … at the level of the relationship between the asset manager and us, but the more comprehensive, geopolitical level: How will the dynamic of ESG evolve in the future?” he added.  n

Investors are grappling with Europe's sustainability regulations. Will new reforms lighten the load?

y B CHRISTOPHER MARCHANT

While the U.S. walks back its sustainability commitments, Europe is more resolute in its ESG ambitions, albeit with calls for tweaks to what some stakeholders see as prescriptive and burdensome rules.

On Feb. 26, the European Commission released an omnibus package, which looks to amend sustainable nance regulations in Europe and ease the reporting burden for corporations. Under the auspices of boosting the bloc's commercial competitiveness, the commission proposes streamlining rules on sustainability reporting, due diligence, taxonomy and more.

The commission estimates these changes could save an estimated €6.3 billion ($6.5 billion) in annual administrative costs and mobilize an additional €50 billion in public and private investments, according to a Feb. 26 news release.

Hyewon Kong, sustainable investment director at U.K. alternatives rm Gresham House, warned against drawing similarities between Europeans' calls for eased sustainability reporting and the backlash against ESG in the U.S.

“We have to be quite careful about putting every geography in one bucket, and de ning deregulation as a global trend. What's happening in the U.S. is quite different from what is happening in the EU and the U.K. Both in the U.K. and EU, I think the focus is purely on streamlining,” Kong said.

Other investors may be more wary. A February survey from U.K. pension consultancy XPS Group found that over half of fund managers respondents believed that pushback on ESG and climate change

initiatives in the U.S. would spill over to European markets.

According to Morningstar data, in 2024, European sustainable funds registered lower in ows compared with 2023, with investments of $53 billion, down from $78 billion in 2023 and a record of $527 billion in 2021.

But while the world's largest asset managers are parting ways with climate investor groups, for instance, Kong said she sees this as an opportunity for ESG-friendly funds to y their ag for asset owners still push-

ing to decarbonize their portfolios.

“Many (European) asset owners are doubling down and asking asset managers to put more effort into climate stewardship. They are looking under the hood, inspecting what managers are saying vs. what they are doing,” Kong said.

Gresham House managed approximately £8.8 billion ($11.4 billion) in assets as of June 30.

Push to streamline

One of the regulations the com-

mission wants to amend is the Corporate Sustainability Reporting Directive.

Initially rolled out in January 2023, CSRD currently requires large, listed companies to publish regular reports on the social and environmental risks they face, and on how their activities impact people and the environment; small and midsize enterprises are due to report for 2026 and onward.

In December, there were calls from the German government to re-

form CSRD, including delaying elements of its implementation and restricting the reporting burden to only the largest companies.

That was followed by a similar proposal from the French government in January, which also argued for the creation of a “mid-cap” category that would contain further reporting exemptions and simpli cations. Its proposal came after an October report, overseen by the former president of the European Central Bank, Mario Draghi, put the ini-

ing rm, said in an interview that given the anti-ESG rhetoric, asset owners and money managers are getting much more focused onnancial returns as their primary mission in investment decision-making.

“We’re starting to see governmental pensions and others say that we need to make nancial returns the principal guidelines, and so the dual mission (returns and ESG), it’s starting to become less of a focus,” Doshi said, “and that’s not to say that everybody’s just throwing out the baby with the bathwater, but that the principal North Star for the investment-decision process is aroundnancial returns.”

Doshi said the biggest challenges that he’s seen with ESG, especially in the U.S., is what he calls the container approach to investing, in which all kinds of values and political perspectives become the determinants of investment success along with nancial returns.

“That container approach, whether you believe in positive climate investment decision-making or social impact decision-making or a DEI-related focused areas in the governance process, all of those things became con ated to a single approach and that obviously caught re as part of this,” Doshi said.

Doshi said he is talking to his clients about focusing on the creation of new and innovative products with the principal guidelines of nancial returns being the “North Star,” but that can achieve elements of sustainability and impact as well. He also mentioned that his real economy clients, such as energy companies and consumer product manufacturers, will continue to invest opportunistically in climate transition-related strategies.

“With the world balancing out focus between what’s renewable and what’s traditional in terms of energy, I think that that’s going to be part of their operating infrastructure (and) their supply chain. All of that’s going to be a part of it,” Doshi said.

He said climate transition investments are long-term investments and many have already been made.

Managers have "already seen those shifts of sales, and they’re accruing signi cant revenue on these things, so we think that these investments aren’t really going anywhere,” Doshi said. “These companies are really in the space of making sure they’re making these strategic investments the right way.”

Legal uncertainty

Cerulli Associates’ Giuditta said that the biggest change since her rm conducted the survey in late 2024 is a now-uncertain legal environment. She said her rm’s advice to asset owners is to really be explicit about how their ESG data is helping returns.

“Just have the data to back it and show how ESG data has helped them better assess the risk/return pro le of investments,” Giuditta said.

The potential legal complications that asset owners fear on the federal level harkens back to the urry of legal and legislative attempts in Republican-led states to squelch ESG investing. What the laws actually forbid has not always been clear, and legal battles have erupted in states

like Oklahoma.

Meanwhile, the fate of ESG-related investments in states that have passed so-called “anti-ESG” laws has been mixed. In Florida, for example, a measure that appeared to ban ESG-related investments did not actually do so.

In May 2023, Florida Gov. Ron DeSantis signed a law requiring public entities in the state to make investment decisions based "solely on pecuniary factors" and not include environmental, social and governance considerations. However, the law does not appear to prevent entities from actually making investments in strategies that adopted those considerations.

For example, the pension and investment committee of Broward Health, a Fort Lauderdale, Fla.based hospital system, discussed at its meeting the month after DeSantis signed the law whether it would have to terminate its pension and operating funds' investments in State Street Global Advisors' SSGA S&P 500 ex-Tobacco Index Fund and move the assets to the SSGA S&P 500 Index Fund.

A memo included with the June

28, 2023 pension and investment committee agenda materials said "both the pension (approximately $400 million) and unrestricted funds include a large-cap equity index fund, SSGA S&P 500 excluding Tobacco. At the time this investment was selected, the committee may have considered non-pecuniary factors. Therefore, the committee should consider a replacement fund, such as the SSGA S&P 500 index fund, at the June Pension and Investment Committee meeting." However, according to a hospital system spokesperson, the system’s board of trustees voted on Aug. 30, 2023, to retain the investments in the ex-Tobacco fund because its investment returns equaled or exceeded those of the SSGA S&P 500 index fund in the trailing, one-year, threeyear, ve-year and seven-year periods.

Similarly, it was a about one month after the passage of the law that the Florida State Board of Administration, Tallahassee, announced it had committed $200 million is to Blackstone Green Private Credit Fund III, the latest in Blackstone's series of green-energy cred-

tial cost of CSRD compliance for a French mid-cap at €800,000 over two years, or 12.5% of investment volume.

Furthermore, a February survey of French and U.K. businesses with European operations, conducted by data rm Semarchy, showed that currently fewer than one in ve (17%) businesses said their data is currently audit-ready for CSRD compliance.

"Although all the changes already visible on the horizon, such as the omnibus bill, may seem daunting at rst glance, they also present an opportunity to simplify reporting obligations and provide better guidance,'' said Robert Bluhm, head of sustainability at Universal Investment Group, a fund service platform provider that administers assets of €1.2 billion.

"That is what we all ultimately want, a simpli cation and consolidation of the reporting requirements at the corporate level, and greater speci city at the fund level,” he said.

In its proposal for amending CSRD, the German government insisted that this could be done without comprising the European Green Deal, a 2020 initiative carrying the ultimate goal of a net zero European Union by 2050, of which it remained supportive.

Ursula von der Leyen, president of the European Commission, echoed these sentiments in the commission's news release announcing the omnibus proposals: "Simpli cation promised, simplication delivered! ... "This (omnibus package) will make life easier for our businesses while ensuring we stay rmly on course toward our decarbonization goals."

In its omnibus package, the commission proposes removing "around 80% of companies from the scope of CSRD, focusing the sustainability reporting obligations on the largest companies which are more likely to have the biggest impacts on people and the environment."

The commission also proposes

postponing reporting requirements for these companies until 2028.

The omnibus package also calls for changes to the Corporate Sustainability Due Diligence Directive, which seeks to improve companies' oversight and accountability in areas such as human rights.

The proposed changes, which have drawn critics on both side of the Atlantic for varying reasons, include delaying CSDDD's roll-out for large companies to mid-2028, reducing the frequency of periodic monitoring exercises, and no longer requiring companies to assess adverse impacts from indirect business partners.

"The postponement of the CSDDD weakens essential supply-chain accountability, delaying necessary progress in environmental and social governance," said Gresham House's Kong.

"While reducing administrative burdens is an important goal, it should not come at the expense of corporate accountability and sustainability progress," she said.

On the other side of the debate, U.S. Congressmen including French Hill, R-Ark., and Tim Scott, R-S.C., are calling for the EU to inde nitely pause the roll-out of CSDDD due to its impact on U.S. companies with global operations.

"CSDDD represents a serious and unwarranted regulatory overreach, imposing signi cant economic and legal burdens on U.S. companies. We strongly urge immediate diplomatic engagement to challenge and halt its implementation," the Congressmen said in a Feb. 26 letter to Scott Bessent, U.S. Treasury secretary, and Kevin Hassett, director of the National Economic Council.

According to the CSDDD data hub, at least 300 U.S. companies listed in the S&P 1500 will be directly affected by the directive.

Reforming the taxonomy

The German government's proposal on CSRD also urged the commission to reform the EU Taxono-

my, a classi cation system to help investors determine which economic activities are environmentally sustainable.

“When we look at nancial market data, so far the taxonomy has not really established itself as a reference framework for corporate funding plans, especially green bond issuance, and also not as the standard for sustainable investment in the EU,” said Silvia Merler, head of ESG and policy research at Algebris Investments, which managed around €28 billion ($29.6 billion) of assets as of Nov. 30.

Merler urged the commission to further investigate why the taxonomy has yet to become the go-to standard for sustainability in Europe. So far the taxonomy has faced setbacks such as the erce debate between France and Germany over the classi cation of nuclear power as sustainable.

Also holding back a fuller embrace of the taxonomy is the complex and stringent nature of its "do no signi cant harm" criteria which assesses if an overtly sustainable investment may also be failing environmental or ESG metrics in other areas.

Research by S&P Global showed that only a small percentage of company activities that substantially contribute to climate change mitigation can be shown to meet the DNSH criteria for all other environmental objectives.

In the omnibus package, the commission proposes simplifying the DNSH criteria as well as reducing "the burden of the EU Taxonomy reporting obligations and limit(ing) it to the largest companies."

Confusing fund labels

Confusing sustainability fund labels also add to the complexity for European investors.

While not part of the omnibus review, reforms to the Sustainable Finance Disclosure Regulation are due out later this year.

Originally created as a disclosure and reporting framework, the SFDR has become a de facto label-

ing system. SFDR currently categorizes funds as Article 6 — which do not require integration of any kind of sustainability into the investment process; Article 8 — promoting ESG compliance; and Article 9, which are strategies with investments that speci cally target sustainable outcomes.

Under the reforms, funds would be labeled as "sustainable," transition," or "ESG collection," giving clearer names than the more opaque Articles classi cations, and "putting retail investors and their needs at its core," according to the EU Platform on Sustainable Finance.

These reforms are separate from the European Security and Markets Authority's updates on ESG-labeled funds, published in May.

“SFDR gives a de nition of sustainable investment where it must meet certain requirements. Those requirements are very broad and they're not really prescriptive," Merler said.

Learning from peers

Appearing to have learned the lessons of its EU predecessor SFDR, the U.K.'s Sustainability Disclosure Requirements were launched last year as a dedicated labeling system, categorizing funds under four labels: “sustainability focus,” “sustainability improvers,” “sustainability impact” and “sustainability mixed-goals.”

However, since SDR's July launch date, only 64 sustainability-labeled funds were registered as of Feb. 3, giving the impression that the labeling approach is too restrictive, according to Hortense Bioy, head of sustainable investing research at Morningstar.

"The European Commission can learn from these developments if they decide to remove Article 8 and 9 (of SFDR) and replace them with product categories. There is always the risk with labels that if they're too prescriptive, they end up reducing opportunities for investors," she said.   it funds.

In a statement, an SBA spokesperson said: “As a duciary, the SBA has always and continues to invest focused solely on maximizing returns, managing risk, defraying reasonable costs, and diversifying investments for the exclusive pecuniary bene t of FRS beneciaries.”

A number of asset owners declined to be interviewed for the story, including the $533.4 billion California Public Employees’ Retirement System, Sacramento.

A spokesperson for the second largest U.S. pension fund, the $349.7 billion California State Teachers’ Retirement System, West Sacramento, said the pension fund has a “ duciary duty to protect the best interests of our members and bene ciaries by ensuring our portfolio’s long-term nancial success.”

“We vote our proxies, engage companies and collaborate with partners to encourage sound governance practices and enhance lasting market performance and shareholder value,” the spokesperson said. “We have not made any changes to our voting practices and

continue to vote in accordance with our corporate governance principles.”

One U.S. retirement plan executive who asked not to be named said their pension fund has never adopted any form of ESG policy and has taken the view “that retirement trust funds are for the exclusive bene t of the trust, and not designed to change the world.”

“Our separate account managers' contracts list the managers as duciaries to the fund, so risk-adjusted performance is their exclusive mission,” the executive said.

“To the extent that they will make the world a better place — without sacri cing returns or increasing investment risk — we wouldn’t have a problem with that. So I don’t expect Trump policies regarding ESG, and particularly DEI ending, will have any effect on (our pension fund).”

For those asset owners who do have ESG and DEI policies, the executive said they may experience growing pressure from their boards and/or stakeholders to dismantle existing programs they philosophically support.

Ultimately, however, “pension funds in the U.S. will also fall along personal political lines of those of their investment people, administrators, and stakeholders. Those supporting DEI will still likely come up with workarounds to keep doing what they are doing," the executive said.

A dispassionate decision

Marcus Frampton, chief investment of cer of the $80.8 billion Alaska Permanent Fund Corp., Juneau, said changes in policy and regulations associated with ESG investments haven’t affected their organization in the past and shouldn’t do so going forward.

“We’ve been successful to-date in getting our stakeholders on board with an approach where we assess investment merits dispassionately,” Frampton said. “This has served us well as it gave us exibility to lean into the oil and gas sector at the height of its unpopularity around 2020-2021 and enabled us to patiently trade out of Russian securities or hold when holding made sense following the Ukraine invasion.”

Danish fund shifts $429M away from SSGA after ESG review

y B SOPHIE BAKER

AkademikerPension dropped State Street Global Advisors from a 3.1 billion Danish kroner ($429 million) allocation after an ESG assessment.

The Gentofte, Denmark-based pension fund, which has a total about 145 billion kroner in assets, engaged conducted an ESG assessment in the fourth quarter, evaluating the results at the beginning of 2025, CIO Anders Schelde said. “After careful analysis and thorough consideration, it became clear that SSGA no longer ( t) the strategy and didn’t live up to our standards.”

The pension fund has maintained a “constructive and open dialogue with SSGA and greatly appreciate their transparency and willingness to engage,” Schelde said. The pension fund engaged with the $4.7 trillion asset manager following SSGA's decision to leave Climate Action 100+, a global investor-led initiative that works to promote action on climate change among big greenhouse gas emitters. SSGA withdrew from the group early in 2024.

“Throughout this process, SSGA has consistently provided updates, we have met several times, and we have received written responses to our inquiries,” Schelde said.

The assets will be reinvested in one of the pension fund’s internal global equity portfolios into which assets are fed from other terminated external mandates, Schelde said.

“APFC doesn’t have any formal ESG policy, just a mandate to maximize return within our board’s articulated risk appetite,” he said.

Regardless of whether asset owners have ESG-related policies or not, Ceres’ Spalding said asset owners have to have “robust dialogues with their managers.”

“They have to make sure they understand how the manager is approaching a full range of risks, including environmental, social and governance risks,” Spalding said. “They've got to be working directly with their managers to be sure that those managers are looking for the mega trends, including climate thematics, but other mega trends around in ation, all of the things they normally ask.”

“In the face of the uncertainty and the attacks that are coming at the state (level), the relationship for asset owners with their managers becomes ever more critical. They got to be asking all the questions. They’ve got to write into their mandates their expectations, and at least that's what I'm hearing from the owners and the managers.” 

"As shared by AkademikerPension, the decision to reduce the use of external managers was prompted by an exercise to increase insourcing capabilities," an SSGA spokesperson said. "As a manager with approximately $50 billion in AUM for Nordic institutional investors, a 35% yearover-year increase in AUM, State Street Global Advisors looks forward to continued discussions with MPIM on future opportunities." MPIM is the in-house investment unit of the pension fund.

The news from AkademikerPension follows a decision by Crawley, England-based DC master trust The People’s Pension, which said Feb. 27 it was shifting £28 billion ($34.7 billion) in equity and xed-income investments away from SSGA. The £32 billion master trust highlighted in its announcement that the allocations would be managed in line with responsible investment policies.

The changes follow a review of the master trust’s responsible investment policy, which features stronger expectations of its asset managers. That new policy, published in April, set out minimum requirements and ongoing expectations for asset managers, including a commitment to net zero and adequate stewardship resourcing. The trustee warned that relationships would be reviewed if those requirements were not met. 

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THE 2025

Winners showcase creativity while helping with retirement goals

“I want to retire, and I don’t know what to do” was a common comment from employees, said Katherine M. Miller, director of Costco’s bene t department, leading to a collaboration with T. Rowe Price for a multi-channel information campaign. “This was really driven by employees,” Miller said.

The target audience was 38,600 employees ages 55 and over, with 31,200 receiving email and 7,400 receiving a print version of the pre-retirement education campaign.

(Costco has a total of 250,000 participants with  total plan assets of $42 million).

The three-step campaign attracted considerable interest based on digital metrics tracked by T. Rowe Price.

The rst step was a brochure highlighting tips for retirement readiness. The email had a 53% open rate and 6% click-through rate compared to the record keeper’s averages of 43% and 4% respectively, Next came an email and postcard — in May 2024 —  describing T. Rowe Price’s digital retirement income planner that offered tools and resources.  The email had a 53% open rate and 7% click-through rate.

PRE-RETIREMENT PREPARATION :

Costco, in partnership with T. Rowe Price, launched a multichannel pre-retirement education campaign in response to employee concerns about retirement planning.

up, which included a new tier with active and passive investments.

ONGOING INVESTMENT EDUCATION :

Intermountain Health (left) launched a multichannel education campaign to inform employees about its 401(k) plan. Red Wing Shoe (above) developed a series of videos to educate employees about retirement planning and, below, Sony Corp. of America implemented an educational campaign to inform participants about its 401(k) plan.

The third component, issued in June 2024, was T. Rowe Price’s Social Security Optimizer tool that enabled participants to estimate when to draw on Social Security and how much they could expect to receive. The email had a 49% open rate and 5% click-through rate.

“The amount of information and the way it was laid out is very well done,” one judge said about the campaign, which won second place in the corporate category for plans with more than 1,000 participants. “The campaign was innovative and helpful,” wrote another judge.

Ongoing Investment Education

Educating Sony Corp. of America’s $6 billion 401(k) plan participants on investment lineup changes required not only multiple sources of communication but also a deliberate strategy of providing information over an extended period of time.

“We wanted a long runway before reaching the investment changes” that took effect in late 2023, said Judy Leung, senior bene ts manager in describing a four-step approach prepared in conjunction with T. Rowe Price. The campaign ran from February 2023 to October 2023.

Phase one featured emails and webinars providing basic information about investing and asset allocation, or “investing 101,” Leung explained.

The next phase was “investing 201,” a more detailed email and webinar on investing, such as contrasting passive and active investing.

Phase three combined print, email and webinar explanations of the new investment line-

Sony then followed up with a postcard, email and webinar “to help ensure understanding of the new lineup and awareness of any subsequent updates to individual portfolios,” said Sony’s award application.

Sony placed rst in the corporate category for plans with more than 1,000 participants.

“Well-positioned and strategic,” one judge wrote. Another judge had more effusive praise: “It’s engaging, educational, personal, easy to follow and understand. The language is clear and easy to read … It’s obvious there was a lot of planning, strategy and effort behind the scenes.”

For Dave Riegelman, the best way to educate new employees about Red Wing Shoe’s retirement bene ts was a series of ve videos describing the $194 million 401(k) plan’s features as well as general information about retirement planning.

The goal was to encourage recruitment and retention, said Riegelman, a Red Wing retirement plans analyst, acknowledging that retail companies can have high turnover.

His company, based in Red Wing, Minn., with 2,600 401(k) plan participants, can hire between 15 to 20 employees per month, but it also has employees who have been with Red Wing for 50 years.

Red Wing has an ongoing education campaign for existing workers, which includes one-on-one meetings — in person or virtual — with a nancial adviser as well as quarterly webinars covering issues such as estate planning and Social Security.

Existing employees are welcome to view the ve videos, but the videos are mandatory for

new workers.

“We want to drive action” with the videos, Riegelman said. “I’m not doing my job if I just do it for you.”

He likened his retirement education philosophy to driver education. “At some point, I can’t drive the car for you.”

Each video provided information on how to contact a nancial planner as well as information available from the call center at Transamerica, the company’s service provider.

Red Wing kept the videos short, enabling employees to learn at their own pace. There was no voice-over, so employees could view the videos in setting ranging from an of ce to a break room, according to the Eddy Awards application.

The videos contained some shoe-related branding: an illustration of compounding used illustrations of a boot growing larger over time.

Since March 2024, at least 10% of employees had reviewed a video, and some have reviewed all ve, according to the company’s Eddy Awards application. Through August 2024, there was a 35% year-over-year  increase in appointments with a third party nancial adviser, who appeared in each video, the application said.

The “broad educational context (was) well crafted,” one judge wrote. “The videos did a great job of breaking down complex concepts

into easy-to-follow, solid statements,” another judge wrote.

Red Wing placed second in the corporate category for plans with 1,000 or more participants.

For an encore, Red Wing will provide a new series of retirement videos during the rst quarter of 2025 for all employees.

With 58,000 participants working in ve states, Intermountain Health, Murray, Utah, had to use multiple strategies to educate employees in 33 hospitals and 385 clinics about a new custom target-date series for its $6.8 billion 401(k) plan.

Crafting and executing the campaign took more than 12 months and included print, video, webinars and FAQs, said Scott Olsen, director of retirement plans, which worked with service provider T. Rowe Price.

The three pages of FAQs range from the basic, such as what is a target-date investment,  to the detailed, such as target-date fund expense ratios.

The multichannel education campaign was necessary because “we tried to understand our diverse workforce and meet their different needs,” Olsen said.

The challenge was explaining to employees how a new custom target-date series would work after a 2022 merger between Intermountain Health and SCL Health and the 2023 merger of their retirement plans.

Intermountain had a risk-based portfolio, which it retains, of ve investing strategies ranging from conservative to aggressive. SCL Health had an off-the-shelf target-date series that was replaced by the custom target-date series. Employees in the merged company can choose either approach, or they can pursue a do-it-yourself investment strategy.

THE 2025 EDDY AWARD WINNERS

Financial Wellness

CORPORATE

Fewer than 1,000 participants

First Place

Wm. K. Walthers, Inc.

Service provider: Francis LLC

1,000 to 5,000 participants

First Place

Emmes

Second Place

EBSCO Industries, Inc.

Service provider: Principal Financial Group

Third Place

Aquent

More than 5,000 participants

First Place

The Walt Disney Company

Second Place tie

CBIZ, Inc.

Service provider: Empower

Second Place tie

Ashley Furniture

Service provider: Francis LLC NOT FOR PROFIT/OTHER

More than 5,000 participants

First Place

ChristianaCare

Service provider: Lincoln Financial

Second Place

Froedtert Health

Service provider: Lincoln Financial

Third Place

Bellin Health

Service provider: Empower PUBLIC

More than 5,000 participants

First Place

The University of Texas at Dallas

Second Place tie

California Savings Plus

Service provider: Nationwide Retirement Solutions

Second Place tie

City of Milwaukee

Service provider: Voya Financial

Third Place

New York Deferred

Service

Ongoing Investment Education

CORPORATE

More than 1,000 participants

First Place

Sony Corporation of America

Service provider: T. Rowe Price

Second Place

Red Wing Shoe Company

Service provider: Transamerica

Third Place

Northwell Health

Service provider: Transamerica

NOT FOR PROFIT/OTHER

More than 5,000 participants

First Place

Intermountain Health

Service provider: T. Rowe Price

GENERIC

First Place

J.P. Morgan Asset Management

Second Place

Transamerica

Conversions/403(b) Consolidations

CORPORATE

1,000 to 5,000 participants

First Place

Securian Financial, Inc .

Service provider: Principal Financial Group

Second Place

PHI Group, Inc.

Service provider J.P. Morgan Asset Management

NOT FOR PROFIT/OTHER

More than 1,000 participants

First Place

The University of North

Carolina System

Service provider: TIAA

Second Place

Schools First Retirement Planning

Service provider: Nationwide Insurance

Third Place

South Central Regional Medical Center (SCRMC)

Service provider:Empower

Pre-Retirement Preparation

CORPORATE

More than 1,000 participants

First Place

Wellmark, Inc.

Service provider: Principal Financial Group

First Place

Costco

Service provider: T. Rowe Price

Angelica Harborth, Employees Retirement System of Texas

Christopher Horton, Savannah River Nuclear Solutions

Kara Johnson, Daimler Trucks North America

NOT FOR PROFIT/OTHER

1,000 to 5,000 participants

First Place

North Mississippi Health

Services, Inc.

Service provider: Lincoln Financial

GENERIC

First Place

ADP Retirement Services

Special Projects

CORPORATE

More than 5,000 participants

First Place

Nestlé USA, Inc.

Service provider: Voya Financial

Second Place

Northwell Health

Service provider: Transamerica

Third Place tie

Bechtel Global Corp.

Service provider: Empower

Third Place tie

International Paper Co.

Service provider: State Street Global Advisors

CORPORATE

1,000 to 5,000 participants

First Place

Trek Bicycle Corporation

Service provider: Transamerica

Second Place

Red Wing Shoe Company

Service provider: Transamerica

Third Place

Graham Packaging Company

Service provider: Principal Financial Group

NOT FOR PROFIT/OTHER

More than 5,000 participants

First Place

Legacy Health

Service provider: Lincoln Financial

Second Place tie

Seventh-day Adventist Church

North American Division

Service provider: Empower

Second Place tie

Memorial Healthcare System

Service provider: Transamerica

Third Place

The University of Texas at Dallas

Service provider: Lincoln Financial

PUBLIC

More than 5,000 participants

First Place tie

Employees Retirement System of Texas

Service provider: Empower First Place tie

Maryland Supplemental

Retirement Plans

Service provider: Nationwide

Asset Management

Ronda Butler Bell, Maryland Teachers & State

Employees Supplemental Retirement Plans

Claire Bouffard, Morgan Lewis

Kimberly Burch-Garcia, County of Los Angeles

Amanda Eiynk, Grazzini Brothers & Co.

Jaime Erickson, Abbott Laboratories

Nancy Faulkner, Encompass Health

Marla Kreindler, Morgan Lewis

Kurt Loring, Applied Industrial Technologies

Jamie McAllister, Callan

Jillian Medoff, Segal Benz

Tamra Miller, Ingevity

Greg Nickett, Conning & Co.

Melissa Pignatiello, ADP TotalSource

Patricia Ricciardi, Northwell Health

Bill Ryan, NEPC

RyAnne Scott, University of Colorado

Alvin Shaver, Southeastern Freight Lines

Erin Uhlenkamp, TIAA-CREF

Marita Yancey, University of Texas at Dallas

Internal judges

Erin Arvedlund

Meaghan Offerman

Robert Steyer

Second Place tie

Missouri State Employees’ Retirement System

Second Place tie

City of Austin

Service provider: Empower

Third Place tie

Washington State Department of Retirement Systems (DRS)

Service provider: Voya Financial

Third Place tie

Savannah River Nuclear Solutions, LLC

Service provider: Transamerica

GENERIC

First Place

ADP Retirement Services

Second Place tie

T. Rowe Price

Second Place tie

T. Rowe Price

Plan Transitions

PUBLIC

More than 1,000 participants

First Place

The University of Alabama System

Service provider: TIAA

Second Place tie

The State University of New York (SUNY)

Service provider: TIAA & CAPTRUST

Second Place tie

National Radio Astronomy

Observatory

Service provider: TIAA

NOT FOR PROFIT/OTHER

More than 1,000 participants

First Place

Gonzaga University

Service provider: TIAA & CAPTRUST

Second Place

Essentia Health

Service provider: Empower

CORPORATE

All Sizes

First Place The Coca-Cola Company Service provider: Transamerica Second Place

Avangrid Service provider: BlackRock First Place

H.B. Taylor Co. Service provider: Francis LLC

Honorable Mention

PUBLIC More than 5,000 participants Kentucky Personnel Cabinet

Scott Gerber, Edelman Financial Engines

Julie Tatge  The backgrounds of the Eddy Awards judges are as diverse as the education and communication campaigns they reviewed, representing a mixture of public, private and not-for-pro t institutions; sponsors and consultants; lawyers and P&I staff members.

Mohammad Raihan, NYC Health & Hospitals

Winners

Last year, the campaign led to an increase in 401(k) plan participation to 90.04% from 86.24%, Olsen said.

Target-date usage increased by 38.8% between January and September. The risk-based portfolio usage rose by 4%.

“The campaign offers a lot of great information about why, how and when to invest,” one judge wrote. “It’s detailed, and it breaks down complex concepts into easily understood action items.”

Intermountain Health placed rst in the not-for-pro t/other category.

Concerned that employees were weren’t effectively planning for retirement of cials at Gonzaga University, Spokane, Wash., spent nearly a year developing an investment strategy aimed at providing lifetime income.

The university swapped out a target-date series from TIAA-CREF, its record keeper, for another target date series, TIAA RetirePlus Pro, a custom product that embeds a xed income annuity and gives the university more exibility, such as adding its own underlying investments. CAPTRUST manages the custom target-date series.

“A lot of participants weren’t making choices based on their projected retirement dates,” said Lisa Schwartzenburg, assistant vice president for human resources operations for the $526.1 million 403(b) plan, which covers approximately 2,700 participants.

“They were either too risky or too conservative.”

The target-date series also provided exibility for participants. They aren’t locked into an annuity, said Schwartzenburg, making a distinction between an annuity product and the opportunity to annuitize.

Previously, the plan offered a stand-alone annuity product. It is still available.

The university conducted an RFP for the target-date series, settling on TIAA RetirePlus Pro. Participants were mapped into the new target-date series from the old one.

The university gave participants a choice to opt out. Only 9% decided against the target-date series, which is fewer than Gonzaga of cials had expected. Those  opting out preferred to create their own strategy based on their existing investments.

Gonzaga communicated the changes via a total compensation fair, which covered all university bene ts, as well as webinars encouraging participants to seek in-person retirement advice and weekly “digital of ce hours,” in which university representatives answered questions about the investment transition. The university issued a detailed transition guide describing plan changes as well as providing links to online resources.

Gonzaga provided “a great transitional guide” with “great promotional information,” one judge wrote.

The university placed rst in the not-forpro t/other category for plans with more than 1,000 participants.

Financial Wellness

The Walt Disney Co. has offered nancial wellness education in the past, but the campaign between February 2024 and April 2024 re ected a greater effort to reach the approximately 140,000 participants in two 401(k) plans with combined assets over $16 billion.

“We took more of an analytical approach to this work by leveraging employee survey data — both our own and that of our vendors — in order to better understand our employees’ needs,” explained Riddhi Patel, director of U.S. retirement programs, bene ts policies and segment support, in an email response to questions.

“We also continually look at external market research to understand industry trends and keep up with the latest in the legislation like SECURE 2.0, in order to leverage opportunities

THE 2025

FINANCIAL WELLNESS WINNERS:

ChristianaCare (above), in collaboration with Lincoln Financial, aimed to help employees understand their health insurance options, while Wm. K. Walthers, Inc. (top right) promoted spending and savings priories. The Walt Disney Co. (bottom right) used a personalized video to help employees understand the power of saving more in their 401(k) plan.

to enhance our programs,” Patel added.

A signature element of the campaign was a personalized video that reviewed a participant’s income, age, deferral rate and account balance to show the impact of what an additional 1% deferral into their 401(k) balance at retirement.

“This personalization demonstrated the power of savings in an impactful way for employees,” Patel said.

Disney of cials found that emails tended to be the most effective form of communication, but print and digital information were used to reach employees in their work areas and via the company intranet,  Patel said.

Disney used a series of emails to highlight speci c nancial wellness issues.

The rst email identi ed nancial resources and tools for managing money and building savings with a link to one-on-one nancial consulting and banking services through a credit union.

The second email focused on tools for shortterm and long-term savings. The third email emphasize the role of the 401(k) plan, discussing the employer match, contribution rates and balances.

The campaign also introduced a student debt match program linked to the 401(k) plan.

“The biggest impact we have seen has been an increase in our hourly plan participation,” Patel said. “We continue to monitor other metrics like program engagement, employee sentiment and bene ciary designations to better understand what our employees need.”

According to Disney’s award application, 20% of participants who viewed the videos increased their 401(k) plan contributions.

The Walt Disney Co. placed rst in the corporate category for plans with more than 5,000 participants.

“The materials are presented in a fun way that appears to re ect corporate culture,” one judge wrote.

Of cials of ChristianaCare and its record keeper, Lincoln Financial, noticed that some employees would start saving for retirement but then request loans and hardship withdrawals.

Concerned about the long-term impact of impairing savings, ChristianaCare settled on promoting critical illness insurance, hospital indemnity insurance and accident insurance as a way to ease participants concerns about tapping into their retirement savings, said Mark LoGiudice, senior manager of bene ts and wellness.

‘We took more of an analytical approach to this work by leveraging employee survey data — both our own and that of our vendors — in order to better understand our employees’ needs.’

DISNEY’s Riddhi Patel

ChristianaCare and Lincoln Financial held online and onsite bene ts fairs in May 2024, leading to greater insurance purchases after open enrollment vs. before open enrollment.

It took about six months to plan ChristianaCare’s selection and implementation of its insurance strategy, whose communication efforts included informational yers as well as web-based information via QR codes and videos about the various supplemental health bene ts.

“I thought the videos were very creative, humorous and relatable,” one judge wrote.

Wilmington, Del.-based ChristianaCare manages three hospitals as well as outpatient facilities. The 403(b) plan has $1.8 billion in assets and covers 13,400 active retirement plan participants.

ChristianaCare hasn’t changed its loan policy. Participants can have two loans outstanding.

“We are looking at emergency savings” via the provisions in SECURE 2.0, but there is no timetable for action, LoGiudice said.

ChristianaCare placed rst in the not-forpro t/other category for plans with more than 5,000 participants.

Although Emmes Group, Rockville, Md., had offered nancial wellness education in the past, “we wanted something more dedicated,” explained Janice Warren, senior manager for U.S. bene ts and wellness.

The company’s $203 million 401(k) plan began using the ProsperWise platform, devel-

oped by the plan’s adviser, Marsh & McLennan Agency, helping raise the plan participation rate to 96% compared to 89% before the platform was offered on Jan. 1, 2024.

Budgeting, college savings and unlimited nancial coaching are part of the services which are provided through webinars and monthly newsletters.

“Our employees are always asking for more education,” Warren said. “We want to enhance our employees’ knowledge.” The wellness platform also can be used by families.

Since the platform’s launch, there have been 4,330 page views on the platform; 460 participants attended nancial wellness webinars; and 65 participated in nancial coaching sessions

“The number of users on the website has grown from 108 since launch to over 683 as of Jan. 31,” Warren said.

Separate from the wellness platform, Emmes Group raised its auto-enrollment deferral rate to 6% from 3% in July 2024. It also raised the limit for auto-escalation to 15% from 10%. The auto-escalation rate remains at 1% per year.

Emmes Group placed rst in the corporate category for plans with 1,000 to 5,000 participants.

“Their use of the monthly newsletters is a great way to keep employees informed and engaged,” one judge wrote. “Great tools for budgeting (and) school scholarships,” another judge wrote.

Securian Financial had been managing its retirement plan record keeping internally for decades, but it sold the business to Standard Insurance Co. and chose, in 2023, Principal Finan-

cial as the record keeper for its de ned contribution, de ned bene t and nonquali ed plans.

“It was a huge undertaking,” said Jeffery Streeper, consulting director for bene ts, coordinating all plans under one record-keeping roof.

As of Sept. 30, Securian’s DC plan had $987 million in assets, DB plan assets were $1.3 billion, and nonquali ed plan assets were $127 million.

The project took 18 months and required an RFP.  Securian chose Principal because “we were impressed by the technology and the integration” of the three plans under one record-keeping roof, Streeper said.

Moving the plans to Principal featured a “complete revamp of the investment structure,” Securian’s awards application stated. The Principal platform offered new tools, resources and online calculators.

The communications campaign was conducted through 2023, featuring a town hall meeting and a multi-channel approach to educating participants.

The campaign included an FAQ answering questions about the new record keeper’s bene ts, an FAQ for participants with loans to explain how they would work under the new system, emails and letters offering links to plan information.

After the conversion, Principal representatives conducted on-site breakfast events. They conducted webinars for participants who worked remotely from Securian’s St. Paul, Minn., headquarters and onsite meetings at the headquarters.

“This campaign is thorough and clearly laid out,” one judge wrote.

After the conversion, the DC plan participation rate rose to 85% from 79%.

Securian took rst place in the corporate category for plans with 1,000 to 5,000 participants.

When the SchoolsFirst Federal Credit Union, Tustin, Calif., of cials looked at their 403(b) and 457(b) plans, they realized that over the years the number of investment options had ballooned to 368 and that there was plenty of room for improving technology and services.

Improvement came in the form of changing its record-keeping platform, a process that took 18 months from the initial idea to the launch.

“There were a lot of moving parts,” said Cristian Lopez, manager, SchoolsFirst Retirement Planning.

The biggest challenge, Lopez said, was communicating the changes to 44,100 participants in more than 250 school districts in California. The changes included a new website and a slimmed down lineup of 56 investments.

SchoolsFirst had worked with Nationwide Insurance for 25 years, and it decided to convert from one Nationwide record-keeping platform to another following an RFP.

“Nationwide is very customer-service based,” said Lopez, whose plan, the SchoolsFirst Retirement Builder Plan, won second place in the not-for-pro t/other category for plans with more than 1,000 participants.

Changes to the website included a discussion of bene ts and different strategies for the 403(b) and 457(b) plans, which had combined assets of $2.6 billion as of June 30.

The communication campaign combined email and regular mail, and it made sure to reach out to decision-makers in each school district, such as principals, superintendents and well-regarded teachers, Lopez said. These individuals were identi ed as having in uence and credibility with employees.

The campaign emphasized a personal touch. The new website incorporated participants’ photos and contained educational content speci c to individual needs.

A series of emails were aimed at speci c audiences, such as people with outstanding loans, those investing in managed accounts and those with speci c investment options to receive additional information.

There was “robust messaging” with “clearly outlined important dates and information provided for someone to easily access their ac-

THE 2025

count,” one judge wrote.

When the city of Austin, Texas, issued a record-keeping RFP in 2023, it gave the incumbent, Empower, the opportunity to re-bid for the city’s 457(b) plan.

Five candidates applied. Empower won a ve-year contract with the possibility of two one-year extensions — but only after Empower agreed to provide more services.

“We wanted open architecture,” said Gail Ray, nancial manager in the city’s nancial management department. “We wanted nancial planning services at no additional cost. We wanted to go from one local representative to two local representatives.”

All of these features were “deal breakers,”

in city employee newsletters, emails, a reusable tote bag and contact cards with QR codes to help participants schedule appointments with local representatives,

“There was clean, clear messaging,” wrote one judge. “It was a very appealing campaign.”

Another judge praised the comprehensiveness of the campaign to provide investment information and consultations. “Videos capture and maintained your attention,” the judge wrote.

The city of Austin tied for second place in the special projects category covering public plans with more than 5,000 participants. It shared the award with the State of Missouri Deferred Compensation Plan.

The challenge to Memorial Healthcare Sys-

Ray said.

“Neither point-in-time investment advice nor nancial planning services were previously provided by the record keeper,” she said.  “If participants needed this type of service, they had to nd a nancial adviser on their own.”

Adding a second local representative cut down the waiting time for participants seeking nancial information.

One local rep could hold 600 to 850 meetings per year; two reps could conduct more than 1,900 meetings. And the city convinced Empower to waive the cost of providing nancial advice over the phone, a service usually linked to managed accounts.

“We don’t want managed accounts, so they offered this for free,” she said.

The new services were presented in videos

Approximately 1,200 participants chose the Roth approach in one year, investing approximately $8.5 million, Crutcher said. “I had hoped for $5 million in year one.”

Memorial, and its service provider Transamerica, conducted an education campaign from November 2023 through mid-February 2024, unveiling a web page promoted as onestop shopping for investment education and the plans’ changes.

The web page enabled employees to arrange appointments with retirement planning consultants — either in-person or virtually. Oneon-one appointments increased by 25% over a corresponding period prior to the campaign.

The overall participation rate rose to 82.4% from 81%.

Memorial provided “impactful and robust communications,” one judge wrote.

“This was a good strategy of email communications, mailer and newsletter,” another judge wrote.

Memorial Healthcare System tied for second in the not-for-pro t/other category for plans with more than 5,000 participants. It shared the award with the Seventh Day Adventist Church North American Division (Empower).

The state of Maryland stopped making matching contributions to participants in the public employees 401(a) plan in 2009. The long-term impact on  participants, especially after the Covid-19 pandemic and a weakened economy in 2022, was decreased or suspended contributions as well as more loans and hardship withdrawals.

To increase participant contributions and participation, the state enacted a law effective July 1, 2023, offering a $600 match on a dollar-for-dollar contribution basis.

The law’s passage was only part of the story: The Maryland Teachers and State Employees Supplemental Retirement Plans, Baltimore, had only eight weeks — from the April  passage to the July 1 effectiveness date  — to develop an education campaign for taking advantage of state appropriations, explained Tonya Toler, director of member services

The challenge was compounded by the fact that Maryland was basically starting from scratch.

“There was no paper trail” from the previous match policy, she said. “We were scrounging and looking for data.”

Aside from implementing the match, Maryland sought to restart contributions from participants who had stopped adding to their accounts, help those who are ineligible for the match to see the bene ts of supplemental retirement plans and assemble technology resources to make the match proceed smoothly.

To qualify for a 401(a) match, a participant must contribute to a state 457(b), 403(b) or 401(k) plan. Aggregate assets for the plans are $5.3 billion.

The education campaign with a theme of “Catch The Match” was a mixture of in-person presentations and webinars — a total of 28 webinars attended by 3,320 employees.

Email blasts, messages appended to participants’ nancial statements and placed in the system’s magazine and on various websites contributed to the education efforts.

tem, Hollywood, Fla., was communicating changes for its 403(b), 401(a) and 457(b) plans to employees who worked long hours via multiple shift changes.

“We needed to modernize our plans and increase effectiveness, engagement and awareness,” said D. Scott Crutcher, director, total rewards: retirement, pension and deferred compensation administration. The plans have combined assets of $1.95 billion.

“We needed to make things more employee-friendly,” Crutcher said.

The changes included adding after-tax Roth features to the 403(b) and 457(b) plans; lowering to vesting schedule to three years from ve years for the 403(b) plan; and increasing the annual employer contribution to 3% from 2.5% for some 401(a) plan members.

As a result, 2,634 participants resumed contributing.

Enrollments increased, as did contributions. Plan participation rose to 73% after the program concluded vs.70% before it started.

“I really liked that they didn’t just email,” one judge wrote. “They had newsletters, postcards, emails and posters in high traf c areas.”

Another judge praised the campaign for providing “relatable examples” as a way to incentivize people to enroll in the plan or increase their contributions.

The Maryland Teachers and State Employees Supplemental Retirement Plans tied for rst place in the category for public plans with more than 5,000 participants. Nationwide is the service provider. Maryland shared the award with the Employees Retirement System of Texas (Empower).  n

Federal government workforce reductions

‘demoralizing’

Government agencies This reduces agency expertise and undermines trust in nancial institutions

The Trump administration's approach to streamlining the federal government is highly problematic and harmful to the trust that Americans place in their nancial institutions.

That was one of the key messages that Ali Khawar, former principal deputy assistant secretary at the Department of Labor’s Employee Bene ts Security Administration, drove home during the opening session at Pensions & Investments’ Dened Contribution East conference on March 10.

Khawar criticized the “weird, anonymous centralized email” sent to government workers asking them

Center stage

and counterproductive

to list their ve accomplishments over the previous week.

“One fundamental problem I have with this approach is that it is demoralizing the very people who are responsible for getting everything done right,” he said, explaining that it is typically 10% of workers who are doing 30% of the work.

An agency’s most valuable workers are not only going to be less productive but are also going to leave, he said.

Khawar warned that the government’s “slash-and-burn” approach would lead to less-effective agencies.

“You’re going to have an agency that has less expertise, is less good at what it does, and is going to be less helpful to the industry in multiple ways,” he said, referring to EBSA and other agencies.

Khawar reminded the audience of EBSA’s strong enforcement record.

EBSA  was the rst agency to open an investigation into Enron and one of its investigators played a critical role

in the prosecution of Bernie Madoff.

Khawar stressed that EBSA’s enforcement program was critical to the trust that workers place in their nancial institutions, noting that people in many other parts of the world don’t trust their institutions.

In the U.S., people trust that if people take money out of their paychecks, they’re not stealing it, he said.

Nevertheless, theft of employee contributions from de ned contribution retirement plans is a problem in the U.S., Khawar added.

“We prosecute criminal cases every year involving those issues,” he said. “The reason that there’s not widespread concern about it is because we have a high level of trust that the government is going to be looking out and catching those people to the extent that they can nd them.”

Khawar complained that with only 800 employees, EBSA’s resources are stretched, given the wide scope of its work, including civil and

criminal enforcement, plan sponsor education, economic analysis, examination of Form 5500s and more.

“That’s not enough to do everything that we need to do. It’s not big enough to be your little angel on your shoulder,” Khawar said.

Khawar conceded that there is a role for making government run better. If the industry thinks that “the

P&I reporters live blog from DC East conference

Greater need for nancial wellness programs

About two-thirds of workers feel they can control their nances, illustrating the need for employers’ nancial wellness programs, said Kenje Mallot, wealth solutions architect at Alight Solutions.

Citing survey research, Mallot said 57% of workers feel they are in control of saving for emergencies, 58% said they feel they can manage debt and 63% said they understand Social Security options.

But 10% are not saving for retirement, she added. Fifty-seven percent have three months or less of living expenses saved.

One company taking an aggressive approach to nancial wellness is the Walt Disney Co.

Among the services beyond its 401(k) and pension plans, the company provides emergency savings and debt management tools, emergency credit and nancial coaching support, and nancial planning consultations, said Jennifer Bense, nancial well-being manager, during the panel discussion, “Crafting a winning nancial wellness program.” Disney also provides credit union banking and wealth management services. One new feature, launched in 2024, is a student debt payment policy linked to the 401(k) match, she said.

ROBERT STEYER

Cracking the Gen Z Code

What can you say about Gen Z, those born between 1996 and 2010, who some research shows, expect to retire at 54?

They still want to learn more about saving for retirement, according to the consensus of speakers at panel discussion “Cracking The Gen Z Code,” March 11 at the Pensions & Investments De ned Contribution Conference.

“We want advice,” said Sadie Saxton, Senior Associate, Institutional Business Development, Impax Asset Management.

“They understand the importance of saving,” Natalie Turner, Manager, Client Experience Experimentation, Vanguard.

GenZ employees learn by personal experience, said Ally Williamson, National Account Director, Empower.

She recalled a veteran co-worker telling her to take advantage of the company match. If you aren’t meeting the match “you are leaving money on the table,” the co-worker said.

Williamson provided some research results that showed GenZ workers, aside from expecting to retire early, appear engaged in saving.

Eighty-eight percent of eligible workers are contributing to their retirement plans, she said. Seventy-one percent feel con dent they will be nancially ready for retirement.

ROBERT STEYER

Talking retirement readiness

A majority of Americans feel con dent that they will be nancially ready for retirement, but there is more work to be done among retirement plan sponsors and service providers to boost retirement readiness, said panelists on “Designing a Retirement Readiness Program: Guiding Employees Into and Through Retirement.”

Joe Buonadonna, product director, workplace managed account consultant at Fidelity Investments, presented data showing that Generation X is the least con dent generation with respect to retirement, with just 34% of that cohort who feels con dent.

“There’s room for improvement to increase overall con dence levels and engagement with this group to drive up retirement readiness,” Buonadonna said.

On the positive side, there are now more digital tools to help engage participants and improve retirement con dence from asset managers, record keepers and employers, said Anthony Randazzo, executive director of Equable Institute, a bipartisan non-pro t. Buonadonna noted that Fidelity creates “tailored experiences for participants” to boost engagement, including educational events, emails and online tools.

BRIAN CROCE

reins are too tight on private equity,” or the “approach to retirement income is wrong,” those conversations are worthwhile and should be had, he said.

“Those are totally legitimate debates to have, but to actually turn them into something you’re going to need an agency that can carry them out,” Khawar said.

PEPs see high take-up with spinoff companies

Pooled employer plans allow plan sponsors to of oad administrative work, reduce their duciary risk and produce better outcomes for their participants, said Rick Jones, senior partner, Aon PEP leader and DC solutions, during the panel “The Game-Changing Potential of PEPs in Retirement.”

The Aon PEP leads to a 30% to 75% reduction in administration time and lower costs and has had strong take-up among companies spun off from Fortune 500 companies, he said.

Beth Jackman, director of global bene ts, retirement and mobility for Atmus Filtration Technologies is one of the companies that quickly made up its mind to join the Aon PEP. Atmus is a spin-off of Cummins, a 100-yearold company that has managed its own DB and DC plans.

“We wanted to continue the bene ts that come with a large plan,” she said. “Our employees were used to all of those things that come with a large plan in terms of the investment choices and fee schedules.”

MARGARIDA CORREIA

MESSAGE: Ali Khawar, former principal deputy assistant secretary at the Department of Labor’s Employee Bene ts Security Administration.

TALKING SHOP: The conference offered a variety of discussions and topics.

LOWER MIDDLE MARKET DIRECT LENDING: A

RESILIENT OPPORTUNITY SPARKING ALLOCATOR INTEREST

As private credit strategies continue to capture the attention of institutional investors, lower middle market direct lending is gaining traction as a growing sector that can offer attractive return opportunities with lower leverage. It also has the ability to provide consistent current income with simpler debt structures and tighter financial covenants in comparison to the upper middle market.

“We believe the lower middle market continues to offer attractive returns with lower leverage profiles and stronger lender protections versus the upper middle market,” said Rich Christensen, senior partner at TPG Twin Brook Capital Partners. “As an asset class, we believe direct lending has gained broad acceptance; and within the asset class, we believe the lower middle market, given a favorable competitive landscape, leads to a pricing premium and favorable risk-return profile.”

What’s more, the sector is primed for a solid year. In 2024, deal volumes picked up, recovering from a sluggish 2023. That momentum is expected to continue this year, offering investors opportunities to pick up yield and return.

“We saw deal volumes experience a broad recovery in 2024 and an acceleration of momentum in the latter half of the year,” Christensen said. “The broad market expectation for this year is that M&A volumes should be consistent or increase over 2024.”

A DISCIPLINED APPROACH

Yet investors are cognizant of potential headwinds that could impact the direct lending market, given uncertainty around economic growth, inflation, interest rates and geopolitical turbulence.

For these reasons and more, it is critical to work with an experienced manager. “The underlying economy and the various disruptions that we’ve seen over the last four years are key considerations as we assess individual credit opportunities,” Christensen noted. “These uncertainties are not factors that we can ignore but rather ones that we must be prepared for. We have established a process and a credit discipline that we believe allows us to lend through most economic cycles.”

COMPARATIVE STRENGTH

A key aspect of lower middle market lending that not all institutional investors may realize is that this segment performed well even through the COVID pandemic and ensuing years when inflation spiked, interest rates rose sharply and economic growth stalled.

“In recent years, we have seen that the lower middle market has been adept at managing through a range of market challenges, including material supply disruptions, labor challenges and a challenging inflationary environment,” Christensen said.

The concept that smaller borrowers can be less risky than larger ones may be counterintuitive, because institutional

investors typically equate the lower middle market with a higher risk profile based on the smaller size of the underlying borrowers, he added. But in fact, strong investor safeguards, combined with a focus on more conservative debt structures and smaller lender groups as compared to those in the upper middle market, provide significant enhancements to borrower risk profiles for lower middle market lenders.

DEEPER UNDERSTANDING

Direct lending as an asset class has experienced strong growth, gaining broad acceptance from both institutional and high-net-worth investors.

“Managers must continually educate investors and provide them with a better understanding of the enhanced lender protections and favorable return profile that’s available in the lower middle market,” Christensen said. “Bringing nuanced discussions to the table and providing a clearer understanding of the credit risk management and enhanced lender protections available in the lower middle market versus typical structures available in the upper end of the middle market is important.”

The

lower middle market has the potential to offer a higher risk-adjusted return over the upper middle market, with lower leverage profiles, simpler debt structures and stronger lender protections helping to drive higher overall recovery rates.

“As investors who may have only had direct lending exposure to the upper middle market become familiar with the lower middle market’s attractive credit return profiles, we are seeing an increase in allocations trickle down into the lower middle market,” he said.

“The lower middle market has the potential to offer a higher risk-adjusted return over the upper middle market, with lower leverage profiles, simpler debt structures and stronger lender protections helping to drive higher overall recovery rates,” he added. “Both pre- and post-pandemic, the lower middle market demonstrated higher recovery rates compared to loans to larger companies.”

Beyond simply understanding the market’s characteristics, return potential and risk factors is the importance of how a manager sources transactions as well as that man -

ager’s credit rigor and risk management. “Managers providing a clear understanding of how credit risk is managed with lower middle market borrowers is a critical aspect of demonstrating the value proposition of the lower middle market over alternative upper middle market strategies,” Christensen said.

PROCESS MATTERS

Investors considering an allocation to the direct lending asset class should have insight into a manager’s process and understand how borrower relationships are managed over time, how the portfolio is built and the nuances of lending in the lower middle market — all key dimensions to help them fully assess the risk profile compared with upper middle market strategies.

The manager’s deal pipeline is an important component. “Scale matters more than ever,” Christensen said. “On the manager side, the scale to drive efficient and consistent capital formation is critical. However, equally as important is having an effective origination capability to generate consistent and diversified deal volume. Maintaining a strong deal flow is absolutely critical to managing risk and achieving higher return thresholds.”

LOOKING AHEAD

In Christensen’s view, the opportunity set looks positive for the lower middle market. If M&A activity continues to strengthen this year, as expected, a key driver of new deal volume will be liquidity from investors exiting their existing portfolio positions and looking for new opportunities. Additionally, refinancing activity is expected to remain an ongoing driver of deal volume.

“One theme we expect to see play out this year is increased sponsor exits from existing portfolio investments,” Christensen said. “The economic and market disruptions over the last four years has pushed investment periods out beyond normalized hold periods and as such, we expect to see private equity firms take advantage of stronger market conditions in 2025 to exit a higher number of portfolio investments.”

“That should be a broad theme in terms of what holds market activity up,” Christensen said. “As we talk to market constituents, there is optimism for some continuation of the volume trends in 2025 that we saw in the back half of 2024.” ■

Sponsored by:

Saudi Arabia picks Miami for its second U.S.-based investment of ce

y B SOPHIE BAKER

Saudi Arabia will open its second U.S.-based investment of ce in Miami, using the city as a gateway not only to the U.S., but also to South America.

Invest Saudi, the kingdom’s nationwide brand to attract and promote investment into Saudi Arabia, is overseen by the Ministry of Investment. Khalid bin Abdulaziz Al-Falih, the minister of investment, announced the new of ce at the Fu-

ture Investment Initiative Institute Priority Summit on Feb. 20 — which is being held in Miami.

The investment of ce will “invest regionally” and will “use Miami as a gateway — a gateway not only to the U.S. given its strong participation of owners of capital, innovation, and the great minds that are ocking to call Miami home; but we’ve also discovered by coming here regularly … (that) Miami is also a good gateway to South America, not just to North America,” he said. “And so by select-

ing Miami as our second of ce … after Washington … we’re opening new pathways for inbound investment into the kingdom of Saudi Arabia, but also facilitating outbound investment.”

The announcement was made following the minister’s participation in a panel discussion about Saudi Arabia’s economy under its Vision 2030 plans.

Also on the panel was Kenneth C. Grif n, founder and CEO of the roughly $65 billion hedge fund Citadel, who in 2022 said he was shifting the rm’s headquarters to Miami.

Grif n — whose hedge fund does not have an of ce in the Middle East, according to its website — highlighted the importance of clear legal and regulatory frameworks to attract global investors to a kingdom.

“As a global investor, that’s music to my ears — I want to be involved in deploying capital in countries where I understand both the legal principles and the regulatory principles that will apply to me, and I want to believe that I will be fairly treated if there is ever a commercial issue that arises,” Grif n said. A number of alternatives managers have opened of ces in the Middle East, but Citadel does not have an of ce in the region listed on its website.

The investment office will “invest regionally” and will “use Miami as a gateway.

SAUDIA ARABIA MINISTER OF INVESTMENT’S KHALID BIN ABDULAZIZ AL-FALIH

In response to a question about advising clients in times of uncertainty, Grif n said while “economic uncertainty is high … the policy uncertainty is even higher.”

Much of the “substantial transformation” of the U.S. government is “good, much of this is important; much of this is long-needed rationalization of a bureaucracy that became too all-encompassing" and intrusive, Grif n said.

But the policy uncertainty that goes with such transformation “means it’s a very dif cult time to invest.”

The status of tariffs makes it difcult to navigate investment, as well as working out “who will be an important ally to America going forward, and with whom are we breaking down long-standing relationships. And I really do hope that the administration nds a way to build as many bridges as possible around the world, to create pathways for American products, American goods and services — that’s very important to how we will successfully invest in the markets. Because we can invest when wealth is created,” Grif n said.

He added that he’s "a bit anxious about this sort of sense of a zero-sum game — ‘more for me, less for you,'" adding that a focus instead of making “the pie bigger for everybody around the world” would create wins for the U.S.

related to providing Plan Administration Services relating to the aspects of the 401(a) Defined Contribution Retirement System (DCRS), the 457 Deferred Compensation Plan of the Government of Guam Retirement Fund; and the Welfare Benefit Plan.

RFP will be issued on Monday, March 17, 2025 Potential offerors may submit written questions on or before Monday, March 31, 2025. Responses to the written questions will be made on or before Friday, April 11, 2025. Submission of proposals will be due by 4:00 p.m. (Chamorro Standard Time) on or before Thursday, April 24, 2025.

All interested persons, firms or corporations are requested to download copies of RFP from the GGRF website at www.ggrf.com. RFP copies may also be obtained at the Administrative Services Division of the Government of Guam Retirement Fund, 424 Route 8, Maite, Guam 96910, between 8:00 a.m. and 5:00 p.m., Monday through Friday, with the exception of official Government of Guam holidays. Proposals must be received by GGRF on or before the due date to be considered for evaluation.

advantages going forward. (Questions and answers have been edited for clarity, conciseness and style).

Q | Did that famous Goldman report give you any qualms about taking the helm of a mid-sized money management firm?

A | I haven’t read the piece in 15 years but I remember the thesis and boy, it was good for the merger business. It created a sense in all of us that, oh my gosh, we must act now, because this is going to happen fast. (But) change in this business takes a lot longer than people think.

Q | But you didn't fear a competitive handicap?

A | I think (the Goldman report) con ated active and passive. There’s the passive business, which is scale driven, and there’s the active business, (which) in my mind is all about excellence — whether it’s small, medium or large, excellence will prevail. (At the height of thenancial crisis) I wasn’t looking 15 years ahead. I was just trying to protect clients and troops in the midst of the GFC. I couldn’t look 15 minutes ahead at the time, let alone 15 years.

Q | Looking back now, does Neuberger’s position on the size spectrum suit you?

A | I love our spot —  large enough to be able to be relevant as a strategic partner to the largest, most sophisticated investors in the world … yet nimble and entrepreneurial enough to be able to continue to deliver alpha to our clients (and do) niche-y things.

Q | You seem singularly focused on Neuberger’s culture.

A | I’m trying to gure out, are people proud to work at the rm and what some people call enablement — is the rm getting the very best from me or am I not able to fully contribute because … the technology stinks? Or my boss is a jerk? Or some work practices don’t make sense? Or I’m in the wrong role, for whatever reason?

Q | You’ve talked about “measuring” Neuberger’s culture.

A | Things I look at that correlate with strong culture (include) retention rates … particularly for senior investors. (Meanwhile) we’re launching our employee survey in the next week or so. We do it periodically, every 18 months or so. We ask, I think, 83 questions. I will read all 2,800 responses.

Q | Do the responses lead to change?

A | All the time. You’ll see it in the six to 12 months after we do the survey. There will be 10 different things that will be changed — oftentimes (touching on) individual team dynamics. For example, a few cycles ago one particular team scored very low on how comfortable they felt disagreeing with their boss. So, I got on a plane and went and visited with

with Neuberger Berman’s George Walker

the leader of the team and the people on the team … and that changed.

Q | How much importance do you ascribe to that kind of fine-tuning?

A | We’re a people business. Those are our assets. It’s not machines or a brand. We’re a team and so how we get the best out of our individuals and how we function as a team and how we deliver for clients is absolutely fundamental to what we do. If you get it right, it’s an enormous source of competitive advantage and if you get it wrong it can be disastrous.

People focus so much on strategy. Strategies are easy to copy. Cultures are really hard to copy. Neuberger has had a pretty terri c run over the course of the past decade and a half. How much of that has been great strategy versus how much of that has been culture? I would say more of it is a function of the culture that we’ve built and improved, as opposed to that we picked a radically different strategy than our peers.

Q | Did Roy Neuberger, who founded the firm in 1939 and died in 2010 at the age of 107, play a big role in defining that culture?

A | What Roy did, I think, particularly well was he stepped down as being CEO relatively quickly … and as owner and founder (worked) to build a rm that really supported its portfolio managers (and) its investment teams. I think that was absolutely de nitional.

Q | After 16 years at the helm, are you still having fun?

A | I love what I do. I’m proud to work here. I’m excited about where we’re headed. I’m 55 — relatively young, I think, so feel like I’ve got another decade plus — a lot left in the tank.

Q | Some observers question whether recent senior executive departures at BlackRock are a function of long-time president and CEO Larry Fink’s continued reign at the $11.6 trillion behemoth he led the way in building. Could extending your stay at the helm lead to similar turnover?

A | The CEO matters more in a topdown driven rm. We’re a bottom-up driven rm and we function more as a partnership — super collaborative. If I got hit by a bus, the rm wouldn’t miss a beat.

Q | No power-hungry, egomaniacal money managers at Neuberger?

A | Not that I’ve found over 18 years, but perhaps somebody will shock me in the future.

Q | Neuberger Berman, a private company for most of its long life, went public briefly in 1999. Are you wedded to remaining private going forward?

A | Our structure is an enormous source of competitive advantage in terms of keeping people. Most of our competitors have to take 40% of pre-tax revenues and give it to public shareholders or a corporate parent. The fact that we take that same 40% and give it back to our employees — either in the context of compensation or in the context of returns or in the context of additional investment — is huge. Anyone who has managed more than one person knows that if you had just x percent more — 3% more, 5% more, whatever it is — you could make everybody happy. As a leader, having 40% more … makes the race a little less fair. Another great bene t is people are able to take a much longer-term point of view, so the challenges that peers face in terms of having to deliver, for equity portfolio managers

who are measured on daily, weekly, monthly, quarterly, annual performance, is just a very different lens than an employee-owned rm makes decisions about.

Q | Speaking of long-term, it seems as if a combination of domestic economic challenges and geopolitical tensions have taken the bloom off the China rose, a market Neuberger has been at the forefront of, among foreign managers investing to build a business there. Does China still burn bright on Neuberger’s radar screen?

A | It’s obviously tricky given the political con ict but I believe we are a force for good, and for us this is a super long-term investment. We had no expectation that the business would be large or pro table anytime soon. The challenges that the Chinese economy and markets have faced mean that any prospective nancial returns are yet more distant than originally envisioned.

Still, I’m pleased with our progress, with our fund management company (in Shanghai) investing about 18 billion renminbi ($2.5 billion) of Chinese money in China — modest but growing. We continue to help the most sophisticated Chinese institutions invest globally. But business helping global investors invest into China has been fairly hard hit, given the geopolitical tensions.

It’s hard to build into struggling markets but I think it makes us better investors. I’m quite proud of what we’re doing. Our being able to co-exist is in all of our long-term interests. I’m comfortable where we stand but I have no expectation that it will be large or pro table. I just want it to be good.

And  if you look at what our focus has been and what our focus will be, a lot of it is around green funds. The Chinese are quite serious about their

commitments on the climate change front.

Q | Speaking of climate change, Neuberger appears to be taking an increasingly lonely stance with its sustained focus on stewardship, including ESG and diversity, equity and inclusion-related issues, even as many competitors have grown wary of leaving their heads sticking out above an increasingly politicized parapet.

A | The politicization of (ESG) has been unfortunate. We’re a leader in stewardship and sustainability. It’s important to us. We have huge investments around it. (And) we’re at a super interesting moment where you see many (money management) rms walking back their commitments to engagement.

I haven’t gotten my head around how does capitalism work when nobody’s behaving like an owner? If owners don’t engage and behave like owners, I worry that’s going to create a whole series of long-term systemic issues. So, we’re doubling down on stewardship. We think it’s really important. We think we do it really well. We care tremendously at the same moment that many rms are going the exact opposite direction. We’re the only rm, broadly, that’s pre-announcing proxy votes, showing our work so people understand. It’s very hard to tell from a yes, no what’s really going on, so we try to explain why we voted a certain way.

Q | Have you had to pay any price in the market for that stewardship stance?

A | I’m not sure we’re getting tremendous commercial bene t from it. I do get angry phone calls but we think it's the right thing to do. We think that’s our role. We take ourduciary obligations incredibly seriously. 

Rebalancing

portunity to capitalize on that valuation change by selling something that is extremely valuable and richly priced and moving that capital into something that’s cheaper. So we encourage people to do a rebalancing in the most thoughtful possible way.”

Approaching rebalancing a U.S. equity portfolio’s overweight to the rest of the world also requires a more thoughtful approach than simply moving some U.S. equity assets to a cap-weighted global benchmark or MSCI ACWI ex-US benchmark, he said.

Doing so may force moving an asset owner's capital into some economies or regions that, while not necessarily struggling, are certainly in a less positive position than the U.S. is in right now, Gross said.

“We like an active global strategy,” he said. “There are different varieties of what that means …but broadly speaking, you want to have the global mandate that potentially includes the U.S. in addition to international so that the managers are not forced to exclude U.S. opportunities but have the option of moving capital elsewhere.”

For the year ended Dec. 31, the MSCI ACWI returned 17.5%, but the MSCI ACWI ex-U.S. returned 5.5%.

The stronger return for the global index including the U.S. gives investors the maximum exibility to nd the best companies in the best industries no matter the region, he said.

Rebalancing into bonds

Meanwhile, Gross said the challenge a lot of investors see in the bond market is that there are very narrow spreads between investment-grade and high-yield corporate credit.

While yields are quite compelling, the risks are that spreads can’t get too much tighter or that if there’s any kind of credit reversal that results in widening spreads, the performance of assets could diminish, he said.

“I don't want to draw too many parallels between today and 2007 because the markets were very different in 2007. But just in a very broad sense, if you go back to the last time we had relatively high Treasury yields and extremely tight credit spreads, it would be the period immediately preceding the great nancial crisis,” Gross said. “(I’m not saying) that today's tight spreads are going to lead to a nancial crisis. We're not seeing the kind of overborrowing and high degree of leverage that characterize certain parts of the xed-income markets back then.”

“But, just directionally, it may be more plausible that the next move is for spreads to either stabilize or even widen from this point forward,” he said.

Investors that would allocate to a traditional xed-income index with a reasonably high allocation to investment-grade corporate credit, Gross said, need to manage the diminished performance potential of doing so.

Gross said active management within xed income is well understood to be superior to passive management, particularly if given the right amount of exibility across the underlying sectors.

“I think a core plus or unconstrained strategy that can use the full spectrum of xed income would be

a much better place to land,” Gross said, “because there are sectors now that are trading at more compelling levels, particularly certain sectors that securitize markets where you can pick up some additional yield that’s maybe a bit more compelling than what you’re getting in corporate credit.”

“So, the rebalance into xed income remains a very plausible destination for money coming out of equities, but you have to be careful about the type of xed income you choose,” he said.

Real assets

The Bureau of Labor Statistics reported Feb. 12 that the CPI rose an annualized 3% in January from a year ago, above the 2.9% gure recorded in December, which was also above forecasts.

Gross was interviewed before the surprise news of the hike in in ation, which economists expect will prevent the Federal Reserve from making more interest rate cuts, But he did say at the time that he is seeing a world in which we’re “probably in a higher-for-longer interest rate environment.”

What that means is nding asset classes that are able to capture some degree of passing through in ation, and revisiting real estate, even though it's been out of favor the last few years, Gross said.

“When you step back from real estate and look at how it's performing, you saw this sort of whipsaw from COVID, which initially hit ofce very hard, hit retail very hard, but was actually net positive for industrial and warehouse distribution based on ecommerce,” Gross said.

However, retail has come back very strongly and while of ce’s reputation has suffered due to poor returns, there are opportunities growing within that sector.

“Even within of ce, if you look at the highest quality properties in the best locations, they are being leased out at incredibly attractive rates, and there's an incredible level of demand for those properties,” Gross said. “So, what we've seen is a little bit of a decline in the net absorption of square footage as people become more selective about the properties they want to occupy, but they're willing to pay a very high price for the best properties.”

Gross said overall, private real estate looks to be on the upswing, primarily because he said one of the forward-looking indicators for the asset class is the performance of

public real estate, which has been on the upswing.

For the year ended Dec. 31, the FTSE Nareit All REITs equity index returned 4.9%. For the three years ended Dec. 31, the index posted a loss of 4.3%.

“It would be great for real estate if rates fell signi cantly, but even at today's rate levels, you're buying into the assets with new money at the correct price for the current market,” Gross said. “That’s a very compelling story, because they do mark themselves to market much more transparently than other private asset classes do.”

Gross also noted infrastructure as an attractive asset class in the higher-for-longer environment, particularly in areas like energy distribution that has a regulated revenue stream. 

Keith Ambachtsheer Director Emeritus International

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combined $130.1 billion, according to Preqin’s Future of Alternatives report.

By comparison, worldwide infrastructure managers’ total assets under management were set to reach a new high of $1.4 trillion in 2024, with fundraising in 2024 staging a comeback to $113 billion, after falling to $92.4 billion from its 2022 peak of $164 billion, Preqin said.

At the forefront of this renewed interest in infrastructure is arti cial intelligence and the expected demand for data centers and energy alongside it, Ferguson said.

“Managers can raise a lot of money (for infrastructure) and the AUM is stickier,” he said.

Managers invested more in infrastructure when real estate cooled off, Ferguson said, adding “2023 and 2024 were the slowest years I’ve seen in real estate in 40 years,” he said.

Demand for data centers

Some real estate rms are acquiring or merging with smaller infrastructure rms to expand into the digital infrastructure, or data center, area.

In September, the $18.2 billion real estate and xed income manager Boyd Watterson Asset Management merged with London-based digital and other infrastructure manager Amber Infrastructure Group. In May, European managers Cain International, a private markets rm with $15 billion in real estate equity and debt and a $1 billion private equity business, announced plans to merge with $1 billion real estate manager Blackbrook Capital, which invests in logistics and warehouse as well as strategic investments in digital infrastructure/data centers.

Bigger managers are getting into the action, too.

On Feb. 24, Apollo Global Management announced the acquisition of Bridge Investment Group, a $50 billion real estate manager just a month after announcing the acquisition of $6 billion Argo Infrastructure Partners, which invests in digital infrastructure as well as renewable energy, transportation, utilities and other industries. As of Dec. 31, Apollo had approximately $751 billion of assets under management.

During Apollo’s Feb. 8 earnings call, Apollo CEO Marc Rowan called

the Argo deal “modest M&A” in infrastructure.

“If you think of Argo as the prototype, we have a large, but not yet fully scaled infrastructure climate business. Argo adds 20-plus originators with a proven track record who have been originating against a relatively small box, $6 billion of AUM,” Rowan explained. “We’re getting 20-plus quali ed individuals, $6 billion of AUM, a full-scale business. ... You should expect us to continue to build origination capabilities in our hybrid and real asset businesses.

“You should expect us to continue to do modest M&A along these same lines where we are quite focused on increasing our capacity to originate,” Rowan said. “That is what we intend to do.”

The Bridge deal looks to hypercharge Apollo’s real assets business, boosting real estate to $110 billion pro forma AUM when the deal closes in the rst half of 2025 from $77 billion now, according to Apollo’s presentation on the deal.

Massive opportunity

Larger rms with both real estate and infrastructure arms are promoting their infrastructure abilities, while de-emphasizing their lagging real estate businesses, sparking a growing convergence of the two asset classes.

“The biggest trend among the PERE (private equity real estate) rms is real estate and infrastructure being organized under one real assets leader as was recently announced at KKR,” Ferguson said.

At Apollo’s investor day in October, rm executives stressed the “massive opportunity in real assets” including a $10 trillion to $12 trillion addressable market in real estate, $15 trillion to $20 trillion in digital infrastructure, $30 trillion in power and utilities, and $30 trillion to $50 trillion in energy transition. Apollo does not break out its infrastructure AUM, according to an Apollo spokesman.

In October, BlackRock closed its acquisition of $100 billion infrastructure manager Global Infrastructure Partners, which Ferguson said is a premier infrastructure rm.

At closing, BlackRock’s infrastructure business had $170 billion in assets under management, according to a news release.

In January, KKR combined its $80 billion real estate business with its $77 billion infrastructure business into real assets.

Blue Owl quietly did the same thing right before its investor day on

Saver’s match

CONTINUED FROM PAGE 2

$20,500, that translates into a $1,000 match if they manage to set aside $2,000. For couples earning less than $41,000, the match can go as high as $2,000 if they put in $4,000.

Wide support, complex logistics

While the saver’s match — which was created under the SECURE 2.0 Act — has wide industry support, employers are waiting on the sidelines to hear from record keepers on how the incentive would work logistically. Only 11% of plan sponsors, for example, say they are de nitely adding — or likely to add — the saver’s match to their plans, according to a recent survey from Alight Solutions. The hesitation stems from the novelty of the incentive and uncertainty over logistics, said Rob Austin, head of thought leadership at Alight.

Feb. 6. For KKR, the recent performance news was better. Infrastructure was KKR’s best-performing business, up 2% in the fourth quarter and 14% in the same periods, KKR reported in its Jan. 4 earnings release.  By comparison, real estate was up 1% on a gross return basis in the fourth quarter and 4% in the 12-months ended Dec. 31.

“With the growth in overall data generation, cloud, and AI, there’s just a need for much more compute (computational power),” said Craig Larson, a partner and head of investor relations during KKR’s Feb. 4 earnings call. “So, there’s little question in our minds that long-term data center, power, infrastructure demand is growing.”

DeepSeek, a Chinese startup that offers an AI-run chat box, “introduced questions on the demand side (for data centers) that really focused on how much and where,” Larson said.

Across KKR’s data center investments since its $15 billion deal to take global data center real estate investment trust CyrusOne private in 2021, the investments have been driven by “by cloud demand and the AI dynamics have all been upside,” he said.

Blue Owl Capital joined the party on Jan. 3 when it closed the acquisition of data center manager IPI Partners, which had about $10.5 billion in assets under management as of June 30.

The data centers sector investment opportunity could be in the trillions of dollars, said co-CEO Marc S. Lipschultz during Blue Owl’s Feb. 6 earnings call.

The digital infrastructure market is expected to exceed $1 trillion of total construction need over the next few years, Blue Owl’s Feb. 7 investor day presentation said.

The IPI deal is already a money maker for Blue Owl, Lipschultz noted. The IPI acquisition added about $14 billion of AUM on a pro forma basis, including $3.3 billion raised in the fourth quarter before the deal closed, Lipschultz said.

“Since the transaction announcement, AUM has already increased 35%, driven primarily by capital raising,” Lipschultz said. “We expect to nish up the current vintage of our agship digital infrastructure fund at the hard cap of $7 billion in short order.”

Lipschultz sees DeepSeek as an example of the continued demand for digital infrastructure.

“It’s hard to reach a conclusion

“There’s no doubt that people are interested in this. They just want to make sure that how it’s going to work is going to be smooth and streamlined and secure,” he said.

Rouse agreed. “They are waiting for the green light from my members,” he said, referring to retirement plan sponsors.

First and foremost, record keepers are urging the Treasury to make the process as simple and ef cient as possible.

“This is not a lot of money for our industry, so our biggest concern is that it be very smooth and very ef cient,” Rouse said. “If the process for accepting payments and correcting mistakes is too dif cult, we are concerned that plans and IRA providers may choose not to participate in the program.”

SPARK is pushing for the creation of a saver’s match “tracking number” that eligible individuals would use to designate the retirement plan or individual retirement account that should receive the match. Savers would contact their retirement plan or IRA provider for their tracking number, which they would

other than what it tells us, that AI is happening more, faster, broader. That’s great news for our strategy,” he said.

Before the DeepSeek news, executives at Ares Management in October announced a $3.7 billion deal to acquire real assets-data center manager GCP International, which has $44 billion in assets under management.

Ares executives voiced few concerns about DeepSeek’s impact on the data center investments. GCP International focuses on new economy sectors such as industrial, digital infrastructure and self-storage

“I think the markets are still trying to digest what DeepSeek actually means and there’s maybe con icting views as to what exactly the cost and investment to train those models actually was,” said Michael Arougheti, CEO and a co-founder of Ares during the rm’s Feb. 5 earnings call.  He said his long-term view is that demand for computational power will continue, which “will not change the opportunity to build data centers with good counterparties in good locations.”

Arougheti said that from his perspective the move was always to lower costs and increase “And what we have seen with technological advancement and greater ef ciency, we will typically see increased demand,” Arougheti said.

“Most of the sites and plans for development that we have are catered towardsdata centers and cloud migration with what I would call upside for AI, meaning that the client can elect to have that optionality in the way that we’ve built the data center for them,’’ he explained.

And data centers are still a healthy investment opportunity, he said. There is not enough capital to satiate the demand which is estimated to be a $4 trillion to $7 trillion annual opportunity, Arougheti said.

Dethroning real estate

Blackstone executives are also leaning into infrastructure as its once-storied real estate business shrinks, foreseeing a huge investment opportunity in digital infrastructure despite DeepSeek.

Speaking on Blackstone’s Jan. 30 earnings call,  Jonathan Gray, president and chief operating of cer, said that while the cost of computational power “is coming down pretty dramatically” with DeepSeek and other A.I innovations, that lower cost will lead to more usage.

“So, we have a sense, and in talking to our clients also, that there’s

then use when ling their tax returns.

“We believe that the use of a saver’s match tracking number system would be one very effective way to prevent the disbursement of saver’s match contributions to an ineligible account,” Rouse said.

SPARK sees the Treasury sending the match deposits directly to plan custodians or record keepers, entities that would then transfer the funds into the appropriate individual accounts. SPARK, however, is urging the Treasury and the IRS to give plan custodians and record keepers a chance to preview a list of the anticipated match contributions in advance.

The plan custodians do not want to accept matches that “do not have a proper home,” Rouse said, referring to savers who are no longer in their plans or who gave incorrect tracking numbers.

“To send back a $165 check to Treasury is going to be so costly,” he said.

SPARK is also encouraging the Treasury to participate in an application programming interface or “API” with the retirement plan ser-

a belief as usage goes up signi cantly, there’s still a vital need for data centers,” Gray said. “The form of that use may change.”

This is good news for Blackstone, which is heavily relying on the sector for future growth.

Blackstone, known for its successful real estate business that Gray formerly helmed, credited infrastructure with the rm’s most recent success.

“The largest single contributor to the rm’s nancial results in the fourth quarter was our dedicated infrastructure strategy BIP (Blackstone Infrastructure Partners), which generated $1.2 billion of fee revenues,” said Stephen A. Schwarzman, co-founder, chairman and CEO of $1.1 trillion Blackstone during its Jan. 30 earnings call.

“BIP has delivered remarkable investment performance since inception only six years ago, including 17% net returns annually for the comingled (fund) strategy.”

Indeed, infrastructure has helped to dethrone real estate as Blackstone’s largest business.

As of Dec. 31, Blackstone’s real estate portfolio dropped to $315.4 billion from $336.9 billion. Real estate is now Blackstone’s second to smallest business, beat out by credit and insurance with $375.5 billion in AUM and private equity at $352.2 billion. The smallest was Blackstone’s $82.4 billion multi-asset investing business.

Blackstone boasts an $80 billion data center portfolio, which its executives say is the largest in the world. Blackstone’s infrastructure, which is part of the rm’s private equity business, exceeds $120 billion, Schwarzman said on the earnings call. Blackstone launched its rst infrastructure fund in 2018.

“The team has done an exceptional job portfolio construction focused on compelling thematic areas, including digital infrastructure, energy and power and critical transportation infrastructure,” he said. “We envision a growth path for our infrastructure business that parallels that of our real-estate business, including geographic expansion, new client channels, moving across the capital structure and risk-return spectrum.” Last year, Blackstone launched a European infrastructure perpetual vehicle and in January, the rm launched an infrastructure vehicle for retail investors, Schwarzman said.

“Over time, we also see opportunities in Asia, the potential for sector-speci c strategies,” he added. n

vice providers to verify the accounts for match recipients.

“We have APIs throughout the industry between custodians and payroll and TPAs and payroll companies and record keepers. We think APIs would need to be built with Treasury,” he said, adding that SPARK would work with Treasury to make sure the APIs are as secure as possible.

In addition, SPARK supports using blockchain technology because it would make it simpler for the government and industry to know who has an account and where it is, while helping with cybersecurity concerns, Rouse said.

Despite all the work that needs to get done, Rouse is optimistic that record keepers will be ready by Jan. 1, 2027, the date that the saver’s match goes into effect.

“We process millions and millions of payrolls every year, and we do it extremely efciently today,” Rouse said. “I’m hoping that through the years of experience we have in processing these types of contributions, that we can make this work.” n

Guidance

nance, related to Securities Exchange Act Rule 14a-8, which concerns shareholder proposals.

Shareholders can le proposals before a public company’s annual meeting.

If a company thinks a proposal is out of bounds or has already been addressed, it can le a no-action letter with the SEC, requesting permission not to include the proposal in its proxy statement.

The SEC, now led by acting Chair Mark Uyeda, has reimposed more business-friendly guidance issued during the rst Trump administration.

In Staff Legal Bulletin, SLB 14M, published Feb. 12, the SEC said that when determining whether it should grant a company no-action relief,  the agency will analyze whether a shareholder proposal affects at least 5% of the company’s total assets, net earnings and gross sales.

Under SLB 14M, the SEC also reinstated three legal bulletins issued during the rst Trump administration with language that made it more likely for the SEC to rule in favor of companies seeking no-action relief. With that move, the bulletin correspondingly rescinded a November 2021 bulletin, SLB 14L, promulgated under former SEC Gary Gensler that made it easier for shareholder proposals to make it onto a company’s proxy ballot.

The 2021 bulletin rescinded the Trump-1.0 era guidance and outlined changes in the division's views on what constitutes "ordinary business" and "economic relevance" when it determines whether a shareholder proposal should be excluded from a company's proxy statement.

Wading into controversial topics

Charles Crain, managing vice president of policy at the National Association of Manufacturers, is happy with the SEC’s new bulletin because the Biden-era guidance “politicized the proxy process and forced manufacturers to wade into controversial topics that were unrelated to their business.”

According to data from The Conference Board, a not-for-pro t think tank, and analytics rm ESGAUGE, SEC staff rejected 108 no-action requests out of 246 submissions in 2022 among Russell 3000 companies (44%), compared with 59 rejections out of 267 submissions in 2021 (22%) before the Biden-era guidance was in place.

The number of shareholder proposals led to Russell 3000 companies has also risen in recent years — from 798 proposals in 2020 to 1,013 in 2024, according to The Conference Board and ESGAUGE.

Since the Biden-era bulletin took effect, companies saw an “in ux” in those politically motivated proposals “and a decrease in the SEC’s willingness to exclude those proposals,” Crain said. “In the absence of 14L, we hope that both of those threats will reverse.”

On the other hand, McGannon said 14L provided all stakeholders with clearer guidelines around the no-action process.

Law rm Gibson Dunn found there were 267 no-action requests submitted to the SEC staff in 2024, representing a submission rate of 29% out of total shareholder propos-

als led, up signi cantly from a submission rate of 20% in 2023 and consistent with a submission rate of 29% in 2022, according to a client alert.

The overall success rate for no-action requests, after dropping to 38% in 2022, continued to rebound in 2024, with a success rate of 68%, compared to a success rate of 58% in 2023, Gibson Dunn found.

Investor groups’ plea

Though most companies don’t hold their annual meetings until the spring, many shareholder proposals have already been led.

As of Feb. 24, 292 no-action requests were submitted by Russell 3000 companies ahead of the 2025 proxy season, of which 37 were granted, nine rejected and 20 withdrawn, according to The Conference Board and ESGAUGE.

‘Shareholder proposals provide value to the marketplace. It signals to other investors, even if they’re not filers, to understand the mood of the broader shareholder sentiment through these votes .’

US

SIF: THE SUSTAINABLE

INVESTMENT FORUM’S BRYAN MCGANNON

In a Feb. 18 letter to the SEC, leaders of investor groups the Interfaith Center on Corporate Responsibility, the Shareholder Rights Group and As You Sow urged the agency not to apply the new bulletin to proposals that have already been led.

“Applying new guidance to previously submitted proposals would unfairly penalize investors who followed the extant guidance in good faith, believing that they were fol-

lowing the procedures that would lead to clear results, limiting the need for the costly back and forth of the no-action process,” the groups said in their letter.

“To be held to the new guidance after ling shareholder proposals would be a costly and unfair outcome, and would reverse the staff practice of providing timely notice to companies and investors when guidance changes.”

Additionally, US SIF, ICCR and the Shareholder Rights Group on Feb. 24 issued a report in which they argued that shareholder proposals enable investors to safeguard their portfolios and protect the American public by holding corporate boards and management accountable for mismanagement and egregious conduct.

“Shareholder proposals provide value to the marketplace,” McGannon said. “It signals to other investors, even if they’re not lers, to understand the mood of the broader shareholder sentiment through these votes. The shareholder proposal process has improved companies, it has improved governance. It is a valuable piece that informs capital markets and those dialogues that are part of the engagement process are incredibly valuable between investors and companies.”  

CONFERENCE PROGRAMS 2025

Influential Women in Institutional Investing Rising Stars Program

DEADLINE IS APRIL 30, 2025

P&I’s Influential Women in Institutional Investing Rising Stars Program returns! After an incredible inaugural year, we’re excited to honor a new class of emerging leaders.

Know a standout with under 10 years in institutional investing (asset managers, allocators, or consultants)?

Nominate them now!

www.pionline.com/Risingstars

2025 NextGen Leaders Program

Presented by Pensions & Investments and DCIIA

DEADLINE IS APRIL 30, 2025

The NextGen Leaders program offers exclusive educational sessions on DC plan management at P&I’s DC West Conference.

Ideal candidates are emerging leaders within DC plan sponsors with under 10 years of experience and the potential to step into future succession roles.

Recommend a colleague today! www.pionline.com/NextGenLeaders

Sharpening the Lens on Private Credit

Wednesday, March 19 | 2:00 pm ET

As the private credit market continues to soar on the back of strong institutional demand for the risk-adjusted returns and resilience that the asset class has shown, allocators are getting more granular in their allocation considerations. Several segments – from direct lending to growth capital and fund financing to opportunistic finance – are garnering interest. With many new entrants to the space, managers expertise, market scale and origination capabilities are front and center. Advances and best practices in benchmarking, both standard and custom, can help allocators with return data as well as evaluate manager performance. This panel of experts will dive into both the drivers and challenges of private credit – o ering nuanced perspective on several sub-segments. They’ll also share how they are addressing investor needs on structures, liquidity, and lender protections – as investors navigate what some are calling the private credit 2.0 era.

REGISTER | pionline.com/private-credit-webinar2025

Sponsored by

2025 Outlook – Post Inauguration Economic and Regulatory Trends

Available on demand

Post-election policy shifts are the talk of the retirement industry. Expect bond market volatility to pick up with the Federal Reserve weighing future interest rate cuts and a Republican-controlled Congress mulling potentially inflationary policies. Meanwhile, the shape of a new retirement reform bill, a follow-up to 2022’s SECURE 2.0, may soon emerge.

Join Neel Mukherjee, chief investment o cer of TIAA Wealth Management, and Chris Spence, TIAA’s managing director for federal government relations, one month after Inauguration Day to discuss economic and regulatory trends to watch in 2025. Moderated by Beverly Goodman, TIAA’s editor in chief.

REPLAY | pionline.com/TIAA-webinar25

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2025 Themes for U.S. Corporate Pensions: Utilizing Surpluses

Available on demand

Projected Benefit Obligation (PBO) funded ratios for U.S. corporate pension plans improved again in 2024, building on overfunded positions many plans have enjoyed since 2023. Over the past two years, BlackRock has encouraged clients to “use their well-funded plan to their advantage” and in some cases to consider “reopening their plan or increasing benefits” as a few of the ways to use a surplus. We anticipate investment conversations for corporate plans will continue evolving away from finding ways to achieve full funding, and towards investing to preserve strong funded ratios and planning optimal ways to use a surplus.

In this year’s outlook, we undertake a more comprehensive review of di erent ways sponsors can use their surplus – many of which have nuanced regulatory or tax considerations, and may require multiple years of planning from an investment perspective to execute e ectively. Register to hear how you can take advantage of the market environment and plan for success.

REPLAY | pionline.com/BlackRock-webinar25

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J.P. Morgan Chase’s DEI is 'proper and legal,' CEO says

y B COURTNEY DEGEN

“We believe our DEI is proper and legal,” said Jamie Dimon, chair and CEO of J.P. Morgan Chase, on March 12, referencing the company’s diversity, equity and inclusion efforts.

“We do not have quotas,” Dimon added at BlackRock’s Retirement Summit in Washington. “We do merit hiring based upon your brain, your heart, your soul, your capability, your background and stuff like that.”

Diversity, equity and inclusion

CONTINUED FROM PAGE 3

fast-growing subset of the private markets and natural capital space,'' he said.

"This is hugely important for us, as we seek to innovate and grow as both an organization and an investor, whilst staying true to our core believes of long-term investing, diversi cation and active, engaged stewardship.”

Win-win situation

Historically — and more traditionally — the way pension funds and other asset owners have beneted from relationships with asset managers is via the returns the managers provide by running assets. Under those relationships, particularly those that have spanned the longer term, asset owners have also negotiated discounted fees, for example.

But in leaving the relationships at that asset manager/asset owner level, “I think they’re leaving money on the table,” said Mark Karasik, head of U.S. asset and wealth management at investment banking and corporate nance advice rm Fenchurch Advisory. By seeding strategies or becoming “systemically important to the asset manager, there’s an opportunity for them to extract additional value — and I think that comes in the form of a GP stake,” he said.

Jeff Stakel, principal at Casey Quirk, a Deloitte business, added that asset owners may take direct stakes in asset managers "to secure access to speci c investment capabilities. Typically, you would see this in strategies that are high in demand but tend to be more capacity-constrained or harder to access — parts of the private credit market are good examples,” he said.

These kinds of deals are also tied to the insourcing trend among asset owners — which has been playing out over the past decade.

“Asset owners recognize that building the required talent inhouse to manage these strategies is becoming more challenging,” Stakel added. “The skill sets needed to complete are evolving and in high demand throughout the industry — partnering with a manager helps secure access to this talent.”

The NEST move with IFM Investors ticks all of those boxed in terms of the drivers noted by Karasik and Stakel. Speaking at the event to announce the deal, Fawcett said: “Shareholders do get more competitive fees. That is one of the bene ts of being an owner. And, as everyone knows, I’m super fee-sensitive,” he said.

initiatives have been under attack recently, both in nance and other industries. On Jan. 21, President Donald Trump issued an executive order mandating federal agencies to determine which universities, foundations and corporations should be investigated for their DEI policies, among other things.

The move aligns with pressure mounting on nance companies, including J.P. Morgan Chase, to diminish or abandon their DEI efforts. Several right-leaning advocacy groups have led proxy proposals

NEST will also participate in IFM’s growth potential. The investment will sit in NEST’s private equity portfolio, “so this is an investment for the scheme. IFM have got great growth opportunities, and so we would anticipate also bene ting from the growth and value of the investment as a private equity investment in its own right,” he said.

And NEST CIO Elizabeth Fernando, also speaking at the event, said one of the attractive points about the partnership “is the ability to co-create a product that meets the needs of NEST… That’s the bit I’m really looking forward to, this ability to design products with a really expert team of individuals to drive” returns for participants, she said.

The reasons behind WYPF’s stake in Rebalance Earth were similar.

“As a large asset owner with a long-term horizon, we have a responsibility to provide direct patient capital where we can, where we have the knowledge and expertise and where we feel the long-term bene ts outweigh the risks,” Ward said. “From direct stakes and close partnerships like these, we can gain access to, learn from, and bene t from the expertise, innovation, and strategic vision of skilled management teams,” which can lead to better overall performance, he said.

Such deals also give pension funds “the ability to capitalize on emerging trends and opportunities in the market — trends and opportunities that we can be at the forefront of, provide in uence for and ensure alignment with our overall aims, objectives and beliefs at WYPF,” Ward added.

The pension fund has similar arrangements in place for private equity, via Northern Private Equity Pool LP — a private equity investment joint venture established in 2018 between WYPF and other local government pension scheme funds; and for infrastructure via GLIL, an open-ended fund structure established in 2015 by Greater Manchester Pension Fund, Manchester, England and the London Pensions Fund Authority; and subsequently joined by West Yorkshire, Merseyside and Lancashire pension funds in 2016.

Long-term partners

There are also huge bene ts for the asset manager that’s selling a stake to an asset owner, sources said.

“Right now, the hardest thing for asset managers is capital formation. Even really good asset managers —that have long-term track records, are generating alpha relative to benchmarks — are having a dif cult time raising capital,” as the hot money is shifting into large alterna-

calling for such companies to leave DEI behind.

Many of the largest publicly traded money managers concentrating on alternatives have mentioned diversity, equity and inclusion initiatives fewer times over the past several years, according to PitchBook’s analysis of 10-K lings.

Dimon said he thinks J.P. Morgan Chase has “the proper rules, requirements and things like that, and if there are disagreements, if you don’t think we’re right, bring it on, but let us know.”

tives rms in particular, Fenchurch’s Karasik said. “The middle market is hungry for capital,” he said.

The attraction from an asset manager is also clear in that a partnership like this can “secure longterm, essentially permanent, capital for its investment strategies,” Stakel agreed. “This can help create more stable long-term economics for the rm.”

At the NEST/IFM event, IFM Investors CEO David Neal said the alliance will “accelerate” what is already a growth story.

“What better way to do that than have a tie-up with one of the … fastest-growing” retirement plans in the shape of NEST, he said. The £5 billion commitment “is obviously going to be a very signi cant support for us — not just growing existing products, but developing new strategies that we can offer” to other asset owners, Neal added.

Other recent deals by asset owners to acquire stakes in asset managers include:

• The £6.5 billion Oxford Endowment Fund, Oxford, England and the A$57 billion ($36 billion) Commonwealth Superannuation Corp., Belconnen, Australia, will each own signi cant minority stakes in newly launched sustainable xed-income manager Osmosis Investment Management NL, according to a Feb. 27 announcement.

• Japanese insurer Nippon Life Insurance Co. said it would invest an additional $550 million in Los Angeles-based xed-income specialist TCW Group. The insurer also said in December that it plans to commit up to $3.25 billion to TCW’s private credit strategies.

• The $302 billion sovereign wealth fund Mubadala Investment Co.’s wholly owned subsidiary, Mubadala Capital, agreed to take private Canadian asset and wealth management rm CI Financial Corp. in a $3.4 billion deal in November.

• New York State Common Retirement Fund agreed to pay up to $350 million for Vista Equity Partners fund stakes, Bloomberg reported in September.

• Mubadala Capital in May completed a deal to acquire part of a 68% equity stake in alternatives manager Fortress Investment Group.

“I think we’re going to see more” pension funds acquiring stakes in asset management rms, Karasik said — especially alternatives where “there’s a lot of value right now. Valuations are attractive, positive secular trends are driving alternative AUM growth."

Stakel agreed, adding: “This has been a trend we’ve seen in the insurance space, and it could make sense for other large asset owners with long-dated capital.” 

bles, people can get defensive ... That’s something that I will say, (and) it’s something that we know exists in our country right now.”

For her work, Aidoo is among the 34 leaders and 27 rising stars being recognized by the De ned Contribution Institutional Investment Association in its Leaders and Rising Stars program.

Also marking its 15th anniversary, the industry group is celebrating individuals “who have distinguished themselves through the meaningful impacts they are making in their organizations, to our industry and in their communities,” said President and CEO Lew Minsky.

Now in its fth year, the award program was previously named the Diversity, Equity & Inclusion Awards.

When describing why they were being recognized, some honorees said they were nominated by their employers, which have acknowledged the work they’ve done to create community in the of ce as well as improve the quality of life outside of it.

All of the honorees have helped extend access and opportunity to others, said Yemi Rose, who founded the nancial wellness platform OfColor. His business, which is targeted at employees of color, was acquired in November by nancial coaching services provider Finance Finesse.

Over the years, institutional investors have bolstered their efforts to promote diversity, equity and inclusion. A 2023 analysis by Willis Towers Watson found that greater diversity in an investment team enables better performance.

Taking different viewpoints into consideration and seeing potential in everyone is what good leadership looks like, said honoree T. Katuri Kaye, director at the law rm Trucker Huss. In addition to being a lawyer, she is the director of diversity, equity and inclusion at the law rm. Her career was shaped by an older Russian man who saw potential in her and taught the young Black mentee how to become a great ERISA lawyer, she said.

“I think the most exciting thing is just when I open the news every day and wonder, ‘Is diversity still happening?’ I don’t think there’s an uneventful day right now,” Kaye said. “But it’s good because I appreciate the challenges that our companies are facing (and) because it really allows us to see who’s really doing the work, who believes in the work and who’s going to be consistent with respect to the work.”

To diversity advocates who may feel discouraged, Rose said “we’re de nitely not where we need to be, but we’ve come a long, long way” in terms of progress since the civil rights movements in the 1960s.

“Sometimes, you’re going to take a couple steps forward, and you’re going to get pushed back a step,” Rose said. “But as long as the arc bends forward toward progress, we’re going to be all right.”

De ning diversity, equity and inclusion

Before anything else, Trucker Huss’ Kaye noted that when talking about what “diversity, equity and inclusion” means to her, she noted what’s become of the three-letter acronym.

“By using ‘DEI’ — especially with how it’s been weaponized these days — we’re taking power away from

what it actually is,” she added. To her, each pillar is de ned as follows:

Diversity: “A way to appreciate and bene t this environment that I’m already in, considering the fact that we literally are not the same. And because we’re not the same, I can gain something from your perspective, and you can gain something from my perspective as well.”

Equity: “Acknowledging that things have not been even for a long time, based on different disparities, based on so many systemic things as we bring into the conversation … and doing what is in our power to level the playing eld.”

Inclusion: “Making sure that everyone has a voice.”

“We live in a diverse society,” Kaye added. “There’s nothing that we can do about that.”

When it comes to de ned contribution plans, industry members are increasingly considering diversity of plan participants and strategies to get groups — such as Generation Z, the newest entrants of the workforce — to save for retirement. Kaye said conversations surrounding such as workforce diversity and retirement didn’t happen when she was still a junior lawyer, but they’ve become more prevalent in her nearly 20 years practicing ERISA law.

Additionally, DCIIA honorees who spoke with P&I noted that there’s more to diversity than racebased considerations. Under the umbrella are gender diversity, neurodiversity, veterans as well as people with disabilities.

Inclusion is about “being perfectly imperfect and celebrating that that around the table,” noted Cheryl Pipia, head of global sales management at T. Rowe Price.

“When you are around the table, you get everyone’s best brain power because people aren’t worried about ... what they should t into,” she said. Instead, they recognize “their accountability to bring in what’s different to increase the conversation and to lead to better outcomes,” she added.

And when it comes to nancial investments, honorees said portfolios also need to be diversi ed.  “We preach diversity for your in-

“Sometimes, you’re going to take a couple steps forward, and you’re going to get pushed back a step. But as long as the arc bends forward toward progress, we’re going to be alright .”

OFCOLOR’S YEMI ROSE

vestment perspective,” said Tyndale Brickey, co-portfolio manager for the special global equity team at Allspring Global Investments. “You’re not going to put all your money in one place and diversify your risk exposure. It’s important to have diversity of thought so you can avoid groupthink.”

Seeking change, entrepreneurship

Earlier in her roughly 30-year career in asset management, Pipia would combine her vacation time with personal development. On travels to countries such as Nepal and Tanzania, she would engage in hands-on volunteer work, which led way for her in 2014 to found the Mission & Movement Foundation, a nonpro t that operates in a way that she said speaks to her.

With humanity and dignity at its center, the organization was founded under the premise that “you can make really big impact with small action,” Pipia said. Starting with small programs in Kenya and Ghana, Mission & Movement recently opened a school in Kenya, and is in the process of building a vocational training center, she added.

Pipia is not the only person who founded their own initiatives to level the playing eld.

After working communications roles at BlackRock and Prudential Financial, Rose launched OfColor in 2020, drawing from his own experiences as a day trader as well as an Jamaican immigrant guring out how to send remittances to his family. While 401(k) plans did not exist in Jamaica, people funded their retirements using the assets they were able to accumulate through their lives, he added.

Not all employees are necessarily aware of what bene ts are available

to them, and for typically for employees from minority groups, they tend to be the ones taking the most from hardship from withdrawing from their 401(k) accounts, Rose said. Leaning on cultural competency, his goal with OfColor was to produce nancial technology that plan participants felt was accessible, as well as nancial coaches who understood their lived experience.

Connecting people, making an impact

After the pandemic forced most workers in the industry to work remotely, employees at Wells Fargo Asset Management “wanted and craved connection,” said Christine Collins, head of sub-advisory strategy at the asset manager’s current incarnation, Allspring.

After the rm became independent of Wells Fargo in 2021, the formation of connectivity groups for employees of diverse groups as well as allies gave way for cross-company collaboration, said colleague Brickey, who alongside Collins co-led the women’s connectivity group at Allspring for two-and-a-half years. Since meeting each other through the group, Brickey and Collins have become close friends, they said.

Among the initiatives the group has created include a formal mentorship program, book clubs and virtual events with featured speakers, which have drawn more than 100 attendees across international of ces.

T. Rowe Price’s Pipia is also the chair of the investment rm’s pride-focused business resource group, and the executive sponsor for the women’s group. In addition to learning how to become an advocate and ally through all of the rm’s groups, she said getting involved has helped her get to know and network with people across the organization

of more than 7,000 employees in the U.S.

“Sometimes, life gets busy, right? You don’t have to carve out time to do that, and these organizations really help you do that,” Pipia added.

Working in a ‘shaky environment’

Honorees who spoke with P&I said programs such as DCIIA's are important to recognize those who are doing the work to advance diversity, equity and inclusion.

“Someone might nominate you for an award, but most times, people that are doing these roles are not getting a pat on the back every single day,” Trucker Huss’ Kaye said. “Sometimes, they do get discouraged, and it’s just a shaky environment right now … we want the companies to see that it’s important, and we want the companies to know that they’re going in the right direction.”

For other members of the industry seeking to do similar work, honorees noted they didn’t do the work alone and turned to others for assistance. A key to their work — and piece of advice for peers — has been speaking up.

“I think it’s quite powerful to know that you are the only person that can bring what you have,” T. Rowe Price’s Pipia said on advice she would give younger peers entering the industry. “Nobody else can bring it, so when you think about it that way, it makes everything a little bit more exciting.”

Programs such as DCIIA’s have given Francis’ Aidoo hope and encouragement, she said.

Sometimes “it is tough to push through those moments of resistance” or challenges to the work she has done to build a more inclusive and equitable world, but the work people like herself do is “so worth it,” she added. Colleagues have come to her and disclosed personal parts of their identity to Aidoo, who said “it means the world” to her that these people feel they can be themselves around her.

The work to advance diversity, equity and inclusion “matters, and that’s in more ways than you realize,” Aidoo added. “It can touch more lives than you realize ... Just keep going.” n

Australian supers to boost U.S. investments to $1 trillion

y B SOPHIE BAKER

Investment in the U.S. economy by Australia’s $2.6 trillion — and growing — super fund industry is set to top $1 trillion over the next 10 years, more than doubling from current gures.

A report commissioned by Australian super-owned infrastructure specialist IFM Investors, based on analysis from the Super Members Council and Australia-based economics, strategy and policy consulting rm Mandala, shows that investment by Australian funds in the U.S. is expected to more than double from about $400 billion. That projection includes about $300 billion of new allocations.

The gures were reiterated in a news release by Australia’s Department of Foreign Affairs and Trade and by Australian Treasurer Jim

Chalmers, speaking at this week’s “Super Summit.” The Australian Embassy in Washington, D.C., and Consulate-General Heather Ridout in New York are hosting the event to

FROM PAGE 1

sult of UPS signing a deal at the beginning of 2024 for Goldman Sachs Asset Management to become the new outsourced chief investment of cer of the shipping giant’s U.S. pension plans. The OCIO model has evolved over the last 20 years to become a massively popular choice among de ned bene t and de ned contribution plans, endowments and foundations and other institutions as a way to have their assets professionally managed.

As of Dec. 31, Goldman Sachs Asset Management had $1.3 trillion in assets under management. Multiasset solutions AUM totaled $380.5 billion as of that date, of which $311.8 billion consisted of OCIO AUM.

While traditionally it has been small- and midsize DB plans that have embraced the OCIO model, the last several years have seen the emergence of large-scale deals involving tens of billions of dollars, which often include entire liftouts of existing investment teams.

The rst widely publicized such megadeal was British Airways, Harmondsworth, England, in 2021 appointing BlackRock as outsourced CIO for £21.5 billion ($26.6 billion) in assets in two de ned bene t plans.

GSAM's rst OCIO client came aboard in 1999 within the manager’s multiasset solutions division, which launched four years earlier, and took hold following the global nancial crisis and the subsequent underfunding crisis for corporate pension funds, said Gregory Calnon, partner, co-head of public investing at Goldman Sachs Asset Management.

“I think enough CFOs and treasurers were in place at these corporations that they had an acknowledgement that there needed to be a different governance structure, a different risk management focus, and that aligned with our expertise within Goldman,” Calnon said.

Calnon said when the multiasset solutions team began expanding its OCIO capabilities in the early 2000s, their thesis was to focus on customization and partnership with clients.

“To gain scale quickly, many early OCIO  offerings were fund of funds

structures, with little ability to address speci c client needs. We took the opposite approach. We have always believed that in order for us to really help clients achieve the objectives that they want, we have to be incredibly customized for the problem they were solving. If we did that well, we could scale the business,” Calnon said.

In order to implement that level of customization over the years, Goldman Sachs has added many professionals such as actuaries with the skills and experience to work with potential OCIO clients such as pension funds, nonpro t organizations and insurance companies.

“We invested in our investing infrastructure such that they were able to model liabilities in a different way for different types of clients, and so we kept adding capabilities and talent and skills to partner with clients where we thought that there would be a good match,” Calnon said.

“The other obvious thing to us is, you know, the name OCIO is kind of a misnomer, right? It sort of implies you hand the keys over. You check in every now and again, but the client has somehow or other absolved themselves of some responsibility,” Calnon said. “We don't believe in that at all either. It's very much a partnership with our clients. And in the same way that we'll meet with them, we'll meet them where they want to be from a customization standpoint, we meet them where they want to be from a governance perspective as well.”

That buildout of a deep customizable OCIO business paid off in 2023 with GSAM’s rst megadeal when BAE Systems, London, outsourced the management of about £23 billion ($28.5 billion) in U.K. pension fund assets, which also saw the defense and aerospace company’s in-house team at BAE Systems Pension Funds Investment Management make the move to GSAM.

That rst staggeringly large OCIO win and the liftout of BAE System’s investment team re ected GSAM’s growing emphasis on an increasingly interesting part of the market, said Christopher Keogh, GSAM’s global co-head, institutional client business. That market consists of about 50 corporate pension plans, both in the U.S. and in Europe, oftentimes closed or frozen with funding ratios of 90% or above and holding $20 bil-

lion by 2040.

Over the coming days, a group of Australia’s largest super funds, along with associations representing them and asset managers, are meeting with members of the Trump administration, governors and congressional representatives from California, Connecticut, Florida, Illinois and Tennessee. Blackstone CEO Stephen Schwarzman has already met with Chalmers, Bloomberg reported.

the scale of Australian supers’ investment in the U.S. was a topic of discussion, the release said.

Chalmers addressed the summit, which he said was “about stronger returns and stronger economic ties between two great countries,” according to a transcript of his speech published on Feb. 25. He highlighted that super fund representatives at the summit manage almost $1 trillion collectively.

showcase the country’s retirement savings and its investments in the U.S.

Australia’s retirement market is forecast to grow to more than $7 tril-

lion or more in assets, Keogh said.

“There’s clearly an increasing interest from CFOs and treasurers to look at what is the best way to service those plans and maintain robust duciary duty at the same time, making sure that it’s in the best place it can be,” Keogh said.

Part of that is recognizing that the sophisticated and exceptional inhouse investment staffs that have been managing these corporate plans don’t necessarily have the core investment and risk management experience and resources required as the plans move further into their derisking glidepaths.

That means a greater share of assets go into xed income and away from growth-oriented assets, and less for some team members to do as that process continues.

“There's a perception in the marketplace that we take on these employees as like a cost of doing business. Nothing could be further from the truth,” Keogh said. “Our model from the beginning has been if we take the whole team, the transition is likely to be much smoother. We're going to have much better knowledge of the idiosyncrasies and complexities of that plan and its needs.’’

“We're going to therefore help ful ll the duciary obligation that still sits at the corporate level in a way that's much more profound and well managed than if we didn't have those teams."

“And then we believe potentially — and there’s arrogance in this — but we really believe that the growth for people’s careers having come into Goldman Sachs is robust,” he said. “They will start inside Goldman Sachs, working on the plan that they have always been working on, but the growth opportunities for people's careers are immense, from the CIO level down to someone who's just been working for three years as an investor within the plan.”

That means being able to develop the talent acquired through the OCIO deals. One example comes from the recently acquired UPS team, said Alexandra Wilson-Elizondo, partner, co-head and co-CIO of multiasset solutions at GSAM.

“One of the individuals that came in with the UPS mandate has a strong background in credit,” Wilson-Elizondo said. “In our dynamic asset allocation process, we have an asset class group that looks at rela-

The summit started in Washington, D.C., on Feb 24 and 25 and will conclude in New York on Feb. 26 and 27. Australian nancial services rm Macquarie Group, which works with 18 of Australia’s top 20 super funds, is sponsoring the event, the release added.

The summit followed a call between Australian Prime Minister Anthony Albanese and U.S. President Donald Trump on Feb. 10, when

tive value across credit. I highlighted to our head of research (that) we would be amiss to not have this person be part of that asset class group, to be impacting more portfolios than the one that they just currently sit on. This person is now co-running the asset class group. Their expertise has been a tremendous addition. It’s impacting other parts of the business such as our sovereign wealth business where our lower-risk mandates invest heavily across the credit complex.”

The opportunities that GSAM presents for his investment staff are part of the appeal for Caballero in leading his team at Goldman Sachs Asset Management, where he now has the title of managing director, asset management.

He and his staff joined GSAM on Sept. 1, almost exactly 35 years after he joined UPS, where he served in a variety of roles including global treasury director, vice president of strategy for emerging markets and CFO, Europe region, before becoming CIO of the pension fund in March 2018.

Caballero was particularly struck by how well the transition to GSAM was managed. “It’s like an M&A transaction. You're buying something. You have to integrate it, for lack of a better term, but if everybody's growing in the same direction with the same set of objectives, that really makes the transition, honestly, a nonevent,” Caballero said.

Cabarello worked on various M&A deals during his years on the nance side at UPS and he compared the OCIO transition to those types of transitions.

Caballero said it’s rare to see such a strong transition with “a lot of delicacy in it” given the complexity of transferring assets from multiple pension plans that are both open and frozen as well as moving the investment staff.

Now that the assets are being managed at GSAM, Caballero said they can now do what they were doing at UPS, but in a “much bigger way, with a broader scale and a global reach.”

“We were a pretty sizable team (for a pension fund), but still, we (were) only a team of 22 including me when we moved over. You have limitations there,” he said. He said his team has access to resources at Goldman Sachs they never would have had at UPS.

“So together, you represent very substantial investment opportunities,” Chalmers said, with the potential for collaboration “on capital ows towards roads and bridges, energy infrastructure and data centers.”

And while Australia is already one of the U.S.’s top 10 foreign investors, “we have trillions of patient, friendly pension capital ready to invest in the new opportunities that lie before us,” he said.  n

While the access to the global scale that GSAM provides has brought about signi cant bene ts for the UPS investment team, the portfolio has brought GSAM its own bene ts.

Timothy Braude, partner, co-head of multiasset solutions at GSAM, said integrating the UPS portfolio brought about two things that people got excited about.

“Number one is they've got a very interesting and innovative (private markets) portfolio. So just being able to sort of work through that and have them engage with our external investment group, our (private markets) team has been really, really interesting. They (also) had some interesting co-investments in the portfolio. So there's a few things that have been can be quite interesting on that side of things,” Braude said.

Aside from strategies already utilized within the UPS portfolio, Braude said his team has always been focused on developing solutions for clients, which they’re integrating into the UPS portfolio.

He said GSAM ask is: “How do we ensure that we are nding alternative sources of return and diversifying what we believe are the two most consistent return drivers, which are the market cap and rates?”

The relationship is proving to be symbiotic for both the UPS portfolio and GSAM.

“We've got a number of alternative sources that we put in our portfolios," Braude said. "We do a bunch of quantitative downside risk hedging, and they have a pretty interesting portfolio in those two areas."

“Being able to integrate that into our platform, especially given some of the research that we were already doing on some innovative alternative risk premium strategies, it’s just super complementary, and in some ways accelerated the research that we were already doing,” Braude added.

As of Dec. 31, the actual allocation of UPS’ U.S. pension plans was 47.2% xed income (down from 58.9% the year before), 16.8% equities (down from 23.3%), 15.6% private equity/ private debt/other (up from 14.2%), 13.7% cash (up from 2.3%), 6.4% real estate (up from 5.9%), 4.9% hedge funds (down from 9.1%) and -4.6% derivatives (up from -13.7%), according to the company’s most recent 10-K ling. n

States

form Education Fund and Demand Progress Education Fund.

One factor is "the crypto industry is not really satis ed with dominating federal politics" and wants to enact policies at the state level as well, and "we've seen that with state-level lobbying efforts by the crypto industry," Hays said.

The Satoshi Action Fund, a bitcoin advocacy organization, works with state lawmakers on advancing “model legislation,” according to Dennis Porter, the organization’s CEO and co-founder.

The objective of such legislation is to enable the state treasurer, state comptroller, or whomever has control over the state’s funds “to have the option, not the requirement, but the option, to be able to allocate into bitcoin,” Porter said, though he added the organization uses “digital asset” in its bill language to remain technology-neutral.

Hays said another factor likely driving state bills is that many crypto assets rely on excitement from buyers "to boost prices and generate interest."

“Targeting pension funds and state funds and basically giving them the green light (to invest in crypto)…is a way to ensure that there’s a steady stream of investor buy-in, a steady stream of liquidity, and that makes the number go up,” according to Hays.

State pension funds

The bills introduced in 23 states vary in what funds they affect, how the funds can invest in crypto, and whether they relate to a bitcoin reserve.

Notably, many of the bills do not say whether the state's pension funds are included in the "state funds" that would be able to invest in crypto.

The Satoshi Action Fund’s model legislation “is more focused on the funds that the treasurer oversees, particularly in the rainy-day fund area, less so on the pension side,” Porter said, but the organization works with treasurers “to pick which funds they believe are the right funds.”

Some bills put restrictions on how much the state can invest in digital assets, only allowing the state treasurer or state retirement system to invest up to 5% or 10% of their funds in crypto — Satoshi’s model legislation suggests a restriction of 10%, but some states choose 5% instead, Porter said.

Porter contended that bitcoin is “a very powerful tool for diversi cation,” and said that while Satoshi is more focused on state investments in crypto, “we certainly believe that the same justi cation applies for pensions.”.

However, “there’s no place for

How the states stack up

Here’s a list of states that have introduced legislation this year to allow state investments in crypto:

ARIZONA: A bill known as the “Arizona Strategic Bitcoin Reserve Act,” which passed out of the state’s Senate Finance Committee on Jan. 27, “allows the State Treasurer, the Arizona State Retirement System and the Public Safety Personnel Retirement System (public funds) to invest up to 10% of the public monies under its control in virtual currency holdings,” according to a fact sheet on the bill.

The bill also states that if the U.S. Treasury Secretary decides to set up a strategic bitcoin reserve, then the state treasurer or a state retirement system can “store its virtual currency holdings in a secure segregated account within the strategic bitcoin reserve,” according to the fact sheet.

OKLAHOMA: A bill known as the “Strategic Bitcoin Reserve Act,” which passed out of Oklahoma’s House Government Oversight Committee on Feb. 25, “authorizes the State Treasurer to invest funds from the State General Fund, Revenue Stabilization Fund and Constitutional Reserve Fund in bitcoin, digital assets with a market cap over $500 billion and stablecoins. The measure also allows a state retirement fund to hold digital assets directly,” according to an of cial summary of the bill.

OHIO: A bill named the “Ohio Bitcoin Reserve Act” would set up a bitcoin reserve fund in the Ohio state Treasury, authorize state fund investments in bitcoin and require state entities to accept payment in crypto. Ohio State Sen. Sandra O’Brien, the Republican who introduced the bill Jan. 28, wrote in a post on X that same day, “Crypto will be a major part of President Trump’s term. When his working group issues recommendations, Ohio will be ready.”

MARYLAND: A bill introduced in the Maryland General Assembly, named the “Strategic Bitcoin Reserve Act of Maryland,” would create a strategic bitcoin reserve and authorize the state treasurer to invest state funds in it.

ILLINOIS: A bill introduced in the Illinois General Assembly, named the “Strategic Bitcoin Reserve Act,” would create a bitcoin reserve in the state Treasury, allowing the

cryptocurrency” in a public pension plan, according to Mark Higgins, senior vice president and institutional advisor for IFA Institutional, a division of Index Fund Advisors.

“This is basically just gambling with taxpayer money,” Higgins said, contending that crypto is an “object of speculation.”

The fact that crypto industry ad-

P&I Events Calendar

treasurer to “accept gifts, grants, and donations of bitcoin from Illinois residents and governmental entities for deposit” into the fund, according to the bill text.

NEW MEXICO: Under a state Senate bill named the “Strategic Bitcoin Reserve Act,” New Mexico’s state treasurer and state investment council could invest in bitcoin from the following funds: land grant permanent funds, severance tax permanent fund, tobacco settlement permanent fund or “any other state fund deemed appropriate by the state investment council,” according to the bill text. The treasurer and council could only invest up to 5% of such funds in bitcoin, the bill stipulates.

NORTH CAROLINA: North Carolina’s House Speaker introduced a bill to enable state investments in digital assets, as long as the digital assets are an exchange-traded product and have an average market capitalization of at least $750 billion over the last 12 months. The investment can’t exceed more than 10% of the fund balance, according to the bill text.

FLORIDA: State lawmakers in Florida have introduced two bills — one in the House and one in the Senate — to authorize the state’s chief nancial of cer to invest public funds in bitcoin. Both bills state that the state’s CFO could not invest more than 10% of the public funds.

WEST VIRGINIA: A bill introduced in the West Virginia State Senate would authorize the Board of Treasury Investments of West Virginia to invest “a portion of public funds in precious metals, any digital asset with a market cap of over $750 billion dollars averaged over the previous calendar year, and stablecoins in any of the funds it oversees subject to applicable laws,” according to the bill text. It would also allow any state retirement fund to invest in exchange-traded products appropriately registered with the SEC, Commodity Futures Trading Commission or the state’s Securities Commission.

KENTUCKY: A bill introduced in the Kentucky General Assembly would authorize the State Investment

vocates are working to pass legislation authorizing such investments suggests "they are aware that pension funds largely have been wary of investing in the stuff, with some notable exceptions," according to Hays. After the SEC's approval of spot bitcoin ETFs and spot ether ETFs, a few pension funds started to invest in the exchange-traded products.

Commission to invest up to 10% of excess cash in certain digital assets and explicitly allow the state’s retirement funds to invest in crypto exchange-traded products.

NEW HAMPSHIRE: Lawmakers in the New Hampshire House of Representatives introduced a bill to allow the state treasurer to invest up to 10% of public funds in precious metals and digital assets.

MISSOURI: In Missouri, a bill introduced in the state Senate would allow the state treasurer to invest up to 10% of public funds in digital assets through the use of secure custody, a quali ed custodian on behalf of the state, or in the form of an exchange-traded product.

MASSACHUSETTS: A Massachusetts state senator introduced a bill that would establish a bitcoin strategic reserve and allow the state treasurer to invest in bitcoin or digital assets. That investment could reach up to 10% of the amount deposited in the state’s Commonwealth Stabilization Fund, over the course of the scal year, according to the bill.

A different bill introduced in the Massachusetts Legislature would authorize the state treasurer and public pension funds to “permit the inclusion of bitcoin and other stable digital nancial assets to serve as stores of value and provide a hedge against in ation, thereby protecting the purchasing power of state funds,” according to the bill text.

MICHIGAN: A bill introduced in the Michigan House would authorize the state treasurer to invest no more than 10% of certain public funds in cryptocurrency.

GEORGIA: A bill introduced in the Georgia Senate would allow the state treasurer to invest in bitcoin, though no more than 5% of any fund could be invested in the asset.

IOWA: Iowa’s state treasurer would be able to invest in up to 5% of money from “the general fund of the state, cash reserve fund, and Iowa economic emergency fund in previous metals, digital assets with a market capitalization of over $750 billion, and stablecoins,” under a bill introduced in the Iowa Legislature.

KANSAS: In Kansas, a bill intro-

The State of Wisconsin Investment Board, Madison, owned about 6 million shares of iShares Bitcoin Trust ETF, valued at about $321 million as of Dec. 31, according to the board’s most recent 13F holdings report led with the SEC. SWIB previously invested nearly $100 million in the iShares Bitcoin Trust ETF back in May, according to their 13F

duced in the state Senate would allow the Kansas Public Employees Retirement System, Topeka, to invest up to 10% of its $27.4 billion assets in bitcoin ETFs.

TEXAS: A bill in the Texas State Senate, known as the “Texas Strategic Bitcoin Reserve and Investment Act,” would establish a strategic bitcoin reserve overseen by the state comptroller. The comptroller does not oversee the Texas Teachers’ Retirement System, the Texas Employees’ Retirement System, the Texas County & District Retirement System or the Texas Municipal Retirement System.

UTAH: In Utah, a bill authorizing state investments in certain digital assets passed the state’s House of Representatives Feb. 6, though the legislation exempts funds of the Utah State Retirement Board, among other funds. Two Republicans, including the House majority leader, introduced the bill.

Failed legislation

WYOMING: A bill introduced in the Wyoming Legislature would have authorized the investment of state funds and permanent funds in bitcoin, but the bill failed to pass out of the House Committee on Minerals, Business and Development on Feb. 10.

MONTANA: A bill introduced in the Montana House of Representatives would have created a “state special revenue account” for investment in digital assets, but the bill failed to pass the House in a Feb. 22 vote.

SOUTH DAKOTA: A bill introduced in the South Dakota Legislature would have allowed the state to invest up to 10% of public funds in bitcoin, but a House committee rejected the bill on Feb. 24.

“My bill to allow South Dakota to invest in bitcoin died 9-3 in committee this morning,” Republican State Rep. Logan Manhart wrote in a Feb. 24 post on X, adding, “We will be back next year.”

NORTH DAKOTA: A bill introduced in North Dakota’s House of Representatives would have authorized state investments in digital assets, but the bill failed to pass the House in a Jan. 31 vote.

holdings report led May 14.

The State of Michigan Retirement System held 460,000 shares of the Grayscale Ethereum Trust ETF, valued at about $10.1 million, and 460,000 shares of the Grayscale Ethereum Mini Trust ETF, valued at about $1.1 million, according to the retirement system’s 13F holdings report for the quarter ended Sept. 30. n