Pensions & Investments 02-12-2024 by pensions-and-investments

THE INTERNATIONAL NEWSPAPER OF MONEY MANAGEMENT | FEBRUARY 12, 2024 | PIONLINE.COM | $50 AN ISSUE / $350 A YEAR

Congratulations to this year’s Leaders and Rising Stars

DCIIA Diversity, Equity & Inclusion Awards LEADERS Tracie Ahern PineBridge

Robin Diamonte RTX Corporation

Lindsey Knopik Multnomah Group

Tony Perrin Morningstar

Steve Stillman Empower

Gayle Baldwin AllianceBernstein

Julio Duran PGIM Real Estate

Dale Korman Harbor Capital

Elizabeth Perry FRTIB

Colleen Tycz Franklin Templeton

KC Boas BlackRock

Kristen Eskew OneDigital

Vivian Lubrano AllianceBernstein

Stephanie Pierce BNY Mellon Investment Management

Jillian Verspyck Bank of America

Rodney Bolden Morgan Stanley

Talia Hanby Vanguard Group

Allysen Mattison Income Research + Management

Megan Roach Russell Investments

Rachel Weker T. Rowe Price

Annie Boschetti Callan

Racheal Hanifan Schroders

Matthew McIntosh PGIM Real Estate

Duncan Robinson Allspring Global Investments

Kaia West Mercer

Kelly Cavagnaro Columbia Threadneedle

Ronald Holloway Corebridge Financial

Aaron Moore Lincoln Financial Group

Tod Ruble Custodia Financial

Akua Woolbright Whole Foods Market

Deborah Christie Cambridge Associates

Ashwini Jambekar PGIM

Eddie Oliphant Ascensus/Newport Group

Laura Stamps Financial Finesse

Brian Woolfolk Pacific Life Insurance Company

RISING STARS Josh Andreasen Edelman Financial Engines

Melissa DiPierro BNY Mellon Investment Management

Henry Hirschfeld Morningstar

Emma O’Brien NEPC

Tyler Arden BlackRock

Amanda Dunne AllianceBernstein

Kieran Johal MFS Investment Management

Ijeh Ogbechie Cambridge Associates

Aniris Ballestas Income Research + Management

Joseph Edmonds T. Rowe Price

Rodney Jones Franklin Templeton

Tangela Reid Russell Investments

Michele Bauer Ascensus

Rosemary Elly Guillette Segal Marco Advisors

Dalia Kiewell Bank of America

Rosemary Romero TIAA

Kelly Blue Mercer

Mya Evans Allspring Global Investments

Kritima Lamichhane PineBridge Investments

Jeffrey Salyer Callan

Georgia Clarke RTX Corporation

Ximena Gonzalez J.P. Morgan Asset Management

Tandi LeFranc Pacific Life Insurance Company

Sadie Saxton Impax Asset Management

Aurora Delgado-Poust PGIM DC Solutions

Rachael Grigsby Jensen Investment Management

Rachel Molina Empower

Sumbal Shahzadi Natixis Investment Managers Saqib Shakil Vanguard Group

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THE INTERNATIONAL NEWSPAPER OF MONEY MANAGEMENT | FEBRUARY 12, 2024 | PIONLINE.COM | $50 AN ISSUE / $350 A YEAR Ari Oshinsky

ESG

Exxon’s legal blitz is a new approach to proxy battle

Retirement plans in the U.S. recover half of 2022 losses

Successful lawsuit could affect future disputes

By DOUGLAS APPELL

FACE TO FACE with Apollo’s John Zito

Apollo’s Zito on explosion in private credit, riding wave Exec discusses boom, what qualifies for asset class and risks he sees INTERVIEWED by JENNIFER ABLAN Apollo Global Management ranks among the largest investment firms on Wall Street. Most recently, Apollo Global Management reported $631 billion in assets under management as of Sept. 30, a 21% increase from $523 billion the end of the third quarter 2022. Apollo and other private credit firms are talking with institutional investors about supplementing fixed income with private credit — in theory, producing

higher returns than plain-vanilla bonds. Pensions & Investments Editor-in-Chief Jennifer Ablan sat down with Apollo’s deputy CIO of credit, John Zito, to learn more about the boom, what qualifies as private credit and what he sees as risks for the credit cycle. Questions and answers have been edited for conciseness, clarity and style. credit is all the rage Q | Private these days, but what exactly is private credit? I’ve heard Apollo’s views that this is an addressable market as a $40 trillion opportunity. Walk us through that.

Private credit is going through

A | a big change in terms of what CONTINUED ON PAGE 48

SEE EXXON ON PAGE 46

SOUND BITE CENTER FOR RETIREMENT RESEARCH’S ALICIA MUNNELL: “Money today

is worth more than money in the future.” Page 2

Illustration by Tim Boelaars

Largest plans show 7% bounce in 2023 amid no-show recession

By BRIAN CROCE Tension between corporations and activist investors is nothing new when it comes to the proxy ballot, but a recent move by Exxon Mobil may change the calculus for all parties, sources said. “Now that the strategy has at the bare minimum gotten the proposal excluded out of the proxy, which was the immediate goal, I think when you’re putting those options on the table for a company then I think litigation becomes something that you consider as more of a viable option,” said Sean Donahue, chair of the public company advisory practice and co-chair of the shareholder activism and takeover defense practice of Paul Hastings LLP. The oil giant made news last month when it filed a lawsuit against climate activist investor Arjuna Capital and nonprofit Follow This to prevent shareholders from once more considering a proposal on its greenhouse gas emissions. And despite criticism from climate groups and activist investors, the move worked: Exxon in a Feb. 1 court filing announced that the groups withdrew the proposal. The lawsuit raised eyebrows because it was a departure from the way these disputes are typically worked out. Shareholders can file proposals before a company’s annual meeting and if a given proposal makes it on to the company’s proxy statement, all shareholders have the chance to vote on it. If a company thinks a proposal is out of bounds or has already been addressed, it can file a no-action letter with the Securities and Exchange Commission, requesting permission not to include the proposal in its proxy statement. But Exxon, in its lawsuit filed on Jan. 21 in U.S. District Court in Fort Worth, Texas, bypassed the

T HE P &I 1000

Texas Teachers says no to private credit Texas Teachers CIO Jase Auby said the pension fund doesn’t invest in private credit, but it is betting big on energy. Page 18

U.S. retirement plans last year clawed back roughly half the ground lost the year before when the start of a Federal Reserve rate hiking cycle sent high-flying stock and bond prices tumbling. Pensions & Investments’ latest annual survey of the 1,000 largest U.S. retirement plans showed their combined assets rebounding 7.1% to $13.02 trillion over the 12 months through Sept. 30, following a record plunge of 13.9% the previous year. Assets of the largest 200 plans, meanwhile, rose 6.9% to $9.45 trillion, a little more than half the prior year’s 13.4% drop. Those outcomes would have seemed a lot to wish for when the latest survey period began on Oct. 1, 2022, amid widespread concerns about how high interest rates would need to rise to curb inflationary pressures and expectations of a looming recession. The recession never came, thanks in part to faster-than-anticipated progress in tamping down inflation and free-spending U.S. consumers, SEE P&I 1000 ON PAGE 46

In this issue: A look at trends in:  Private credit Page 3  Target-date funds Page 3  Cybersecurity Page 17  Active equity Page 18  Diversity Page 19  Real estate Page 19 Plus interviews with:  Chris Ailman Page 3  Jase Auby Page 18  Allan Martin Page 38 Data and graphics begin on Page 16 For the full report, go to pionline.com/sponsors24

THE P &I 1000 NE W ME XICO P E RA

N.M. PERA leaning on private assets to hike returns, but not risk By ARLEEN JACOBIUS It has been a busy first year and a half for Michael Shackelford, chief investment officer at the New Mexico Public Employees Retirement Association. Hitting the ground sprinting, Shackelford started his job leading the investment team at the $16.3 billion pension plan in August 2022 fresh from his role as director of investments at the $10.1 billion North Dakota Department of Trust Lands, Bismarck. Since then, he has spent much of his time shepherding the board through two asset allocation revamps. The board made the first asset allocation changes at its Oct. 27, 2022, meeting and Shackelford spent the remainder of the year working on

QUICK START: Michael Shackelford did two allocation revamps in just 18 months.

implementation of the new allocations, which took effect Jan. 1, 2023. It bolstered the Santa Fe, N.M.-based SEE PERA ON PAGE 52

February 12, 2024

IN THIS ISSUE VOLUME 52, NUMBER 2

Defined contribution Honorees of DCIIA’s fourth annual Diversity, Equity and Inclusion Awards said there are still challenges in DEI, but work is ongoing to improve it. Page 4 Rep. Richard Neal reintroduced a bill that would require businesses with 10 or more employees to automatically enroll their workers in IRAs or 401(k)-type retirement plans. Page 12

Exchange-traded funds As institutional investors continue to increase their allocations to alternatives, ETF offerings have struggled to break through. Page 13

Private credit Carlyle Group CEO Harvey Schwartz believes concerns about the risks of private credit are exaggerated, he said during an appearance at the iConnections Global Alts 2024 conference. Page 6 Years before private credit blew up into a $1.7 trillion market, SLC Management started offering the strategies to Canadian pension funds. Page 6

Sovereign wealth funds Alaska Permanent Fund Corp. will deploy fewer assets to buyouts and venture capital, and emphasize direct investments and co-investments within private equity in the future, CIO Marcus Frampton said. Page 6

Pensions & Investments Defined Contribution

Idea to cut 401(k) tax deferrals blasted Proposal floated by Boston research center as a way to bolster Social Security By MARGARIDA CORREIA A proposal floated by the Center for Retirement Research at Boston College to bolster Social Security by eliminating the tax deferrals that individuals receive for contributing to their 401(k) retirement savings accounts has drawn sharp industry criticism, with some lashing out on social media. “I personally cannot think of a more preposterous idea,” said Brian Graff, chief executive officer at the American Retirement Association, in a LinkedIn post shortly after the report was released on Jan. 16. The proposal urges the industry to eliminate or reduce the tax deferrals, saying they are expensive, benefit the wealthy who are at no risk of poverty in retirement, and do little, if anything, to increase savings or expand coverage to workers without access to plans. The authors of the report — Alicia Munnell, the 25-year director and founder of Bos-

ment account simply shift ton College’s Center for Retheir savings over to a tax-adtirement Research; and vantaged retirement account. Andrew Biggs, a senior fellow “You’re bribing them to do at the American Enterprise what they’d do anyway,” Biggs Institute — note that in 2020 said. tax preferences for employCritics were dumbfounded, er-sponsored retirement saying that reducing or elimplans — both defined contriinating the tax incentive bution and defined benefit would in fact deter people plans – and individual retirefrom saving. ment accounts cost the gov“I think it would be a very ernment some $185 billion to large social experiment to try $189 billion. this on the American public,” “This is a lot of money,” Biggs said in an interview. ‘LOT OF MONEY’: Andrew Biggs said Rob Reiskytl, a partner and actuarial retirement con“You can fix three-quarters of cited about $185 billion in sultant at Aon. “What Aon the Social Security funding 401(k) tax deferrals that could would likely be afraid of with gap using that money.” go toward Social Security. this proposal is that changing One of the biggest arguments the authors make in the report is that the tax advantage associated with retirement tax deferrals don’t make much of a difference savings will likely not work in favor of incentin getting people to save for retirement. They ing additional savings, which is, in our opinwould have saved regardless of the incentive, ion, what’s needed.” David Blanchett, managing director, portthe authors contend, citing various studies. “The tax deferral doesn’t necessarily cause folio manager and head of retirement repeople to save more. It affects more where search at PGIM, also expressed grave conthey save,” Biggs said, explaining that people cerns about the proposal’s impact on savings. who would have saved in a taxable investSEE PROPOSAL ON PAGE 45

Pension Funds

Canadian funds tap opportunities in Brazil Pension funds drawn by Brazil’s vibrant economy, especially for infrastructure

Departments At deadline ��50 By the numbers ��14 Changes ahead ��52 Classified ��44 DC roundup ��12

By PALASH GHOSH ETFs ��13 Hirings ��42 Other views ��10 Reporters notebook ��8 RFPs ��44

Money manager surveys in progress Responses to Pensions & Investments’ annual survey of defined contribution service providers are due Feb. 23. Firms record keeping assets for U.S. institutional, tax-exempt DC plans are eligible. Results will run April 1. For P&I’s annual money manager survey, responses are due March 22. Firms managing U.S. institutional, tax-exempt assets are eligible. Results will run June 10. To request a survey or obtain further information, please contact Anthony Scuderi at ascuderi@pionline.com or 212-210-0140, or visit www.pionline. com/section/surveys.

LONG TERM: Eduardo Farhat said CDPQ’s Brazil assets represent about 2% of the

pension fund’s global portfolio, with a focus on infrastructure for its stable returns.

Entire contents ©2024 Crain Communications Inc. All rights reserved. Pensions & Investments (ISSN 1050-4974) is published monthly in January, February, March, July, August and December, and semimonthly in April, May, June, September, October and November by Crain Communications Inc., 130 E. Randolph St., Suite 3200, Chicago, IL 60601. Periodicals postage paid at Chicago, IL, and at additional mailing offices. POSTMASTER: Send address changes to Pensions & Investments, Circulation Dept., 1155 Gratiot Avenue, Detroit, MI 48207-2912. $350 per year in the U.S. Printed in U.S.A.

Keith E. Crain, Chairman Mary Kay Crain, Vice Chairman KC Crain, President & CEO Chris Crain, Senior Executive Vice President Bob Recchia, Chief Financial Officer G.D. Crain Jr., Founder (1885-1973) Mrs. G.D. Crain Jr., Chairman (1911-1996) Published by Crain Communications Inc. Chicago offices: 130 E. Randolph St., Suite 3200, 60601 London offices: 11 Ironmonger Lane, EC2V 8EY New York offices: 685 Third Ave., 10th Floor, 10017 Address all subscription correspondence to Pensions & Investments, 1155 Gratiot Ave., Detroit, MI 48207-2732 or email customerservice@pionline.com.

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Canadian pension funds have been investing in Brazil, a huge country that boasts a growing $2.1 trillion economy, the largest such economy in Latin America and an especially attractive target for infrastructure and energy investments, as evidenced by the recent agreement by Caisse de Depot et Placement du Quebec to increase its stake in a natural gas transmission firm. Ironically, Brazil jumped two spots last year to surpass Canada itself as the globe’s ninth biggest economy, the International Monetary Fund found. In December, Montreal-based CDPQ agreed to acquire an additional 15% stake in Transportadora Associada de Gas (TAG) from ENGIE Brasil Energia, the renewable energy firm, in a deal valued at about $C848 million ($632 million). TAG owns and manages Brazilian natural gas transportation assets, spanning more 2,800 miles and 10 states across the vast country. As a result of the deal, CDPQ will own a 50% stake in TAG, which CDPQ initially invested in about five years ago. Emmanuel Jaclot, executive vice president and head of infrastructure at CDPQ, stated in a news release Dec. 28 that this deal is “consistent with our infrastructure strategy: in this instance, reinvesting in a portfolio company with well-contracted assets, led by a seasoned management team, and in Brazil, a country where we intend to keep growing our portfolio in SEE BRAZIL ON PAGE 45

Influential Women in Institutional Investing

Know an influential woman? P&I now accepting IWII nominations Pensions & Investments is accepting nominations for the 2024 Influential Women in Institutional Investing awards, a recognition program for women who are having an outsized impact on the professional investment and retirement market as well as driving positive change in the industry. Honorees will be featured in the Sept. 9 issue of P&I as well as at an awards ceremony and half-day conference on Sept 12 in Chicago. The deadline for nominations is March 15. To be eligible for recognition, women must be currently employed in institutional investing, have a minimum of seven

years of experience in the industry and demonstrate a measurable effect and results within her workplace and within the industry. Nominees ideally should demonstrate a commitment to attract, retain, support and promote women into the industry. Women across the institutional investment

industry are eligible, including asset owners, asset managers, consultants and service providers. Submissions will be evaluated by the 2024 advisory board, a select group of 2023 honorees and the Pensions & Investments leadership team. Entries will be grouped by years of experience for judging purposes. Last year, the program recognized 65 women. More information about the program, including criteria and frequently asked questions, can be found at pionline.com/ n IWIInominations2024.

February 12, 2024 | 3

Pensions & Investments

Cayce Clifford

THE P&I 10 0 0 FAC E T O FAC E WIT H CHRIS AILMAN

Ailman opens up on evolution of CIO role CalSTRS exec weighs in on upcoming retirement, market risks and retirement security

R E L AT E D C O N T E N T For the full interview, go to PIonline.com/ facetoface

the U.S. presidential elections and bitcoin. Questions and answers have been edited for style, clarity and conciseness.

By JENNIFER ABLAN Christopher Ailman, chief investment officer of the California State Teachers’ Retirement System, sat down with Pensions & Investments at his West Sacramento-based headquarters, following the announcement of his retirement last month. Ailman talked about his storied and successful career at the nation’s second-largest public pension fund, which has grown to $327 billion as of Dec. 31 from $116 billion in 2000 when he first joined. Ailman, who is retiring on June 30 with plans to stay on as an adviser through the end of the year, also shared his outlook on the growth of private credit, China, the impact of

written quite a bit about the Q | We’ve pressures facing public pension fund CIOs today. What are the most-needed skills, in your opinion?

No. 1, communication. I described the CIO

A | job as a sandwich, where you do have to manage up and down, that’s typical of lot of jobs. But there are more people above you than you realize. You’ve got not just only the fact that you don’t usually have one report, you have a board, so five to 12 reports. Then you’ve got stakeholders, you’ve got the public, you’ve got CONTINUED ON PAGE 40

TALK MORE: Christopher Ailman said the most important skill for a public pension fund CIO is communication.

THE P&I 10 0 0 P R IVAT E C R E D I T

THE P &I 1000 TARGE T-DATE F UNDS

Institutional investors increase Target-date funds: already big bets on private credit prevalent as default but not always used Plans count on income, diversification; some worry a downturn could hurt that By ARLEEN JACOBIUS Private credit assets remained at high boil last year as investor interest in the asset class continued to heat up despite recovering bond yields. T H E DATA But concerns are rising over how the asset class will fare in a downturn and Data on funds whether borrowers will be able to conwith the most tinue paying higher rates and expectaassets in private tions that loss rates will mount. credit begins on page 34 Defined benefit funds of the 200 largest U.S. retirement plans reported $126.2 billion in private credit assets as of Sept. 30, up 29% from the year before and up from just $16.1 billion five years ago. The growth in private credit assets is more than double the 12.5% growth rate in the prior year’s survey. But investors shouldn’t count on this growth | SEE CREDIT ON PAGE 51

TRADE-OFF: Karin Anderson thinks better returns on high

yield could cut into private credit because of liquidity.

By MARGARIDA CORREIA

of assets workers actually invest in the funds varies widely. For example, in its latest survey Numbers can tell great stories, of the 1,000 largest U.S. reespecially about company tirement plans, Pensions & 401(k) plans. T H E DATA Investments found that One overlooked but reData on funds among the 50 largest develatory number? The with the most fined contribution plan percentage of total 401(k) assets in sponsors that reported tarassets held in target-date target-date get-date fund assets, the funds, the popular set-itfunds begins on page 35 percentage of total plan and-forget-it investments assets held in target-date found in almost all workfunds ranged from 5.9% to 64.4%. place retirement savings plans. For industry professionals, the While almost all employers offering retirement plans include the in- seemingly insignificant little numvestment options in their plan line- ber can often open a big window into ups — and usually as the default the stories of the companies offering investment option — the percentage SEE TARGET ON PAGE 39

Company stock posts mixed returns for DC plans

Of the 200 largest plan sponsors, 19 reported employer stock in their DC plans, ranging from 0.6% to more than 47% of assets, based on responses to P&I’s annual survey of the 1,000 largest U.S. retirement plans. Although big allocations can increase concentration risk, roughly half of the 10 DC plans with the largest allocation to the sponsor’s stock had 10-year returns that topped the S&P 500.

More stock, but mixed returns, valuations: Costco Wholesale led DC plans with 47% of assets invested in company shares,

Magnificent two: Amazon and Microsoft include company shares as part of their DC program’s investment lineup, which represented 6.5% and 8.3% of the plan’s assets, respectively, as of Dec. 31, 2022, the latest filings available.

but Costco stock — along with the stocks of Northrop Grumman, AbbVie and Eli Lilly — outperformed the S&P 500’s 12.6% return over 10 years. The index returned 14.3% over five years and 20.8% over one year. In addition, Northrop Grumman, Costco, Merck and Eli Lilly have price-to-earnings multiples ranging from 29 to 73, all higher than the S&P 500 index’s 22, suggesting higher earnings growth expectations.

Top 10 DC plans with company stock % of assets in co. stock

Costco Wholesale Honeywell

27%

Eli Lilly

25%

AbbVie

20%

Northrop Grumman

11%

-0.8%

10%

Merck

Prudential Financial

28.7%

40.1%

9.3% 11.1%

20.8% 17.6%

10.4%

1.3% -1.2%

11.9% 6.2%



42.3%

89.4%

One-year return Five-year return 10-year return

Price to earnings Price to sales

5.3 10 1.6 29 11

28.7%

S&P 500 10-year return: 12.6%

6.5%

1.9

15.6% 14.7% 12.5%

24.1%

S&P 500 P/E: 22

1.6

Sources: Pensions & Investments, Bloomberg, U.S. Department of Labor

50.5%

18.1

1.7

9.4%

5.6% 7.9% 6.4%

61.9%

16.4%

-6.4%



Amazon Microsoft

3.7

15.8%

3.3% 4.0%

Company stock returns

46 1.3 21

30.9%

10%

RTX

Company stock valuations 22.6%

25%

Wells Fargo

Bank of America

Company stock returns

47%

8.3%

50 5.2 7 0.8

% of plan assets in co. stock

One-year return

10-year return

Compiled and designed by Larry Rothman and Gregg A. Runburg

February 12, 2024

Pensions & Investments

Tony Miranda

Defined Contribution

DEI efforts built on community engagement, open discussions DCIIA honorees say challenges still exist, but work is ongoing By CARYL ANNE FRANCIA

RELATING: Rachel Weker said giving people space to share their stories helps others challenge their perceptions and reminds them not to make assumptions.

There’s no single formula for bolstering efforts toward diversity, equity and inclusion in and out of the workplace, but changes start when at least one person is com-

mitted to making improvements, DEI leaders said. People have ideas with the intention of doing something great, “which is phenomenal,” said Laura Stamps, senior consultant and head of DE&I engagement strategy at Financial Finesse. “But understanding where you’d like to make an impact and what it takes to do so is critical, and it doesn’t mean you have to know it right away,” she added. “I’m still

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Andrew Collins Head of ESG & Responsible Investing San Fran. Employees’ Retirement System

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learning every single day, and the learning comes from reading a lot of different things, but really just talking to various people and digging into them.” Stamps is among a group of financial professionals who are being recognized by the Defined Contribution Institutional Investment Association for advocating or contributing to DEI in their organizations. The association will celebrate 35 leaders and 29 rising stars at its fourth annual Diversity, Equity and Inclusion Awards program, which will held Feb. 27. The program enables DCIIA “to highlight the terrific work being done in the area by our member organizations,” said Lew Minsky, president and CEO of the association. “Equally important is the opportunity it gives us as an organization to recommit to our DEI mission and advocating for DEI principles and initiatives throughout the year.” Honorees told Pensions & Investments that while it is gratifying to be recognized, their goal is to make the path for those pursuing similar careers less difficult than their own. As someone who was surrounded by very few women when she started her career, Deborah Christie said it’s been a passion of hers to “get more women into finance.” Working at Cambridge Associates as managing director of public equity research, Christie also serves an ambassador for Girls Who Invest, a nonprofit aiming to bring more female university students into finance. She also served as the chair of the manager’s women-focused employee resource group, or ERG, for five years. Christie said that what drew her to Cambridge Associates 18 years ago was seeing a woman, Sandra Urie, serving as its CEO. Urie stepped down from that role in 2016 and served as chairwoman emeritus until her retirement last year. Today, women make up 50% of the firm’s executive leadership and 33% of its managing directors, Christie said. But more work still has to be done in breaking barriers. Referencing McKinsey & Co.’s 2023 Women in the Workplace report, she said “the broken ladder is still prevalent in the industry and in other fields.” If women are not promoted early in their careers, she said a “funnel” is created that traps women in lower positions. To improve DEI in the workplace, honorees shared advice, from holding open conversations and mentoring young talent, to volunteering in community efforts and participating in ERGs, or employee resource groups. They added that these ERGs are not limited to people with corresponding identities but can also include allies who want to engage and learn. ERGs even collaborate on activities. Honoree Duncan Robinson is director of quantitative insights and data science at Allspring Global Investments. He also is co-lead of the asset manager’s group focused on Native people, and is also a member SEE DCIIA ON PAGE 50

SHINE IN CHALLENGING TIMES INSIGHT AND EXPERTISE TO SUPPORT DC PLAN PROFESSIONALS

Rely on our retirement insights and market perspectives — backed by 100 years of experience — to develop solutions to plan sponsor challenges. Find your silver lining at mfs.com/silverlining-dc.

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Pensions & Investments

Sovereign Wealth Funds

Alaska Permanent revamps its private equity portfolio CIO says fund will deploy fewer assets to venture capital, and will emphasize direct investments By ROB KOZLOWSKI

Christopher Goodney/Bloomberg

DIFFERENT VIEW:

Harvey Schwartz thinks people claiming private credit is systematically risky are just doing so because it’s ‘good for headlines.’

Regarding direct private equity investments, Frampton said the board’s approval in November was more of a formalization of a strategic plan to do them. The sovereign wealth fund currently has a team of seven investment professionals concentrated on private equity, and Frampton said they’re seeking an additional person. There will be an initial focus on buyouts of cash flow-positive U.S. businesses, with a target of $50 million to $100 million per deal initially with between 25% and 50% ownership, according to a presentation included with Oct. 30 board meeting materials. The direct investments will provide a net fee savings of $22 million over the first four years, the presentation said.

Alaska Permanent Fund Corp., Juneau, will deploy fewer assets to buyouts and venture capital, and emphasize direct investments and co-investments within private equity in the future, said Marcus Frampton, chief investment officer. Direct investing is not new for the $78.6 billion sovereign wealth fund, Frampton said in a Feb. 1 interview at the iConnections Global Alts 2024 conference in Miami. ‘Hard to call turning points’ Former CIO Jay Willoughby in 2012 spearheadWhile emphasizing both direct investments ed a direct investment in American and co-investments, Frampton said Homes 4 Rent, a single-family rentAPFC will still commit money to al company and homebuilder. buyout funds and venture capital, APFC was the company’s first injust less than in the past. vestor, and the sovereign wealth “I think there was tremendous fund ultimately invested about $700 excess that built up in venture and million in the company, which has buyouts, and I think the air’s comsince gone public. ing out the balloon a lot in venture, It was a very profitable investbut not really in buyouts,” he said. ment, Frampton said, and APFC “Maybe things have corrected has gone on to make other smaller slightly, but it’s hard to call turning direct deals in sectors such as biopoints. I don’t think that there’s gotechnology and has generally alloing to be a crash, but I think buyout cated those to a “special opportuniprivate equity is a little unattractive ties” asset class. where it is right now.” SHIFT IN FOCUS: Marcus By 2015, APFC had created the Frampton said he changed “But we’re maintaining our reprivate equity and special opportu- the special opportunities lationships, deploying some monnities asset class, and deals like the asset class to tactical to take ey, but not really hitting the gas American Homes 4 Rent deal would advantage of dislocations. pedal,” he said. “So at the peak, we be allocated to special opportuniwere deploying up to $2 billion a ties. A year ago, Frampton took “special opportu- year into venture and private equity. We’re doing nities” off the name of the asset class. $1 billion right now, and then $1 billion last year, “Every private equity guy thinks everything he and we did $1.5 billion the year before.” does is a special opportunity, but everything Frampton said 2021 will go down in history they’re doing is private equity,” he said. as the worst vintage year, and the worst of the So, he re-created the notion of the special op- excess. portunity asset class into “tactical opportunities,” “I think it’s going to benefit us in the long run,” which APFC’s board approved in July. Frampton said, “but it hasn’t really shown up in “I’m interested in dislocations, and I thought our returns yet, and at the same time, we’re getthe first thing we would do there — so I did this a ting some nasty marks in our venture portfolio.” year ago — I thought we were going to buy oil and Frampton said about one-third of the net asset gas limited partnerships in a discount,” Frampton value of the sovereign wealth fund’s private eqsaid. “And it just turned out the opportunities are uity portfolio is in venture capital, which Frampjust not there. I kept hearing, ‘Oh, there’s people ton said is a relatively high percentage among dumping these things,’ and there’s not really peo- U.S. funds of similar sizes and is negatively affectple dumping these things.” ing the whole portfolio’s performance. “There might have been in 2020 and 2021 for “I’m concerned about some of our existing exsix months or something,” Frampton said, “Right posure and write-down potential,” he said, “And now, I don’t really have any big investments then just knowing we have more venture than our there, but I’m looking and I think it’s smart to peers, I’m being cautious on deployment.” kind of be patient and not think everything you As of Dec. 31, the actual allocation to private look at is a dislocation.” equity was 18.6%; the target is 16%. n

Private Credit

Carlyle’s Schwartz: Fears over private credit risk exaggerated CEO also says he doesn’t agree with those who want Fed to cut rates 6 to 8 times By ROB KOZLOWSKI and ARLEEN JACOBIUS Harvey Schwartz, CEO of The Carlyle Group, believes concerns about the risks of private credit are exaggerated, he said during an appearance at the iConnections Global Alts 2024 conference in Miami on Jan. 30. Schwartz, who will mark the first anniversary of his taking the helm of the alternative investment giant on Feb. 15, said those who pronounce private credit as systematically risky are just doing so because it’s “good for headlines.” “I don’t think it’s a rational framework,” said Schwartz, who mentioned that private credit is now Carlyle’s biggest business. “If you want to think about risk, and where historically you’ve seen real problematic risk, it requires three things: concentration, leverage and connectivity.” Those three items provide the “kindling for systemic risk.” He countered that from Carlyle’s perspective, “it’s not the business we’re in. Leverage is low, the liability structure is

really fantastic — you can’t have a run on a bank — we don’t have a concentrated position and we’re not interconnected. It’s just a bit exaggerated and a bit misunderstood.” Schwartz also said he does not agree with those who wish the Fed will make six to eight cuts in interest rates, calling it a “bad wish.” He noted that during his time at Goldman Sachs in sales and trading when quantitative easing was announced to combat the financial crisis of 2008, he and his colleagues were unsure about the Fed’s moves. “We were nervous about quantitative easing, then we liked it, then we liked it way too much,” Schwartz said. Overall, he said, “people got a little too hooked on quantitative easing.” Instead, he said the emphasis should be on the cost of capital normalizing, and then the Fed making modest cuts. Schwartz said he is an “optimist by nature,” and sees the economy moving forward positively, based on the data that Carlyle has on the 1 million employees of the portfolio companies it owns. “I think wealth accumulation in the world will continue, and that means as businesses grow, they will need more capital,” he said. “As providers of capital, our role will get increasingly important.” SEE SCHWARTZ ON PAGE 50

Private Credit

SLC brings its pioneering private credit investing to pension funds Years before asset class ballooned to $1.7 trillion, strategy offered in Canada By ERIN ARVEDLUND SLC Management was an early investor in private credit, one of the first to offer the strategy to Canadian pension funds more than a decade ago. So says Steve Peacher, president of the in-house asset manager of Sun Life, the Canadian insurance giant. As of Dec. 31, SLC Management oversaw roughly C$374 billion ($283 billion) in assets. Pensions & Investments spoke

with Peacher, who ran the high-yield group at Putnam Investments before joining SLC Management in 2009 as CIO to oversee the insurance company’s general account. Sun Life launched the asset manager in 2013 to manage funds across fixed income and alternatives. Through acquisitions and purchases of majority stakes in managers over the years, SLC’s strategies include those from Prime Advisors; Crescent Capital Group, an alternative credit firm; Ryan Labs Asset Management, offering institutional fixed income; BentallGreenOak, offering real estate; and InfraRed Capital Partners, an infrastructure fund firm. Of SLC’s $283 billion in assets un-

der management, $115 billion reflects assets of Sun Life, while the remainder is managed on behalf of pension funds, other insurers and sovereign wealth fund clients. “Life insurance companies invest their own money very much like pension funds, with (a) lot of fixed income and alternative investments,” Peacher said.

Building awareness

“We for decades had an investment-grade private credit and the team invested for Sun Life’s balance sheet,” he said. “They added excess spread over investment-grade corporate market, but their loss ratios were extraordinarily low.” “It was a crown jewel within SLC.

However, it was a new idea for (Canadian pension funds), although not new for insurance companies. Life insurance companies have been in the private placement market for decades, and were the drivers.” Starting in 2014, SLC launched a private credit fund in Canada and pension funds there used it as part of the fixed-income mix, he said. Historically, private credit added roughly an extra 150 basis points over public corporate bonds, on a comparable rating and duration, he noted. “That extra spread ebbs and flows” between 75 to 150 basis points over investment-grade corporate bonds, he added. In the past few years, “a number of other players have said ‘we need

to get into this market.’ We’ve been copied!” Peacher recalled. “It’s exploded across the ratings spectrum. It’s become standard allocation, and it will grow in this yield environment. And some of the banks have been forced to move away from this market.” In 2015, “there was really only one consultant saying ‘we love investment-grade private credit, but clients aren’t asking for it yet.’But more clients got interested in private credit as part of a fixed-income portfolio. It was a new idea, but it’s not new for insurance companies. We’ve since come to the U.S. and gained traction with U.S. pensions.” Unlike public fixed income, the SEE SLC ON PAGE 51

Marketing Material Investment involves risk. This material is for distribution to professional investors only and issued by Pictet Asset Management Inc., (Pictet AM Inc) which is registered as an SEC Investment Adviser. Past performance is not a guide to future performance. The views and opinions stated are those of Pictet Asset Management Inc as of the date of this material.

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REPORTERS NOTEBOOK START EARLY

Dems aim to create ‘401Kids’ accounts Democratic lawmakers have introduced bicameral legislation that would create children’s savings accounts, which could later be used toward college, housing or retirement savings. Senate Majority Leader Chuck Schumer, D-N.Y., and Sens. Bob Casey, D-Pa., and Ron Wyden, D-Ore., introduced the 401Kids Savings Act alongside Reps. Don Beyer, D-Va., Joyce Beatty, D-Ohio, and Suzan DelBene, D-Wash., on Jan. 31. The bill would create a savings account for all newborns and children in the U.S. under 18, to which families, non-profits, employers, foundations and others could contribute. Once account holders turn 18, they could use the money “for post-secondary education and training, a small business, a first home or retirement security,” according to a Jan. 31 news release from Casey’s office. “The 401Kids Saving Act would invest in our nation’s youth and make it easier for future generations of children to build savings, escape poverty and obtain economic security,” Schumer said in the news release. “No one should miss out on the opportunity to go to college, own a home, or start a business because they don’t come from a wealthy family. This legislation would ensure that every child in America has much more ability to reach their full potential.” While all families could contribute up to $2,500 per year toward the accounts, lowerand moderate-income families would also receive federal support. The accounts would be built on state 529 plan platforms and managed by state treasurers, according to the news release. For every dollar invested in 401Kids accounts, “society would receive at least $2.61 in benefits associated with increased income, improved health, additional tax revenues and savings to other government sectors,” according to an analysis from Jose Diaz, chief economist at the Constellation Fund, a philanthropic organization focused on fighting poverty in Minneapolis and St. Paul, Minn. Organizations endorsing the bill include the Aspen Institute Financial Security Program, National Association of Social Workers, Northern California College Promise Coalition, and Vestwell, according to the news release. — COURTNEY DEGEN

HITTING THE RIGHT NOTE

TIAA, Wyclef Jean make retirement something to sing about The language of retirement planning and saving is challenging enough for middle-aged participants, so imagine how daunting it is for younger participants. TIAA-CREF has put its imagination to work with hip-hop artist Wyclef Jean and several other hip-hop artists who have created a song, “Paper Right,” that describes the need for financial education and retirement planning. TIAA calls the song an “anthem” that identifies gaps in savings and retirement and offers suggestions for combating them. “Music possesses an extraordinary ability to elevate awareness, inspire and drive conversation among key audiences, including younger generations,” Zara Mirza, chief brand officer for TIAA, said in a January news release announcing the collaboration.

“Paper Right is about building a financial legacy for future generations,” Jean said in the release. “The most important thing I hope people take away from the song and my partnership with TIAA is that saving earlier can set you and your family up for long-term success.” For older participants and those who are hip-hop challenged, there’s a YouTube link to the “Paper Right” performance on The Tonight Show Starring Jimmy Fallon complete with a real-time libretto. According to the TIAA news release, streaming the song will automatically donate 100% of the song’s sales to First Generation Investors, an organization that provides financial education to high school students. — ROBERT STEYER Credits: Karl Merton Ferron/The Baltimore Sun (Camden Yards); Hollie Adams/Bloomberg (Rubenstein)

PLAY BALL

Carlyle co-founder skipper of team on deck to buy Orioles David Rubenstein, co-founder and co-chairman of The Carlyle Group, is leading a team that is on deck to buy a control stake of the Baltimore Orioles baseball team for $1.7 billion, according to a Major League Baseball announcement. Also in the investor lineup that is buying the stake from the Angelos family, currently majority owner of the Orioles, are other ace alternative investors: Michael Arougheti, co-founder and chief executive officer and president of Ares Management Corp.; Mitchell Goldstein and Michael Smith, co-heads of the Ares’ credit business; as well as Michele Kang, founder and CEO of Cognosante, a medical technology company, and Cognosante Ventures, a venture capital firm, the release shows. Others in the group aren’t exactly bleacher

PART OF THE TEAM: David Rubenstein, a lifelong Orioles fan, wants to buy a stake in the baseball team.

bums. They include Cal Ripken, Jr., former Oriole’s shortstop and third baseman and MLB Hall of Famer; Kurt Schmoke, former Baltimore mayor; Grant Hill, NBA Hall of Famer; and Mike Bloomberg, former mayor of New York. The deal is subject to review and approval

by MLB’s ownership committee and a vote of approval by the entire MLB ownership. “I am grateful to the Angelos family for the opportunity to join the team I have been a fan of my entire life,” Rubenstein said in the release. — ARLEEN JACOBIUS

RETIREMENT CRISIS

401(k) experiment has failed, according to labor economist

NEW BOOK: Teresa Ghilarducci’s latest book, due out March 8, discusses why there is a retirement crisis.

The 401(k) plan experiment has failed, and the retirement crisis in the United States is only getting worse, said Teresa Ghilarducci, labor economist and author of the forthcoming book "Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy." Ghilarducci, who is also professor of economics at The New School for Social Research and the director of the Schwartz Center for Economic Policy Analysis and The New School’s Retirement Equity Lab, said in a Jan. 19 interview that while her past booksexplored her thoughts on what should be done to address the retirement crisis, this latest book addresses why there is a retirement crisis. She said that the book’s aim is to review the last 10 years of research by multiple entities on what she calls the "liminal" period of a person’s lifetime. "You know, between 55 and 70 when policymakers think they know what a life course looks like," said Ghilarducci, "that you work up until 62 and then you have to be instructed by experts to tell you how to invest your money and to claim Social Security later." "Then the experts say, ‘Well at 62, let’s do a look back. Oh, you didn’t have enough savings. Too bad. You didn’t save enough.’ Right. But they have a pretty good idea about what that

period of 55 to 70 looks like," she said, "And they’re wrong. The experts and professionals and policymakers are wrong." What they’re wrong about, she said, is the idea that one should approach retirement savings with the premise that one should expect to work longer is deeply flawed. Instead, Ghilarducci said, most Americans are forced out of the labor market earlier than they want, so all the advice from experts like financial advisers or policymakers that one should save a certain percentage of their paychecks and then claim Social Security later does not speak to the lives of most Americans. As she says in her book, the nation should "not depend on people working longer to make up for inadequate retirement-income security. Doing so only exacerbates inequalities in wealth, health, well-being and retirement time." "Much of the loss of their security came from the loss of defined benefit plans for ordinary people," said Ghilarducci. "That it’s like that 40-year experiment with 401(k)s and do-ityourself, now the results are coming in, and it was a failure, right? Too bad a couple of generations have to live with that failure.” Ghilarducci’s book will be released on March 8. — ROB KOZLOWSKI

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OTHER VIEWS MICHAEL A. ERVOLINI

Active asset management: It’s premature to wave the white flag as 2024 looks bright

s we look back on 2023, what does the year say about the active asset management industry? Consider: ■ Record ETFs were issued, driven by active products (new and conversions). ■ Commitments to alternative asset strategies grew sharply. ■ Morningstar will likely report enormous active fund outflows and ETF inflows. ■ SPIVA, published by S&P Dow Jones Indices, will likely report that most active managers underperformed their benchmarks. It makes great sense for active asset managers to launch ETFs and alternative strategies to broaden their platform offerings. These moves provide many benefits, including revenue diversification, a more complete product lineup for investors, and the ability to access new clients desiring more than traditional mutual funds. But what about their core active fund business? When was the last time anyone got excited about an active mutual fund launch? Does the industry see a future where active mutual funds continue to play a critical role in investor portfolios, or is the industry beginning to concede — either inadvertently or intentionally — to the pressure that lower fee passive products and ETFs have put on their overall market share? Is the industry Michael A. Ervolini is considering waving a distinguished fellow, the white flag? decision science and A recent report by portfolio managePwC paints a chalment, at FactSet. He lenging, but not is based in Boston. unexpected picture: By 2030, the “mutual fund industry” will experience slower growth and a continuation of downward fee pressure as well as further consolidation of fund companies to the tune of 20% acquired or “eliminated.” Active mutual funds have and continue to face serious headwinds. Adapting to these challenges with new and repackaged offerings is both necessary and smart business. But there is another rather obvious opportunity that traditional active mutual funds have not fully embraced that can potentially correct what got the industry into this predicament in the first place — improving performance. Every year, SPIVA reminds us that active managers have not delivered benchmark-beating returns in a consistent fashion. The result of this is disillusionment, fear, and the desire by investors to purchase beta as cheaply as possible and look for alpha elsewhere. The performance challenges facing traditional active management are rapidly eroding this industry that generations heretofore have counted on to build and maintain wealth.

e believe a different future for active management is possible. Rather than further retrenchment, 2024 could instead include: ■ More active funds beating their benchmarks. ■ Active mutual funds staunching/reversing outflows. ■ Funds capitalizing on artificial intelligence to deliver consistent, excess returns at attractive fees.

Alex Nabaum/The iSpot

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Jennifer Ablan Editor-in-chief/chief content officer

You might think this future unachievable, but we believe active management has a fighting chance. That’s right: I’m suggesting we can substantially bolster active fund management performance, or at least a meaningful portion. Admittedly, it’s a tall order given past results. Naysayers will say that active managers have tried everything to improve, but we know that is not correct. What they have not done yet is shift their thinking. They’ve not approached the topic of skill as rigorously as other fund characteristics, such as: performance, risk, attribution, style and peer comparisons. Traditional analytics (e.g., attribution, information ratio, upside/downside capture, tracking error, hit rates, and win/loss ratios) offer valuable insights into manager skill based on fund outcomes. When these metrics are augmented with analytics that focus exclusively on how the manager’s decisions (i.e., buying, selling, position sizing) drove those outcomes, an entirely new level of insight is revealed. This insight allows for the rigorous and granular quantification of which decisions are adding alpha and which tend to regularly destroy it. It achieves a deeper understanding of skill. Skill is, after all, what managers purport to provide, what investors are seeking (and will pay for), and what drives fund results up and beyond the benchmark.

kill is the combination of the manager’s expert judgment and investment processes. When judgment and processes are well calibrated, great choices prevail, supporting the delivery of excess returns. When either element is off, the choices made may feel right, but they frequently destroy alpha rather than add to it. Judgment and processes can only be studied by examining the decisions made by the manager. Consider this example: A value manager’s new buys reflect a classic factor signature. When compared to their sector peers, the typical new buys tended to exhibit below-median price/book, above-median margin growth, below-median leverage, and above-median price momentum. Performing the same analysis separately on

the fund’s buys that became winners and those that became losers provides surprising and valuable insights. The winners had below-median price/book but were not as cheap as the losers. The winners clearly had stronger balance sheets than the losers. The winners had strong margin growth, while the losers often exhibited flat or declining margin growth. The winners also showed positive price momentum while the losers experienced price declines. Feedback like this transforms skill assessment and improvement from a guessing game to a highly rigorous process. It not only helps managers become more self-aware and improve, it’s also being used today by asset owners/allocators to vet new equity managers and work more effectively with existing allocations. It’s worth noting that one of the drivers of the active ETF movement is the simple fact that many investors remain committed to active management — they are merely casting around for a more economic packaging. Lowering fees is not the only option. Stronger, more consistent results can also serve this purpose. The latter approach offers the dual benefits of satisfying investor desires (i.e., alpha at a reasonable fee) while also providing the revenues and margins that will enable active management to not merely exist, but to flourish. We see a future of promise for the active asset management community. It all comes down to understanding, developing, and applying skill. And that requires the shift in thinking mentioned together with action. This results in a deliberate approach to improving that relies on rigorous feedback regarding which current judgments and processes are working and which need refinement; the implementation of modest process shifts that are likely to improve the level and consistency of fund alpha; and assessing how effective the shifts are in delivering the desired improvements. Done right, 2024 and beyond can be one great comeback. 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.

Pensions & Investments

February 12, 2024

OPINION OTHER VIEWS LETITIA WEBSTER

Sustainability promises to drive private market value creation for years

performance, as well as he operating environcontributing to a stronger equity ment for private story when an exit is being markets has become considered. more complicated. This work can be detailed and After many years often requires specialist when the low cost of capital knowledge, but there can be created fertile conditions to quick wins. Many private buy, grow and sell companies, companies have never had a investors today must navigate sustainability strategy and higher interest rates, unpreprivate equity owners can push dictable consumer demand and for progress. turbulent geopolitics. Letitia Webster is Often this includes things like It is no surprise that in this head of sustainability simple energy efficiency environment limited partners for private investing changes. In a huge manufacturare increasingly methodical in at Goldman Sachs ing company, upgrades to allocating capital. Despite this, Asset Management, lighting, heating and energy pension funds and institutional based in New York. management systems can investors have continued to drastically cut emissions and channel capital toward costs. For logistics-heavy businesses, alternatives, with private markets reaching more than $15 trillion this year, according to switching fleets to cleaner fuels can save millions of dollars and cut pollution. Preqin. Some of the biggest opportunities in In this context, sustainability has sustainability relate to innovation — finding emerged as a powerful value creation driver. profitable solutions to the complex problems While not a silver bullet, it now sits firmly posed by environmental and social challengalongside traditional areas that remain es. We see huge potential for those compacritical to improving businesses, like scaling nies that are enablers of sustainability of revenues, building operational excellence, other companies — for example through hiring the right talent, and equipping providing complex energy management companies for a rapidly evolving digital and systems or detailed certification work on cybersecurity landscape. supply chains. To investors, for many years there was a There are also enormous opportunities perceived trade-off between sustainability for businesses that can turn waste streams and delivering performance. In private into new raw materials or energy sources on markets, the opposite is now true. a massive scale, focusing on areas as diverse Private equity owners can be hands-on as cotton recycling, battery components, and with portfolio companies to upgrade their agricultural waste. sustainability efforts. This isn’t about being Certain businesses are explicitly focused virtuous, but as a lens to mitigate risks, on the circular economy, but for many it’s an increase revenue and improve bottom-line

incidental discovery that they can take a stream of waste that used to be a cost burden and turn it into a revenue source. With human capital too, portfolio companies are paying closer attention to building meritocratic and inclusive cultures that reward hard work and enable talent from all backgrounds to succeed. These efforts are important in a competitive marketplace for talent, and done well they can help to increase morale, creativity and productivity. In private equity, where there are opportunities to have employees participate in value creation through equity schemes, it can build impetus and buy-in for the journey a company is on. Ownership Works, a non-profit initiative that seeks to increase employee ownership in private companies, has been a powerful voice for employee ownership in private equity and we expect to see continued uptake. Viewing operations through a sustainability lens can help managers, limited partners and companies identify and mitigate risks in their supply chains — such as environmental degradation or labor issues — that could negatively impact their reputation or materially damage their businesses. It is also a source of opportunity to cut costs and grow revenues. Because LPs recognize this, it is driving conversation and capital flows. In a survey of 200 investors by Goldman Sachs earlier this year, most investors reported that they are staying the course in private markets — increasing allocations to many strategies, deepening their relationships with managers, and seeking more co-investment opportunities.

We also learned that, beyond track record, the biggest factor that LPs consider when selecting a private markets manager is operational expertise. In private markets, whether through full ownership or minority stakes, the ability to influence outcomes is in a different league compared with public market managers. Without healthy M&A and IPO markets as straightforward exit routes, managers are holding portfolio companies longer. Instead of applying leverage and hoping for valuation multiples to expand, managers need alternative routes to value creation. Meanwhile, many of these portfolio companies face a plethora of headwinds ranging from inflation, supply chain disruption and higher energy prices to artificial intelligence and climate risk. A sustainability lens, we believe, is critical to navigating the coming years in private equity. Even if the macro environment stabilizes in 2024, leading to more constructive conditions for deal-making, the importance of intensive operating partnership between private markets managers and portfolio companies should remain a major performance driver. The importance of sustainability promises to quietly endure for decades to come. This should lead to better outcomes for investors who allocate to managers who can put in the hard, detailed work associated with sustainable value creation. 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.

OTHER VIEWS NIELS PEETZ-LARSEN and ADAM POSNER

Revolutionizing health, wealth — untapped investment potential in biotech

n the realm of investment opportunities, biotechnology stands out as a rapidly evolving field with immense potential. Over the past two decades, groundbreaking advances in biotechnology have not only transformed healthcare, but have also presented unique investment opportunities. Innovation shifts and scientific breakthroughs have opened doors to promising investment avenues that are often overlooked and unexplored by mainstream investors. It’s no secret that advances in biotechnology have materially improved human life in new ways. After first being achieved in 2002, the cost of sequencing an individual genome has declined from over $1 million in 2008 to under $1,000 today and revolutionary medicines have followed. Children with previously incurable diseases like spinal muscular atrophy can now lead more normal lives, survival rates for many cancers have improved dramatically, and developments in areas such as immunotherapy now offer hope where there previously was none. Despite these remarkable advances, it’s often overlooked how little exposure most investors have to these game-changing therapies and the economic windfalls they can bring.

istorically, the development of novel therapeutics predominantly occurred in university laboratories or within the extensive research and development divisions of large global pharmaceutical companies. However, as these entities often struggled with allocating capital in a

Niels Peetz-Larsen and Adam Posner are both principals at HighVista Strategies, based in Boston. well-organized way across their widespread research initiatives, public market investors increasingly advocated for a reduction in R&D spending. Instead, the focus shifted toward enhancing efficiency and profitability from already approved therapies and utilizing cash flow for the distribution of stable dividends. As a result, much of this R&D effort has been pushed into many smaller, independent firms where incentives and rewards can be better aligned for talented researchers pursuing potentially groundbreaking science. This shift is vividly illustrated by the dramatic surge in the number of small and midcap biotechnology firms publicly traded in the United States. From just 250 in 2003, their numbers have swelled to over 600, representing a market capitalization of over $600 billion and accounting for one-seventh of all publicly traded firms today.

Despite this vast public footprint, these innovative firms are lightly represented in the broad market indexes that tend to anchor most investor portfolios. The Russell 3000 index, for example, which offers broad-based exposure to U.S. equities, has less than a 0.5% weighting to this area, while the technology and innovation heavy Nasdaq 100 index has no exposure. Furthermore, investing in individual stocks is generally not advisable for most investors considering that the median market capitalization of each public biotech firm is small, and an investor needs deep scientific expertise to effectively evaluate the clinical ventures of each company. This makes it exceedingly difficult for investors to smartly build exposure to this exciting and potentially highly profitable area.

e believe that a portfolio approach is an effective strategy. This involves aggregating exposure by investing through several highly skilled, aligned, and appropriately sized biotechnology specialist investors. Given that each specialist manages a concentrated portfolio reflective of his or her unique investing style and capabilities, combining these portfolios can provide diversified exposure without significant overlap. This method can allow for a diversified yet focused investment in the biotech sector, that capitalizes on the expertise of various specialists. For example, while one specialist might gravitate toward long-term winners seeking to capture potentially large new therapeutic areas,

another might gravitate toward fallen angel investments trading at or below the value of cash on the balance sheet. Each style has merit and the potential to generate outsized returns; and if the two approaches don’t overlap, the excess returns should be fundamentally uncorrelated. In this manner, investors would be able to craft a portfolio where potentially high and uncorrelated outperformance from the specialist partners add to return but also help to materially reduce the volatility of the inherent underlying sector exposure. We believe this approach offers a way for investors to correct a somewhat systemic portfolio underweight and more prudently obtain much larger exposure to the exciting developments taking place in biotechnology today. The biotech sector presents a compelling investment opportunity that extends beyond traditional market indexes. Unique investment potential can be gained through the sector’s growth which is driven by independent firms and ground-breaking research. By adopting a strategic portfolio approach and by leveraging the expertise of multiple biotech specialists, investors can smartly navigate this sector which is complex but rewarding. This approach not only allows for participation in cutting-edge health innovations, but also positions investors to potentially reap significant economic benefits. n This content represents the views of the authors. It was submitted and edited under Pensions & Investments guidelines but is not a product of P&I’s editorial team.

February 12, 2024

Pensions & Investments

DC ROUNDUP

Congress reintroduces bill that mandates auto enrollment Rep. Richard Neal, D-Mass., reintroduced a bill that would require businesses with 10 or more employees that don’t offer a retirement plan to automatically enroll their workers in IRAs or 401(k)-type plans. Neal first introduced the legislation in 2017. The Automatic IRA Act of 2024 would generally apply to plan years beginning after 2026, requiring that employers with over 10 workers either set up a 401(k)-type plan or facilitate auto IRAs. 401(k)type plans must automatically enroll employees at a default contribution rate of 6%, automatically increasing by 1% annually until reaching 10%. Employees could choose not to contribute, and the Treasury Department would be directed to create rules pertaining to the implementation of automatic escalation. The other option would be for employers to select a provider of an auto IRA arrangement, and contribute a default percentage of each worker’s paycheck to their IRA account, the bill summary said. Employers could also choose to have each employee select the auto IRA of their choosing. The default contribution rates for auto IRAs would be set at 6% in the first year, 7% in the second year, 8% in the third, 9% in the fourth and 10% for every year thereafter. Employees could choose between a traditional IRA or Roth IRA, with the default choice a Roth IRA, or employees could choose to opt out altogether. In the case of auto IRAs, the legislation directs the Treasury secretary to issue guidance that allows for individuals outside of traditional employment to have access to such plans, including freelance workers, independent contractors, gig workers and those who are self-employed, according to the bill summary. The legislation would also create a new tax credit for small businesses — those with under 100 employees — that facilitate auto IRAs, allowing $500 per year for three years, applying to tax years starting after 2024. The bill “would build on, expand upon, and protect the growing state-facilitated automatic IRA retirement saving programs,” the bill summary said. Nineteen states have enacted state-run retirement savings programs, 15 of which are auto-IRA programs, as of Jan. 1, according to Georgetown University’s Center for Retirement Initiatives. Another feature of the bill would require that 401(k)-type plans with over 100 participants provide participants the option to receive at least 50% of their vested account balance in the form of lifetime income, if the participant’s account balance is over $200,000. Several retirement industry organizations expressed their support for the bill in news releases and letters to Neal. “The American Retirement Association (ARA) strongly supports the Automatic IRA Act that will significantly increase access to workplace retirement savings programs,” ARA CEO Brian Graff said in a Feb. 7 statement. “Importantly, it achieves this by leveraging the existing public-private partnership that drives the successful 401(k) system providing benefits to over 100 million Americans.” “ACLI estimates that more than 31 million workers will gain access to

employer-based retirement plans if the legislation is adopted,” Susan Neely, president and CEO of the American Council of Life Insurers, said in a Feb. 7 statement.

BlackRock launches online hub for plan advisers BlackRock is accelerating its efforts to help retirement plan advisers. In a bid to help them build their retirement plan business, BlackRock launched a new digital hub that will provide them with tools and resources, the asset manager announced in a news release Jan. 30. The digital hub is free to advisers. BlackRock cited Cerulli Associates data showing that almost 2 in 3 retirement plan advisers (62%) reported wanting more support in building their defined contribution retirement business and that 39% valued support in growing their wealth business. The formation of the digital hub, which BlackRock dubbed the Defined Contribution Practice Management Program, comes as advisers increase their presence in the retirement plan business. These specialist advisers increased the DC assets they manage by 14% between 2018 and 2022, outpacing the 6% growth rate for the overall adviser market, BlackRock said, citing Cerulli data.

Ascensus splits retirement business into 4 units Ascensus has reorganized its retirement business into four segments to support its ongoing growth, the record keeper announced in a news release Feb. 5. The four segments — core retirement, partner solutions, small business, and retirement products and solutions — each report to Ascensus President Nick Good. Core retirement represents the company’s Ascensus-branded defined contribution segment; partner solutions serves Ascensus’ extensive private-label partnerships with financial institutions; small business encompasses the company’s CoPilot, Individual (K), and SIMPLE plans products and solutions; and retirement products and solutions provides tailored services to banks, credit unions and other entities. All but the retirement products and solutions business segment are new, an Ascensus spokesman said. “Creating defined segments allows us to tailor our business even more effectively to the specific needs of those we serve, and enhances our ability to deliver even more to them,” Good said in the news release. In addition to ranking fifth in the number of plans under its administration, Ascensus also leads in the 529 education savings and state-facilitated retirement plan marketplace, with 43 state 529 plans and 75% of the SFRP assets under administration, the record keeper said. As of Sept. 30, Ascensus has more than $723 billion in assets under administration.

Centerra, Aon to pay $7.5M to settle target-date suit Centerra LLC and its investment manager, Aon, agreed to pay $7.5 million to settle an ERISA lawsuit by current and former employees.

ment and retention, with 90% citing this as a reason.

Vanguard, Fidelity dominate in target-date assets Vanguard Group and Fidelity Investments together managed 50% of the $3.55 trillion in target-date fund assets at the end of 2023, according to Vanguard, which cited data from Morningstar. The five largest target-date fund money managers accounted for more than 80% of the assets. Target-date fund market share

Vanguard Group

36%

Fidelity Investments

14%

T. Rowe Price

12%

BlackRock

11%

American Funds

State Street Global Advisors

J.P. Morgan

Other

12%

Source: Vanguard Group

Attorneys for plaintiffs and defendants filed a settlement document Feb. 2 in a U.S. District Court in Columbia, S.C. The company, its fiduciaries and its investment manager, Aon, are defendants. Aon will pay $4.5 million; Centerra will pay $3 million. The plaintiffs sued in December 2020, arguing the Centerra 401(k) plan’s use of a target-date series offered by Aon was worse than the target-date series it replaced. Plaintiffs said actions by the defendants breached their fiduciary duties and represented prohibited transactions under ERISA. “Defendants admit no wrongdoing or liability with respect to any of the allegations or claims in this action,” the settlement document said.

Trading by participants in 401(k)s drops in 2023 Trading in 401(k) plans was lighter and calmer last year compared with 2022, according to research by Alight. Net trading activity as a percentage of starting balances was 0.82% last year vs. 1.27% in 2022, as measured by the Alight Solutions 401(k) index, which is based on 401(k) trading activity of more than 2 million people with more than $200 billion in collective assets. Last year, there were only 14 above-normal trading days compared with 41 above-normal days in 2022. Normal trading occurs when the net daily movement of participants’ balance equals between 0.3 times and 1.5 times the average daily net trading activity for the preceding 12 months. “Historically, within the Alight Solutions 401(k) Index trading increases as stocks fall,” an Alight report said Jan. 18. “However, with rising markets in 2023, 401(k) investors were content to watch their balances increase and not make large trades.” The biggest sources of inflows last year were bond funds (48% of total index allocations), money market

funds (28%) and large-cap U.S. equity funds (16%). The biggest sources of outflows were target-date funds (39%), company stock (24%) and stable value funds (17%). However, target-date funds provided the biggest source of contributions (49%), with large-cap U.S. equity funds (21%) and international equity funds (7%) far behind. The allocations to target-date funds (31.4%) and large-cap domestic equity funds (27.5%) together were higher than the combined total of the 11 other assets classes in the Alight index.

Profits might push small businesses to offer plans Making bigger profits is the single most important reason that might spur small businesses to offer retirement plans, according to a new report from the Employee Benefit Research Institute, the Center for Retirement Research at Boston College and Greenwald Research that was released Feb. 5. Almost 1 in 4 small businesses (23%) said the biggest reason that would drive them to seriously consider offering a plan was an increase in profits, outweighing state mandates to enroll workers in state-run plans (14%), lower administrative requirements (14%), and business tax credits for starting a plan (11%), the report found. Almost 3 in 4 small-business owners not offering a plan (72%) reported not being aware of tax credits available to cover the costs of starting one. However, 78% said the tax credits would make it at least somewhat more attractive to offer a plan. Among small-business owners offering plans, 95% said the reason they offer a plan is the positive effect on employee attitude and performance. Another top reason is the competitive advantage small businesses gain in employee recruit-

Lawsuit over BlackRock funds dismissed A federal judge in Madison, Wis., dismissed a lawsuit by former CMFG Life Insurance Co. employees, who claimed the company and its 401(k) plan fiduciaries had violated ERISA by retaining a BlackRock target-date series that they had alleged performed worse than a selected group of other providers’ target-date series. “The court agrees with defendants that plaintiffs’ allegations are insufficient to support a fiduciary breach claim under ERISA,” U.S. District Court Judge William M. Conley wrote Jan. 26. “Prudence is not measured in a vacuum; rather, courts must look at the context in which the fiduciary made the investment decision, including available alternative investments.” BlackRock is not a defendant. This is one of 11 lawsuits making the same allegations of poor performance for BlackRock’s LifePath Index Funds when compared with four other target-date series. Among the cases for which there has been a ruling, seven others have been dismissed. CUNA Mutual 401(k) Plan for Non-Represented Employees, Madison, Wis., had $875 million in assets as of Dec. 31, 2022.

Northeast Grocery hit with 401(k) lawsuit Participants in a 401(k) plan run by Northeast Grocery Inc. have sued the company and plan fiduciaries, alleging several ERISA violations. Plaintiffs accused the defendants of failing to monitor and control record-keeping costs, failing to offer less expensive share classes and failing to provide better-performing investments, said the complaint filed Jan. 17 in a U.S. District Court in Utica, N.Y. Fiduciaries “repeatedly failed to monitor, explore and consider the lowest share class options for investments in the plan,” said the lawsuit — Collins et al. vs. Northeast Grocery Inc. et al. Plaintiffs also said fiduciaries should have removed a Fidelity Investments’ target-date series because cheaper, better-performing target-date series were available in the marketplace. Fidelity is not a defendant. The lawsuit, which seeks class-action status, complained that plan executives didn’t monitor record-keeping costs, and it alleged that the fees paid to Fidelity “were far more significant than recognized reasonable rates for similarly sized plans.” Spokeswoman Mona Golub wrote in an email that Northeast Grocery hasn’t yet been served with the lawsuit, adding the company doesn’t comment on pending litigation. Northeast Grocery represents the merger of two grocery companies, Tops Markets and Price Chopper/ Market 32, which closed in November 2021. The retirement plans for the two companies were merged to create the Northeast Grocery Inc. 401(k) Plan, Schenectady, N.Y.

Pensions & Investments

February 12, 2024

EXCHANGE-TRADED FUNDS

Alternatives ETFs wait for big moment with institutions By ARI I. WEINBERG Over the last few years, the allocation that large institutional investors have been willing to commit to alternatives has appeared limitless. And the larger the investor, the more likely they were to utilize alts. With few exceptions, however, alternatives offerings in the $8.3 trillion U.S. exchange-traded product market have failed to attract significant institutional interest. Yet some recent market and product trends have helped to shine a light on the opportunities and advantages of ETFs beyond equity and fixed-income exposures. Through January, broadly defined alternative ETFs managed just $6.7 billion; currency products sat at $31.9 billion — due mostly to the introduction of spot bitcoin ETFs in January; and commodity exchange-traded products held $126.6 billion, primarily invested in gold and other precious metals funds, according to FactSet Research Systems. According to the 2023 NACUBO-TIAA Study of Endowments, marketable alternatives made up nearly 18% of assets, on average, for U.S. college and university endowments larger than $1 billion. This category includes hedge funds, absolute return, market-neutral, longshort, event-driven and deriva-

tives-based strategies. Even smaller programs down to $25 million held at least 5.7% of the portfolio in alternatives. State and municipal retirement systems with promised benefits greater than $1 billion held 5% in hedge fund strategies and 6.6% in commodities and miscellaneous alternatives, according to an analysis by Equable Institute. Large institutional alternatives allocations, however, have generally been devoid of ETFs. Yet, in an October regulatory filing, the roughly $48 billion General Electric Pension Trust revealed an over $100 million investment in the Simplify Market Neutral Equity Long/Short ETF, which was launched in June 2023. The investment “is a shot across the bow of hedge funds all across the U.S.,” Bloomberg Intelligence Senior ETF Analyst Eric Balchunas said at a conference in December. “There’s a growing population of hedge-fund like strategies in the ETF wrapper,” said Aaron Filbeck, managing director and head of UniFi by CAIA at the Chartered Alternative Investment Analyst Association. These include long/short equity, merger arbitrage and managed futures. “But to get to the liquidity required for an ETF product, what is being stripped out?” Filbeck asked. “You are either sacrificing

leverage or an illiquidity premium.” It’s unlikely that ETFs will extend into venture capital, private equity or private credit, Filbeck said. Valuation, terms and liquidity on such assets do not make them amenable to the exchange-traded fund vehicle.

alytics at FactSet Research Systems. Among those that did deliver were the $176 million Franklin Systematic Style Premia ETF (FLSP), a long-short equity strategy seeking exposure to quality, value, momentum and carry. Launched in late 2019, the fund has added $82.5 million in assets High correlations and achieved total reIn an analysis for turns of 16.6% over the Pensions & Investments three-year period endof U.S.-listed ETFs with ed Jan. 29. strategies outside of “Given the increaslong equity or fixed ining correlations of eqcome, FactSet found 51 uities, credit and some ETFs with a one-year other alternative assets, correlation (R-squared) clients are always lookbelow 0.05 to both eqing for more efficient uity and fixed income. LIQUIDITY ISSUE: Aaron Among those products Filbeck said a new trend is ways to access non-corwere three long-short ‘hedge-fund like strategies related strategies,” said Dan Muzzarelli, head of ETFs, five bitcoin fu- in the ETF wrapper.’ U.S. ETF distribution at tures ETFs, and the remaining invested in commodities Franklin Templeton. “Interest tends and commodity futures ETPs. In- to pick up late cycle.” Pushing those correlations tocluded in the commodity products are a handful of funds that invest in ward zero, however, is challenging. the burgeoning market for carbon Of the 30 hedge-fund like ETFs that had at least one year’s worth of hiscredits. “Very few of the ETFs that might tory, 12 had an R-squared value of be expected to provide positive, un- 0.5 or higher against either U.S. eqcorrelated returns actually deliv- uity or investment-grade bond marered, at least to the standard of hav- kets, according to FactSet. “Commodities and currencies ing a goodness-of-fit of 0.05 or less,” said Elisabeth Kashner, vice presi- provided better diversification,” dent and director of global fund an- Kashner said.

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Eric Biegeleisen, partner and deputy chief investment officer at 3EDGE Asset Management, which manages $1.8 billion in ETF portfolios for retail, high-net-worth, and small institutions, said his firm regularly evaluates and invests in commodity ETPs, including energy and agricultural futures and precious metals, as part of its real asset portfolio. He added that many firms like his will manufacture their own longshort or market-neutral strategy using ETFs, rather than buying a packaged product. Similarly, Dulari Pancholi, partner and head of credit and multiasset research at NEPC, said she has observed investment managers watching ETFs and tracking flows “to get a sense of market movement and sentiment as a measurement to better inform when they might put on or take off a trade.” Institutional investors and private wealth clients, however, are not yet looking to bring alternative ETFs into their portfolios, according to Pancholi. Franklin’s Muzzarelli counters that there are some cases where institutions are evaluating ETFs in their market-neutral portfolios. “In this asset class, daily liquidity, transparency and low fees are all tenets that resonate with any buyer,” he said. n

February 12, 2024

Pensions & Investments

BY THE NUMBERS Pension risk transfer activity

Monthly corporate funding ratio

Total completed transactions (billions)

Most recent transactions (millions)

$90

Type

Sponsor

Date

Assets

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

Shell USA

Feb. 7

$4,900

Huntington Ingalls Industries

Feb. 1

$411

Ball Corp.

Jan. 26

$1,800

Lockheed Martin

Jan. 24

$414

Office Depot

Jan. 18

$179

Renesas Electronics

Jan. 8

Church of England

Dec. 18

$31

Thales Group

Dec. 1

$3,400

Unisys Corp.

Nov. 27

$250

The Co-operative Group

Nov. 24

$5,000

Walgreens Boots Alliance

Nov. 24

$6,000

MMC U.K.

Nov. 16

$2,500

Deutsche Bank

Nov. 13

$619

Other $80 Total transactions:

Total transactions:

$70

Lump-sum acceptance

Total transactions:

$60

Total transactions:

Lump-sum offer

$50

Longevity swap

$40 $30

Buyout

$20

$10 $0

Buy-in

Total transactions:

2020

2021

2022

2023

115%

January 2024: 105.4% 110% 105% 100% 95% 90% 85% 80% 75% 70%

For details on all recent pension risk transfers, go to pionline.com/ pension-risk-transfer.

2024

65%

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Trailing 12-month returns by asset class February

March

April

May

June

2022 July

August

September

October

November

December

January

February

March

April

May

June

July

August

September

October

November

December

2024 January

S&P 500 16.4%

S&P 500 15.6%

Real Estate 0.7%

Cash 0.1%

Cash 0.2%

Cash 0.4%

Cash 0.6%

Cash 0.8%

Cash 1.1%

Cash 1.5%

Cash 1.9%

Cash 2.2%

Cash 2.6%

MSCI ACWI ex-U.S. 3.0%

Cash 3.3%

S&P 500 19.6%

MSCI ACWI ex-U.S. 13.4%

S&P 500 15.9%

S&P 500 21.6%

MSCI ACWI ex-U.S. 12.1%

S&P 500 13.8%

S&P 500 26.3%

S&P 500 20.8%

Real Estate 10.6%

Real Estate 12.2%

S&P 500 0.2%

S&P 500 -0.3%

BB U.S. Agg -10.3%

S&P 500 -4.6%

High Yield -10.6%

High Yield -14.1%

High Yield -11.8%

High Yield -9.0%

High Yield -11.2%

Russell 2000 -3.4%

High Yield -5.5%

High Yield -3.3%

Cash 2.9%

S&P 500 2.9%

MSCI ACWI ex-U.S. 12.7%

S&P 500 13.0%

MSCI ACWI MSCI ACWI ex-U.S. ex-U.S. 11.9% 20.4%

MSCI EM 10.8%

MSCI ACWI ex-U.S. 9.3%

Russell 2000 16.9%

High Yield 9.3%

High Yield 0.6%

Cash 0.1%

Real Estate -5.2%

S&P 500 -10.6%

High Yield -8.0%

S&P 500 -11.2%

BB U.S. Agg -14.6%

S&P 500 -14.6%

S&P 500 -9.2%

BB U.S. Agg -13.0%

High Yield -5.2%

Russell 2000 -6.0%

BB U.S. Agg -4.8%

S&P 500 2.7%

High Yield 0.0%

Russell 2000 12.3%

MSCI EM 8.3%

High Yield 7.2%

MSCI EM 11.7%

S&P 500 10.1%

High Yield 8.7%

Cash 0.0%

High Yield -0.7%

High Yield -5.2%

High Yield -5.3%

High Yield -12.8%

BB U.S. Agg -9.1%

BB U.S. Agg -11.5%

S&P 500 -15.5%

BB U.S. Agg -15.7%

MSCI ACWI MSCI ACWI MSCI ACWI MSCI ACWI MSCI ACWI ex-U.S. ex-U.S. ex-U.S. ex-U.S. ex-U.S. -11.9% -16.0% -5.7% -7.2% -5.1%

High Yield 1.2%

MSCI ACWI ex-U.S. -1.4%

High Yield 9.1%

Russell 2000 7.9%

Russell 2000 4.7%

High Yield 10.3%

High Yield 6.2%

Cash 5.1%

High Yield 13.4%

Cash 5.3%

BB U.S. Agg -8.5%

BB U.S. Agg -8.2%

Real Estate -13.5%

Real Estate -9.8%

Real Estate -16.6%

Real Estate -22.4%

Russell 2000 -18.5%

BB U.S. Agg -12.8%

S&P 500 -18.1%

S&P 500 -8.2%

S&P 500 -7.7%

BB U.S. Agg -0.4%

BB U.S. Agg -2.1%

Cash 3.7%

High Yield 4.4%

Cash 4.4%

Russell 2000 8.9%

Cash 4.9%

MSCI EM 4.2%

MSCI EM 9.8%

Russell 2000 2.4%

Russell 2000 -14.3%

MSCI ACWI MSCI ACWI ex-U.S. ex-U.S. -0.4% -1.5%

2023

MSCI ACWI MSCI ACWI ex-U.S. ex-U.S. 15.6% 5.9%

BB U.S. Agg -2.6%

BB U.S. Agg -4.2%

MSCI ACWI MSCI ACWI ex-U.S. ex-U.S. -10.3% -12.4%

Global exU.S. fixed income -18.8%

Russell 2000 -17.9%

Russell 2000 -23.5%

Global exU.S. fixed income -24.6%

Russell 2000 -13.0%

Global exU.S. fixed income -18.7%

BB U.S. Agg -8.4%

BB U.S. Agg -9.7%

MSCI EM -10.7%

Russell 2000 -3.6%

Russell 2000 -4.7%

MSCI EM 1.7%

Cash 4.1%

MSCI EM 1.3%

Cash 4.6%

Global exU.S. fixed income 2.6%

Global exU.S. fixed income 2.5%

Real Estate 9.8%

BB U.S. Agg 2.1%

Russell 2000 -6.0%

Russell 2000 -5.8%

Global exU.S. fixed income -15.5%

Global exU.S. fixed income -16.7%

MSCI ACWI MSCI ACWI MSCI ACWI ex-U.S. ex-U.S. ex-U.S. -19.4% -15.3% -19.5%

Global exU.S. fixed income -24.8%

MSCI ACWI ex-U.S. -24.7%

Real Estate -16.9%

MSCI EM -20.1%

MSCI EM -12.1%

Real Estate -14.4%

Global exU.S. fixed income -10.7%

Global exU.S. fixed income -3.9%

Global exU.S. fixed income -6.5%

BB U.S. Agg -0.9%

Global exU.S. fixed income -2.5%

Global exU.S. fixed income 0.6%

Global exU.S. fixed income 3.4%

BB U.S. Agg 0.4%

BB U.S. Agg 1.2%

Global exU.S. fixed income 5.7%

Global exU.S. fixed income -0.2%

Global exU.S. fixed income -7.1%

Global exU.S. fixed income -7.9%

Russell 2000 -16.9%

Russell 2000 -25.2%

Global exU.S. fixed income -18.5%

MSCI EM -21.8%

MSCI ACWI ex-U.S. -25.2%

Real Estate -24.7%

MSCI EM -17.4%

Russell 2000 -20.4%

Real Estate -12.6%

MSCI EM -15.3%

Russell 2000 -11.6%

MSCI EM -6.5%

MSCI EM -8.5%

Global exU.S. fixed income -1.8%

BB U.S. Agg -3.4%

BB U.S. Agg -1.2%

Real Estate 2.8%

Real Estate -4.1%

Real Estate -2.0%

BB U.S. Agg 5.5%

MSCI EM -2.9%

MSCI EM -10.7%

MSCI EM -11.4%

MSCI EM -18.3%

MSCI EM -19.8%

MSCI EM -25.3%

MSCI EM -20.1%

Global exU.S. fixed income -22.0%

MSCI EM -28.1%

MSCI EM -31.0%

Global exU.S. fixed income -19.8%

Real Estate -23.6%

Global exU.S. fixed income -14.2%

Global exU.S. fixed income -16.7%

Real Estate -20.3%

Real Estate -14.3%

Real Estate -14.8%

Real Estate -3.9%

Real Estate -6.5%

Real Estate -4.2%

BB U.S. Agg 0.6%

Russell 2000 -8.6%

Russell 2000 -2.6%

Cash 5.2%

Real Estate -3.1%

An up and down year for corporate high yield U.S. corporate high-yield bond monthly returns 4.5% 3.8%

3.7%

1.7%

U.S. corporate high-yield bond spreads (basis points)

U.S. corporate high-yield bond yield to worst

500

9.75%

480

9.50%

460

9.25%

440

9.00%

420

8.75%

400

8.50%

380

8.25%

360

8.00%

340

7.75%

320

7.50%

1.4% 1.1%

1.0% 0.0%

0.3%

-0.9% -1.2% -1.2%

-1.3% Jan.

Feb.

Mar.

Apr.

May

June July 2023

Sources: P&I Research Center; NISA Investment Advisors; Bloomberg LP

Aug.

Sept.

Oct.

Nov.

Dec.

Jan. 2024

300

’22

2023

’24

7.25%

’22

2023

’24

Sponsored by:

ROBUST SOURCING & CAREFUL SELECTION For managers in this space, the ability to deploy capital on a consistent basis is as important as the sourcing of that capital. “We’ve seen some managers that have proven

pionline.com/tpgtwinbrook-direct-lending24

This sponsored Investment Insights was not created, written or produced by the editors of Pensions & Investments and does not represent the views or opinions of the publication or its parent company, Crain Communications Inc. For information on participating in P&I Custom Content projects, please contact Julie Parten at 952.495.0422 or julie.parten@pionline.com.

TwinBrook.pdf

RunDate: 02/12/24

Full Page

Color: 4/C

February February12, 12,2024 2024

THE

Pensions & Investments

L ARG E S T R E T IR E MENT FUNDS

What’s inside THE FUNDS How the data was compiled 19 The largest retirement funds/ sponsors 20 Funds by category 24 Funds by type 25 Average DB plan asset mixes 26 Average DC plan asset mixes 27 Aggregate asset mixes: DB plans 28 Aggregate asset mixes: DC plans 29 Assets of the top 200 funds by plan type 30 Number of funds using strategy cited 30 Makeup of the top 200 assets: DB vs. DC 30

DEFINED BENEFIT DB assets by investment vehicle 30 Funds with the most DB assets managed internally 30 Funds with DB assets in hybrid funds 30 Funds with DB plans using an external cybersecurity vendor 30 Funds with DB plans with fees paid to external money managers 30 Funds with DB plans using ESG factors 31 Funds with DB assets invested under ESG principles 31 Funds with DB plans using hiring policy for WMDV-owned managers 31 Funds with DB assets managed by WMDV-owned managers 31 Funds with DB assets invested in China 31 Most-used DB managers 31 Most-used DB consultants 31 Most-used DB primary custodians 31 Funds with the most DB assets in U.S. equity 32 Non-U.S. equity 32 Global equity 32 Emerging markets equity 32 Developed markets equity 32 LDI strategies 32 REITs 32 U.S. fixed income 33 Global/non-U.S. fixed income 33 Developed markets fixed income 33 Emerging markets debt 33 Bank loans 33 High-yield securities 33 Inflation-protected securities 33 ETFs 33 Alternatives 34 Alternatives, by class 34

Tim Boelaars

Assets are in billions for years ended Sept. 30. $13,022.6

DEFINED CONTRIBUTION Largest DC plans by type 35 Largest DC plans by asset class 35 Funds with DC plans offering auto enrollment 35 Funds with DC plans offering auto escalation 35 Funds with DC plans offering white-label options 35 Funds with DC plans offering stand-alone retirement income options 35 Funds with DC plans offering an ESG focus 35 Funds with DC plans using an external cybersecurity vendor 36 Funds with DC plans with fees paid to external money managers 36 Most-used DC managers 36 Most-used DC consultants 36 Most-used DC primary custodians 36 Most-used DC record keepers 36 MORE ONLINE To view the complete report, including a full data set, go to pionline.com/sponsors24

Change in assets by category

Top 1,000 funds $14,127.9

Top 200 funds

$12,157.8

Top 200 corporate funds

Top 200 public funds

Top 200 union funds

Top 200 miscellaneous funds

$10,203.8 $9,445.9 $8,838.7

$5,246.8 $4,634.3

$4,968.7

$3,435.3 $2,826.1 $2,928.4

$1,349.9 $1,221.1 $1,338.0

2021

2022

2023

2021

2022

2023

2021

2022

2023

2021

2022

2023

$171.8

$157.2

$210.8

2021

2022

2023

2021

2022

2023

Pensions & Investments

THE

L ARG E S T R E T IR E MENT FUNDS

The 2023 P&I 1000 at a glance 2023 assets

One-year change

Five-year change

Top 1,000 assets

$13,022.6

7.1%

18.3%

Defined benefit

$7,706.5

3.7%

11.5%

Defined contribution

$5,316.1

12.4%

29.7%

Top 200 assets

$9,445.9

6.9%

Top 100 assets

$7,640.0

Top 50 assets

One-year change

Five-year change

Inflation-protected securities

$70.7

-0.6%

-6.5%

Cash

$109.3

23.9%

U.S. active equity

$252.7

U.S. active bonds

$722.1

19.3%

Passive U.S. equity

6.6%

18.1%

$5,937.1

6.1%

18.4%

Top 25 assets

$4,369.1

7.1%

19.2%

Top 200 DB

$6,265.4

4.4%

14.9%

$3,180.5

12.1%

28.9%

Top 200 DB plans Internally managed*

Assets are in billions as of Sept. 30. 2023 assets

Top 200 DC

February 12, 2024

2023 assets

One-year change

Five-year change

Employer contributions

$158.0

1.2%

11.3%

41.0%

Benefits paid

$320.3

4.0%

23.6%

18.6%

-37.6%

Fees paid to money managers

$5.8

3.6%

N/A

2.1%

-4.4%

$714.8

10.9%

18.1%

Top 200 DC plans

Passive U.S. fixed income

$174.6

2.9%

33.6%

Passive equity

$712.4

23.6%

32.2%

Non-U.S. active equity

$370.6

15.2%

-15.2%

Passive bonds

$61.3

8.3%

22.1%

$4.0

25.0%

-9.1%

Global/non-U.S. active bonds

$57.9

13.5%

-22.3%

REITs

Global equity (active & passive)

$298.8

30.5%

12.2%

Inflation-protected securities

$9.3

16.3%

10.7%

Emerging markets (active & passive)

$197.2

10.4%

3.0%

Commodities

$0.7

-12.5%

-36.4%

Private equity

$0.0

N/A

Real estate equity

$1.1

N/A

Target-date strategies*

Equity

$159.5

7.1%

-4.9%

Debt

$37.7

26.9%

59.1%

China equity

$7.8

4.0%

N/A

$1,407.5

9.9%

8.6%

China debt

$0.1

-50.0%

N/A

U.S. equity (active & passive)

$571.2

14.5%

10.5%

LDI investments

$72.9

-11.2%

-22.5%

U.S. fixed income (active & passive)

$430.0

5.5%

3.3%

Hedge funds

$152.6

10.3%

-4.6%

Direct investments

$133.6

2.2%

-3.0%

Funds of funds

$19.0

150.0%

-14.4%

Commodities

$17.9

-7.7%

-1.6%

Private equity

$731.7

5.8%

99.3%

Non-U.S. equity (active & passive)

$184.5

9.2%

16.6%

Global/non-U.S. fixed income (active & passive)

$20.6

39.2%

7.9%

Global equity (active & passive)

$63.9

47.6%

9.8%

Real estate

$15.4

-3.8%

N/A

Venture capital

$58.2

-7.5%

42.0%

Other alternatives

$67.0

-10.5%

31.6%

Buyouts

$418.3

8.5%

100.5%

Passive equity

$1,086.7

14.7%

15.2%

Mezzanine

$4.7

2.2%

56.7%

Passive bonds

$192.7

5.2%

40.6%

Distressed debt

$19.4

14.1%

-2.5%

Enhanced indexed equity

$40.8

27.5%

-19.0%

Private credit/debt

$126.2

28.8%

683.9%

Enhanced U.S. indexed bonds

$29.1

7.8%

-2.7%

Energy*

$27.5

-3.8%

-14.1%

Real estate equity

$511.5

0.2%

52.9%

Fossil fuel

$6.7

N/A

REITs

$24.9

-17.5%

-52.2%

Renewable

$0.9

N/A

High yield

$90.2

17.8%

29.0%

Infrastructure

$93.9

30.2%

227.2%

Bank loans

$13.2

11.9%

25.7%

Hybrid plans

$154.6

-9.7%

-13.0%

$421.9

20.1%

56.8%

Custom

$286.2

14.2%

43.3%

Off-the-shelf

$103.6

32.5%

133.3%

Contributions

$73.2

10.4%

33.3%

Employer

$23.5

23.7%

39.9%

Employee

$49.7

5.1%

30.4%

Fees paid to money managers

$0.3

0.0%

N/A

401(k)

$576.8

23.8%

-10.9%

Profit sharing

$17.3

14.6%

25.4%

ESOP

$5.5

-12.7%

-77.3%

457

$168.8

13.7%

32.7%

401(a)

$95.8

1.3%

40.3%

403(b)

$85.5

47.2%

65.7%

Other DC

$802.7

12.7%

37.2%

*Total is greater because some funds did not provide breakouts. Historical data may include retroactive updates.

THE P&I 10 0 0 C Y B E R S E C U R IT Y

Sponsors seeking firms to address cybersecurity risks External vendors are more in demand as concerns rise for plans

use an external cybersecurity vendor for their defined benefit plans, while four disclosed they use a vendor for their defined contribution plans. Though cybersecurity firms offer a variety of services, the retireBy COURTNEY DEGEN ment plans that use them often do so to supplement their own cybersecuWith cybersecurity now a crucial rity programs, sources said. External firms can help “with issue in the retirement industry, the development, the some plan sponsors are implementation, (and) turning to external firms T H E DATA the maintenance of all to help prevent the next A list of DB plans the security programs cyberattack. using an external that (plans) have,” said “There’s definitely a cybersecurity Hank Kim, executive dilot more attention on cyvendor is on rector and counsel for bersecurity,” said Robert page 30 the National ConferR. Gower, director at ence on Public EmployTrucker Huss, a law firm ee Retirement Systems. focused on employee benefits law. Specifically, many plans seek out And for large plans with more than $1 billion in assets, Gower said “third-party 360 cybersecurity rethere’s been a “slow uptick” in the views,” where a firm will conduct a review of both the plan’s cyberseuse of external cybersecurity firms. According to data collected from curity policies and procedures, and Pensions & Investments’ survey of the ensure that such policies are being 200 largest retirement plans, 12 pub- followed by the plan’s vendors, lic retirement funds disclosed they which can include their record

R E VIE W: Robert R. Gower said cybersecurity firms will make sure a plan's procedures are being followed by its external vendors.

keeper, custodian, managed account provider and investment consultant, Gower said. When looking over a plan’s cybersecurity framework, those firms often utilize guidance from the Department of Labor’s Employee Benefits Security Administration, which issued cybersecurity guidance in April 2021. The DOL guidance includes online security tips for plan participants, tips to help plan fiduciaries select a service provider, and best practices for fiduciaries and record keepers to manage cybersecurity

risks. Such practices include having a formal, well-documented cybersecurity program; conducting prudent annual risk assessments; and obtaining a reliable third-party annual audit of security controls, among others. EBSA oversees retirement plans that are governed by ERISA, which includes most private employer plans.

Protecting plans

Tenable, a cybersecurity firm that provides services to the $63.3

billion Maryland State Retirement & Pension System, Baltimore, is focused on exposure management — helping organizations identify, understand and address the cyber-risks they face. Since retirement systems rely heavily on technology, “the key to safeguarding these systems is in taking proactive action to understand where potential weaknesses lie in the technology environment and secure these issues before a criminal actor has a chance to exSEE CYBER ON PAGE 41

February 12, 2024

THE

L ARG E S T R E T IR E MENT FUNDS

Pensions & Investments

FAC E TO FAC E

Texas Teachers' Auby: Private credit not for us CIO says pension fund eschews asset class, but is betting big on energy

Whitney Milam

By ERIN ARVEDLUND America’s fifth-largest pension fund doesn’t invest in private credit — at all — but invests heavily in energy, including oil and gas, wind and solar energy companies. The $181.7 billion Texas Teacher Retirement System supports 2 million teachers in Texas, active and retired, or 1 in every 20 Texans. Jase Auby, the pension fund’s chief investment officer, met with Pensions & Investments to discuss the retirement plan’s strategic asset allocation; its support of oil and gas investing as other pension funds and endowments divest; and the reason it avoids investing in the latest hot asset class — private credit, an exploding market that recently crossed the $1.7 trillion mark, according to Bloomberg. While Texas Teachers is similar to many other state-run retirement systems, there are key differences. “We look very similar to a lot of our peers, but we have key differences,” said Auby at his Austin offices. “We’re a little overweight private markets, we’re at about 40% private markets ... defined as private equity, real estate, energy, natural resources and infrastructure,” he said. TRS also holds about 10% in hedge funds. However, “We have a zero percent allocation to private credit,

are actually quite thin. In private credit, they’re much higher. There’s an ongoing debate, whether the advantages of that leverage and private borrowers that are more illiquid is enough to offset that additional fee burden in the private credit asset class. So we have a zero allocation to private credit. However we do view credit as an asset class to be invested in when there’s a dislocation.” The last time was the global financial crisis in 2008-2009. At that point, TRS again had a zero allocation to credit, “then we ramped up to 8% allocation to credit right after the GFC. It was a great investment, a great thing we did. Then we had the discipline — this is the hardest part — to actually sell it all back down” to take profits.

Asset allocation review

TI MI NG: CIO Jase Auby said Texas Teachers invests in private credit only when there is a big market dislocation.

with bond risk, to create which is interesting beR E L AT E D a hybrid security called cause our peers have on CONTENT credit. Philosophically the order of 10%. By and For the full that’s been behind the large, it’s a very standard interview, endowment model for looking fund with those including video many years.” few key differences.” highlights, go to Second, the median Why no private credPIonline.com/ public pension fund has it? Auby cites two main auby an assumed return hurreasons: “We’ve very dle of 7%. much followed the en“With interest rates so low for a dowment model method of investing. Look at the origins of the mod- number of decades, that’s driven us el; it said either own equities or all out of the credit markets. So Treasuries; you shouldn’t neces- even if we had wanted to be in sarily put business risk together credit, we would not have been

able to,” he said. “Now we have this new thing, called private credit. Two things have happened; rates have gone up generally, so even liquid credit is starting to look more interesting. But private credit has found a way to boost those returns, by levering credit, as well as finding smaller borrowers who might pay a little bit of premium over public markets.” However, private credit’s returns are offset by much higher fees, Auby said. “In liquid credit markets, the fees

TRS’ last five-year review of its strategic asset allocation was in 2019, and the retirement system’s undergoing its next one this year. The 2019 breakdown was 54% global equities, 21% real return, 21% stable value and 8% allocated to risk parity, a total of 104%; the portfolio has leverage at the asset allocation level. “We have 13 asset classes that roll up three buckets: equity, stable value (Treasuries, or stable value hedge funds that hold value in crisis conditions), and real return, like real estate that offers a hedge in inflation environments.” Most pension funds have a 7% return target “with similar time horizons. We have the longest time SEE AUBY ON PAGE 37

THE P&I 10 0 0 AC T I V E E Q U I T Y

For some funds, active is once again attractive Search for alpha drives some pension funds to buck passive trend

increased market volatility — as well as the outsized influence of the Magnificent Seven on large-cap U.S. equity products — the pendulum is slowly swinging back to favor active investment. Many active managers By CHEYENNE LIGON also argue that the rise of passive investing puts the economy on autopiand DOUGLAS APPELL lot, allowing big companies to get Passive investing has been a even bigger unchecked, without dominant trend in recent years, but necessarily staying inventive, good some large U.S. pension funds are or even profitable. For pension funds, however, the seeing more opportunities ramping decision to increase their expoup in active management. sure to active U.S. equiIn some ways, the trend ties is less about convicis surprising. Low-fee inT H E DATA tion in the merits of dex funds — particularly Data on funds active investment and those focused on the effiwith active and more about an opportucient large-cap segment passive assets nity to find alpha. of the U.S. stock market begins on For the latest Pensions — have historically outpage 32 & Investments survey of performed their actively the largest U.S. retirement managed counterparts over the mid to long term. The track plans, active U.S. equity assets for record and cost efficiency of pas- the top 200 defined benefit plans sive products have made them a jumped 18.6% to $252.7 billion as of great success: In 2023, passive fund Sept. 30, topping a 10.9% rise in net assets eclipsed those in active passive U.S. equity assets to $714.8 funds for the first time ever, accord- billion — following a decade or more where the growth of passively ing to data from Morningstar. But, despite the continued growth managed assets has dwarfed that of of passive management, there has active. Over the past five years endbeen a growing number of fund ed Sept. 30, active U.S. equity is managers claiming that, in the “new down 37.6% while passive is up normal” of higher interest rates and 18.1%, according to P&I data.

In 2023, the $181.7 billion Texas Teacher Retirement System, Austin, increased its active U.S. equities by 20% to $25.7 billion, and decreased its passively managed U.S. equities by nearly 37% to $3.2 billion. The $30.6 billion pension plan of the Alaska Retirement Management Board, Juneau, committed $2.85 billion to active equity in 2023 — up from zero the previous year — and decreased its passive exposure in the same category by 34% to $5 billion. The $21.5 billion pension plan of the Idaho Public Employees Retirement System upped its active U.S. equities exposure by 26% to

$3.25 billion and decreased its passive U.S. equities exposure by a modest 6% to $1.8 billion. Even the $450.3 billion California Public Employees’ Retirement System, Sacramento — which still heavily leans passive, with $102.4 billion in passively managed U.S. equities last year — upped its exposure to active U.S. equity by 131% to $8.65 billion. Passive U.S. equity was down 2.6%.

A conscious choice

Jase Auby, CIO of Texas Teachers — whose public equity portfolio is approximately 6% passive and 94%

active — said the pension fund’s exposure to active investment products is a conscious choice. “However, it’s on an opportunity-by-opportunity basis. We would not hesitate to go passive if we didn’t see opportunities. You know, we’ll shut down a portfolio and just put it in a passive (product) without even thinking about what we’ll replace it with. And likewise, if we find a good alpha source we will invest in it without thinking about how much passive there is,” Auby said. “So passive is a byproduct of our investment process rather than an allocated amount.” Over the past year, Auby said his portfolio delivered record alpha. “We’ve seen a real return to fundamental investing, things folks invested in that haven’t worked for so long because interest-rates were going down and down,” Auby said. “Fundamentals are starting to be rewarded now that the Fed has begun to tighten.” That opportunity to find alpha in actively managed products is driving pension funds like CalPERS and the $95.2 billion Massachusetts Pension Reserves Investment Management Board to add more to their active strategies in 2024. SEE ACTIVE ON PAGE 37

Pensions & Investments

THE

L ARG E S T R E T IR E MENT FUNDS Michael Austin/The iSpot

February 12, 2024

T HE P&I 1000 REAL E STATE

Infrastructure portfolios soar; real estate stumbles Write-downs affect real estate returns, while infrastructure continues its historic climb By ROB KOZLOWSKI

THE P&I 1 0 0 0 E M E R G I N G M A NAGERS

Diversity a factor, but not top priority, for manager hires Some retirement plans put emphasis on diversity with policies, formal programs By CARYL ANNE FRANCIA When hiring money managers, U.S. pension funds say they have one thing to make clear: It is their fiduciary duty to prioritize firms that can generate strong returns and mitigate risks. But there are ways that funds make their selection while promoting diversity, regardless of whether they have formal policies for hiring minority- and women-owned programs. Aside from encouraging inclusiveness within the asset management industry, considering the identity of a firm’s ownership in hiring practices can help allocators create a broad talent base. That can increase the “likelihood of capitalizing on investment opportunities in an increasingly global and diverse world,” said Joanna Bewick, a managing director, portfolio manager and senior consultant at Wilshire Advisors and leader of its DEI and diverse-owned manager initiative. “We’ve seen over the past five years is increasing interest in DEI in the asset management industry, so in the time that I’ve worked with this initiative I have seen increasing interest in our client base (and) from the consulting industry,” Bewick added. “Even nondiverse-owned firms have improved their reporting when it comes to their diversity statistics.” In Pensions & Investments’ survey of the 1,000 largest U.S. retirement plans, 27 of the top 200 plans reported that

T H E DATA Data on funds using diverse managers begins on page 31

they have policies or programs to hire firms owned by women, minorities, people with disabilities and veterans. The data shows 22 plans, including some that don’t have a formal policy, reported investments with diverse firms. Collectively, diverse-owned firms managed a total of $139.6 billion in defined benefit assets. One such fund without a formal policy is the New Mexico Public Employees Retirement System. Michael Shackelford, chief investment officer of the $16.3 billion fund, said not having a formal policy doesn’t necessarily mean that PERA isn’t looking at the diversity of firms it hires. After assessing firms for their capabilities and fees, diversity would be looked at as a “tiebreaker,” he said. By considering the metric of diversity, “we’re telling the manager ‘why aren’t you more diverse?’ I think the more managers hear that from funds and plans, the more likely they are to bring in that entry-level pipeline of more diverse associates and analysts from the junior level, even at the mid level and sometimes the senior level,” Shackelford added. “The more they hear that from allocators, the more likely they’re going to move in that direction.”

Emerging managers

A handful of pension funds also run “emerging manager” programs, some with the goal of hiring managers with owners from diverse backgrounds. SEE DIVERSITY ON PAGE 36

T H E DATA Data on funds with real estate and infrastructure assets begins on page 34

the struggles in the office sector, he said repricing in multifamily assets in 2023 concerned his team more. "There are likely to be further adjustments in pricing downward as buyers and sellers bridge the gap in bid/ask pricing. Potential interest rate cuts, loan maturities and liquidity needs is expected to bring more transaction activity in equity this year," he said. The NCREIF Fund Index-Open End Diversified Core Equity, for example, posted a net loss of 12.9% for the year ended Sept. 30.

Real estate equity assets among the top 200 U.S. retirement plans with defined benefit assets stayed relatively flat for the year ended Sept. 30 as write-downs affected performance, while infrastructure continued to grow by leaps and bounds, according to the latest Pensions & Investments survey. The differences reflect not only performance but the maturity of the real estate asset class, into CalPERS $6 billion less which U.S. retirement plans have The largest U.S. pension fund, invested for decades, while infraCalPERS, alone accounted for $6 structure has been one of the billion less in real estate equity fastest-growing asset classes assets, reporting $54 billion as of from virtually nothing less than Sept. 30, a drop of 10.3% from 20 years ago. $60.2 billion a year earlier. For As of Sept. 30, real estate equithe year ended Sept. 30, the ty assets totaled $511.5 billion, up $450.3 billion California Public 0.2% from the year before, acEmployees’ Retirement System’s cording to the survey. real estate portfolio had a net reWhile assets did rise slightly, turn of -10.5%, just below its the increase was significantly benchmark return of -10.7%. less than the survey recorded in Spokespeople at CalPERS did ‘Performance the previous five years. Real esnot respond to requests for furtate equity assets are up 52.9% was going to ther information. over the past five years. Still, said Nicolini, pension be a big John Nicolini, managing direcfund clients in no way are looktor and senior consultant at in- headwind to ing to move away from real estate vestment consultant Verus, who lower their allocations. any real estate or “We’re leads its real assets practice, said still allocating far in an interview that performance allocation more aggressively to real estate was the reason for real estate asthan really any other real asset growing year sets stalling. class over the last two quarters,” “Real estate has seen pretty over year.' he said. material write-downs at the valIn a later email, Nicolini said VERUS' JOHN NICOLINI ue of the assets, so that’s going to they have been most aggressive explain why real estate barely within real estate credit and opmoved or for some plans probably shrank,” portunistic real estate. Nicolini said. “Performance was going to be a big “Credit has been an easier place to get capital headwind to any real estate allocation growing deployed at favorable returns so that’s been an year over year. That was one of the few asset area of focus. We will likely shift towards more classes taking write-downs on the private side.” traditional equity funds in the second half of In a later email response to questions, Nicoli- 2024,” he said. ni said that while most P&I readers are aware of SEE REAL ESTATE ON PAGE 38

How P&I compiled the data for top 1,000 Pensions & Investments gathered information for this report, published annually since 1974, in three steps. Questionnaires were sent to more than 1,300 fund sponsors in P&I’s database. The largest 1,000 were identified from completed questionnaires, follow-up phone calls and emails, and database searches. Data for sponsoring entities that did not respond was culled from published annual or quarterly reports and Form 5500s filed with the Department of Labor. P&I’s survey generally covers the 12 months ended Sept. 30, 2023. In cases where no information was available from the fund, or the data was older than June 30, 2023, P&I, along with its partner Cognition Solutions, calculated estimates to Sept. 30. There were a few new questions added to the survey this year. Private credit was added as a stand-alone asset allocation option for defined benefit plans to reflect the growing importance in plans’ portfolios. Energy investments were broken out into clean energy

and fossil fuel energy investments and a new breakdown regarding real estate assets was added — categorizing investments by core, core-plus, value-added and opportunistic. For defined benefit plans that disclosed any investments in exchange-traded funds, they were given the option to provide ETF ticker symbols this year. On the defined contribution side, “other retirement income options” was added as a choice for what was provided within target-date funds, as well as a question asking for specifics on offering a retirement income option. Annuities were already an option within the target-date fund question. Real estate equity assets excluding REITs was also added. Dollar amounts generally are rounded to the nearest million; in certain tables and charts, they are rounded to billions. The aggregate asset mixes represent the weighted averages of all reported allocations for the respective funds. All data in this special report is ©2024 Crain Communications Inc. Reproduction  without permission is prohibited.

February 12, 2024

THE

L ARG E S T R E T IR E MENT FUNDS

The largest retirement funds/sponsors

Pensions & Investments

Ranked by total assets, in millions, as of Sept. 30.

DB ASSET MIX Rank

2023 rank

Total DB assets

Total DC assets

Sponsor

Assets

Change

Stocks

Federal Retirement Thrift

$782,835

13.5%

Bonds

Cash

Other

California Public Employees

$452,453

4.7%

$450,289

$2,164

42.1%

22.3%

1.6%

34.0%

Dan Bienvenue, Deputy CIO-Total Portfolio & Interim CIO (DB); Christine Reese (DC)

California State Teachers

$309,931

6.7%

$307,868

$2,063

38.2%

14.1%

2.1%

45.6%

Christopher Ailman, CIO (DB); Patrick Bivins, Pension Program Manager III (DC)

New York City Retirement

$247,999

8.7%

$247,999

43.2%

30.4%

1.0%

25.4%

Steven Meier, CIO & Deputy Comptroller-Asset Management

New York State Common

$246,307

5.6%

$246,307

41.3%

19.9%

1.0%

37.8%

Anastasia Titarchuk, CIO

Florida State Board

$194,659

6.3%

$180,466

48.9%

16.4%

1.2%

33.5%

Lamar Taylor, Interim Executive Director & CIO (DB); Daniel Beard, Chief of DC Programs (DC)

Texas Teachers

$181,656

4.8%

$181,656

35.7%

12.8%

2.5%

49.0%

Jase Auby, CIO

Washington State Board

$167,033

7.8%

$140,495

$26,538

24.6%

16.3%

59.1%

Christopher Hanak, CIO

Wisconsin Investment Board

$130,932

6.6%

$124,565

$6,367

42.0%

46.0%

12.0%

Edwin Denson, Executive Director & CIO (DB); Shelly Schueller, Director-Deferred Compensation (DC)

New York State Teachers

$130,783

6.2%

$130,783

52.2%

22.8%

1.2%

23.8%

Thomas K. Lee, Executive Director & CIO

North Carolina

$126,472

6.5%

$111,796

$14,676

36.0%

26.2%

11.3%

26.5%

Christopher Morris, Co-CIO

Boeing

$119,225

1.4%

$51,005

$68,220

California University

$118,284

6.6%

$85,684

$32,600

51.4%

13.1%

6.2%

29.3%

Jagdeep Singh Bachher, CIO & VP-Investments

Virginia Retirement

$110,665

8.1%

$104,010

$6,655

25.7%

13.3%

1.6%

59.4%

Andrew H. Junkin, CIO (DB); Laura Pugliese, Portfolio Manager-DC Plans (DC)

Michigan Retirement

$109,513

9.0%

$96,813

$12,700

32.1%

8.9%

4.4%

54.6%

Jon M. Braeutigam, CIO

Ohio Public Employees

$107,468

6.4%

$105,126

$2,342

43.8%

24.3%

0.3%

31.6%

Paul Greff, CIO

Oregon Public Employees

$98,280

2.4%

$95,141

$3,139

20.7%

20.8%

58.5%

Rex Kim, CIO (DB); Claire Illo, Investment Officer (DC)

Massachusetts PRIM

$95,241

7.7%

$95,241

39.5%

17.3%

0.5%

42.7%

Michael G. Trotsky, Executive Director & CIO

Minnesota State Board

$95,177

8.0%

$83,036

$12,141

50.0%

20.0%

4.0%

26.0%

Jill E. Schurtz, Executive Director & CIO

New Jersey

$94,039

7.9%

$88,789

$5,250

44.8%

21.0%

9.5%

24.7%

Shoaib Khan, Director & CIO

Kaiser Permanente

$91,551

5.2%

$56,919

$34,632

Georgia Teachers

$91,088

6.7%

$91,088

71.7%

26.7%

1.0%

0.6%

Charles W. Cary Jr., CIO

AT&T

$90,497

-2.3%

$45,605

$44,892

RTX

$89,511

2.1%

$41,232

$48,279

18.0%

43.0%

3.0%

36.0%

Robin L. Diamonte, VP & CIO

Ohio State Teachers

$87,456

5.4%

$84,946

$2,510

49.2%

19.1%

1.4%

30.3%

Matthew E. Worley, Deputy Exec. Dir.-Invest. & CIO

United Nations Joint Staff

$81,546

9.9%

$81,546

51.0%

29.4%

1.6%

18.0%

Pedro Guazo, Representative of the Secretary-General, OIM

Lockheed Martin

$76,842

-3.9%

$25,443

$51,399

IBM

$76,670

1.2%

$23,648

$53,022

4.2%

82.5%

General Electric

$74,410

-3.9%

$47,782

$26,628

Tennessee Consolidated

$74,373

7.9%

$63,291

$11,082

44.0%

17.3%

1.2%

General Motors

$73,439

-4.2%

$45,916

$27,523

Los Angeles County Employees

$72,167

6.7%

$72,167

32.0%

17.5%

United Parcel Service

$71,931

3.2%

$40,251

$31,680

25.2%

41.3%

Pennsylvania School Employees

$69,072

4.7%

$68,862

$210

26.9%

Illinois Teachers

$65,637

8.2%

$65,637

Bank of America

$65,521

7.6%

$16,666

Maryland State Retirement

$63,269

3.1%

$63,269

Colorado Employees

$63,017

8.2%

$57,550

Northrop Grumman

$62,427

3.9%

$28,988

Nevada Public Employees

$56,247

9.8%

$56,247

J.P. Morgan Chase

$54,674

7.5%

$15,155

$39,519

Ameeta Gosain, CIO-DB Plan (DB); Daniela Nese (DC)

Ford Motor

$54,659

-10.3%

$32,889

$21,770

Erin Rohde, CIO

Wells Fargo

$54,550

-2.6%

$8,784

$45,766

11.6%

83.1%

2.7%

2.6%

Thomas B. Hooley, SVP

Missouri Schools & Education

$53,527

4.6%

$53,527

42.4%

14.5%

0.3%

42.8%

Craig A. Husting, CIO

Teamsters, Western Conference

$53,428

5.9%

$53,428

44.0%

16.0%

1.0%

39.0%

Alan D. Biller, Chairman, Alan Biller and Associates

Utah Retirement Systems

$51,700

7.3%

$43,300

35.0%

20.0%

45.0%

Daniel D. Andersen, Executive Director

Arizona State Retirement

$50,678

4.0%

$50,678

38.0%

4.0%

0.2%

57.8%

Paul Matson, Executive Director

Connecticut Retirement

$49,982

23.2%

$49,982

46.9%

21.4%

0.7%

31.0%

Ted Wright, CIO

FedEx

$49,307

-7.4%

$24,826

31.1%

48.8%

3.2%

16.9%

Jeff Lewis, VP-Retirement Investments

Illinois Municipal

$48,922

7.5%

$48,922

54.2%

24.1%

0.4%

21.3%

Angela Miller-May, CIO

South Carolina Public Employees

$48,683

8.9%

$39,879

$8,804

44.2%

17.6%

2.8%

35.4%

Geoffrey Berg, CIO

State Farm

$48,595

6.1%

$32,855

$15,740

Verizon

$45,773

2.2%

$12,644

$33,129

Indiana Public Retirement

$45,743

6.8%

$39,006

$6,737

15.6%

27.7%

1.5%

55.2%

Johnson & Johnson

$45,214

1.9%

$21,596

$23,618

Alabama Retirement

$44,169

8.6%

$41,733

$2,436

60.4%

15.7%

8.2%

15.7%

David G. Bronner, CEO

Texas County & District

$43,779

8.4%

$43,779

26.0%

31.0%

4.0%

39.0%

Casey Wolf, CIO

Microsoft

$42,572

9.2%

377

Teamsters, Central States

$42,147

603.9%

$42,147

Delta Air Lines

$41,792

-2.0%

$14,783

Iowa Public Employees

$41,129

2.5%

$41,129

Texas Employees

$40,039

7.6%

$35,567

Walmart

$39,598

26.3%

Alaska Retirement

$39,225

4.0%

$30,616

Pennsylvania Employees

$38,805

6.3%

San Francisco City & County

$38,097

Federal Reserve Employees

$37,484

$782,835

$14,193

Key person

Sean McCaffrey, CIO

Elizabeth Tulach, CIO

Thomas Lurquin, VP & CIO (DB); Rajiv Mathur, Executive Director (DC)

Paul Colonna, President & CIO-LMIMCO

13.3%

Rick Klutey, Managing Director & CIO Harshal Chaudhari, Deputy Treasurer & CIO-Global Pensions

37.5%

Michael Brakebill, CIO (DB); Hunter Bethea, Director-Deferred Compensation (DC)

1.3%

49.2%

Jonathan Grabel, CIO

2.6%

30.9%

Ernie Caballero, CIO

23.9%

-2.9%

52.1%

Benjamin L. Cotton, CIO (DB); Jennifer Mills, Deputy Executive Director & Director-DC Investments (DC)

33.7%

11.5%

2.1%

52.7%

R. Stanley Rupnik, Executive Director & CIO

34.3%

58.0%

0.5%

7.2%

David Andreasen, Director & SVP-Retirement Plan Invest.

29.0%

26.3%

0.9%

43.8%

Andrew Palmer, CIO

$5,467

53.1%

18.9%

0.5%

27.5%

Amy C. McGarrity, Interim Executive Director & CIO

$33,439

30.6%

37.6%

2.5%

29.3%

Dennis Newberry, VP-Investments & Trust

54.7%

27.8%

3.7%

13.8%

Steve Edmundson, CIO

$48,855

$8,400

$24,481

Laurence Fulton, CIO Scott Davis, CIO Neil Roache, CIO

$42,572

Dan Goff, Corporate VP-Worldwide Tax Pete Priede, Sr. Director

$27,009

5.8%

5.7%

7.9%

80.6%

36.9%

24.7%

1.2%

37.2%

Sriram Lakshminarayanan, CIO

34.4%

18.3%

2.1%

45.2%

David T. Veal, CIO (DB); Angelica Harborth, DC Program Manager (DC)

$8,609

41.7%

19.6%

1.0%

37.7%

Zachary Hanna, CIO

$34,408

$4,397

48.5%

18.1%

2.6%

30.8%

James G. Nolan, CIO (DB); Sara McSurdy, CFO (DC)

4.7%

$33,546

$4,551

24.7%

5.4%

1.5%

68.4%

Alison Romano, CEO & CIO (DB); Diane Chui Justen, DC Plan Manager (DC)

10.1%

$25,100

$12,384

$4,472 $39,598

Adam Stavisky, SVP-U.S. Benefits

William G. Clark, CIO

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February 12, 2024

THE

L ARG E S T R E T IR E MENT FUNDS

The largest retirement funds/sponsors

Pensions & Investments

Ranked by total assets, in millions, as of Sept. 30.

DB ASSET MIX Rank

2023 rank

Sponsor

Assets

Change

Total DB assets

Total DC assets

Texas Municipal Retirement

$37,216

7.0%

$37,216

Exxon Mobil

$34,706

20.2%

$11,861

$22,845

American Airlines

$34,321

8.2%

$11,496

$22,825

New York State Deferred Comp.

$33,890

16.8%

Nokia USA

$33,447

-0.9%

$24,672

Mississippi Employees

$33,134

6.0%

$31,061

$2,073

General Dynamics

$32,331

9.7%

$11,693

$20,638

Chevron

$31,589

27.6%

$11,597

$19,992

CVS Health

$31,504

7.7%

$5,467

$26,037

Honeywell

$31,322

1.9%

$17,290

Alphabet

$31,044

25.1%

National Electric

$31,022

11.2%

$17,527

$13,495

Pfizer

$30,971

-2.6%

$11,769

$19,202

World Bank

$30,799

4.1%

$30,799

Procter & Gamble

$30,070

10.6%

$1,441

Illinois State Board

$29,568

5.2%

$24,376

Costco Wholesale

$29,224

16.4%

Los Angeles Fire & Police

$28,980

7.8%

$28,980

Caterpillar

$28,476

13.4%

$12,625

$15,851

United Airlines Holdings

$28,300

12.3%

$3,100

$25,200

Citigroup

$28,123

7.9%

$9,860

$18,263

6.6%

66.4%

1.5%

25.5%

Pantelis Apessos, Man. Dir.-Strategy & Invest. (DB); Leonardo Rodriguez, Dir. & Sr. Invest. Officer (DC)

102

Deloitte

$27,790

16.6%

$7,457

$20,333

24.4%

56.5%

1.1%

18.0%

Alex Lee, CIO

Intel

$27,616

11.6%

$816

$26,800

10.0%

89.5%

0.5%

101

New York City Deferred Comp.

$27,552

11.7%

Walt Disney

$27,500

8.8%

Louisiana Teachers

$27,348

100

Stellantis NA

$26,739

Illinois State Universities

Stocks

Bonds

Cash

Other

Key person

35.4%

5.9%

0.6%

58.1%

Yup S. Kim, CIO

40.0%

26.3%

P.B. Newman, Manager-Global Pension Fund

33.7%

Ken Menezes, Managing Director-AM, F&E, CI&R

$33,890

Sharon Lukacs, Executive Director

$8,775

John Hickey, VP-Global Benefits

$14,032

58.1%

18.6%

0.7%

22.6%

Charles Nielsen, CIO

Peter Oades, SVP & CIO

30.0%

46.0%

3.0%

21.0%

Dominick DeAlto, VP-Investments (DB); Charles Malone, Director-Savings Plan Investments (DC)

$31,044 Kevin McCormack, Exec. Director-NEBF Investments

John F. Gandolfo, Director & CIO

$28,629 $5,192

44.8%

24.4%

0.5%

30.3%

$29,224

Scott Richards, Sr. Investment Officer (DB); Jennifer Koelle, Investment Officer-Public Markets (DC) Mark Siegel, AVP-Benefits

50.0%

20.3%

4.6%

25.1%

Bryan Fujita, CIO Martin Rumbold, Defined Benefit Manager (DB); Trisha Romero (DC) Eric Harder, Managing Director-Corporate Finance

Max Prokopisins, Treasury Manager

$27,552

Georgette Gestely, Director

$15,400

$12,100

Carrie-Ann Stepien, Director

6.5%

$24,551

$2,797

8.4%

$17,724

$9,015

$26,331

-4.9%

$14,365

$11,966

$26,288

4.8%

$22,634

Kansas Public Employees

$26,169

5.7%

Dow

$26,079

-2.0%

35.5%

11.8%

3.2%

49.5%

Philip Griffith, CIO (DB); Blake Lee, Manager-Public Markets (DC)

$3,654

34.8%

21.9%

0.4%

42.9%

Suzanne Mayer, Executive Director

$24,793

$1,376

48.4%

22.5%

3.3%

25.8%

Bruce Fink, CIO (DB); Arlen Zentner, DC Plan Officer (DC)

$16,080

$9,999 47.2%

21.4%

1.2%

30.2%

Alyssa Rieder, VP & CIO (DB); Liz Meckenstock (DC)

103

CommonSpirit Health

$25,434

7.8%

$8,534

$16,900

100

Shell USA

$25,191

-2.1%

$14,974

$10,217

101

110

Ernst & Young

$24,980

11.9%

$8,312

$16,668

102

PepsiCo

$24,801

-3.5%

$11,838

$12,963

103

104

Abbott Laboratories

$24,754

5.8%

$10,430

104

107

FMR

$24,658

9.3%

105

111

SUNY

$24,643

11.2%

$24,643

Michael Consorte, Director-Universitywide Benefits

106

PG&E

$24,582

-4.3%

$16,739

$7,843

Ashley Mawhorter, Principal

107

105

National Railroad

$24,310

5.2%

$24,300

$10

William J. Carr III, CEO & CIO

108

113

Southern Co.

$23,502

7.9%

$15,157

$8,345

109

Oracle

$23,475

5.0%

110

114

Deere

$23,393

9.1%

$13,243

111

115

Operating Engineers International

$23,193

8.2%

$23,193

51.4%

25.0%

112

116

Kentucky Teachers

$23,191

8.9%

$23,191

59.3%

12.9%

113

122

Idaho Public Employees

$22,961

15.5%

$21,523

$1,438

54.8%

114

108

Prudential Financial

$22,517

0.5%

$12,388

$10,129

2.7%

115

106

Truist Financial

$22,375

-2.0%

$12,744

$9,631

116

155

Sammons Enterprises

$22,319

43.8%

117

112

Hawaii Employees

$22,189

1.0%

$22,189

118

119

National Rural Electric

$22,163

9.1%

$8,566

$13,597

119

Ascension

$21,944

-11.2%

$6,939

$15,005

120

Mass General Brigham

$21,790

8.9%

$9,241

$12,549

121

123

Merck

$21,526

8.3%

$8,722

$12,804

122

124

Los Angeles City Employees

$21,436

8.2%

$21,436

123

117

L3Harris Technologies

$21,220

2.7%

$7,401

$13,819

124

127

Mayo Clinic

$21,068

9.2%

$10,574

$10,494

125

121

Orange County

$21,046

5.5%

$21,046

126

129

Eli Lilly

$20,950

10.6%

$10,322

127

125

Arkansas Teachers

$20,745

5.1%

$20,745

128

131

Nebraska Investment Council

$20,705

10.7%

$19,818

$887

129

128

Georgia Employees

$20,631

7.8%

$17,934

$2,697

70.0%

26.2%

3.8%

Charles W. Cary Jr., CIO (DB); Jim Potvin, Executive Director (DC)

130

134

Arizona Public Safety

$20,540

12.2%

$19,808

$732

37.3%

8.8%

7.0%

46.9%

Mark Steed, CIO (DB); William Thatcher, Portfolio Manager (DC)

131

133

Oklahoma Teachers

$20,084

9.1%

$20,084

58.9%

23.6%

0.2%

17.3%

Sarah Green, Executive Director

132

138

HCA Healthcare

$20,056

13.5%

133

126

Consolidated Edison

$20,002

2.2%

134

143

UnitedHealth

$19,991

17.0%

Walter Kress, CIO

$14,324 $24,658

$23,475

Peter Shott, VP-Human Resources

$10,150

Jeffrey A. Trahan, VP & Treasurer

23.6%

Marc D. Becker, Director-Investments

0.7%

27.1%

Gary Harbin, Executive Secretary

29.0%

0.3%

15.9%

Richelle A. Sugiyama, CIO

56.5%

0.6%

40.2%

Gail Maytin, CIO Jeffrey J. Schappe, CIO

$22,319

$10,628

22.4%

3.0%

52.8%

15.6%

3.7%

74.6%

Kristin Varela, CIO

27.9%

Corey Amon, CIO David Erickson, CIO

61.4%

36.3%

1.0%

1.3%

Timothy Dillane, Assistant Treasurer

45.6%

27.9%

1.3%

25.2%

Rodney L. June, CIO

45.5%

11.6%

0.5%

42.4%

Molly A. Murphy, CIO

22.0%

1.5%

3.7%

72.8%

Susan Ridlen, Assistant Treasurer

54.0%

14.0%

0.8%

31.2%

Rod Graves, Deputy Director Ellen Hung, State Investment Officer

$20,056 $14,688

$5,314 $19,991

Robert Hoglund, SVP & CFO

Pensions & Investments

THE

L ARG E S T R E T IR E MENT FUNDS

February 12, 2024

DB ASSET MIX Rank

2023 rank

Sponsor

Assets

Change

Total DB assets

Total DC assets

135

150

New York City MTA

$19,863

22.9%

$10,937

$8,926

136

141

California Savings Plus

$19,700

14.0%

137

151

Providence Health

$19,196

19.1%

$1,463

138

136

West Virginia Investment

$19,185

7.4%

$19,185

139

118

Wespath (UMC)

$19,156

-6.5%

$8,406

140

169

Publix Super Markets

$19,108

32.3%

$19,108

141

167

Amazon.com

$19,049

30.8%

$19,049

142

140

Los Angeles Water & Power

$19,026

8.7%

$19,026

143

130

Morgan Stanley

$18,781

9.8%

$1,894

144

149

Ohio Deferred Compensation

$18,665

15.2%

145

137

Maine Public Employees

$18,654

5.0%

146

139

Los Angeles County Deferred

$18,645

6.2%

147

135

Episcopal Church

$18,239

1.6%

$16,779

$1,460

148

132

Corteva

$17,848

-3.5%

$11,246

$6,602

149

148

PricewaterhouseCoopers

$17,582

8.3%

$3,542

$14,040

150

144

Koch Industries

$17,555

4.9%

$6,986

$10,569

151

146

Ohio School Employees

$17,455

5.6%

$17,455

152

157

New York City Teachers

$17,388

13.6%

153

154

Medtronic

$17,387

11.8%

154

142

Duke Energy

$17,344

155

145

New Mexico Public Employees

$17,028

156

147

Ohio Police & Fire

157

172

158

159

166

160

Stocks

Bonds

Cash

Other

$19,700 $17,733

$10,750

Sandy Blair, Administrator

44.0%

29.0%

21.0%

Alec Stais, CIO

46.1%

15.4%

6.0%

38.5%

Craig Slaughter, Executive Director & CIO

23.0%

65.7%

11.3%

David Zellner, CIO

41.1%

22.5%

0.8%

35.6%

Jeremy Wolfson, CIO

24.8%

12.7%

0.2%

62.3%

$16,887 $18,665

$18,595

Key person

$59

Paul Miller, Interim Executive Director

$18,645

James Bennett, CIO Teresa Gee, Chief Public Finance Officer Michael J. Hood, EVP, CIO & Managing Director

13.1%

53.7%

4.5%

28.7%

Valerie J. Sill, President & CEO-DuPont Capital

38.4%

14.7%

3.9%

43.0%

Farouki A. Majeed, CIO

37.0%

43.0%

2.0%

18.0%

Ross Pillsbury, Director-Global Investments

24.3%

21.5%

0.2%

54.0%

Michael Shackelford, CIO (DB); Karyn Lujan, DC Manager (DC)

21.2%

25.6%

3.6%

49.6%

Theodore G. Hall, CIO

99.0%

1.0%

32.6%

7.1%

15.8%

David L. Eager, Executive Director

$17,388

Ronald Swingle, Deputy Director-Investment Admin.

$3,610

$13,777

1.2%

$7,284

$10,060

2.1%

$16,274

$754

$16,880

2.7%

$16,880

Accenture

$16,817

18.8%

$221

Cisco Systems

$16,665

9.7%

Kentucky Public Pensions

$16,594

13.4%

$16,594

162

U.S. Bancorp

$16,516

10.1%

$7,636

$8,880

161

171

National Elevator Industry

$16,418

15.7%

$10,832

$5,586

162

152

Liberty Mutual

$16,360

2.1%

$6,909

163

174

Comcast Holdings

$16,287

17.2%

164

159

Cigna

$16,200

7.3%

165

179

Apple

$16,110

18.6%

166

163

New Mexico Educational

$16,021

7.3%

$16,021

25.9%

22.8%

167

170

San Diego County

$16,021

11.4%

$16,021

50.6%

30.8%

168

161

MetLife

$15,925

6.0%

$7,892

$8,033

169

153

1199SEIU National

$15,869

0.0%

$15,776

$93

170

164

Toyota USA

$15,513

4.1%

$4,636

$10,877

171

Exelon

$15,300

-44.5%

$9,736

$5,564

172

165

South Dakota

$15,169

3.0%

$14,486

$683

173

181

University of Pennsylvania

$14,965

11.9%

$2,301

$12,664

174

184

Michigan Municipal

$14,939

14.3%

$11,557

$3,382

175

178

IAM National

$14,862

9.4%

$14,115

$747

176

229

NYU

$14,830

38.9%

$1,814

$13,016

177

180

Roche USA

$14,821

9.2%

$3,118

$11,703

David McDede, VP & Treasurer

178

177

Target

$14,718

7.4%

$3,415

$11,303

Al Ezban, Director

179

173

Bayer

$14,558

4.7%

$4,692

$9,866

180

160

AbbVie

$14,542

-3.5%

$4,394

$10,148

181

175

USAA

$14,330

3.6%

$5,012

$9,318

182

San Bernardino County

$14,308

8.8%

$14,308

17.9%

13.7%

7.6%

60.8%

Donald Pierce, CIO

183

185

Montana Board of Investment

$14,209

9.0%

$14,209

41.3%

20.9%

1.2%

36.6%

Dan Villa, Executive Director

184

176

Electrical Industry, Joint Board

$13,910

0.9%

$4,496

$9,414

46.0%

22.0%

1.0%

31.0%

Robert Ball, CIO

185

168

Dominion Energy

$13,892

-4.4%

$8,959

$4,933

186

156

International Paper

$13,719

-11.3%

$8,120

$5,599

187

183

PNC

$13,647

3.9%

$5,242

$8,405

188

189

Cox Enterprises

$13,642

9.4%

$7,257

$6,385

189

187

BAE (NA)

$13,542

5.2%

$4,698

$8,844

190

202

Louisiana State Employees

$13,425

13.6%

$13,425

191

186

$13,366

3.5%

$3,853

$9,513

192

199

Bank of New York Mellon

$13,332

11.7%

$8,286

$5,046

193

205

KPMG

$13,287

13.9%

$4,634

$8,653

194

190

Southwest Airlines

$13,120

6.2%

195

193

Deseret Mutual Benefit

$12,937

6.2%

$7,927

196

194

BP America

$12,900

6.3%

$5,100

$7,800

Don Kettering, VP-Pensions

197

206

Dell Technologies

$12,820

10.4%

$389

$12,431

Chris Johnson, Retirement Program Manager

198

191

Delaware Public Employees

$12,695

3.4%

$12,695

199

201

Walgreens Boots Alliance

$12,690

7.0%

200

Travelers

$12,631

6.3%

Top 200 total

$9,445,864

$16,596 $16,665 44.5%

$9,451 $16,287

$3,900

Lawrence J. Salva, SVP, Chief Accounting Officer & Controller

$12,300 $16,110 1.3%

50.0%

Bob Jacksha, CIO

18.6%

Stephen C. Sexauer, CIO

Lorraine Monchak, CIO Soo young Der, Manager-Investment Group Douglas Brown, SVP & CIO

36.2%

15.2%

24.0%

24.6%

Matt Clark, State Investment Officer

49.8%

21.1%

1.4%

27.7%

Jeb Burns, CIO Jonathan S. Young, Director-Investments & 401(k) Plan

Randy Brodsky, Director-Capital Markets & Trust Invest.

64.0%

22.0%

14.0% David Yim, CIO

William J. McHugh, Assistant Treasurer-Asset Mgmt.

15.7%

49.5%

1.9%

32.9%

Frank Glover, Sr. Director-Retirement Investments

51.7%

19.4%

1.7%

27.2%

Robert W. Beale, CIO

32.0%

56.0%

4.0%

8.0%

Bruno G. Grimaldi, Managing Director-Pension Investments & Ind.

$13,120

Elaine Parham, Sr. Manager-Compensation

$5,010

49.7% $12,690

$4,030

Carol Tusch, CIO

$8,601

25.2%

5.8%

19.3%

Joanna Adams, Pension Administrator

February 12, 2024

THE

L ARG E S T R E T IR E MENT FUNDS

The largest retirement funds/sponsors

Pensions & Investments

Ranked by total assets, in millions, as of Sept. 30.

Funds by category

Rank

Sponsor

Assets

Change

Total DB

Total DC

Rank

Sponsor

Assets

Change

Total DB

Total DC

201

New York Life

$12,560

4.9%

$7,166

$5,394

270

Southern Baptist Convention

$9,285

13.1%

$283

$9,002

202

Textron

$12,537

-1.9%

$7,137

$5,400

271

Adventist Health

$9,259

100.8%

$259

$9,000

203

Cook County Employees

$12,478

10.5%

$12,478

272

Eaton

$9,248

-0.2%

$2,454

$6,794

204

Kroger

$12,466

5.7%

$2,275

$10,191

273

Nestle USA

$9,233

-5.4%

$2,495

$6,738

205

Oklahoma Public Employees

$12,449

10.7%

$10,987

$1,462

274

CUNY

$9,192

13.4%

$9,192

206

Huntington Ingalls

$12,427

3.1%

$6,934

$5,493

275

Meta Platforms

$9,166

42.9%

$9,166

207

Sacramento County

$12,340

6.8%

$12,340

276

UBS Americas

$9,106

8.7%

$1,060

$8,046

208

Lumen Technologies

$12,337

9.1%

$5,242

$7,095

277

Capital One Financial

$9,080

14.4%

$232

$8,848

209

Nationwide

$12,285

10.6%

$4,805

$7,480

278

Advocate Health

$9,070

47.3%

$1,007

$8,063

210

Northwell Health

$12,276

12.0%

$2,564

$9,712

279

Boilermaker-Blacksmith

$9,021

0.6%

$7,771

$1,250

211

IMF

$12,157

7.0%

$12,157

280

Union Pacific

$9,010

1.6%

$4,674

$4,336

212

Rhode Island Employees

$12,083

5.4%

$10,341

$1,742

281

Motorola Solutions

$9,008

-0.9%

$3,266

$5,742

213

Tennessee Valley Authority

$12,078

5.5%

$8,295

$3,783

282

Marathon Petroleum

$8,997

6.9%

$2,154

$6,843

214

Sutter Health

$12,029

0.2%

$5,898

$6,131

283

Carpenters, Northern California

$8,975

20.2%

$5,479

$3,496

215

Parker-Hannifin

$11,844

16.8%

$5,455

$6,389

284

Northwestern Mutual

$8,940

-8.1%

$5,119

$3,821

216

Constellation Energy

$11,801

242.3%

$6,816

$4,985

285

North Dakota State

$8,935

40.0%

$8,935

217

Altria

$11,741

-0.2%

$6,802

$4,939

286

Los Angeles City Def. Comp.

$8,919

16.6%

$8,919

218

MIT

$11,703

4.3%

$5,297

$6,406

287

Utah Higher Education

$8,889

13.4%

$8,889

219

Presbyterian Church

$11,667

7.8%

$10,618

$1,049

288

Marriott International

$8,871

9.7%

$8,871

220

Cargill

$11,625

7.9%

$2,854

$8,771

289

WestRock

$8,869

9.9%

221

Marsh McLennan

$11,623

4.0%

$4,406

$7,217

290

TIAA

$8,751

17.1%

$8,751

222

Home Depot

$11,533

10.4%

$11,533

291

Columbia University

$8,699

21.0%

$8,699

Rank

Fund

Assets

223

FirstEnergy

$11,517

0.5%

$3,787

292

Vanguard Group

$8,697

13.3%

$8,697

Boeing

$119,224

224

Massachusetts Def. Comp.

$11,456

10.3%

$11,456

293

Entergy

$8,683

3.3%

$5,074

$3,609

Kaiser Permanente

$91,551

225

National Grid USA

$11,452

-6.1%

$6,076

$5,376

294

BASF USA

$8,592

3.2%

$2,161

$6,431

AT&T

$90,497

226

Elevance Health

$11,421

4.7%

$1,250

$10,171

295

NFL Player Benefits

$8,513

15.9%

$3,318

$5,195

RTX

$89,511

227

Missouri State Employees

$11,303

3.1%

$8,491

$2,812

296

UFCW Industry, Illinois

$8,500

1.7%

$8,500

Lockheed Martin

$76,842

228

Goldman Sachs

$11,289

9.4%

$890

$10,399

297

Albertsons

$8,498

3.4%

$1,407

$7,091

IBM

$76,670

229

Wyoming Retirement

$11,244

9.0%

$10,284

$960

298

Texas Instruments

$8,429

1.3%

$682

$7,747

General Electric

$74,409

230

Longshoremen ILWU-PMA

$11,242

5.8%

$8,521

$2,721

299

Southwest Airlines Pilots

$8,376

14.1%

$8,376

General Motors

$73,439

231

Novartis US

$11,153

8.4%

$2,026

$9,127

300

MUFG Americas

$8,348

6.9%

$4,855

$3,493

United Parcel Service

$71,932

232

NTESS

$11,090

-3.5%

$5,676

$5,414

301

Johnson Controls

$8,294

2.2%

$1,691

$6,603

Bank of America

$65,521

233

New Hampshire Retirement

$11,071

3.0%

$11,071

302

Univ. of Southern California

$8,273

13.7%

$128

$8,145

234

Motion Picture Industry

$11,061

19.7%

$5,108

$5,953

303

Cleveland-Cliffs

$8,250

0.5%

$4,440

$3,810

Public funds

235

Allstate

$11,026

-0.2%

$4,503

$6,523

304

Paramount Global

$8,244

11.5%

$2,460

$5,784

Rank

Fund

Assets

California Public Employees

$452,453

$7,730

$4,351

$4,518

Assets are in millions as of Sept. 30.

Top 200 asset breakdown Union funds: 2.2% 2022: 1.8%

Misc. funds: 14.2% 2022: 13.8%

Corporate funds: 31.0% 2022: 32.0%

Public funds: 52.6% 2022: 52.4%

The largest funds Corporate funds

236

Alameda County

$10,900

4.8%

$10,900

305

ConocoPhillips

$8,236

17.5%

$1,295

$6,941

237

Chicago Teachers

$10,866

1.8%

$10,866

306

Carpenters, New York City

$8,235

8.7%

$4,890

$3,345

California State Teachers

$309,931

238

Duke University

$10,806

13.4%

$2,681

$8,125

307

Yale University

$8,233

19.7%

$8,233

New York City Retirement

$247,999

239

McKinsey

$10,788

29.7%

$353

$10,435

308

Danaher

$8,227

5.5%

$6,334

New York State Common

$246,307

$5,809

Florida State Board

$194,659

Texas Teachers

$181,656

$8,173

Washington State Board

$167,033

$3,647

Wisconsin Investment Board

$130,932

$8,092

New York State Teachers

$130,783

$735

$7,337

North Carolina

$126,472

240

NextEra Energy

$10,787

0.3%

$4,937

$5,850

241

Charter Communications

$10,671

7.1%

$2,644

242

San Diego City

$10,633

6.1%

243

Contra Costa County

$10,570

6.4%

244

Sherwin-Williams

$10,562

-4.6%

$122

$10,440

245

Cleveland Clinic

$10,458

9.7%

$1,130

246

GlaxoSmithKline USA

$10,446

1.1%

$2,910

247

Arkansas Employees

$10,400

8.3%

$10,400

248

UPMC

$10,318

10.5%

$2,855

249

Stanford University

$10,289

11.8%

$208

250

D.C. Retirement Board

$10,277

8.6%

$10,277

251

Harvard University

$10,159

33.4%

$1,549

252

Missouri Local Government

$10,106

3.9%

$10,106

253

Bristol-Myers Squibb

$10,069

13.3%

309

Burlington Northern Santa Fe

$8,210

4.0%

$1,893 $2,401

310

Carpenters, North Atlantic

$8,203

-9.6%

$10,633

311

Progressive

$8,173

26.4%

$10,570

312

Coca-Cola

$8,150

4.4%

313

Evangelical Lutheran Church

$8,092

13.4%

$9,328

314

Sanofi-Aventis

$8,072

9.9%

$7,536

315

Thermo Fisher Scientific

$8,049

10.2%

$959

$7,090

316

Broadcom

$8,001

8.3%

$1,212

$6,789

$7,463

317

Tenet Healthcare

$7,987

1.0%

$663

$7,324

$10,081

318

Hewlett Packard Enterprise

$7,983

6.9%

319

Cummins

$7,948

9.2%

320

University System of Georgia

$7,940

321

Lowes

$7,901

$166

$8,027

$8,610

$9,903

322

HSBC USA

$7,896

$8,203

$4,503

$7,983 $3,200

$7,940 $7,901

2.8% -0.8%

254

Schlumberger

$10,044

-4.2%

$3,476

$6,568

323

Mount Sinai

$7,880

17.3%

255

Eversource Energy

$9,948

8.0%

$6,073

$3,875

324

T-Mobile

$7,869

7.5%

$3,596 $23

$4,300 $7,857 $7,869

256

Mars

$9,900

6.0%

$5,554

$4,346

325

Sempra Energy

$7,818

5.8%

257

Southern California Edison

$9,870

18.6%

$4,614

$5,256

326

UNC System

$7,817

-12.3%

258

American Honda Motor

$9,762

13.6%

$4,664

$5,098

327

American Express

$7,785

13.0%

259

Siemens USA

$9,739

7.8%

$1,527

$8,212

328

Cornell University

$7,774

14.6%

260

Hartford Financial

$9,726

6.2%

$3,626

$6,100

329

Warner Bros. Discovery

$7,741

261

YMCA

$9,694

14.1%

$9,694

330

American International Group

$7,722

-2.0%

262

Illinois Police Officers

$9,642

48.3%

$9,642

331

Illinois Firefighters

$7,658

14.1%

$7,658

263

American Electric

$9,624

4.6%

$4,604

332

DTE Energy

$7,517

-5.2%

$4,311

264

Fairfax County Retirement

$9,527

11.6%

$9,527

333

Michigan State University

$7,508

13.4%

265

Edward Jones

$9,522

18.5%

$9,522

334

Chubb

$7,470

2.3%

$3,477

266

Public Service Enterprise

$9,453

-6.1%

$5,453

$4,000

335

Ventura County

$7,448

10.0%

$7,448

267

General Mills

$9,412

-10.1%

$5,144

$4,268

336

Farmers Group

$7,441

3.6%

$3,047

268

Phillips 66

$9,397

26.8%

$2,175

$7,222

337

Nucor

$7,439

21.3%

269

Leidos

$9,337

14.7%

$29

$9,308

338

Sheet Metal National

$7,428

10.4%

$5,020

$4,748

$3,126

$4,692 $7,817

$1,004

$6,781

Union funds Rank

Fund

Assets

Teamsters, Western Conf.

$53,428

Teamsters, Central States

$42,147

National Electric

$31,022

Operating Engineers Int’l

$23,193

National Elevator Industry

$16,417

1199SEIU National

$15,869

IAM National

$14,862

Electrical Ind., Joint Board

$13,911

Miscellaneous funds Fund

Assets

$7,774

Federal Retirement Thrift

$782,835

$546

$7,195

California University

$118,284

$3,537

$4,185

United Nations Joint Staff

$81,546

Federal Reserve Employees

$37,484

World Bank

$30,799

Illinois State Universities

$26,289

CommonSpirit Health

$25,434

SUNY

$24,643

National Railroad

$24,310

National Rural Electric

$22,163

$3,206 $7,508 $3,993

$4,394 $7,439

$7,428

Rank

Pensions & Investments

THE

Funds by type Assets are in millions as of Sept. 30.

Top 200 asset breakdown

DC funds: 33.7% 2022: 32.1%

DB funds: 66.3% 2022: 67.9%

The largest funds Defined benefit plans Rank

Fund

Assets

L ARG E S T R E T IR E MENT FUNDS

Sponsor

Assets

Change

Total DB

Total DC

Rank

Sponsor

Assets

Change

Total DB

339

AstraZeneca US

$7,417

7.7%

$852

$6,565

408

Schneider Electric USA

$5,886

0.8%

$1,447

$4,439

340

TriNet Group

$7,410

14.1%

$7,410

409

United Natural Foods

$5,870

-0.2%

$1,559

$4,311

341

Montgomery County

$7,408

24.1%

$6,145

$1,263

410

Jacobs Engineering

$5,783

10.5%

$278

342

Houston Police Officers

$7,375

7.8%

$7,375

411

Stryker

$5,745

15.8%

343

Aon

$7,367

0.2%

$1,546

$5,821

412

UFCW Joint Trust, S. Calif.

$5,711

21.0%

344

Manufacturers & Traders

$7,367

4.2%

$3,011

$4,356

413

Wawa

$5,684

37.8%

345

Insperity

$7,355

29.9%

$7,355

414

Burns & McDonnell

$5,658

35.8%

346

University of Chicago

$7,340

11.6%

$1,370

$5,970

415

Milwaukee City

$5,655

7.1%

$5,655

347

ADP

$7,268

7.0%

$1,629

$5,639

416

Battelle

$5,622

2.8%

$2,894

$2,728

348

Humana

$7,254

16.3%

$7,254

417

McKesson

$5,612

34.3%

349

Emerson Electric

$7,225

0.5%

$3,590

$3,635

418

Rockwell Automation

$5,588

-5.0%

$2,195

$3,393

350

Intermountain Healthcare

$7,221

5.7%

$3,079

$4,142

419

UFCW, Atlanta

$5,563

9.6%

$5,563

351

Colorado Fire & Police

$7,217

8.5%

$6,493

$724

420

Thomson Reuters

$5,519

11.6%

$1,595

$3,924

352

ADP TotalSource

$7,183

421

Principal Financial

$5,518

2.4%

$1,637

$3,881

353

UANPF

$7,160

3.9%

$7,153

422

Valero Energy

$5,517

4.4%

$2,344

$3,173

354

Philadelphia Public Employees

$7,128

12.7%

$7,128

423

Nissan USA

$5,515

4.3%

$1,856

355

Becton, Dickinson

$7,127

5.2%

$2,129

$4,998

424

Florida Deferred Compensation

$5,514

13.4%

356

Charles Schwab

$7,113

17.3%

$7,113

425

CMS/Consumers Energy

$5,507

1.1%

357

Booz Allen Hamilton

$7,059

10.8%

$7,059

426

GEICO

$5,473

10.3%

358

WTW

$7,057

2.4%

$3,874

427

Sentara Healthcare

$5,438

7.1%

$2,399

$3,039

359

Qualcomm

$6,998

7.2%

$6,998

428

Operating Engineers Local 3

$5,428

17.5%

$4,990

$438

360

National Sprinkler Local 669

$6,995

9.8%

$4,469

$2,526

429

Operating Engineers Midwest

$5,394

6.6%

$5,390

United States Steel

$6,965

0.1%

$4,361

$2,604

430

TD Bank

$5,379

7.9%

$994

$4,385

-6.6%

$3,197

$3,729

431

Army & Air Force Exchange

$5,366

9.4%

$5,366

$6,866

432

Illinois Tool Works

$5,353

13.7%

$1,366

$4,081

$2,776

433

Baxter International

$5,352

21.5%

$1,316

$6,846

434

HDR

$5,343

40.4%

California Public Employees

$450,289

California State Teachers

$307,868

362

Kraft Heinz

$6,926

New York City Retirement

$247,999

363

MITRE

$6,866

9.0%

$246,307

364

Goodyear Tire & Rubber

$6,857

-8.7%

SAP America

$6,846

10.7%

New York State Common

$3,183

$5,702

$3,255

$180,466

366

Corning

$6,844

-4.0%

$2,756

$4,088

435

Kimberly-Clark

$5,305

1.1%

$1,031

Ameren

$6,832

3.2%

$4,076

$2,756

436

Kern County Employees

$5,302

8.2%

$5,302

$6,820

437

Ecolab

$5,232

-5.0%

$1,762

$2,625

$4,150

438

Bechtel Global

$5,229

7.0%

$6,700

439

Takeda Pharmaceuticals

$5,222

10.2%

$140,495 $130,783

368

Chicago City Deferred Comp.

$6,820

13.4%

$124,565

369

Sysco

$6,775

-13.6%

$111,796

370

ABA Retirement

$6,700

8.1%

371

Vermont Pension

$6,686

6.8%

$5,734

$952

440

Boston Scientific

$5,215

13.9%

Wisconsin Investment Board North Carolina

Defined contribution plans

$2,252

$3,987 $4,036 $5,343

$181,656

New York State Teachers

$3,659

$5,473

Florida State Board Washington State Board

$5,655

$5,514

Texas Teachers

$5,612

6 7

$5,505

$5,684

367

Total DC

$5,745

365

Rank

361

February 12, 2024

$4,274

$3,470 $5,229

$342

$4,880 $5,215

372

Michelin

$6,668

4.3%

$2,486

$4,182

441

CSX

$5,163

0.3%

$2,262

Fund

Assets

373

Xcel Energy

$6,585

-0.2%

$2,799

$3,786

442

New York State Nurses

$5,152

4.4%

$5,137

$15

Federal Retirement Thrift

$782,835

374

MassMutual

$6,559

6.5%

$2,588

$3,971

443

Deutsche Bank USA

$5,146

6.4%

$1,153

$3,993

Boeing

$68,220

375

Pentegra

$6,536

-38.9%

$4,262

$2,274

444

Health Care Service

$5,139

10.2%

$2,134

$3,005

IBM

$53,022

376

University of Kentucky

$6,465

13.4%

$6,465

445

Xerox

$5,128

0.4%

$1,380

$3,748

Lockheed Martin

$51,399

377

Amgen

$6,450

10.6%

$6,450

446

Robert Bosch

$5,113

2.6%

$1,489

$3,624

Bank of America

$48,855

378

Mid-America Carpenters

$6,442

15.1%

$5,052

$1,390

447

PPL

$5,108

0.2%

$3,324

$1,784

RTX

$48,279

379

Trinity Health

$6,361

-9.0%

$5,271

$1,090

448

Stanford Hospital

$5,079

16.5%

$159

$4,920

Wells Fargo

$45,766

380

Memorial Sloan-Kettering

$6,354

8.5%

$1,390

$4,964

449

Whirlpool

$5,061

-4.0%

$2,118

$2,943

AT&T

$44,892

381

Macy’s

$6,350

3.6%

$2,352

$3,998

450

Hearst

$5,054

8.6%

$2,553

$2,501

Microsoft

$42,572

382

University of Rochester

$6,348

14.9%

$6,348

451

Bridgestone Americas

$5,045

-10.6%

$2,092

$2,953

Walmart

$39,598

383

Siemens Healthineers USA

$6,328

7.8%

$837

$5,491

452

Houston Firefighters

$5,021

3.7%

$5,021

384

Carpenters, Southwest

$6,317

12.4%

$6,302

$15

453

BJC HealthCare

$5,020

2.0%

$2,826

385

Washington University

$6,312

17.2%

$6,312

454

Maryland Supplemental

$5,020

9.5%

386

Service Employees 32B & 32J

$6,311

22.3%

$2,231

455

Frontier Communications

$5,019

-1.0%

387

California Inst. of Technology

$6,302

16.3%

$6,302

456

Parsons

$4,976

41.1%

388

Boston Retirement

$6,255

8.6%

$6,255

457

PPG Industries

$4,975

-0.1%

389

WEC Energy Group

$6,214

-22.0%

$2,830

$3,384

458

Quest Diagnostics

$4,950

6.1%

390

Ingersoll-Rand

$6,201

3.1%

$855

$5,346

459

Louisiana Parochial Employees

$4,941

11.9%

$4,941

391

Savannah River

$6,191

3.0%

$3,807

$2,384

460

ECA & Local 134 IBEW

$4,935

11.2%

$2,173

$2,762

392

Highmark

$6,168

7.4%

$3,233

$2,935

461

Major League Baseball

$4,869

7.0%

$4,837

$32

393

Laborers, Northern California

$6,152

26.0%

$4,783

$1,369

462

San Jose Police & Fire

$4,861

11.5%

$4,861

394

Steelworkers Pension

$6,135

4.3%

$6,133

463

Sony America

$4,847

10.8%

$4,847

395

Salesforce.com

$6,119

23.8%

$6,119

464

Enterprise Rent-A-Car

$4,842

14.5%

$4,842

396

Carpenters, Eastern Atlantic

$6,104

110.4%

$4,130

$1,974

465

Kansas Regents

$4,840

7.4%

397

Air Products & Chemicals

$6,101

29.6%

$3,514

$2,587

466

S&P Global

$4,831

2.9%

398

Capital Group

$6,094

5.7%

$6,094

467

Northwestern University

$4,795

14.5%

399

Philips

$6,085

5.3%

$516

$5,569

468

NTCA

$4,793

3.5%

400

State Street

$6,050

5.8%

$870

$5,180

469

University of Nebraska

$4,790

13.4%

401

San Mateo County

$5,990

12.0%

$5,990

470

Conagra Brands

$4,786

-4.1%

402

AECOM

$5,976

7.6%

$99

471

Maryland Optional

$4,754

13.4%

403

Fresno County

$5,946

12.5%

$5,946

472

Painters & Allied Trades

$4,745

12.3%

404

Alaska Air

$5,931

1.4%

$1,938

$3,993

473

Winco Foods

$4,735

36.3%

405

Eastman Kodak

$5,923

0.7%

$3,488

$2,435

474

Science Applications Int’l

$4,700

10.6%

$45

$4,655

406

Nike

$5,920

13.3%

$5,920

475

Pinnacle West

$4,681

-5.4%

$3,294

$1,387

407

WMATA Retirement

$5,914

11.6%

Rank

Public DC plans Rank 1

Fund

Assets

New York State Def. Comp.

$33,890

New York City Def. Comp.

$27,552

Washington State Board

$26,538

California Savings Plus

$19,700

Ohio Deferred Comp.

$18,665

Los Angeles Co. Deferred

$18,645

New York City Teachers

$17,388

North Carolina

$14,676

9 10

Florida State Board Michigan Retirement

$14,193 $12,700

$4,080

$5,914

$5,877

$2,901

$2,194 $5,020

$2,173

$2,846 $4,976

$1,049

$3,926 $4,950

$4,840 $1,251

$3,580 $4,795

$2,199

$2,594 $4,790

$3,015

$1,771 $4,754

$4,088

$657 $4,735

C O N T IN U E D O N PAG E 26

February 22, 12, 2022 2024

THE

L ARG E S T R E T IR E MENT FUNDS

The largest retirement funds/sponsors

Pensions & Investments

Ranked by total assets, in millions, as of Sept. 30.

Rank

Sponsor

Assets

Change

Total DB

Total DC

Rank

Sponsor

Assets

Change

Total DB

Total DC

476

Norfolk Southern

$4,671

1.2%

$2,297

$2,374

545

Baker Hughes

$4,016

10.0%

$525

$3,491

477

Fiserv

$4,666

3.8%

$4,661

546

San Joaquin County

$3,995

9.5%

Average DB plan asset mixes

478

H-E-B

$4,659

24.2%

$4,659

547

Navy Federal Credit Union

$3,988

$1,827

$2,161

As of Sept. 30.

479

PACCAR

$4,656

16.7%

$2,301

$2,355

548

Anheuser-Busch InBev

$3,984

-1.0%

$695

$3,289

480

Laborers, Chicago & Vicinity

$4,652

17.8%

$4,652

549

Publicis USA

$3,976

8.7%

$143

$3,833

Top 200 plans

481

Regions Financial

$4,637

2.3%

$1,980

550

Ericsson

$3,949

-19.7%

$563

$3,386

$2,657

$3,995

482

Eastman Chemical

$4,619

2.1%

$1,243

$3,376

551

T. Rowe Price

$3,922

9.0%

483

Saudi Arabian Oil

$4,610

6.1%

$1,822

$2,788

552

MedStar Health

$3,921

8.7%

$1,212

$2,709

484

RELX

$4,592

6.9%

$1,352

$3,240

553

Northern Trust

$3,913

-1.9%

$1,202

$2,711

485

Lutherans-Missouri Synod

$4,585

3.3%

$3,800

$785

554

Ball

$3,899

1.9%

$1,336

$2,563

486

Hartford HealthCare

$4,582

-0.5%

$2,664

555

XPO Logistics

$3,881

487

University of Oregon

$4,576

13.4%

488

Louisiana Sheriffs

$4,569

8.6%

$4,569

$4,576

556

CenterPoint Energy

557

McDonald’s

489

Inter-American Dev. Bank

$4,559

-7.0%

$4,559

558

490

SAG-Producers

$4,559

9.8%

$4,544

$15

491

Transamerica

$4,556

-5.8%

492

Linde

$4,545

2.1%

$2,283 $1,944

493

Emory University

$4,536

11.6%

494

Zurich American

$4,521

8.7%

$1,409

495

Producer-Writers Guild

496

Equitable Holdings

$4,502

13.8%

$4,494

$4,497

7.6%

$2,160

$2,337

497

Nashville & Davidson County

$4,496

1.4%

$4,116

498

Pipefitters Local 597

$4,487

10.6%

499

Reynolds American

$4,456

500

TJX

501

Community Health

502

Saint-Gobain

$1,918

$3,922

-7.0%

$1,660

$2,221

$3,873

-4.7%

$1,322

$2,551

$3,873

14.4%

Lincoln National

$3,861

9.0%

$827

$3,034

559

Fresno City Retirement

$3,849

8.6%

$3,597

$252

$2,273

560

Seattle City Employees

$3,847

10.7%

$3,847

$2,601

561

Idaho National Laboratory

$3,846

-2.9%

$1,897

$1,949

$4,536

562

Guardian

$3,836

-2.8%

$1,973

$1,863

$3,112

563

Allina Health

$3,826

10.5%

$40

$3,786

564

BMO Financial

$3,798

6.8%

$1,029

$2,769

565

Johns Hopkins

$3,798

7.3%

$2,351

$1,447

$380

566

University of Wisconsin

$3,793

13.4%

$2,544

$1,943

567

Campbell Soup

$3,785

8.8%

$1,895

$1,890

-26.8%

$2,478

$1,978

568

Citizens Financial

$3,772

8.6%

$1,082

$2,690

$4,455

5.6%

$1,555

$2,900

569

Unisys

$3,772

-4.7%

$2,497

$4,452

8.8%

$21

$4,431

570

Baltimore Fire & Police

$3,771

8.6%

$3,771

$4,424

-8.0%

$2,314

$2,110

571

Daimler Trucks

$3,766

6.0%

$1,181

$3,873

$3,765

-0.7%

$457

$3,308

$3,759

-2.3%

$1,532

$2,227

505

Colgate-Palmolive

$4,414

1.8%

$1,390

$3,024

574

KBR

$3,758

32.0%

$53

$3,705

506

RWJBarnabas Health

$4,413

13.2%

$811

$3,602

575

Archer Daniels Midland

$3,748

11.0%

$862

$2,886

507

Meijer

$4,391

7.8%

$2,645

$1,746

576

Carpenters, W. Washington

$3,719

13.7%

$3,086

$633

508

Avangrid

$4,336

-6.6%

$2,202

$2,134

577

Nordstrom

$3,711

9.1%

509

Comerica

$4,336

-6.4%

$2,582

$1,754

578

Omnicom Group

$3,688

9.5%

$45

$3,643

510

Kinder Morgan

$4,326

3.4%

$1,775

$2,551

579

Operating Engineers Local 18

$3,680

17.5%

$3,677

511

National Football League

$4,324

29.5%

$124

$4,200

580

Carpenters, New Jersey

$3,673

11.3%

$1,788

$1,885

512

Montgomery Public Schools

$4,308

10.9%

$2,258

$2,050

581

Salt River Valley

$3,664

1.9%

$2,587

513

Iron Workers, California

$4,299

12.4%

$3,193

$1,106

582

Vanderbilt U. Medical Center

$3,652

14.8%

514

Nevada Higher Education

$4,288

13.2%

$4,288

583

Auto Club of S. California

$3,650

10.3%

518

Directors Guild-Producer

$4,274

11.0%

$2,088

519

Laborers, Massachusetts

$4,269

15.8%

$2,182

520

FM Global

$4,257

-1.9%

521

CNA Financial

$4,256

1.1%

522

Occidental Petroleum

$4,230

523

Evergy

524

Laboratory Corp. of America

525

$3,711

$1,077 $3,652 $1,312

$4,282

584

Corewell Health

$3,637

3.0%

$4,133

585

Santa Clara County Def. Comp.

$3,630

13.4%

$3,630

586

BlackRock

$3,629

14.8%

$3,629

$2,186

587

Analog Devices

$3,628

-9.3%

$3,628

$2,087

588

Kentucky Deferred Comp.

$3,605

12.4%

$3,605

$2,721

$1,536

589

West Virginia Higher Education

$3,600

$2,073

$2,183

590

Tyco Electronics

$3,599

-4.8%

3.7%

$65

$4,165

591

Visa

$3,599

14.1%

$4,228

1.4%

$2,885

$1,343

592

Freeport-McMoRan

$3,584

-0.1%

$4,212

8.4%

$234

$3,978

593

Cedars-Sinai

$3,550

Genuine Parts

$4,198

7.2%

$1,963

$2,235

594

Montefiore Medical Center

$3,548

526

Fresenius Medical Care

$4,186

16.2%

$375

$3,811

595

Waste Management

527

Atlanta City

$4,182

7.8%

$3,718

$464

596

Tyson Foods

528

John Hancock

$4,175

-8.4%

$2,000

$2,175

597

529

Halliburton

$4,162

10.4%

$37

$4,125

530

San Antonio Fire & Police

$4,151

18.6%

$4,151

531

Boehringer Ingelheim

$4,147

3.5%

$1,589

532

Voya Financial

$4,129

1.9%

$1,812

533

Teamsters Local 710

$4,105

25.3%

$4,105

534

UFCW, N. Calif.

$4,090

8.8%

$3,756

535

Boston University

$4,084

12.7%

536

Houston Municipal

$4,068

3.3%

$4,068

537

Santa Barbara County

$4,057

9.2%

$4,057

538

Banner Health

$4,049

11.1%

539

Bloomberg

$4,048

11.3%

540

Weyerhaeuser

$4,042

-5.7%

541

Ameriprise Financial

$4,037

2.7%

542

JetBlue Airways

$4,026

543

Cardinal Health

544

BHCC

$1,518

$2,066

$694

$2,856

10.2%

$18

$3,530

$3,544

11.8%

$107

$3,437

$3,507

16.1%

$27

$3,480

Alcon

$3,503

11.0%

$66

$3,437

598

Dallas City Employees

$3,500

3.2%

$3,500

599

University of Miami

$3,498

13.4%

$2,558

600

Molson Coors Beverage

$3,497

-8.6%

$2,317

601

Centene

$3,489

$3,498 $1,166

$2,331 $3,489

602

Starbucks

$3,481

16.7%

$334

603

Phoenix City Employees

$3,476

7.2%

$3,476

$4,084

604

Savings Banks Employees

$3,462

9.0%

$2,097

605

Fannie Mae

$3,454

9.1%

606

ABB

$3,445

2.3%

$3,481

$717

607

Adobe Systems

$3,445

17.6%

$4,048

608

Manhattan & Bronx Surface

$3,442

8.6%

$3,442

$1,834

$2,208

609

Fifth Third

$3,429

6.8%

$112

$1,169

$2,868

610

Chicago Municipal Employees

$3,413

13.7%

$3,413

13.9%

$4,026

611

Interpublic Group

$3,412

10.6%

$72

$4,025

7.6%

$4,025

612

RBC Wealth Mgmt.

$3,402

9.0%

$4,020

-24.4%

613

Packaging Corp. of America

$3,399

$4,020

$2,973 $3,599

$3,988

$61

$2,401

$3,600 $626

3.7%

5.3%

4.8%

18.6%

19.3%

1.6%

1.5%

2.0%

1.7%

15.1%

15.2%

10.9%

11.8%

1.2%

N/A

9.3%

10.2%

0.5%

10.4%

9.1%

14.7%

13.6%

18.9%

28.9%

0.0%

0.7%

11.2%

10.7%

8.3%

9.4%

5.3%

N/A

9.4%

8.9%

0.0%

Top 1,000 plans Corporate plans

2023

2022

U.S. stock Non-U.S. stock Global equity U.S. fixed income Global/non-U.S. fixed income Cash Private equity Real estate equity Private credit/debt Alternative investments Other

12.6%

11.1%

6.3%

6.1%

5.7%

6.3%

45.4%

44.4%

0.6%

0.9%

2.2%

8.7%

12.4%

4.8%

5.5%

0.9%

N/A

9.7%

7.7%

3.1%

3.4%

Public plans

2023

2022

U.S. stock Non-U.S. stock Global equity U.S. fixed income Global/non-U.S. fixed income Cash Private equity Real estate equity Private credit/debt Alternative investments Other

21.9%

21.8%

13.6%

13.4%

5.4%

4.8%

18.7%

19.4%

1.6%

1.9%

1.6%

15.0%

15.1%

10.8%

11.6%

1.3%

N/A

9.3%

10.1%

0.5%

0.6%

$1,365

Union plans

2023

2022

$3,454

U.S. stock Non-U.S. stock

22.2%

19.4%

9.9%

9.1%

Global equity

11.6%

10.5%

U.S. fixed income Global/non-U.S. fixed income Cash Private equity Real estate equity Private credit/debt Alternative investments Other

18.2%

28.1%

0.4%

0.6%

$2,728 $3,445

$3,317

$3,340 $3,402

$1,082

3.6%

2022

Kellogg

$4,277

8.0%

18.7%

CRH Americas

-0.2%

N/A

10.4%

2023

573

$4,277

5.7%

0.8%

21.1%

572

Univ. of Missouri Curators

4.7%

U.S. stock Non-U.S. stock Global equity U.S. fixed income Global/non-U.S. fixed income Cash Private equity Real estate equity Private credit/debt Alternative investments Other

$3,511

517

13.4%

Union plans

$4,419

$1,236

2.3%

8.8%

$2,585

$907

$146

0.5%

2.6%

$1,275

5.4%

6.5%

0.6%

13.3%

7.1%

11.6%

44.2%

13.6%

$4,418

$4,279

6.5%

45.5%

2022

$4,419

$4,282

5.6%

5.7%

21.7%

KeyCorp

Amsted Industries

5.9%

2023

Applied Materials

FIS

10.1%

21.9%

504

516

2022

11.4%

U.S. stock Non-U.S. stock Global equity U.S. fixed income Global/non-U.S. fixed income Cash Private equity Real estate equity Private credit/debt Alternative investments Other

503

515

2023

U.S. stock Non-U.S. stock Global equity U.S. fixed income Global/non-U.S. fixed income Cash Private equity Real estate equity Private credit/debt Alternative investments Other

Public plans

$3,793

$2,338

Corporate plans

$2,317

0.9%

12.3%

10.9%

9.7%

4.0%

N/A

9.4%

9.0%

1.4%

1.8%

Pensions & Investments

THE

Average DC plan asset mixes As of Sept. 30.

Top 200 plans

L ARG E S T R E T IR E MENT FUNDS

February 12, 2024

Total DB

Rank

Sponsor

Assets

Change

Total DB

Total DC

Rank

Sponsor

Assets

Change

614

Christian Church (Disciples)

$3,388

9.8%

$2,549

$839

683

Universal Health Services

$2,898

9.7%

Total DC

615

Oklahoma Firefighters

$3,383

6.4%

$3,383

684

Pipe Trades, Twin Cities

$2,897

12.1%

$1,408

$1,489

616

Graham Holdings

$3,382

-6.0%

$2,586

$796

685

Unilever USA

$2,896

2.5%

$922

$1,974

617

Princeton University

$3,376

17.1%

$3,376

686

Arlington County

$2,894

8.6%

$2,894

618

$258

687

Intercontinental Exchange

$2,893

12.5%

$703

$3,345

688

Tallahassee City

$2,886

9.9%

$2,067

$819

$1,554

$1,322

$2,898

UMWA Health & Retirement

$3,356

-9.0%

Corporate plans

2023

2022

619

United Church of Christ

$3,345

14.1%

Sponsoring co. stock

9.9%

9.6%

620

Rite Aid

$3,343

4.5%

$124

$3,219

689

IBEW Local 103

$2,876

9.8%

Other U.S. stock

34.6%

31.8%

621

Operating Engineers Local 12

$3,342

24.5%

$3,159

$183

690

Wake Forest Baptist Medical

$2,874

21.1%

Non-U.S. stock

6.5%

5.6%

622

Sonoma County

$3,338

5.1%

$3,338

691

Bakery & Confectionery

$2,870

-8.6%

$2,870

623

Unum Group

$3,322

-1.2%

$1,363

$1,959

692

Cincinnati Children’s

$2,870

-1.0%

$1,316

624

Gwinnett County Pub. Schools

$3,304

10.8%

$2,512

$792

693

Chicago Policemen

$2,868

12.8%

$2,868

625

Estee Lauder

$3,275

2.8%

$831

$2,444

694

NiSource

$2,861

2.8%

$1,318

626

MPERS

$3,275

9.1%

$3,275

695

Blue Cross/Shield of Michigan

$2,859

7.7%

$1,575

$1,284

627

Fairfax County Education

$3,260

15.0%

$3,260

696

NCR

$2,857

-2.6%

$1,022

$1,835

628

CBRE

$3,252

15.9%

$3,252

697

Jones Lang LaSalle

$2,856

9.1%

629

Laborers Local 731

$3,252

8.5%

$2,430

$822

698

Carpenters, Ohio

$2,854

12.6%

7.9%

$532

$2,713

699

Nutrien

$2,847

$3,239

700

Smithfield Foods

$2,844

$1,295

$1,923

701

US Foods

$2,840

$3,201

702

Pitney Bowes

703

NYC Hotel Trades

704

Fixed income

5.2%

5.1%

Stable value

10.5%

12.9%

Cash

0.9%

Target date

22.2%

23.4%

Inflation protection

0.6%

0.7%

Annuities

0.6%

Other

9.0%

9.4%

$3,098

Public plans

2023

2022

630

Barclays Bank

$3,245

U.S. stock

39.2%

38.4%

631

W.W. Grainger

$3,239

12.1%

Non-U.S. stock

5.9%

5.4%

632

Fixed income

Mondelez International

$3,218

-14.3%

5.1%

5.2%

633

Stable value

13.7%

16.7%

Fluor

$3,201

9.0%

Cash

634

2.1%

Teamsters, N.Y. State Conf.

$3,198

96.7%

$3,198

Target date

25.8%

23.6%

635

Olin

$3,197

-1.8%

$2,023

Inflation protection

0.6%

0.9%

636

Pennsylvania Municipal

$3,177

9.6%

$3,177

Annuities

0.6%

637

NXP Semiconductors

$3,165

4.8%

Other

7.0%

7.1%

638

IQVIA

$3,155

639

Cintas

$3,148

$1,174

$2,190

$2,874

$1,554

$1,543

$2,856 $2,450

$404

$996

$1,851

-4.0%

$1,553

$1,291

0.2%

$773

$2,067

$2,838

0.4%

$1,189

$1,649

$2,837

7.3%

$2,174

Freddie Mac

$2,829

11.0%

$663 $2,829

705

Memphis City

$2,827

7.7%

$2,468

$359

$3,165

706

East Bay Municipal Utility

$2,820

12.5%

$2,177

$643

$424

$2,731

707

Jacksonville Retirement

$2,800

7.7%

$2,300

$500

17.2%

$69

$3,079

708

Land O’Lakes

$2,798

2.4%

$917

$1,881

Union plans

2023

2022

640

Baltimore County

$3,141

8.5%

$3,141

709

Laborers, Minnesota

$2,794

11.4%

$2,794

U.S. stock

N/A

27.0%

641

Georgia Municipal

$3,136

14.2%

$3,000

$136

710

Oncor Electric Delivery

$2,790

-9.8%

$1,842

$948

Non-U.S. stock

N/A

4.0%

642

LyondellBasell

$3,126

-8.9%

$971

$2,155

711

Williams

$2,790

3.4%

$1,302

$1,488

Fixed income

N/A

3.0%

643

Sentry Insurance

$3,124

5.6%

$1,381

$1,743

712

Fox

$2,766

7.9%

$861

$1,905

Stable value

N/A

11.0%

644

Marin County Employees

$3,120

3.0%

$3,120

713

American National Red Cross

$2,754

-17.1%

$1,347

$1,407

Cash

N/A

0.0%

645

Iowa Fire & Police

$3,113

3.8%

$3,113

714

Mastercard

$2,750

14.2%

Target date

N/A

53.0%

646

N/A

1.0%

$3,112

3.1%

$453

$2,659

715

Inflation protection

Hallmark Cards

Jones Day

$2,749

9.2%

Annuities

647

0.0%

$3,105

6.1%

$1,963

$1,142

716

N/A

Los Angeles County MTA

Minnesota Colleges & Univ.

$2,728

11.6%

Other

N/A

1.0%

648

Georgetown University

$3,099

12.3%

$183

$2,916

717

Latham & Watkins

$2,726

14.8%

$354

$2,372

649

UnityPoint Health

$3,093

10.3%

$141

$2,952

718

Nexstar Media Group

$2,722

-2.4%

$1,599

$1,123

650

Detroit Police & Fire

$3,086

9.7%

$3,086

719

Hershey

$2,715

3.7%

$818

651

Laborers, Southern California

$3,080

15.9%

$2,967

$113

720

George Washington University

$2,708

12.4% 4.2%

$854

$1,851 $1,607

Top 1,000 plans

$2,750 $992

$1,757 $2,728

$1,897 $2,708

Corporate plans

2023

2022

652

American Family

$3,079

-7.5%

$1,232

$1,847

721

Andersen

$2,705

Sponsoring co. stock

9.5%

8.2%

653

Tenneco

$3,079

11.5%

$1,100

$1,979

722

New York Times

$2,702

0.7%

$1,095

Other U.S. stock

34.3%

32.8%

654

University of Alabama

$3,069

13.4%

$3,069

723

Equity League

$2,701

11.3%

$2,267

$434

Non-U.S. stock

6.8%

6.1%

655

SAS Institute

$3,055

3.8%

$3,055

724

Westinghouse Electric

$2,699

-21.8%

$1,030

$1,669

656

ATI

$3,042

8.4%

$1,139

725

Anne Arundel County

$2,692

15.1%

$2,335

$357

657

Hawaii Deferred Compensation

$3,039

11.6%

$3,039

726

Guam Retirement

$2,683

9.4%

$2,217

$466

658

Austin Employees

$3,038

2.6%

$3,038

727

Fort Worth Employees

$2,669

6.4%

$2,669

659

AFTRA

$3,028

15.4%

$3,013

$15

728

Intuit

$2,657

16.2%

660

Blue Cross & Blue Shield

$3,025

-74.7%

$2,647

$378

729

Dartmouth-Hitchcock

$2,651

8.6%

$636

661

Building Trades United

$3,021

7.0%

$3,021

730

LSC Communications

$2,648

-12.8%

$1,690

$958

662

Micron Technology

$3,021

12.8%

$3,021

731

UMass Memorial Health

$2,634

6.1%

$985

$1,649

$2,633

Fixed income

5.6%

5.9%

Stable value

10.0%

11.7%

Cash

1.2%

1.4%

Target date

23.3%

24.2%

Inflation protection

0.6%

0.7%

Annuities

0.5%

Other

8.2%

8.5%

$1,903

Public plans

2023

2022

663

Phoenix City Def. Comp.

$3,000

30.3%

$3,000

732

Denver Employees

$2,633

16.0%

U.S. stock

39.5%

38.7%

664

Navistar

$2,998

-5.7%

$1,607

$1,391

733

McMaster-Carr Supply

$2,633

15.6%

Non-U.S. stock

5.8%

5.4%

665

Thrivent Financial for Lutherans

$2,996

3.1%

$1,201

$1,795

734

Dillard’s

$2,630

$2,657 $2,015

$2,633 $2,630

Fixed income

5.2%

5.4%

666

Hanford Site

$2,978

-0.1%

$1,167

$1,811

735

Laborers, Ohio

$2,630

-5.0%

$2,624

Stable value

14.1%

17.1%

667

Hess

$2,972

-2.9%

$2,001

$971

736

IBEW 11, 440, 441, 477

$2,623

-2.1%

$1,449

$1,174

668

Ryder System

$2,972

-1.5%

$1,254

$1,718

737

Best Buy

$2,622

12.8%

669

Aerospace

$2,966

-0.6%

$1,990

$976

738

Solvay USA

$2,620

8.0%

$702

670

Arkansas Local Police & Fire

$2,960

8.8%

$2,960

739

Retail Clerks, Washington

$2,608

0.3%

$2,608

671

DaVita

$2,956

29.6%

$2,956

740

Kohler

$2,599

4.8%

$1,466

672

Hormel Foods

$2,949

4.5%

$1,186

$1,763

741

Stanislaus County

$2,588

7.3%

$2,588

$1,768

Cash

2.0%

1.9%

Target date

25.7%

23.4%

Inflation protection

0.6%

0.9%

Annuities

0.5%

Other

6.6%

6.7%

Union plans

2023

2022

673

Precision Castparts

$2,943

-2.2%

$940

$2,003

742

Yale-New Haven Hospital

$2,582

U.S. stock

37.1%

31.6%

674

Wellington Mgmt.

$2,940

13.7%

$208

$2,732

743

Amica Mutual Insurance

$2,577

-4.1%

Non-U.S. stock

7.6%

5.4%

675

Oklahoma Police

$2,935

1.9%

$2,935

744

Trader Joe’s

$2,574

13.9%

Fixed income

12.3%

9.5%

676

San Jose Federated City

$2,934

18.1%

$2,934

Stable value

12.1%

12.9%

677

Swagelok

$2,930

28.8%

$2,622 $1,918

$1,133

$2,582 $809 $2,574

745

Newell Brands

$2,559

-1.0%

$864

$1,695

$2,930

746

Ricoh USA

$2,538

-5.4%

$545

$1,993

$1,076

747

Assurant

$2,533

4.3%

$742

748

DXC Technology

$2,516

5.1%

Cash

0.2%

0.6%

678

Harley-Davidson

$2,928

-6.4%

$1,852

Target date

26.4%

35.3%

679

Operating Eng. 302 & 612

$2,923

10.3%

$2,923

Inflation protection

0.0%

0.1%

680

Celanese Americas

$2,918

-15.9%

$2,070

$848

749

Gannett

$2,511

-18.1%

$953

$1,558

Annuities

0.0%

681

Sidley Austin

$2,917

3.1%

$984

$1,933

750

Howmet Aerospace

$2,504

-4.4%

$775

$1,729

Other

4.3%

4.6%

682

Discover

$2,911

12.8%

$509

$2,402

$1,791 $2,516

C O N T IN U E D O N PAG E 28

February 12, 2024

THE

L ARG E S T R E T IR E MENT FUNDS

The largest retirement funds/sponsors Rank

Sponsor

Assets

Change

751

Hy-Vee

$2,504

8.3%

Total DB

752

Fidelity National

$2,488

9.8%

753

Tampa Fire & Police

$2,487

12.8%

$2,487

754

BMW USA

$2,485

5.6%

$714

755

Louisiana Municipal Police

$2,480

8.6%

$2,480

756

Iowa Administrative Services

$2,470

13.4%

757

Operating Eng. Local 825

$2,466

13.6%

758

Black & Veatch

$2,464

26.5%

759

Clorox

$2,461

4.4%

760

L’Oreal USA

$2,454

0.5%

761

Carnegie Mellon University

$2,448

15.0%

762

Quad/Graphics

$2,446

4.4%

763

Advance Publications

$2,445

-4.9%

764

Hawaiian Electric Industries

$2,444

-9.4%

765

Huntington Bancshares

$2,421

766

Magna Int’l of America

$2,421

767

Corebridge Financial

$2,420

1.3%

768

Henkel

$2,418

769

Verisk Analytics

$2,417

770

Christiana Care Health

771

Cognizant

772 773

Ranked by total assets, in millions, as of Sept. 30.

Total DB

$2,135

Aggregate asset mixes: DB plans

$2,130

As of Sept. 30.

Total DC

Rank

Sponsor

Assets

Change

$2,504

820

Western Digital

$2,135

10.5%

$2,488

821

Carpenters, Illinois

$2,132

7.1%

822

Louisiana Deferred Comp.

$2,130

12.0%

823

BHP

$2,122

30.0%

$1,749

$373

824

Dartmouth College

$2,109

9.8%

$105

$2,004

$1,771

Pensions & Investments

Total DC

$2,132

Top 200 DB plans

$2,470

825

Brown University

$2,104

15.1%

$1,409

826

South Broward Hospital

$2,102

10.7%

$815

$1,287

$2,464

827

IBEW Local 68, District 8

$2,098

40.5%

$1,211

$887

$405

$2,056

828

Enbridge

$2,096

9.3%

$866

$1,230

$849

$1,605

829

Penske Truck Leasing

$2,096

10.1%

$636

$1,460

$2,448

830

Case New Holland

$2,095

13.1%

$162

$1,933

$320

$2,126

831

First American

$2,084

8.9%

$2,084

$999

$1,446

832

Sodexo

$2,082

7.8%

$2,082

$1,777

$667

833

San Diego County Def. Comp.

$2,073

7.4%

$2,073

3.9%

$732

$1,689

834

Syngenta

$2,071

-1.3%

$380

$1,691

5.0%

$162

$2,259

835

Roofers United

$2,063

6.1%

$1,901

$162

$2,420

836

Tacoma Employees

$2,063

2.2%

$2,063

-6.3%

$401

$2,017

837

Franklin Resources

$2,050

10.4%

$2,050

0.6%

$422

$1,995

838

Advanced Micro Devices

$2,045

32.2%

$2,045

$2,416

6.9%

$613

$1,803

839

Northeastern University

$2,036

14.5%

$2,396

19.4%

$2,396

840

Crane

$2,033

24.0%

Stanley Black & Decker

$2,395

14.4%

$2,280

841

J.C. Penney

$2,027

Syracuse University

$2,355

15.7%

$2,355

842

Vulcan Materials

$2,023

774

Old Republican International

$2,350

13.5%

$519

$1,831

843

Chicago Public Schools

$2,020

11.6%

775

Alaska Electrical

$2,347

11.1%

$2,140

$207

844

Twin City Hospital, Nurses

$2,019

9.7%

$2,019

776

Pearson

$2,347

6.9%

$84

$2,263

845

Baltimore City

$2,012

3.0%

$2,012

777

Fulton County

$2,345

10.1%

$1,581

$764

846

Teva USA

$2,006

4.2%

778

CHS

$2,342

6.4%

$877

$1,465

847

CPS Energy

$1,997

10.1%

$1,997

779

CITGO Petroleum

$2,342

1.0%

$1,211

$1,131

848

IBEW Local 26

$1,981

13.3%

$920

$1,061

780

Christian Brothers

$2,327

8.5%

$1,474

$853

849

Dover

$1,980

0.2%

$403

$1,577

781

Avaya

$2,326

-2.8%

$707

$1,619

850

DENSO International

$1,971

11.2%

$226

782

SEPTA

$2,321

9.3%

$1,978

$343

851

Kohl’s

$1,958

21.7%

783

Depository Trust & Clearing

$2,320

5.6%

$775

$1,545

852

Middlesex County

$1,946

10.9%

$1,946

784

Agilent Technologies

$2,313

27.3%

$359

$1,954

853

Detroit General Retirement

$1,937

16.0%

$1,937

785

Seafarers

$2,311

4.6%

$2,094

$217

854

Dallas Police & Fire

$1,933

12.9%

$1,933

786

Jacksonville Police & Fire

$2,309

-0.5%

$2,309

855

Stationary Engineers 39

$1,933

8.7%

$1,667

787

PacifiCorp

$2,308

-2.7%

$805

$1,503

856

Old Dominion Freight Line

$1,927

17.6%

788

Mutual of Omaha

$2,275

10.6%

$1,022

$1,253

857

S.C. Johnson & Son

$1,926

9.6%

$433

789

Teamsters, Philadelphia

$2,273

7.8%

$2,273

858

Chicago Transit Authority

$1,922

3.4%

$1,922

790

Energy Transfer

$2,258

25.7%

$20

$2,238

859

Snap-on

$1,920

-3.6%

$1,102

$818

791

University of Louisville

$2,245

13.4%

$2,245

860

Wolters Kluwer

$1,907

9.2%

$80

$1,827

792

GROWMARK

$2,240

5.2%

$1,647

$593

861

Tulare County

$1,904

5.9%

$1,904

793

AMETEK

$2,236

11.0%

$582

$1,654

862

Bimbo Bakeries USA

$1,895

10.7%

$743

794

Vanderbilt University

$2,223

11.7%

$2,223

863

Telephone & Data Systems

$1,894

11.3%

795

University of Notre Dame

$2,219

13.0%

$2,219

864

VF Corp.

$1,889

-15.7%

$950

$939

796

Ahold Delhaize USA

$2,213

-56.2%

$937

865

San Luis Obispo County

$1,888

4.8%

$1,643

$245

797

Baptist Health South Florida

$2,213

31.0%

$2,213

866

Carpenters, N. Central States

$1,884

8.2%

$1,633

$251

Global equity 7.0% 6.6%

798

Colorado Retirement

$2,205

11.6%

$2,205

867

MidAmerican Energy

$1,883

-0.1%

$502

$1,381

U.S. fixed income

799

Keysight Technologies

$2,202

5.8%

$2,202

868

Longshoremen NYSA ILA

$1,881

14.2%

$1,178

$703

800

Bricklayers International

$2,200

23.6%

$234

869

MGM Resorts Int’l

$1,879

10.1%

801

Cook County Deferred Comp.

$2,188

13.4%

$2,188

870

Baystate Health

$1,873

$813

$1,060

802

Cincinnati City

$2,185

3.1%

$2,185

871

Blue Cross/Shield of Mass.

$1,873

-4.6%

$932

$941

803

Triumph Group

$2,182

-10.5%

$1,337

$845

872

Fortune Brands Hm. & Sec.

$1,869

9.8%

$494

$1,375

804

Dun & Bradstreet

$2,171

-0.3%

$1,060

$1,111

873

Oshkosh

$1,869

3.8%

$146

$1,723

805

Gap

$2,171

9.8%

$2,171

874

University of Maine

$1,868

11.4%

$19

$1,849

806

Teamsters, C. Pennsylvania

$2,171

4.4%

$900

875

Volvo Group

$1,866

0.8%

$685

807

Steel Dynamics

$2,170

876

Philadelphia City Def. Comp.

$1,865

13.4%

$1,865

808

Graybar Electric

$2,169

9.5%

$546

$1,623

877

ARAMARK

$1,859

5.6%

$1,859

809

Cultural Institutions

$2,161

9.5%

$1,510

$651

878

California State University

$1,858

13.4%

$1,858

810

Lam Research

$2,154

3.1%

$2,154

879

Office Depot

$1,844

-17.0%

811

Hilton Hotels

$2,152

6.3%

$302

$1,850

880

Southern Electrical Retirement

$1,837

18.9%

812

Owens Corning

$2,148

1.3%

$617

$1,531

881

Transocean

$1,832

-7.6%

$1,159

813

New Jersey Transit

$2,147

38.9%

$2,147

882

Carpenters, Twin Cities

$1,828

4.4%

$1,828

814

Republic Services

$2,145

24.4%

$182

$1,963

883

Pactiv Evergreen

$1,825

-50.5%

$963

815

Wood Group U.S. Holdings

$2,144

-4.6%

$2,144

884

Essentia Health

$1,824

11.5%

816

Louisiana Firefighters

$2,140

12.2%

885

Puget Sound Energy

$1,817

0.8%

$713

$1,104

817

Seagate Technology

$2,140

5.3%

$2,140

886

BorgWarner

$1,816

5.2%

$132

$1,684

818

Suffolk County Deferred Comp.

$2,136

11.8%

$2,136

887

National Railroad Passenger

$1,815

8.9%

$355

$1,460

819

Louisiana Schools

$2,135

6.5%

888

Paychex

$1,815

6.5%

$1,057

$115

$1,276

$1,966

$1,271

$2,140

$2,135

$2,104

$2,036 $731

$1,302

9.5%

$17

$2,010

8.6%

$653

$1,370

U.S. stock 20.5% 20.0% Non-U.S. stock 12.6% 12.2% Global equity 7.1% 6.7% U.S. fixed income 19.9% 21.0% Global/non-U.S. fixed income 2.0% 1.9% Cash 2.0% 1.7% Private equity 14.5% 14.8%

$2,020

$2,006

$1,745 $1,958

$266

2023 2022

Real estate equity 10.4% 11.1% Private credit/debt 1.3% N/A Alternative investments 9.2% 9.9% Other 0.5% 0.7%

$1,927 $1,493

$1,152

Top 1,000 DB plans U.S. stock 20.5% 20.1% Non-U.S. stock 12.6% 12.3%

$1,894

20.1% 21.3%

$1,879

$640

$1,181

$1,204 $1,837 $673

$862 $1,824

$1,815

Global/non-U.S. fixed income 2.0% 1.9% Cash 2.2% 1.7% Private equity 14.3% 14.6% Real estate equity 10.2% 10.9% Private credit/debt 1.3% N/A Alternative investments 9.1% 9.7% Other 0.7% 0.9%

Pensions & Investments

THE

Aggregate asset mixes: DC plans

L ARG E S T R E T IR E MENT FUNDS

February 12, 2024

Rank

Sponsor

Assets

Change

Total DB

Total DC

Rank

Sponsor

Assets

Change

889

Iron Workers 40, 361, 417

$1,809

14.9%

$657

$1,152

958

IBEW Local 1

$1,577

3.8%

890

Lehigh Hanson

$1,808

-5.4%

$921

$887

959

IBEW Local 58

$1,576

15.5%

$830

$746

891

Caesars Entertainment

$1,806

11.4%

$1,806

960

Hubbell

$1,575

-1.1%

$451

$1,124

892

Allianz of America

$1,800

6.3%

$1,800

961

Dana

$1,562

2.9%

$550

$1,012

893

Bank of the West

$1,800

8.4%

$355

$1,445

962

Credit Union Retirement

$1,559

894

Operating Engineers Local 15

$1,799

12.6%

$39

$1,760

963

Teamsters Local 639

$1,559

7.1%

$1,559

895

Skadden, Arps, Slate

$1,797

5.7%

$148

$1,649

964

Operating Eng. 94, 94a, 94b

$1,557

11.0%

896

Teamsters Trucking, N.E.

$1,795

-6.1%

$1,795

965

DeKalb County Employees

$1,553

16.2%

$1,553

897

Nassau County Def. Comp.

$1,793

3.2%

$1,793

966

Orlando City

$1,552

8.6%

$1,552

898

Aptiv

$1,791

6.3%

$1,791

967

Evonik (NA)

$1,550

-6.9%

$241

899

Woodward

$1,791

4.1%

$1,626

968

Western & Southern Life

$1,545

2.9%

$1,096

$449

900

Indiana Deferred Comp.

$1,789

10.8%

$1,789

969

Sealed Air

$1,541

4.7%

$116

$1,425

901

Carpenters, Greater Pa.

$1,779

15.7%

$1,248

$531

970

SRI International

$1,541

12.6%

902

Bertelsmann

$1,778

7.9%

$128

$1,650

971

Wayne County

$1,533

6.8%

903

El Paso Fire & Police

$1,777

8.0%

$1,777

972

WESCO International

$1,530

5.6%

904

First Citizens Bank

$1,777

29.5%

$1,437

$340

973

Hanesbrands

$1,525

-8.2%

$835

905

Levi Strauss

$1,774

-3.1%

$888

$886

974

Rio Tinto America

$1,522

2.6%

$662

906

Underwriters Laboratories

$1,772

-0.7%

$216

$1,556

975

Garmin International

$1,520

11.4%

907

Navy Exchange

$1,771

5.9%

$1,771

976

MDU Resources

$1,520

6.2%

$101

908

UVM Medical Center

$1,771

977

Service Employees Int’l

$1,518

16.8%

$1,393

$125

909

TECO Energy

$1,757

-2.7%

$749

$1,008

978

O-I Glass

$1,516

-4.6%

$832

$684

910

Alcoa

$1,751

-41.3%

$1,087

$664

979

Barnstable County Retirement

$1,514

17.3%

$1,514

911

Milliman

$1,751

12.6%

$1,751

980

Lexmark International

$1,511

1.3%

$372

$1,139

912

W.R. Berkley

$1,750

15.3%

$1,750

981

Talen Energy

$1,510

-1.5%

$1,017

$493

913

NV Energy

$1,749

-1.2%

$807

$942

982

Weil, Gotshal & Manges

$1,510

3.9%

$618

$892

914

Operating Engineers Local 324

$1,748

15.3%

$1,747

983

Lear

$1,508

4.4%

$357

$1,151

915

LafargeHolcim US

$1,737

-1.6%

$666

$1,071

984

Astellas US

$1,506

916

FMC

$1,736

-2.6%

$1,120

$616

985

Iron Workers, Mid-America

$1,501

10.9%

$876

$625

917

Graphic Packaging

$1,726

6.5%

$226

$1,500

986

SKF USA

$1,499

-0.1%

$696

$803

918

Brunswick

$1,724

12.6%

$1,445

919

Biogen

$1,720

Other 4.1%

920

AFSCME

$1,716

921

AmerisourceBergen

$1,708

4.2%

922

Panasonic USA

923 924

As of Sept. 30.

Top 200 DC plans

2023 2022

U.S. stock 40.6% 38.5% Non-U.S. stock 5.4% 4.3% Fixed income 4.0% 4.1% Stable value 5.8% 7.2% Cash 14.3% 17.6% Target date 24.6% 22.7% Inflation protection 0.3% 0.4% Annuities 0.9% 1.0%

Top 1,000 DC plans U.S. stock 40.5% 38.3% Non-U.S. stock 5.5% 4.6% Fixed income 4.3% 4.7% Stable value 6.1% 7.4% Cash 13.4% 16.1% Target date 24.8% 23.0% Inflation protection 0.3% 0.4% Annuities 0.9% 0.9% Other 4.2% 4.6%

$165

Total DB

Total DC

$1,577

$1,559

$1,557

$1,309

$1,541 $1,076

$457 $1,530 $690 $860 $1,520 $1,419

$1,506

$1,724

987

DLA Piper

$1,495

0.5%

$50

$1,720

988

IBEW Local 332

$1,492

9.9%

$748

$744

$208

989

Alliant Energy

$1,489

-1.1%

$237

$1,252

5.9%

$1,508

$1,708

990

National Integrated Group

$1,489

134.1%

$1,489

$1,705

2.0%

$277

$1,428

991

TechnipFMC USA

$1,489

-2.9%

$385

$1,104

Keurig Dr Pepper

$1,698

5.7%

$142

$1,556

992

Hanover Insurance

$1,488

4.9%

$380

$1,108

Cambridge Retirement

$1,697

4.8%

$1,697

993

Laborers Central

$1,488

14.6%

$1,213

925

Howard Hughes Medical

$1,695

13.5%

$1,695

994

Fujitsu America

$1,475

7.8%

926

TRW Automotive Holdings

$1,694

-8.6%

$1,688

995

Verso

$1,472

-10.5%

$856

927

Boy Scouts of America

$1,692

2.8%

$1,479

$213

996

Sheet Metal, N. California

$1,468

7.5%

$1,468

928

Arizona Deferred Comp.

$1,690

10.9%

$1,690

997

Masco

$1,462

10.8%

$80

929

Milwaukee County

$1,688

-1.1%

$1,688

998

Deluxe

$1,459

3.9%

930

Memphis Light Gas & Water

$1,680

10.4%

$1,680

999

Iron Workers, Southern Ohio

$1,459

16.8%

931

First Horizon

$1,679

7.9%

$679

1,000

Sacramento Co. Def. Comp.

$1,452

13.4%

932

CentraCare Health

$1,674

933

Windstream

$1,671

-14.3%

934

NVR

$1,668

4.4%

935

Nielsen

$1,667

3.5%

$252

936

American Fed. of Musicians

$1,656

-0.6%

$1,656

937

Juniper Networks

$1,655

17.7%

938

NOV

$1,652

6.6%

$204

$1,448

939

Yum Brands

$1,641

-23.3%

$771

$870

940

Valvoline

$1,640

-12.9%

$1,361

$279

941

Bemis

$1,626

3.4%

$355

$1,271

942

Plymouth County Retirement

$1,624

13.9%

$1,371

$253

943

Beth Israel DMC

$1,621

8.6%

944

Teamsters Local 705

$1,621

6.2%

945

BDO USA

$1,619

946

ONE Gas

$1,619

2.4%

$787

$832

947

Equifax

$1,613

0.5%

$418

$1,195

948

Saint Louis University

$1,612

9.9%

949

Laborers, Indiana

$1,610

27.9%

950

Nemours Foundation

$1,609

951

Pipe Trades, S. California

$1,608

952

Zoetis

$1,606

953

MBTA Retirement

$1,604

1.8%

954

Portland General Electric

$1,604

-2.6%

$560

$1,044

955

Laborers International

$1,590

12.2%

$1,444

$146

956

Independence Blue Cross

$1,588

3.0%

$719

$869

957

Rolls-Royce (NA)

$1,588

-4.1%

$1,587

$1,000 $1,674

$490

$1,668 $1,415

$1,655

$1,621 $1,621 $138

13.6%

$1,181

$1,481

$1,612 $1,566

$44

$616

$993

$1,316

$292 $1,606

$1,604

201-1,000 total

$3,576,737

1-1,000 total

$13,022,601

$275 $1,475 $616

$1,382 $1,459

$988

$471 $1,452

February 12, 2024

THE

Pensions & Investments

L ARG E S T R E T IR E MENT FUNDS

Defined benefit funds

Assets of the top 200 funds by plan type As of Sept. 30.

Funds with the most DB assets managed internally Among the top 200 funds; assets are in millions as of Sept. 30.

Public funds

52.6%

2022: 52.4%

Corporate funds

Miscellaneous funds

Union funds

2022: 32.0%

2022: 13.8%

2022: 1.8%

31.0%

14.2%

Makeup of the top 200 assets: DB vs. DC

2.2%

Defined benefit 66.3% 2022: 67.9%

As of Sept. 30.

Defined contribution 33.7% 2022: 32.1%

Number of funds using strategy cited Among the top 200 funds as of Sept. 30.

Defined benefit funds Strategy

Number of funds

Strategy

Number of funds

U.S. active equity

Cash

U.S. passive equity

Inflation-protected securities

U.S. enhanced equity

High-yield

Non-U.S. active equity

Bank loans

Non-U.S. passive equity

U.S. real estate equity

Non-U.S. enhanced equity

Non-U.S. real estate equity

Global active equity

Timber

Global passive equity

Farmland/agriculture

Developed markets equity, active

Infrastructure

Developed markets equity, passive

Hedge funds (direct investments)

Emerging markets equity, active

Hedge fund of funds

Emerging markets equity, passive

Energy

REITs

Commodities

U.S. active bonds

Private equity

U.S. passive bonds

Buyouts

U.S. enhanced indexed bonds

Venture capital

Global/non-U.S. active bonds

Mezzanine

Global/non-U.S. passive bonds

Distressed debt

Developed markets bonds, active

Private credit/debt

Developed markets bonds, passive

Digital assets/cryptocurrency

Emerging markets debt, active

ETFs

Emerging markets debt, passive

Mutual funds

China equity

Commingled vehicles

China debt

Separate accounts

Passive equity

Number of funds

Target-date strategies

$71,679

$54,048

$19,1

$20,286

$39,782

U.S. equity

Non-U.S. equity

California Public Employees

$263,701

$106,286

California State Teachers

$135,846

$67,740

New York State Common

$102,686

$55,579

Georgia Teachers

$91,088

$50,481

Florida State Board

$82,382

$39,480

New York State Teachers

$74,491

$41,438

North Carolina

$60,387

$18,492

New Jersey

$58,403

$23,805

$15,970

$18,628

Ohio Public Employees

$54,288

$23,382

$4,251

$21,991

Ohio State Teachers

$53,901

$19,808

$9,331

$14,778

Texas Teachers

$50,666

$11,882

$19,068

$21,432

Wisconsin Investment Board

$46,836

Alabama Retirement

$41,733

$19,107

$6,092

Global equity

Pennsylvania School Employees

$39,778

$8,771

$3,870

Colorado Employees

$33,836

$13,666

$4,187

Tennessee Consolidated

$32,405

$17,622

$3,101

Virginia Retirement

$28,750

$3,911

$2,548

Michigan Retirement

$22,789

$16,117

$2,586

Washington State Board

$20,984

Texas Employees

$16,683

Oregon Public Employees

$14,314

Honeywell

$12,541

Alaska Retirement

$12,079

$7,396

Maryland State Retirement

$12,003

$3,418

Corteva

$8,253

$218

$47,106

$987

$24,281

$4,571

$16,554

$13,873

$60

$18,186 $29,257

$31,323

$16,221 $6,534 $13,129

$4,838

$10,871

$9,198

$12,492

$3,474 $5,959

DB assets by investment vehicle Among the top 200 funds as of Sept. 30.

Separate accounts

$6,320

$1,303

$6,513 $7,051

$4,683 $1,696

$107

$5,552

$1,263

$6,039

Funds with DB assets in hybri Among the top 200 funds; assets are in Fund

Assets

Texas County & District

$43,779

Northrop Grumman

$28,888

California State Teachers

$17,898

Citigroup

$9,860

Wells Fargo

$8,784

CommonSpirit Health

$8,534

Ernst & Young

$8,312

2022: 73.3%

Commingled vehicles

Funds with DB plans wi th fee money managers

2022: 26.2%

Among the top 200 funds; amounts are in

28.2%

Mutual funds

Fund

Amount

$996

2022: 0.3%

$713

ETFs

Maryland State Retirement

$569

Illinois Teachers

$478

2022: 0.2%

RTX

$426

Number of funds

Teamsters, Western Conf.

$346

West Virginia Investment

$249

Indiana Public Retirement

$223

Illinois Municipal

$189

Colorado Employees

$178

0.5%

Funds with DB plans using an external cybersecurity vendor

REITs

Passive bonds

Inflation-protected securities

CITs

Commodities

ETFs

� Alabama Retirement

� Maryland State Retirement

California State Teachers

$166

Private equity

Managed accounts

� Florida State Board

� New York City Retirement

Pennsylvania Employees

$114

� Illinois State Board

� New York State Teachers

Kentucky Public Pensions

$109

� Illinois Teachers

� Oklahoma Teachers

� Los Angeles County

� Pennsylvania School

Ohio School Employees

$108

Mississippi Employees

$101

� Maine Public Employees

� Texas County & District

New Mexico Public Empl.

$88

Off-the-shelf

Real estate equity

Mutual funds

Digital assets/cryptocurrency

Separate accounts

millions

71.1%

Wisconsin Investment Board

$59

$4,086

New York State Common

Custom

$39

$20,984

0.2% Strategy

Global U.S. fi inco

Total assets

Defined contribution funds Strategy

U.S. fixed income

Fund

Rank

Among the top 200 funds; as of Sept. 30.

Employees

millions a

Pensions & Investments

THE

L ARG E S T R E T IR E MENT FUNDS

Funds with DB plans using ESG factors

fixed ome

,048

$19,177

Real estate

Alternative investments

$12,511

,782

$1,531

,106

,281

$527

,554

,186

$9,412 $12,638

,628

,991

$4,664

,778

$9,023

,432

-$1,716

,221

-$709

534

$4,174 $396

$2,412 $13,612

,871

� Hawaii Employees

� New Jersey

� California Public Employees

� Illinois State Board

� New York City Retirement

� California State Teachers

� Illinois State Universities

� New York State Common

� Colorado Employees

� Los Angeles City Employees

� New York State Teachers

� CommonSpirit Health

� Los Angeles County Empl.

� Washington State Board

� Corteva

� Los Angeles Water & Power

� Wespath (UMC)

� Ernst & Young

� Maryland State Retirement

� Wisconsin Investment Board

$274

$599

$307,868

Mandates

$3,944

New York State Common

$246,307

$20,000

Wespath (UMC)

$8,240

CommonSpirit Health

$4,322

$1,053

Among the top 200 funds; assets are in millions as of Sept. 30.

Equity assets

Among the top 200 funds; amounts are in millions as of Sept. 30.

Fund

Assets

No. of mgrs.

Fund

Assets

New York State Common

$31,500

125

Texas Teachers

$2,949

Illinois Teachers

$17,932

CommonSpirit Health

$2,395

Illinois Municipal

$12,750

Pennsylvania Employees

$2,281

Massachusetts PRIM

$10,349

RTX

$10,304

Illinois State Universities

$10,226

Illinois State Board

$10,214

$8,534

$6,659

Indiana Public Retirement

$4,998

New Mexico Public Empl.

$3,796

22 14

Ohio Public Employees

No. of mgrs.

Fund

Assets

Fund

Assets

California State Teachers

$2,572

Mississippi Employees

$246

Ohio State Teachers

$704

Oregon Public Employees

$226

Wisconsin Invest. Board

$698

Los Angeles City Empl.

$221

Illinois Teachers

$536

West Virginia Investment

$147

Idaho Public Employees

$450

Maine Public Employees

$146

$774

Kentucky Teachers

$396

Deloitte

$95

$501

Colorado Employees

$365

KPMG

$59

RTX

$318

International Paper

$42

Michigan Retirement

$266

New York State Common

$31

CommonSpirit Health

$258

Providence Health

$15

Assets

Fund

$1,296

California State Teachers

$1,210

Citigroup Merck IBM

$445

Oklahoma Teachers

$364

KPMG

$92

Providence Health

$57

Debt assets

,984

513

$376

Fund

Funds with DB plans using hiring policy for WMDV-owned managers

051

Among the top 200 funds as of Sept. 30.

683

552

$1,230

039

$231

ets in hybrid funds millions as of Sept. 30. Fund

Assets

Merck

$8,172

Deloitte

$7,457

Prudential Financial

$6,567

KPMG

$4,634

Providence Health

$1,463

� California State Teachers

� Los Angeles County Empl.

� Pennsylvania Employees

� Citigroup

� Maryland State Retirement

� RTX

� CommonSpirit Health

� Massachusetts PRIM

� Texas Teachers

� Eli Lilly

� Merck

� United Airlines Holdings

� IBM

� New York City Retirement

� Virginia Retirement

� Illinois Municipal

� New York State Common

� Wespath (UMC)

� Illinois State Board

� New York State Teachers

� Wisconsin Investment

� Illinois State Universities

� Northrop Grumman

� Illinois Teachers

� Ohio Public Employees � Ohio State Teachers

� Indiana Public Retirement

Assets

Ohio State Teachers

$54

International Paper

Illinois Teachers

Indiana Public Retire.

Deloitte

CommonSpirit Health

KPMG

West Virginia Investment

Most-used DB primary custodians Among the top 200 funds as of Sept. 30.

Board

Custodian

Times mentioned

Custodian

Times mentioned

BNY Mellon

J.P. Morgan

State Street

Fifth Third

Northern Trust

Most-used DB managers Among the top 200 funds as of Sept. 30. Overall

U.S. equity

U.S. fixed income

Real estate

Delta Air Lines

$197

Manager

Texas Employees

$36

BlackRock

104

BlackRock

Blackstone

State Street Global

PIMCO

Acadian

Prudential

J.P. Morgan

Wellington

Prudential

Baillie Gifford

J.P. Morgan

Prudential

Northern Trust

Loomis Sayles

State Street Global

Invesco

State Street Global

RhumbLine

MacKay Shields

Arrowstreet

Clarion

Oaktree

Mellon

Western Asset

LSV

AEW

Wellington

T. Rowe Price

NISA

Wellington

UBS

Apollo

Channing

J.P. Morgan

Mondrian

Westbrook

Carlyle

J.P. Morgan

State Street Global

Lazard

PIMCO

Neuberger Berman

millions as of Sept. 30. Fund

Amount

Operating Engineers Int’l

$86

CommonSpirit Health

$85

Minnesota State Board

$83

Kentucky Teachers

$79

Nevada Public Employees

$76

Alaska Retirement

$72

Idaho Public Employees

$60

Iowa Public Employees

$58

Ohio Police & Fire

$53

Texas County & District

$39

Kansas Public Employees

Manager

Times mentioned

Non-U.S./global

Times mentioned

ans wi th fees paid to external nts are in

Assets

California State Teachers

Funds with DB assets invested in China

New York State Teachers

086

ts are in

Fund

Funds with the most DB assets managed by WMDV-owned managers

Maryland St. Retirement

,492

Among the top 200 funds; assets are in millions as of Sept. 30.

� Alabama Retirement

$9,461

,257

,129

Funds with DB assets invested under ESG principles

Among the top 200 funds; as of Sept. 30. Global/nonU.S. fixed income

February 12, 2024

Manager

Times mentioned

Manager

Times mentioned

Manager

Times mentioned

Most-used DB consultants Among the top 200 funds as of Sept. 30. Overall

General

Private equity

Albourne

NEPC

Aksia

Townsend

Albourne

Aksia

Aon

Hamilton Lane

StepStone

Aksia

Aon

Meketa

Albourne

Cliffwater

$30

NEPC

Callan

StepStone

Hamilton Lane

KPMG

$17

Callan

RVK

Franklin Park

Aon

Illinois State Board

$15

Meketa

Wilshire

Callan

Providence Health

Hamilton Lane

Verus

Cambridge

Meketa

StepStone

Mercer

AEW

Townsend

Segal Marco

Cliffwater

NEPC

Wilshire

NEPC

Texas Employees

Intel

Manager

Times mentioned

Hedge funds

Manager

Times mentioned

Real estate

Times mentioned

Manager

Times mentioned

Manager

Times mentioned

February 12, 2024

THE

L ARG E S T R E T IR E MENT FUNDS

Pensions & Investments

Defined benefit funds DB funds with the most assets, by class

Among the top 200 funds; assets are in millions as of Sept. 30.

U.S. equity Total Rank

Active

Fund

Assets

Rank

California Public Employees

$111,013

California State Teachers

New York State Common

Passive

Fund

Assets

Rank

Texas Teachers

$25,652

$72,146

Georgia Teachers

$65,712

New York City Retirement

$65,603

Georgia Teachers

$50,481

New York State Teachers

7 8

Enhanced

Fund

Assets

Rank

Fund

Assets

California Public Employees

$102,366

Pennsylvania School Empl.

$8,771

$21,565

California State Teachers

$67,137

New York State Teachers

$3,995

$15,486

New York State Common

$55,579

West Virginia Investment

$3,100

Ohio State Teachers

$14,401

New York City Retirement

$50,117

Minnesota State Board

$3,062

Illinois Municipal

$12,052

Florida State Board

$39,130

United Parcel Service

$2,762

$44,842

Tennessee Consolidated

$10,618

New York State Teachers

$37,863

Maryland State Retirement

$2,547

Florida State Board

$44,778

New York State Common

$10,133

Georgia Teachers

$28,916

San Diego County

$2,293

Texas Teachers

$28,887

Colorado Employees

$8,818

New Jersey

$23,805

Teamsters, Western Conf.

$1,423

Minnesota State Board

$26,807

Alabama Retirement

$8,806

Nevada Public Employees

$22,179

Kentucky Public Pensions

$613

Ohio Public Employees

$24,279

California Public Employees

$8,647

Minnesota State Board

$21,148

Eli Lilly

$575

Global equity

Non-U.S. equity

Total

Total Fund

Assets

Rank

Fund

Assets

California Public Employees

$78,620

Wisconsin Investment Board

$57,973

California State Teachers

$45,329

California University

$44,025

New York City Retirement

$39,333

South Carolina Public Empl.

Texas Teachers

$35,971

Virginia Retirement

Florida State Board

$30,710

New York State Common

$26,633

Ohio Public Employees

Rank

Developed markets equity

Emerging markets equity

Total

Fund

Assets

Rank

Fund

Assets

California Public Employees

$58,653

California Public Employees

$19,967

$17,361

Wisconsin Investment Board

$53,262

New York City Retirement

$18,031

$15,849

Florida State Board

$35,078

Texas Teachers

$14,820

Los Angeles County Empl.

$14,947

New York State Common

$34,604

California State Teachers

$11,371

Florida State Board

$12,727

California State Teachers

$33,958

Florida State Board

$8,358

$21,741

Operating Engineers Int’l

$11,907

New York City Retirement

$23,598

New York State Teachers

$5,983

Ohio State Teachers

$18,848

Arkansas Teachers

$11,221

Texas Teachers

$21,149

Wisconsin Investment Board

$4,711

New York State Teachers

$17,695

Washington State Board

$10,437

Virginia Retirement

$18,366

New Jersey

$4,507

North Carolina

$17,537

New York State Common

$9,682

Los Angeles County Empl.

$17,688

Ohio Public Employees

$4,460

New York State Teachers

$17,429

Maryland State Retirement

$4,284

Active Rank 1

Fund

Texas Teachers

Active Assets

Rank

$33,310

Fund

Wisconsin Investment Board

Assets

$25,149

New York City Retirement

$32,889

Virginia Retirement

$15,849

Florida State Board

$30,696

Washington State Board

$10,437

4 5

California State Teachers Ohio State Teachers

$25,793

$18,582

Ohio Public Employees

$17,950

New York State Common

$16,391

Massachusetts PRIM

$11,941

North Carolina

California Public Employees

6 7

New York State Common

$10,011 $9,681

Arkansas Teachers

$8,571

Colorado Employees

$8,035

Texas Employees

$6,854

$11,162

California University

$6,120

$8,795

New York State Teachers

$5,717

Passive Rank

Florida State Board

Passive

Fund

Assets

Rank

California Public Employees

$69,825

California State Teachers

New Jersey

Rank

Active Rank

Active

Fund

Assets

Rank

Fund

Assets

Florida State Board

$32,348

New York City Retirement

$15,542

New York State Common

$24,361

Texas Teachers

$13,546

Wisconsin Investment Board

$21,484

California State Teachers

$10,632

Texas Teachers

$19,763

Florida State Board

$8,358

New York City Retirement

$19,643

Maryland State Retirement

$4,228

Virginia Retirement

$18,366

Massachusetts PRIM

$4,111

Ohio State Teachers

$15,226

Wisconsin Investment Board

$3,665

California State Teachers

$15,160

Ohio Public Employees

$3,558

Ohio Public Employees

$14,392

Ohio State Teachers

$3,356

Texas Employees

$11,450

California Public Employees

$2,843

Passive

Fund

Assets

California University

$37,905

$19,536

Wisconsin Investment Board

$32,824

$12,195

South Carolina Public Empl.

$17,361

New York State Teachers

$12,002

Los Angeles County Empl.

New York State Common

$10,242

Nevada Public Employees

$8,580

Georgia Teachers

Fund

Assets

Rank

Fund

Assets

California Public Employees

$52,701

California Public Employees

$17,124

Wisconsin Investment Board

$31,778

New York State Teachers

$3,191

California State Teachers

$18,798

New York City Retirement

$2,489

$14,947

South Carolina Public Empl.

$15,440

Tennessee Consolidated

$2,142

Operating Engineers Int’l

$8,275

Los Angeles County Empl.

$14,947

Georgia Teachers

$2,129

Maine Public Employees

$4,617

New Jersey

$10,433

Alaska Retirement

$2,088

$8,409

Florida State Board

$2,716

New York State Common

$10,243

South Carolina Public Empl.

$1,920

Minnesota State Board

$8,155

Arkansas Teachers

$2,650

New York State Teachers

$8,811

New Jersey

$1,762

Washington State Board

$7,285

Illinois State Universities

$1,904

Nevada Public Employees

$8,580

Idaho Public Employees

$1,504

New York City Retirement

$6,444

New Mexico Public Employees

$1,620

Operating Engineers Int’l

$8,275

Texas Teachers

$1,274

REITs Rank

Rank

Passive

LDI strategies

Fund

Assets

Rank

Fund

Assets

Rank

Fund

Assets

Rank

Fund

Assets

California Public Employees

$4,233

Ohio Public Employees

$1,224

RTX

$17,571

Corteva

$4,831

New York State Teachers

$2,946

Los Angeles Fire & Police

$1,184

United Parcel Service

$16,635

Deloitte

$3,635

California State Teachers

$2,159

Alabama Retirement

$1,114

Honeywell

$8,029

Merck

$3,168

Florida State Board

$1,855

Pennsylvania School Empl.

$1,033

Prudential Financial

$5,821

American Airlines

$2,883

Ohio State Teachers

$1,467

Massachusetts PRIM

$960

International Paper

$5,193

CommonSpirit Health

$2,309

Pensions & Investments

THE

L ARG E S T R E T IR E MENT FUNDS

February 12, 2024

U.S. fixed income Total Rank

Active

Fund

Assets

Rank

New York City Retirement

$74,297

California Public Employees

Passive

Fund

Assets

Rank

California Public Employees

$78,080

$72,468

New York City Retirement

New York State Common

$49,061

Wisconsin Investment Board

$46,635

California State Teachers

6 7 8

Enhanced

Fund

Assets

Rank

Fund

Assets

Wisconsin Investment Board

$28,687

California State Teachers

$27,352

$68,171

Texas Teachers

$21,482

Northrop Grumman

$1,293

New York State Common

$49,061

Nevada Public Employees

$15,656

Wespath (UMC)

$289

North Carolina

$29,257

Florida State Board

$12,810

Ohio Police & Fire

$198

$43,315

New York State Teachers

$27,253

Pennsylvania School Empl.

$11,036

Florida State Board

$29,511

Georgia Teachers

$24,281

Oregon Public Employees

$8,764

North Carolina

$29,257

Washington State Board

$20,984

Iowa Public Employees

$7,820

New York State Teachers

$27,253

Ohio Public Employees

$20,882

Los Angeles County Empl.

$7,452

Ohio Public Employees

$24,402

New Jersey

$19,627

Massachusetts PRIM

$6,694

Georgia Teachers

$24,281

Wisconsin Investment Board

$17,948

Maryland State Retirement

$6,139

Global/non-U.S. fixed income

Developed markets fixed income

Emerging markets debt

Inflation-protected securities

Total

Rank

Fund

Assets

Rank

Fund

Assets

Rank

California Public Employees

$27,665

California Public Employees

$5,768

Indiana Public Retirement

$5,098

Indiana Public Retirement

$3,479

Wisconsin Investment Board

Arkansas Teachers

$2,871

New York State Teachers

$2,636

Wisconsin Investment Board

$2,757

Los Angeles Water & Power

$2,521

New York State Teachers

$2,636

Ohio School Employees

$2,171

Los Angeles Water & Power

$2,521

Louisiana State Employees

Illinois Teachers

$2,410

Ohio School Employees

$2,236

Louisiana State Employees

Mississippi Employees

Assets

$21,897

New York City Retirement

$8,125

$2,757

Pennsylvania School Empl.

$7,276

Illinois Teachers

$1,977

Indiana Public Retirement

$5,662

Indiana Public Retirement

$1,619

California State Teachers

$3,827

Ohio Public Employees

$1,166

Ohio Public Employees

$3,520

$1,787

Ohio State Teachers

$933

Massachusetts PRIM

$3,300

Illinois Municipal

$1,676

San Bernardino County

$859

Maryland State Retirement

$2,159

Mississippi Employees

$1,433

Pennsylvania School Empl.

$796

Idaho Public Employees

$2,002

$2,225

Louisiana Teachers

$1,354

Massachusetts PRIM

$769

Los Angeles County Empl.

$1,847

$2,066

Illinois State Universities

$1,183

Maryland State Retirement

$663

Active Assets

Rank

California Public Employees

$12,871

Indiana Public Retirement

3 4 5

7 8 9 10

Assets

Rank

Fund

Assets

California Public Employees

$5,498

California Public Employees

$7,373

$3,683

New York State Teachers

$2,636

Wisconsin Investment Board

$2,757

Wisconsin Investment Board

$2,757

Los Angeles Water & Power

$2,521

Illinois Teachers

$1,977

New York State Teachers

$2,636

Ohio School Employees

$2,171

Indiana Public Retirement

$1,619

Los Angeles Water & Power

$2,521

Indiana Public Retirement

$2,064

Ohio Public Employees

$1,166

Illinois Teachers

$2,410

Louisiana State Employees

$1,787

Ohio State Teachers

$933

Ohio School Employees

$2,236

Illinois Municipal

$1,676

San Bernardino County

$859

Arkansas Teachers Mississippi Employees

$2,225

$2,170

$2,066

Passive Rank

Active

Fund

Louisiana State Employees

Mississippi Employees Louisiana Teachers Illinois State Universities

$1,433 $1,354 $1,183

8 9 10

Massachusetts PRIM Maryland State Retirement Mississippi Employees

High-yield securities Rank

$20,304

New York City Retirement

$13,433

Wisconsin Investment Board

$5,451

Teamsters, Western Conf.

$5,236

Ohio Public Employees

$3,398

Kentucky Public Pensions

$3,276

New Jersey

$3,159

New Mexico Educational

$2,830

Connecticut Retirement

$2,676

Texas Employees

$2,407

$633

Fund

Assets

Rank

Fund

Assets

Rank

Fund

Assets

California Public Employees

$14,794

Indiana Public Retirement

$1,415

California Public Employees

$14,524

Indiana Public Retirement

$1,415

California Public Employees

$270

Pennsylvania School Empl.

$396

San Bernardino County

$715

Maryland State Retirement

$10

Arkansas Teachers

$701

International Paper

Pennsylvania School Empl.

$396

Citigroup

$55

Maryland State Retirement

$10

Kansas Public Employees

ETFs

Assets

California Public Employees

$653

Passive

Fund

$769

Rank

$21,822

Fund

Assets

Wisconsin Investment Board

California Public Employees

Active Rank

Fund

Bank loans

Fund

Assets

Rank

Fund

Assets

Rank

Fund

Assets

Rank

Fund

Assets

Alabama Retirement

$1,005

Providence Health

$106

Wisconsin Investment Board

$2,717

Texas Employees

$1,338

California State Teachers

$767

Illinois Teachers

$14

Massachusetts PRIM

$2,163

Maryland State Retirement

$497

CommonSpirit Health

$337

Texas Employees

Oregon Public Employees

$1,979

Kentucky Teachers

$349

Maine Public Employees

$210

Illinois Municipal

$1,676

Los Angeles City Employees

$262

Ohio State Teachers

$181

Los Angeles County Empl.

$1,372

California Public Employees

$214

February 12, 2024

THE

L ARG E S T R E T IR E MENT FUNDS

Pensions & Investments

Defined benefit funds DB funds with the most assets in alternatives, by class

Among the top 200 funds; assets are in millions as of Sept.

Total Rank

Fund

Assets

Rank

Fund

Assets

Rank

Fund

Assets

Rank

Fund

Assets

California Public Employees

$153,186

Massachusetts PRIM

$40,649

Ohio State Teachers

$26,492

Texas Employees

$16,083

California State Teachers

$140,566

Pennsylvania School Empl.

$35,521

California University

$25,137

Colorado Employees

$15,858

New York State Common

$90,161

Wisconsin Investment Board

$35,009

Tennessee Consolidated

$23,746

Connecticut Retirement

$15,518

Texas Teachers

$86,143

Los Angeles County Empl.

$34,806

Missouri Schools & Educ.

$22,946

RTX

$14,999

Washington State Board

$81,500

Illinois Teachers

$34,670

Minnesota State Board

$22,043

South Carolina Public Empl.

$14,112

New York City Retirement

$62,998

Ohio Public Employees

$31,273

San Francisco City & County

$21,144

Indiana Public Retirement

$13,520

Virginia Retirement

$61,823

New York State Teachers

$31,126

New Jersey

$20,952

Iowa Public Employees

$13,293

Florida State Board

$58,574

North Carolina

$29,670

Teamsters, Western Conf.

$19,779

United Parcel Service

$12,447

Oregon Public Employees

$55,637

Arizona State Retirement

$29,327

Texas County & District

$17,340

Louisiana Teachers

$12,161

Michigan Retirement

$52,849

Maryland State Retirement

$27,740

Hawaii Employees

$16,112

Maine Public Employees

$11,578

Real estate equity Rank

Infrastructure

Fund

Assets

Rank

California Public Employees

$54,045

California State Teachers

Washington State Board

Hedge funds total*

Fund

Assets

Rank

California Public Employees

$15,278

$50,527

California State Teachers

$33,268

New York State Common

Texas Teachers

$30,023

New York State Common

$26,104

Florida State Board

7 8

Hedge funds (event driven)

Fund

Assets

Rank

Fund

Assets

California State Teachers

$20,024

New York State Common

$1,585

$11,076

Michigan Retirement

$10,028

RTX

$1,165

$8,369

Texas Teachers

$9,805

Illinois Teachers

$1,146

New York City Retirement

$6,605

Massachusetts PRIM

$7,417

Maryland State Retirement

$891

Oregon Public Employees

$6,230

New York State Common

$7,279

California University

$638

$20,268

Pennsylvania School Empl.

$6,121

Delta Air Lines

$7,256

Texas Employees

$555

New York City Retirement

$16,712

Los Angeles County Empl.

$3,966

Hawaii Employees

$6,192

New Jersey

$505

Oregon Public Employees

$13,641

Washington State Board

$2,945

Virginia Retirement

$6,176

New York City Retirement

$484

New York State Teachers

$13,380

Teamsters, Western Conf.

$2,727

Florida State Board

$6,135

Texas County & District

$457

Massachusetts PRIM

$12,616

California University

$2,703

RTX

$5,357

Citigroup

$359

Hedge funds (relative value)

Hedge funds (equity hedge)

Hedge funds (tactical trading)

Hedge funds (multistrategy)

Rank

Fund

Assets

Rank

Fund

Assets

Rank

Fund

Assets

Rank

Fund

Assets

RTX

$2,000

Virginia Retirement

$6,176

California State Teachers

$18,272

Oregon Public Employees

$4,842

California State Teachers

$1,752

Texas County & District

$1,229

United Parcel Service

$2,961

Los Angeles County Empl.

$4,657

New Jersey

$1,373

New York City Retirement

$1,017

New York State Common

$1,652

North Carolina

$2,356

Maryland State Retirement

$1,356

New York State Common

$689

Illinois Teachers

$1,426

RTX

$1,293

New York State Common

$1,283

Texas Employees

$547

New York City Retirement

$1,396

West Virginia Investment

$1,085

Pennsylvania School Empl.

$1,245

West Virginia Investment

$375

Maryland State Retirement

$1,279

Colorado Employees

$714

Indiana Public Retirement

$1,153

Citigroup

$358

Indiana Public Retirement

$1,013

California University

$681

New York City Retirement

$902

Oregon Public Employees

$310

Ohio Police & Fire

$970

Maine Public Employees

$449

Texas Employees

$420

Maryland State Retirement

$233

Eli Lilly

$843

Alaska Retirement

$295

Illinois Teachers

$336

Deloitte

$192

RTX

$759

Texas Employees

$143

Private equity Rank

Private credit/debt

Buyouts

Venture capital

Fund

Assets

Rank

Fund

Assets

Rank

Fund

Assets

Rank

Fund

Assets

California Public Employees

$60,249

Arizona State Retirement

$12,114

California Public Employees

$42,983

Texas Teachers

$6,706

California State Teachers

$54,892

California Public Employees

$10,836

California State Teachers

$40,522

Florida State Board

$4,294

Washington State Board

$41,284

New York State Common

$10,219

New York State Common

$34,684

California State Teachers

$4,140

New York State Common

$38,189

Illinois Teachers

$7,510

Washington State Board

$28,725

Texas County & District

$3,250

Texas Teachers

$32,728

North Carolina

$7,269

Texas Teachers

$22,642

Maryland State Retirement

$3,144

Oregon Public Employees

$26,627

Florida State Board

$6,163

Oregon Public Employees

$21,328

Michigan Retirement

$2,760

New York City Retirement

$25,169

Los Angeles County Empl.

$5,262

Minnesota State Board

$16,272

New York State Common

$2,742

Michigan Retirement

$22,711

Pennsylvania School Empl.

$5,203

New York City Retirement

$14,838

Ohio State Teachers

$2,626

Virginia Retirement

$19,528

Teamsters, Western Conf.

$4,043

Virginia Retirement

$13,291

Ohio Public Employees

$2,374

Wisconsin Investment Board

$19,096

Wisconsin Investment Board

$3,875

New York State Teachers

$11,356

Los Angeles County Empl.

$1,907

Mezzanine Rank

Distressed debt

Energy

Commodities

Fund

Assets

Rank

Fund

Assets

Rank

Fund

Assets

Rank

Fund

Assets

Maryland State Retirement

$1,715

New York City Retirement

$4,387

Texas Teachers

$12,872

Pennsylvania School Empl.

$4,192

Pennsylvania Employees

$1,665

California State Teachers

$2,358

Washington State Board

$3,313

California State Teachers

$3,986

California State Teachers

$352

Oregon Public Employees

$1,651

North Carolina

$2,073

Ohio Public Employees

$2,627

Virginia Retirement

$324

Florida State Board

$1,610

Minnesota State Board

$2,040

Los Angeles County Empl.

$2,179

Teamsters, Western Conf.

$146

Washington State Board

$1,346

Oregon Public Employees

$1,370

Indiana Public Retirement

$936

RTX

$126

California Public Employees

$1,212

New Jersey

$1,052

Oregon Public Employees

$838

New Jersey

$86

New Jersey

$954

Maryland State Retirement

$925

Texas Teachers

$715

Indiana Public Retirement

$69

Eli Lilly

$921

Orange County

$727

Florida State Board

$551

Illinois Teachers

$61

New York State Common

$764

Teamsters, Western Conf.

$698

Louisiana Teachers

$384

Kentucky Teachers

$58

New York State Teachers

$742

Texas County & District

$440

Los Angeles Water & Power

$276

*Total hedge fund data includes both direct hedge funds and funds of funds; subcategories include only direct hedge fund data.

Pensions & Investments

THE

L ARG E S T R E T IR E MENT FUNDS

February 12, 2024

Defined contribution funds Largest DC plans by type 401(k) plans

Largest DC plans by asset class

457 plans

Rank

Fund

Assets

Rank

IBM

$53,022

RTX

Passive equity

Fund

Assets

Rank

New York State Def. Comp.

$33,890

$46,499

New York City Def. Comp.

Wells Fargo

$45,766

Northrop Grumman

$29,681

Costco Wholesale

Passive bonds

Fund

Assets

Rank

Fund

Assets

Federal Retirement Thrift

$458,475

Federal Retirement Thrift

$30,736

$22,135

IBM

$27,004

Northrop Grumman

$4,802

Ohio Deferred Comp.

$18,665

RTX

$23,071

RTX

$3,038

Los Angeles Co. Deferred

$14,559

Northrop Grumman

$18,264

Delta Air Lines

$2,047

$29,224

California Savings Plus

$9,743

New York City Def. Comp.

$14,275

Wells Fargo

$1,483

United Parcel Service

$29,026

Minnesota State Board

$8,885

Wells Fargo

$12,374

IBM

$1,375

Delta Air Lines

$27,009

Wisconsin Investment Board

$6,367

Delta Air Lines

$10,332

Michigan Retirement

$1,347

United Airlines Holdings

$25,200

Washington State Board

$6,088

New York City Teachers

$9,756

Citigroup

$1,177

American Airlines

$22,825

New Jersey

$5,250

Citigroup

$9,119

New York City Def. Comp.

$1,168

Intel

$19,965

Illinois State Board

$5,192

PNC

$7,861

American Airlines

$1,009

403(b) plans Rank

401(a) plans

Fund

Assets

Rank

California University

$22,200

New York City Teachers

3 4

REITs

Inflation-protected securities

Fund

Assets

Rank

Fund

Assets

Rank

Fund

Assets

Washington State Board

$20,450

IBM

$1,329

IBM

$2,025

$17,388

Florida State Board

$14,193

RTX

$704

RTX

$1,426

CommonSpirit Health

$16,900

SUNY

$12,570

Delta Air Lines

$224

Wespath (UMC)

$733

SUNY

$10,486

Alaska Retirement

$7,524

Florida State Board

$187

New York City Def. Comp.

$493

Ascension

$9,448

Indiana Public Retirement

$6,340

Accenture

$181

California University

$436

Providence Health

$6,309

California University

$5,800

KPMG

$178

Washington State Board

$416

California State Teachers

$1,935

Tennessee Consolidated

$4,155

Washington State Board

$166

North Carolina

$365

Tennessee Consolidated

$829

Ascension

$3,955

SUNY

$150

SUNY

$320

Maine Public Employees

$17

South Carolina Public Empl.

$3,845

Ohio State Teachers

$124

Intel

$300

Illinois State Universities

$3,622

Eli Lilly

$111

Citigroup

$241

Profit-sharing plans Rank

ESOPs

Custom target-date strategies

Off-the-shelf target-date strategies

Fund

Assets

Rank

Northrop Grumman

$3,758

RTX

$1,780

Fund

Assets

Rank

Fund

Assets

Deloitte

$9,521

Rank

Fund

Assets

Federal Retirement Thrift

$187,334

CommonSpirit Health

$10,877

Southwest Airlines

$5,231

Electrical Ind., Joint Board

$2,066

California University

$13,700

Northrop Grumman

$8,478

Intel

$8,319

Costco Wholesale

$7,933

KPMG

$518

RTX

$8,082

Deloitte

$7,810

Ascension

American Airlines

$7,400

Wells Fargo

$7,133

North Carolina

$7,340

United Airlines Holdings

$6,721

Florida State Board

$7,048

National Rural Electric

$5,337

Los Angeles Co. Deferred

$6,765

Ernst & Young

$4,488

IBM

$6,432

Citigroup

$4,163

Delta Air Lines

$6,102

Accenture

$4,118

Funds with DC plans offering white-label options

Funds with DC plans offering auto enrollment

Among the top 200 as of Sept. 30.

� Alaska Retirement

� Ernst & Young

� International Paper

� Northrop Grumman

� AbbVie

� Federal Retirement Thrift

� Northrop Grumman

� American Airlines

� Florida State Board

� Los Angeles Co. Deferred

� Oregon Public Employees

� Accenture

� Ford Motor

� Pennsylvania Employees

� California Savings Plus

� Honeywell

� Merck

� Pennsylvania Employees

� Alaska Retirement

� IBM

� PNC

� RTX

� American Airlines

� Illinois State Board

� Providence Health

� Citigroup

� Illinois State Universities

� Prudential Financial

� CommonSpirit Health

� Indiana Public Retirement

� RTX

� Corteva

� Intel

� Southwest Airlines

� Costco Wholesale

� International Paper

� Tennessee Consolidated

� Delta Air Lines

� KPMG

� Texas Employees

� Electrical Industry, Joint

� Merck

� United Airlines Holdings

� Michigan Municipal

� Virginia Retirement

� Michigan Retirement

� Wespath (UMC)

� Citigroup

� IBM

� Minnesota State Board

� Colorado Employees

� Illinois State Board

� New Jersey

� United Airlines Holdings

� Corteva

� Illinois State Universities

� New York City Deferred

� Virginia Retirement

� Delta Air Lines

� Indiana Public Retirement

� Eli Lilly

� Intel

Funds with DC plans offering an ESG focus Among the top 200 as of Sept. 30. � Alaska Retirement

� New York City Teachers

� California Savings Plus

� New York State Deferred

� Citigroup � Colorado Employees � CommonSpirit Health � Deloitte � Honeywell � Illinois State Universities � KPMG � Louisiana Teachers � New Jersey

Compensation

� Oregon Public Employees � Pennsylvania School

Employees

Compensation

� North Carolina

� Wells Fargo

Funds with DC plans offering stand-alone retirement income options

Board � Eli Lilly � Ernst & Young

Among the top 200 as of Sept. 30.

Funds with DC plans offering auto escalation

� Alaska Retirement

� Pennsylvania Employees

Among the top 200 as of Sept. 30.

� Colorado Employees

� PNC

� Costco Wholesale

� Prudential Financial

� Deloitte

� RTX

� American Airlines

� Eli Lilly

� New Jersey

� Ascension

� Ford Motor

� Northrop Grumman

� California Savings Plus

� Honeywell

� PNC

� Citigroup

� IBM

� Providence Health

� Colorado Employees

� Illinois State Board

� Prudential Financial

� SUNY

� Illinois State Board

� Washington State Board

� Illinois State Universities

� Wespath (UMC)

� Michigan Retirement

� CommonSpirit Health

� Intel

� RTX

� Wisconsin Investment

� Minnesota State Board

� Corteva

� International Paper

� Southwest Airlines

� New Jersey

� Costco Wholesale

� KPMG

� United Airlines Holdings

� Northrop Grumman

� Deloitte

� Merck

� Virginia Retirement

� Delta Air Lines

� Michigan Retirement

Board

February 12, 2024

THE

L ARG E S T R E T IR E MENT FUNDS

Pensions & Investments

Defined contribution funds Most-used DC managers Among the top 200 funds as of Sept. 30. Overall

U.S. stock

Non-U.S. stock

Manager

Times mentioned

Manager

Times mentioned

Vanguard

BlackRock

State Street Global

T. Rowe Price Fidelity

Fixed income Times mentioned

Capital Group BlackRock

T. Rowe Price

Fidelity

State Street Global

Capital Group

Dodge & Cox Dimensional

Stable value

Manager

Times mentioned

BlackRock

Vanguard

State Street Global

Fidelity

Dimensional

Dodge & Cox

Capital Group

PIMCO

Voya

Manager

Times mentioned

Galliard

Vanguard

Invesco

BlackRock

State Street Global

Voya

State Street Global

PIMCO

T. Rowe Price

AllianceBernstein

Prudential

EARNEST

T. Rowe Price

Dimensional

Voya

Prudential

J.P. Morgan

Dodge & Cox

Allspring

Baillie Gifford

Dodge & Cox

BlackRock

Jennison

Northern Trust

Loomis Sayles

Jennison

Northern Trust

Lazard

TCW

Vanguard

Most-used DC consultants Among the top 200 funds as of Sept. 30. Consultant

Target date Times mentioned

Times mentioned

Most-used DC primary custodians Among the top 200 funds as of Sept. 30.

Manager

Most-used DC record keepers

Funds with DC plans with fees paid to external money managers

Among the top 200 funds as of Sept. 30.

Among the top 200 funds; amounts are in millions as of Sept. 30.

Consultant

Times mentioned

Empower

Fund

Amount

IBM

$68

Fund

Michigan Retirement

$14

RTX

$64

Corteva

$10

CommonSpirit Health

$49

AbbVie

Delta Air Lines

$27

Alaska Retirement

Amount

Callan

Consultant

Times mentioned

Mercer

State Street

Fidelity

Aon

BNY Mellon

Voya

California Savings Plus

$26

Indiana Public Retirement

NEPC

Northern Trust

Alight

Providence Health

$21

Idaho Public Employees

RVK

Fidelity

TIAA

KPMG

$18

New Mexico Public Employees

CAPTRUST

Empower

Vanguard

Segal Marco

Fifth Third

Corebridge

Cambridge

J.P. Morgan

Nationwide

Meketa

Voya

Bank of America

Funds with DC plans using an external cybersecurity vendor

Rocaton

Principal

Among the top 200 funds; as of Sept. 30.

Voya

Diversity CONTINUED FROM PAGE 19

Each pension fund has its own definition for what is considered an emerging manager, and they usually emphasize having a sound target strategy as the first criterion. In the case of the California State Teachers’ Retirement System, West Sacramento, its definition first describes “emerging and diverse managers” as firms that “generate performance aligned with the risk and return objectives” for its portfolio, as noted in the pension fund’s 2022 report on diversity in the management of its investments. But to support the program, CalSTRS said it pursues opportunities that “promote diversity in the investment industry,” including participating in programs, initiatives and conferences that allow these managers to connect directly with the fund. CalSTRS reported $3.6 billion in assets with emerging managers in its 2022 diversity report, with the largest share of assets managed by these firms was in global equity, which totaled $1.8 billion. The fund’s global equity emerging managers program started 15 years ago with Bivium Capital Partners, Leading Edge Investment Advisors and Xponance Asset Management, all of which are minority-owned, the report added.

Aside from generating alpha by investing in early stage funds with “a high potential for success,” the allocator’s goals for the program include gaining access to and cultivating long-term partnerships with the next generation of managers, it noted in the 2022 report. CalSTRS also used these diverse and emerging managers for private equity, fixed income, real estate and inflation-sensitive asset classes. As of Sept. 30, CalSTRS had $1.8 billion in assets with minority- and women-owned managers, which is close to 0.6% of the fund’s total $307.9 billion.

Focus on small firms

The Teacher Retirement System of Texas, Austin, does not have a policy for hiring diverse-owned managers, but it has an emerging manager program led by senior director Kirk Sims, who defines these firms as those “at an early stage of their life cycle.” The program’s focus is on small firms that typically have AUM of less than $3 billion, and have private-market funds with a preferred target size of less than $1 billion and are in their fourth or earlier fund. While generating alpha is the pension fund’s priority, the program will “engage with diverse managers while doing so,” Sims added. Most of the program’s committed capital has been allocated to diverseowned managers, which Texas

� Alabama Retirement

� Indiana Public Retirement

� Illinois State Board

� Maine Public Employees

NYSTRS established its MWBE Teachers defines as those with at least 33% ownership held by under- strategy to “codify and replicate the best practices for the inclusion” represented demographic groups. As of Sept. 30, 53% of the pro- of managers, investment banks, gram’s commitments are managed and service providers in the deby firms owned by African Ameri- mographic, according to the fund’s cans, Asian Americans, Hispanic 2022-2023 fiscal year report. As of Sept. 30, minority- and Americans, women and veterans. Sims said the program started with women-owned managers had close private equity in 2005, but it has to $6.7 billion, or 11.9%, of NYSTRS’ total $56.3 billion asgrown to include sets under external public markets, real management. Private estate and infraequity and private structure. debt commitments As of Sept. 30, mimade up the largest nority- and womenshare. NYSTRS also owned firms manhired these firms to aged $2.9 billion, or put assets into real close to 1.6%, of the estate equity and Texas Teachers’ total debt, as well as doassets of $181.7 bilmestic, international lion, while the fund’s and global equities. emerging manager program managed $6 billion, or 3.3%. DUAL PURPOSE: Kirk Sims Scoring systems Instead of a broad said Texas Teachers engages When assessing emerging managers with diverse managers while managers for diverprogram, the New also looking to generate alpha sity, some asset ownYork State Teachers’ in the pension fund’s returns. ers employ scoring Retirement System, systems for a firm’s Albany, seeks to expand opportu- ownership or employee base. nities in its fund for minority- and New Mexico PERA’s Shackelford women-owned business enter- said the fund keeps a scorecard for prises, or MWBEs, in accordance how committed a manager is to inwith state law. In its guidelines, creasing diversity among its staff, the $130.8 billion fund defines emphasizing that “it’s not a dis“traditional” firms to be at least qualifier” but rather a “tiebreaker” 51% owned by at least one minor- for when two managers come really ity group member or woman, while close in the hiring process. “substantially owned” firms have at In its 2023 investment consulleast 25% ownership. tants survey, P&I recently asked

investment consultants a question on incorporating diverse managers in manager “screenings/searches.” The results appeared as an even split with 24 firms saying “no” and 25 firms saying “yes,” but under the surface, many of the “yes” answers were qualified. Several consultants said they incorporate diverse managers only if “client directed.” One response said: “Upon client request we will include DEI in the screening criteria utilized to evaluate manager candidates,” but “to date this has not been requested very often by clients.” Innovest Portfolio Solutions said its DEI rating system for money managers includes “questions on diversity of ownership, portfolio management team, firm demographics, and policies and initiatives in place regarding DEI.” In the P&I consultant survey, the Denverheadquartered consultant said its goal is to “increase meetings with diverse managers,” believing that it “will translate to a higher percentage of diverse investment managers” the firm recommends to clients. NEPC employs a proprietary DEI scoring system “to evaluate all investment managers’ commitments to DEI practices, as well as their progress.” The Boston-based firm said it developed its own diverse manager policy “to address a possible unconscious bias and the inequitable representation of diverse-owned firms in client portfolios” and created a committee to

Pensions & Investments

THE

Auby CONTINUED FROM PAGE 18

horizon of any teachers pension fund in the country, 25 years, primarily because we’re adding so many new teachers who are starting out. That’s extended the length of our liability.” TRS is weighing four themes in its allocation review. “What’s the risk level we should take? Risk is very hard to measure,” he said, as “measures like volatility are deeply flawed. We’re looking at whether we may want to increase the risk in the portfolio overall.” Second, the role of private equity. “Private equity had a very healthy premium to public markets through the great financial crisis” in 2008. Post-GFC that premium has eroded. “It’s still positive,” he said, comparing the premium of 500 to 600 basis points pre-financial crisis to 300 to 400 basis points post-GFC. “The question is: Do we continue to have those healthy premiums? We’ve loved our private equity allocation. We’ve been overweight vs. our peers for a very long time. It’s the top-performing asset class in our structure for the past 25 years. Don’t get me wrong, we’re very focused on private equity. But this is the time to begin to think about how persistent is that premium going to be.” As of September, TRS has 18%, or $32.7 billion, allocated to private equity. That is partly because the knowhow of the asset class is “dispersed all over the world. (Alums) of large, successful PE firms are opening up more and more firms, and now thousands of firms are competing for the same deals. It’s a heavily competed space.” support this effort. Since 2018, Wilshire has included a diverse-owned firm in each public securities manager search it conducts for advisory clients, unless they opt out. Doing so captures different matters and perspectives in managing money, in addition to providing a broad set of talent, Bewick said.

Coming together

NYSTRS will hold its 14th annual Minority- and Women-Owned Business Enterprises Investments and Professional Services Conference on Feb. 15. The following day, the $246.3 billion New York State Common Retirement Fund — which had the most assets managed by minority- and women-owned firms in P&I’s survey at $31.5 billion — will host its 17th annual Emerging Manager & MWBE Conference. The events give attendees a chance to not only to gain knowledge about the two pension funds, but also for managers and service providers to network with allocators in the effort to enhance diversity in its strategies. At NYSTRS’ 2023 conference, it had an opening address delivered by Seema Hingorani, founder and chair of Girls Who Invest as well as the managing director and strategic client and talent engagement lead at Morgan Stanley Investment Management. A keynote was given by Tina Byles Williams, CEO, CIO and founder of Xponance.

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Another allocation TRS is examining: U.S. Treasuries. Whereas Treasuries used to have more of a negative correlation to stocks, “now it’s close to zero. The ability of Treasuries to act as that shock absorber for us that we can really count on in a downturn, we still believe in that, but maybe a little less so.” As of September, TRS had 12.8% allocated to government bonds, including Treasuries and TIPS, or $23.2 billion. Hedge funds have worked for TRS, he said. The assets in hedge funds total about $10 billion. “It’s a little bit of a truism that when volatility increases in the markets that’s good for hedge funds. We have definitely seen that. Our hedge fund portfolio has lived up to its promise; it holds value during drawdowns; and continues to deliver alpha above the cash rate for the long term.” TRS has two hedge fund portfolios, one a stable value hedge fund portfolio, and then market directional hedge funds in the public equity bucket. The stable value hedge fund portfolio returned 5.9% for the year ended Sept. 30 and an annualized 9.3% and 6.6% over three and five years, respectively, surpassing the benchmark in all periods.

Investing outside the U.S.

Auby is honest that investing outside the U.S. “has not worked. The U.S. has been the all-star for the past 10 years or so.” However, “it’s very rare for a region of the world to repeat from one decade to the next,” he said. The jury’s out on whether the U.S. will repeat its strong performance of the 2020s, he added. India has pulled ahead, as the country’s stock market since 2020 is the No. 1 performing asset class, Auby said. This year’s conference will be held on the campus of the State University of New York at Albany and include a first-time attendee preconference networking session. The partnership with the university aims to give students a new career pathway, said Heidi Brennan, manager of communications and outreach at NYSTRS. While the conference will not be streamed live this year, recordings of the event will be available to registrants who are not able to attend in person. With the $35.6 billion Texas Employees Retirement System, Texas Teachers hosts an emerging manager conference, drawing managers and allocators across the world, including CalSTRS, as the West Coast fund noted in its diversity report. Since the TRS/ERS Emerging Manager Conference launched in 2012 with 115 attendees, the event has drawn in more than 2,000 attendees annually since 2021, when the in-person event in Austin moved online due to the COVID-19 pandemic. The 17th annual conference will be held virtually on Feb. 28, and there are no plans to bring the event back in person. Sims said that holding the conference online benefited attendees by eliminating travel costs as well as enabling more members of a management firm to attend and speak with allocators, as opposed to an individual representing the team. 

“We are invested in India. We’re overweight non-U.S. vs the ACWI benchmark. We’re overweight India and non-U.S. in general.” India is tantalizing to the pension fund. “India’s really interesting. Can India be that growth engine that China was for so many years? It comes down to will India continue to liberalize? Will they make that technological leap, skip several generations of technology, get everyone a cell phone. Can the legendary red tape and bureaucracy

China is another story. The stock market rout has scared off foreign investors from China, he said. In September 2022, “We adjusted our policy benchmark to put a half weight on China in emerging markets. The reason was China had become such a large component of the emerging markets index. It’s since gone down. But at the time, China was 34%. One country was 34% of the emerging markets index. We thought that was too much to have in one index if you’re trying to build a balanced emerging mar-

‘We’ve loved our private equity allocation. We’ve been overweight vs. our peers for a very long time. . . . But this is the time to begin to think about how persistent is that premium going to be.’ TEXAS TEACHER RETIREMENT SYSTEM’S JASE AUBY be whittled down? Can the judiciary system become functioning? Can folks who are working at companies out of bankruptcy, can that make it through the Indian system without political interference from stock promoters and others?” he said. “India could be the bestperforming country this decade. That momentum is often linked to the political cycle there as well. Modi seems entrenched in power and doing the right things for the country.” As of June 30, 2022, the latest publicly available data, TRS showed India at 16.2% of the emerging markets portfolio.

kets portfolio. We cut that to 17%. We still have that strategic allocation to China.” The issues that China faces now “are long-lived ones. It’s going to take several years for them to recover from what’s occurring right now. The spark is the real estate markets. There’s wealth effects involved. It’s going to be a rough couple years. But we remain invested. It’s a large focus of ours, China is a huge economy and it effects markets globally.”

Fossil fuels, renewables

Texas Teachers is one of the pension fund world’s largest inves-

February 12, 2024

tors in energy, holding $13 billion in the asset class. “This is Texas: we are an oil and gas state, proudly. We’re also a renewables state. We’re No. 1 in wind energy production in the U.S. and we’re No. 1 in solar energy. We play the entire energy complex across the board within Texas” including wind and solar companies. Yet, “the real focus is oil and gas. We can commit significant capital to oil and gas industry. The expertise is in Texas. We feel like that’s a strategic advantage for us. We’re one of the only funds — on the planet really — that maintains a dedicated private energy investment portfolio.” U.S. endowments “have all exited” fossil fuels, he said. “That’s an opportunity for us; we’ve stepped into their shoes in many instances. When they were exiting energy markets, we were able to go in. We love oil and gas investing. We’re pro fossil fuels as an investing opportunity. It really is a fiduciary matter for us. We have a very clean fiduciary mandate here; which is maximize return, subject to taking prudent risk. It’s just that simple. We don’t have anything like an ESG overlay as we invest the portfolio.”

Economy, interest rates

The Fed is going to lower rates, he predicted. Federal Reserve Chair Jay Powell “strongly implied they will not lower rates in March. Folks are focused on the next meeting. It’s a question of how many cuts this year. The more important question for us is why? Will they cut because of a potential recession on the horizon? The current probability over the next 12 months is 45%. That seems reasonable. We would be more pessimistic if we were to shade it one way or the other. A recession is likelier than consensus.” 

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“One of our key objectives is implementing active strategies with the potential for adding value relative to the (strategic asset allocation) benchmark and doing so without materially increasing total portfolio risk,” a CalPERS spokesperson said. “We intend to expand our active programs as we build out new capabilities, with the focus on increasing our value add.”

Among the top 200 funds; assets are in billions as of Sept. 30.

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MassPRIM tests active

Earlier this year, historically passive-leaning MassPRIM tapped RhumbLine Advisers to manage $500 million in active U.S. equities. Michael McElroy, director of public markets at MassPRIM, said during a Jan. 30 investment committee meeting that the $500 million commitment was a “small initial allocation” while the fund observes its performance compared to passive products. McElroy also said the RhumbLine fund excluded Magnificent Seven stocks — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla. Like the other pension funds turning to active investments for alpha, that toe-dip could turn into a plunge if the returns are good enough. “Hard to say how large we would potentially want to get this, but we’re

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asking for $500 million and then we would come back to the committee at a later point if we thought it was warranted,” McElroy said. John Delaney, a Philadelphiabased portfolio manager with Willis Tower Watson’s OCIO business, noted there is a “certain level of concentration risk” from the Magnificent Seven that is driving broader index returns as they be-

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come such a large portion of major developed market indexes. “We’ve seen asset owners look to more actively manage strategies, to reduce the potential concentration risk of those seven stocks in their portfolios,” said Delaney, adding that there have been more discussions around equity in the past year “than we’ve probably had in the past five years combined.” 

February 12, 2024

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THE P&I 10 0 0 N E P C ’ S A L L A N MART IN

Consulting veteran sees many challenges ahead NEPC’s Allan Martin cites uncertainties at home and abroad By DOUGLAS APPELL Allan C. Martin — an NEPC partner who began working with pension funds back when investments were pretty much confined to domestic stocks, bonds and cash— retired last month at what he depicts as a time of considerable challenges for institutional clients and consultants alike. “When I joined Bankers Trust in 1969, if you looked at defined pension plans, about half of (their) assets were in the form of investment contracts with insurance companies” and a quarter of what remained was managed by Bankers Trust and J.P. Morgan, Martin noted in an interview. In the interim, public defined benefit plans — Martin’s exclusive focus over 23 years with NEPC — have moved on to a diverse mix of public and private assets, overseen by staffs “as expert as I’ve ever seen them,” with ever-superior risk management tools at their disposal and support from custodians that’s better than ever, he said. But all isn’t rosy, Martin said, pointing to political uncertainties at home and geopolitical uncertainties globally as factors clouding the outlook now for institutional asset owners.

Pressures mounting

At home, Martin notes, politics are increasingly intruding into the world of pension fund management. “I’ve never seen political pressure on plans that I’ve seen today,” Martin said, noting that the only common ground between calls on the left for

immediate divestment of fossil fuels and calls on the right to avoid China and ignore ESG considerations is their ability to constrain pension managers’ efforts to craft the best portfolios for plan members. Amid that charged political atmosphere, Martin said he likes to think of himself as a centrist, but for some, his belief that people have the right to a secure retirement and healthcare, regardless of their employment status, leave him “more to the left.” On the topic of secure retirement, Martin said he’s happy to be working with public defined benefit plans — as the most efficient vehicles for meeting the needs of workers in retirement — and lamented statistics showing the number of DB plan members plunging over the past half century to 12 million from 27.2 million while the ranks of defined contribution plan members were jumping to 85.3 million from 12 million over the same period. Defined contribution 401k plans, designed to be supplemental, “are not now nor have they ever been an adequate retirement vehicle,” Martin said, noting that employees covered by the $48.7 billion Arizona State Retirement System would have to put well over 30% of their annual salaries into a 401k plan to match the benefits they earn now after 40 years of service as DB plan members. He pointed to IBM’s decision earlier in January to reopen its defined benefit plan as a hopeful sign that “we’ll move back to a world that recognizes that employers have an obligation to help workers retire with dignity and not just giving some money now and promise that maybe it will be OK later.” If not, and with the average worker having only $65,000 or so in 401k savings with five years remaining until retirement, this is poised to be

“the next great crisis that nobody wants to talk about,” Martin said. The domestic political conundrum now, meanwhile, is less the result of strongly held views than an unwillingness to work toward a compromise, he said. Martin recalled a heated but “civilized” debate decades ago at Bankers Trust’s annual pension conference about whether to invest in apartheid-era South Africa. “Today’s arguments are no longer civilized,” with the fundamental is-

Paul Kolevsohn, partner, head of North American real estate at Mercer, said their clients are not decreasing their real estate allocations, but generally keeping the levels of their allocations and maintaining their commitment models. “The thing to keep in mind about real estate is out of (all) the private markets, it’s the most mature. We have an open-ended benchmark that starts in 1978 and that benchmark has something like 30 funds in there. Clients are at their desired commitment levels,” he said. “What we are seeing is the emergence of infrastructure vs. real estate,” Kolevsohn said. As of Sept. 30, infrastructure assets among the top U.S. retirement plans with defined benefit assets totaled $93.9 billion, up 30.2% from $72.1 billion the prior year. Remarkably, that total has increased 227% in the trailing five years, and the asset class has grown from $18 million the first time P&I measured the data as of Sept. 30, 2006.

NEPC’S ALLAN C. MARTIN sues in play too often getting lost in a flurry of slogans and name calling, leaving it very, very difficult to manage retirement assets in certain venues, Martin lamented. Meanwhile, long-standing U.S. policies that have been key to the postwar surge in global growth are in play for the first time in memory, whether it be alliances such as the North Atlantic Treaty Organization, which underlay America’s security posture for the past 70 years or the broad U.S. commitment to free trade. While working through the “first order” effects of, say, a broad-based shift to greater tariff protections for U.S. manufacturers is a considerable effort, thinking through the second,

Double-digit increases

Every one of the plans with the top

cause “the politics are so significant there.”

Fostering next generation

The consulting industry, meanwhile, faces its own set of challenges, with factors such as remote work in the wake of the COVID-19 pandemic and the growth of outsourced CIO businesses complicating the task of fostering the next generation of industry leaders to replace the pioneers of the 1970s and 1980s who are retiring now, Martin said. “There was a big group of people that came in that wave in the ’70s, ’80s and ’90s” that did a great job and are moving on now, he said, calling the situation facing the in-

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10 largest infrastructure portfolios saw double-digit increases in assets for the trailing one-year period. The Washington State Investment Board, Olympia, saw the largest increase in

dustry a “brain drain.” Martin said the growing importance of consultants’ outsourced CIO businesses remains a development meriting close monitoring to ensure that the more tactical aspects of those OCIO businesses don’t infect the “long-term strategic perspective” that’s key to advising pension fund clients – even if there’s no hard evidence at present of such a pitfall. Meanwhile, for an “apprenticeship business” such as consulting where experience is key, mentoring people in a post-COVID-19 world where people aren’t in the office has become an added challenge, he said. Martin called his own apprenticeship at NEPC, after 26 years at Bankers Trust and four years at growth equity shop RCM, an especially happy one, built on an agreement he hammered out with NEPC founder Richard Charlton after Charlton reached out to him in 2000 to lure Martin to the firm. Martin said when he expressed concerns that in an industry lacking operating leverage like consulting, the better he performed, the greater NEPC’s incentives would be to stretch him thin by having him cover ever more accounts, Charlton agreed to have him look after a maximum of six public pension fund accounts, of sufficient size to make the economics work, and that Martin could retain those accounts as long as he and the clients were amenable. Martin said that set up has let him efficiently leverage the experience he’s accumulated over years and decades with NEPC clients such as the $13.1 billion San Bernardino County Employees’ Retirement System,

‘(Hopefully) we’ll move back to a world that recognizes that employers have an obligation to help workers retire with dignity and not just giving some money now and promise that maybe it will be OK later.’

of real estate equity Real estate Growth in DB plans CONTINUED FROM PAGE 19

third and fourth order effects will “boggle your mind,” Martin said. A move to “less coordination, less free flow of goods and services, more protectionism” threatens to push the world in the direction of the environment that prevailed in the lead up to World War I, with a lot of nations focused on their own special interests, Martin said. Martin said that backdrop leaves him especially concerned about the mix now of U.S. stocks vs. non-U.S. and emerging markets stocks be-

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assets among those top 10 portfolios. WSIB reported $2.95 billion in infrastructure assets as of Sept. 30, a 50.95% increase from a year earlier. Infrastructure falls within the board’s

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tangible assets asset class. A spokesman for the board, which oversaw $167 billion in retirement plan assets as of Sept. 30 including $140.5 billion in its commingled trust

fund of defined benefit plan assets, said the swift rise in infrastructure assets is due to the board raising the target to its tangible assets asset class to 8% in October 2021 from 7%. As a result, in the two years ended Sept. 30, the commingled trust fund’s actual allocation to tangible assets rose to 7.1% from 5.5%, and many of the commitments fell within infrastructure, the spokesman said. The Washington board was far from alone in seeing significant leaps in infrastructure assets. CalPERS and CalSTRS’ infrastructure assets grew by 26.3% and 24.7%, respectively, to $15.3 billion and $11.1 billion during the year ended Sept. 30. At CalPERS’ June 20 investment committee meeting, Sarah Corr, managing investment director for real assets, said the pension fund was in the midst of increasing its investments in infrastructure within real assets, particularly in international infrastructure. A spokesperson said in a Jan. 26 email, “We cannot get more specific on this issue.” Matthew Ritter, partner and head of real assets investments at investment consultant NEPC, said in an interview that the rise in infrastructure assets is due primarily to so many pension funds creating new targets to the asset class over the past five years and building to those targets.

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since 2003; the $14.9 billion New Mexico Education Retirement Board, since 2007 and the $48.7 billion Arizona State Retirement System, since 2009. “I know the boards, I know the challenges,” he said, adding that understanding governance and the pressures people come under is key.

Credit concerns

Meanwhile, the current policy backdrop — with the U.S. Federal Reserve’s rate hiking cycle cresting and yields this year just as likely to fall as push higher — is as challenging as any in memory, Martin said. That prospect could justify adding on the margin to his clients’ modest allocations to U.S. Treasuries and trimming the substantial private credit exposures of 15% to 20% they’ve built up over the years, he said. “I still think private credit is attractive (but) relative to where it’s been, maybe not as much,” Martin said. But he remains a fan, saying while “it’s not riskless,” the risks of private credit are “relatively manageable.” By way of explanation, to outperform with stocks, “you have to have a thesis that’s different … you have to be right” and ultimately other people have to recognize that you were right and bid up the price of the stock, Martin said. Or, “I can buy a loan off a bank at a discount” and as long as the credit gets repaid, there’s no need to worry about what anybody else thinks, he said. Martin said while the full-time consulting phase of his career is coming to an end, he has no plans to leave the scene entirely. “I want to stay intellectually engaged in this,” even if there’s nothing concrete to report at present about his next moves, he said. As a “Type A” personality, Martin said, the only thing he needs to be careful of is not ending up doing just as much work as he was doing before he retired.  “Many are still underallocated,” said Ritter, so he expects those assets to continue to rise dramatically. Perhaps the most notable trend among this groundswell of investments is how the markets has evolved and expanded. “It depends on each investor’s objectives,” said Ritter. “You can achieve return, income stream, partial inflation hedge, and overall a good diversifier for the portfolio.” “If you look back historically, the traditional definition of infrastructure, you think of infrastructure as long-duration assets with stable cash flows, frequently in a kind of monopolistic environment.” While that would apply to the traditional areas of investment, such as roads and electric transmission lines, Ritter said he’s seen a big growth in the areas of digital infrastructure, energy transition and renewable energy. “We’ve increasingly seen managers view infrastructure more as private equity in nature in terms of their risk/return profile,” said Ritter. “That dynamic has expanded the appeal of infrastructure.” Infrastructure funds’ internal rate of return was 10.9% for the year ended March 31, according to the most recent available data provided by PitchBook. 

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Target CONTINUED FROM PAGE 3

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Target-date fund asset percentages DC fund target-date asset percentages among the top 1,000 funds that provided data, by total fund size. Not shown: the Federal Retirement Thrift, which had 24% of its $782 billion in assets invested in TDFs. 100%

PERCENTAGES OF TOTAL ASSETS IN TARGET- DATE FUNDS

Pensions & Investments

the plans and their workforces. Plans with a high percentage of as90% sets in target-date funds — those with high participant use of the funds — tend to be younger compa80% nies with younger employees. Those with a low percentage, in contrast, 70% are more likely to be older, more mature organizations with older workers, many of them retirees, according 60% to industry experts. Companies dating back to the ’70s 50% and ’80s that have “mature plans” tend to have many older workers and retirees who are unlikely to use 40% target-date funds because they entered the workforce before the in30% vestment products even existed, said Greg Ungerman, Callan’s defined contribution practice leader. 20% These older participants, who might hold as much as 60% of plan 10% assets, “have been doing it themselves from the get-go” and never needed a “do-it-for-me option like a 0% $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 $55 target-date fund,” he said. F U N D T O TA L D C A S S E T S (B I L L I O N S) David O’Meara, senior director and head of defined contribution investment strategy at Willis Towers universities founded in 1948. The funds. Its $42.6 billion 401(k) had For people with a defined benefit Watson, echoed similar views. More system’s combined $24.6 billion held just 28% of its assets in the funds. plan, the target-date fund may not mature populations that have been in three defined contribution plans Microsoft’s younger rivals — Apple be the right investment because it’s founded in 1976, Amazon founded in designed to be for someone who in the workplace longer tend to be had only 5.9% in target-date funds. more likely to self-select their inThe one with the highest uptake 1994, Meta founded in 2004, and Al- has the bulk of their retirement asvestments, he said. was a younger entity: phabet (Google founded in 1998) — sets in the defined contribution “They have more exCommonSpirit Health, each had higher allocations of 44.6%, plan, he said. perience in investing Austin explained that particia nonprofit hospital 59.6%, 66% and 64%, respectively. P&I used the tech companies’ pants with a larger pool of assets in their own money and chain founded in 2019, oftentimes will not be made up of entities Form 5500s as of Dec. 31, 2022, to cal- a defined benefit plan might opt not in the target-date fund,” that opened operations culate the target-date fund percent- to invest in a target-date fund beO’Meara said. in 1986 and 1996. Its ages. None of the companies com- cause they are looking to invest Not only that, he more conservatively or aggressively $16.9 billion 403(b) pleted P&I’s survey. Industry experts agree that there than they otherwise would with the added, older participlan had the bulk of its pants are also the ones assets, 64.4%, in tar- isn’t anything inherently bad about target-date fund. low participant uptake, saying that with the highest bal“People will view their defined get-date funds. ances, which reduces Interestingly, an usage of the funds is merely a re- benefit pension plan as almost a the plan assets that CHOICE: David O’Meara analysis of the Form flection of workforce dynamics and fixed income-type fund because you would otherwise be in said participants who have 5500s of five of the plan design. know it’s going to be there,” Austin There is “no particular range that said. “It’s steady, it’s not as volatile.” target-date funds. largest technology worked longer tend to be If participants don’t want to take companies — Alphabet, you would like your target-date more likely to self-select Amazon, Apple, Meta funds to be in,” said Rob Austin, head on additional risk, they might opt to Age vs. TDF assets their investments. (formerly Facebook) of research at Alight Solutions. put all their savings in a defined conThe observations bear themselves out in P&I’s data. and Microsoft — adds support for “Some plans might have very large tribution plan into something more Among the 50 largest DC plan spon- the premise that younger companies target-date percentages and other stable, such as a stable value or monsors that reported target-date assets, are more likely to have higher allo- might have lower. I don’t think ey market fund, rather than a tarthe one with the lowest participant cations to target-date funds. Among there’s necessarily a good estimate get-date fund. “They might think to themselves, uptake of the products was the State the five tech giants, the oldest, Mic- for where you should be.” Plans with low participant use of ‘I don’t need to take on a volatile University of New York, a large sys- rosoft — founded in 1975 — had the tem of New York public colleges and lowest allocation to target-date target-date funds can indicate that stock market. I can put everything in they either don’t automatically de- stable value, put everything in bonds, fault employees into the investment and that with my defined benefit Growth of target-date strategies in DC plans options or they started to do so late. plan will get me to a very adequate retirement,’” Austin said. Among the top 200 funds; assets are in billions as of Sept. 30. Regardless of whether participant Later start $500 For plan sponsors that chose tar- use of target-date funds is low or get-date funds as the qualified de- high, industry experts urge plan Total fault investment alternative after sponsors to make sure that partici$450 2007 or 2008, when doing so became pants are aware of target-date funds Custom popular, “it stands to reason that they and how they work. Sometimes, they Off-the-shelf $400 would be much further behind” in say, participants use the funds incorthe amount of total plan assets in- rectly by choosing multiple vintages vested in target-date funds, Callan’s of the funds or pairing them with $350 other investments when they should, Ungerman said. Willis Towers Watson’s O’Meara in most cases, be used as a single $300 agreed, saying plan sponsors that “all-in-one” investment. Participant education around tardesignated target-date funds as the $250 QDIA 10 years ago, rather than 15 get-date funds should be as usyears ago, would likely see lower er-friendly as possible, O’Meara said. “It’s important for those commuadoption of the funds among par$200 nications to be written in a way such ticipants. “We have seen that it takes time as not to explain how the engine $150 for those assets to build up from works, but how they’re to use it,” he those new hires to be defaulted in said. “Too often our communications and accumulate a balance over time,” that go out to employees share all of $100 the details that an investor may want O’Meara said. Alight’s Austin added that low to know, and in doing so can miss the $50 participant use of target-date funds forest for the trees and not commucould also indicate that the plan nicate at the level that most particisponsor has a defined benefit plan pants are able to understand and $0 2018 2019 2020 2021 2022 2023 really take action.” that participants are relying on. 

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Ailman opens up on evolution of CIO role NGOs (non-governmental organizations) that follow you and then below you, you have a team of staff. So communication, up and down, is critical. I’ve been blessed with the ability to take really complex things and try to explain them in terms that people can generally understand. But in down markets, you actually have to communicate more. When you don’t want to talk, you want to go hide in a dark room, that’s when you actually have to talk more. the biggest selling Q | What’s point, in your opinion, of taking the job, given those pressures?

This job here, specifically, the

A | team below, is incredible. And if

you let them do their job and get them the resources they need, they’ll make you look really good. I’m testament to that. It’s sad how few investment decisions I get to make because that comes with the job. It’s kind of like, picture a big cruise boat, the captain doesn’t drive the boat, he doesn’t usually even steer the wheel. But he leads everything, and that’s kind of like my position. I’ve got all these departments doing things, but if I get them, give them the right tools, pick the right people, point them in the right direction, then get out of their way, they’re awesome! You know, I personally think that running public funds — because it’s long term — gives you the chance to get away from that quarterly pressure that you get on Wall Street. You’re gonna to make more money on Wall Street, but I think you can have job satisfaction and you can have quality life, that’s what I sell to my staff coming to work for us. your take on investing Q | What’s in private credit? Some say we’re in a bubble. How do you determine if it’s worth the risk? Are those worries overblown?

Oh, I think worries always tend

A | to get overblown because we do

well at worrying — but it’s good to worry. It’s not a bubble because, yes, there’s a lot of money going into it, but there was a big vacuum with the fact that banks, really through the regulations, came out of that market. The attractiveness, I think it’s gonna slow down because the attractiveness was when rates were rising. That’s variable rate. It was really attractive. Well, rates obviously have peaked and are probably gonna drop down, and therefore those will reset lower. But I don’t think it’s a panacea. It’s just an alternative to long-duration fixed income. your take on bonds and Q | What’s fixed income, in general?

When I look back at bonds, A | where I started in the ’80s, when yields were significantly higher and I had a tailwind. I had the wind at my back the whole time in my career, with interest rates declining and they went to zero … that makes fixed income pretty unattractive as an asset class. And if you look at our history, we were steadily going from 30% fixed income all the way down to finally stopping at 10%, which is really low. Now fixed income, I’ve said it before on TV, fixed income is back —

it’s an asset class. It’s gonna have a yield up and down and there are times it’ll be attractive and times it’ll be unattractive. But with the amount of deficit the U.S. government has and how much we have to finance, fixed income is going to be around as an investment alternative for a long time. It is an alternative to equity. It’s an interesting area, it serves a purpose, but I think we have to look at, No. 1, in the ’80s and ‘90s I would have told you interest rates can never go to zero, it’s physically impossible. Yet, they did — even went negative. Now they’ve gone to zero twice.You’ve got a factor that all that in. Fixed income now is not the asset class it was in the ’80s and ‘90s. It’s different but it’s still a viable place in a portfolio.

Cayce Clifford

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has surprised you the Q | What most in this cycle and also what has surprised you the most about your time here at CalSTRS?

You know what, I said this yes-

A | terday and it’s funny but people

don’t laugh at it because maybe they’re just puzzled by it. The board, after ’08, asked me to list what they called “inevitable surprises,” what are the big bad things that can happen out there on the horizon? The best way to describe it is here in California, the San Andreas Fault. We know it’s gonna go off. When it does, it’ll be a surprise, but we all know it’s gonna go off. I listed a global pandemic for almost 15 years as a major risk we had to look out for it. I’m thinking Ebola or SARS or one of those. I had no idea there was a thing called COVID. We had a global pandemic, and yet stocks were one of the, you know, we were up 25% that year. But what surprises me is, even if you anticipate risks, you don’t know how things are gonna happen, so that’s one surprise, is just how uncertain, as much as we think we can predict the future.

else has surprised you | What during your investment career?

Wall Street’s gotten very clever at A | creating products —the number of new products and new things — it’s constantly continuous learning. I don’t know that I anticipated that coming into the job.You kind of learned in the ’80s and ’90s, you kind of learned capital market theory and you know, your Sharpe ratios, information ratios, and the amount of proliferation of financial products in the 2000s has been overwhelming. I have more golf balls than memorabilia from firms that don’t exist anymore, that, you know, if I hire a kid out of college, they’ve never heard of these firms. And it just makes me laugh (about) how much things have changed.

Q | What do you think of bitcoin? It’s not a currency and it is not A | an asset class. It’s thin air, it’s invisible and yet people assign it a value. Air has a value, air exists, so I gotta say bitcoin exists. I can bring up a whole page on Bloomberg of all kinds of currencies, all kinds of digital coins. It’s not institutional. It’s not something that I think will be an institutional asset class. I’ll be surprised to see if it survives a decade. I think part of the problem is, its biggest strength is it’s invisible, but that’s also its biggest weakness.

COVID-19: Christopher Ailman said one surprise was the pandemic he had listed as a risk for 15 years was not Ebola or SARS.

Ailman’s legacy The nation’s second-largest public defined benefit plan has grown considerably under the oversight of CIO Chris Ailman. Here’s a look at CalSTRS’ growth and impact. Assets: $327 billion as of Dec. 31, up from $116 billion in 2000, the year Ailman joined the pension fund. Performance: Net of fees, CalSTRS returned 8% over the 20-year period ended June 30, outpacing its benchmark of 7.9%. Over the past 10 years, CalSTRS returned 8.7% vs. a benchmark of 8.4%. Capabilities: CalSTRS internally manages $135.8 billion, which would make it the 148th-largest money manager in the world. Growth of alts: CalSTRS has $140.6 billion in alternative investments, up from $6.1 billion in 2000. In effect, CalSTRS manages more in alternative investments than the entire combined size of the endowments of Harvard ($50.7 billion), Yale ($40.7 billion) and Stanford ($40.9 billion). Manager relationships: Works with 215 unique managers across all asset classes, including 66 real estate managers, compared with 43 and 12, respectively, in 2000. Impact: A little more than 1 million participants and their beneficiaries rely on CalSTRS for their retirement. That’s significant because educators do not pay into, or receive, Social Security. Sources: CalSTRS, P&I Top 1,000 surveys, 2023, 2022; endowment filings

The fact you have no idea if half of the people involved in it are actually criminals and doing things nefariously. That lack of transparency, I

think, is a serious problem for institutional investors. But its correlation to other assets has just simply been way too volatile. I don’t think (bitcoin) meets the standard of a fiduciary asset yet. The fact that retail can buy something doesn’t make it fiduciary institutional quality. I don’t believe it has right now a value and I think we’ll see if it survives. You look at the immense number of them that have come and gone, Bitcoin has been the only one that seems to have hung in there and maybe ethereum, but it’s interesting. We’ll see in the future, talk to me in 10 years if it’s still around. the possibility of a second Q | With Trump term, and his penchant for tariffs, are you taking a more cautious look at investing in China?

We took a deep dive. I guess the

A | answer is partially we’re always taking a look at it. We’re not involved very much in the private markets in China — only in the liquid public markets. We know there’s gonna be a ton of rhetoric this election year, which is sad. I thought last fall having Biden finally meet with Xi was such a positive. Our two countries are interlinked, whether we like it or not. They are the second-largest economy in the world, as long as they’re in the investment market, the challenge will always be geopolitical risk. From what they’ve said about Taiwan, what we say about Taiwan, inherently, that’s gonna come to a point some decade. We’re still market weight after our study of China. We decided to just stay market weight and not go heavily in the private markets, and I think that position will hold. As we try to gauge the problem with geopolitical risk, it’s not like a traditional risk that ebbs and flows and kind of reverts to a mean. Political geopolitical risk is almost binary, like a light switch, it’s either on 100% or it’s off. if Trump pushes more tax | And cuts, are you worried that could reignite inflation and overheat the economy?

It’s tough to predict the future.

A | Clearly, the deficit, no matter

who gets elected, the deficit’s getting bigger. What I think we’re starting to finally realize in America is that we’re a debtor nation, and we have to finance a huge amount of debt. If you read some of the research on the interest on the federal deficit, you realize now that rates are up, it’s staggering and will even exceed the Defense Department budget. Now we finally have a real credit problem in the USA where we’re borrowing so much money and paying so much interest, whoever is in the office is gonna have a real challenge. I think that’s gonna come when people talk about investment strategy for the next president, I think the dominant theme is going to be recognition of probably growing deficits, not shrinking deficits, and because there are just so many demands for the federal budget that’s gonna put pressure certainly on Treasury options. We never used to care about the tail on a Treasury auction, and I even saw today on Bloomberg lots of chatter about the seven-year note. I mean, no one ever normally cared about the auctions and auction calendar.You’re gonna care about the tail and the fact that for whatever reason Treasury didn’t extend the maturity of that portfolio when rates were low and I guess there were real technical reasons, they’ve got a ton of debt that’s maturing, and that means those auctions are gonna crowd out other investors. And just inherently, not just drive rates dramatically higher, but keep rates up off a zero. I think that’s gonna be a big focus certainly in the next four years. will it take for WashingQ | What ton to get serious about fixing Social Security?

I would love to be able to say that

A | we plan ahead and anticipate problems. It seems like Washington and even our country only reacts to when there is a crisis. I don’t know what it’s gonna take other than the cost you know, the baby boomers are

Pensions & Investments

THE

all like me, all retiring, and the cost is gonna be enormous. Pay as you go has not worked, does not work and now will not work demographically. Thank goodness, the generation below Z is even bigger than the baby boomers, but you can’t pass that generational burden back down on them. You guys have written a lot of very interesting articles about the question, has the 401(k) experiment worked, or has it failed.

Q | What do you think? Oh, I always felt that it was A | doomed to not have a good success simply because not that people weren’t investing it properly … studies after studies have shown even people who match our asset allocation, they have a 100-basis-point drag due to fees but they never put enough money away. It’s all about time, value, money. In the typical 401(k), people start way too slow and low and don’t really start to ramp up even in their 40s, they don’t start to ramp up till their 50s — in which case there’s no time to compound that money, and it’s far too late. I think that’s legitimate concern — with longevity extending, people are really gonna have that social risk to our country of outliving their money. advice would you give to Q | What your successor?

Have a clear vision and a clear

A | mission. There are so many competing demands on us, but being very singularly focused on what needs to be done to fund the plan — which is a rate of return — and trying to produce a little bit of alpha. So what issues should you take and actually reflect that pressure onto the staff vs. when do you need to protect them from it and let them just do their jobs. This market, you know, the world is certainly more complex. the job of a of a public Q | Is pension fund official as attractive now as it was when you took the role some 20 years ago?

The turnover was bad back

A | then. The turnover is still bad

now. I’ve really tried to understand that. I think in a lot of cases you report up to a boss — that is a board — that has multiple heads. And even if you report to the CEO, they’re going to hang on by that board. Answering to a board is a challenge because, No. 1, they constantly turn over, (and) they probably, due to the rules, haven’t done your job before. So to answer your question, I think the job is still demanding. When (retired Idaho CIO) Bob Maynard and I look back at the ’80s and ’90s, we realized we had no idea that we had the wind at our back, everything. You know, the markets rose, it was wonderful (then Fed-chairman Alan) Greenspan was dropping interest rates. Times were so simple but like anything in the past you look back and realize, “Wow I had it easy then, now it seems so tough.” I think these jobs have always been challenging. They’re probably more challenging because they’re certainly more public, the funds are much larger. It really puts a lot of pressure on you. Because the decisions, you know, when the markets drop a percent in the day, we drop a half a billion, and that’s still a real staggering number. been doing this for some Q | I’ve time now and I know that investors hate losing even a penny.

L ARG E S T R E T IR E MENT FUNDS

February 12, 2024

People hate to lose their own A | money, but when you manage T HE P&I 1000 EMERGENCY SAVINGS somebody else’s money, it’s kind of like (being part of) a couple. If you lose money, you got to talk to your spouse. It’s even worse when it’s all kinds of people around you and you’re affecting lives — in our case, a million people. That weighs on you.

have we not covered | What about you and CalSTRS?

Back in 2000, Both PERS and A | STRS were open and I competed for both. (The recruiter) was very direct with me and told me I was the No. 3 candidate at PERS. I pulled out when STRS opened up, and on my brother-in-law’s advice came over here, and obviously, I’m glad I did. But I think that always kind of gave me a chip on my shoulder and made me want to compete against them. I’m pretty proud of our track record. We don’t compete for beneficiaries. It’s just sort of a friendly rivalry. We have a lot of staff that go back and forth. My team will tell you that the first bet, the first goal each year is to earn the 7% (assumed rate of return), next is to beat the benchmark and third is if we can beat CalPERS, so that’s the grand the triple crown if we can get it any particular year. I have to say, knock on wood, we’re globally recognized as one of the top funds. We are seven, eight years in row being listed as (one of the) Best Places to Work in your survey. I’m so proud of that, that’s really awesome. There’s no question that STRS’ culture is our secret sauce, and that definitely has produced alpha and has made this team perform better. is your biggest accomQ | What plishment?

I’m going to say diversity of the

A | team. When marketing people

and money managers come here, they constantly tell me how our team is so different, and our culture is different. I feel like I can say I had a big hand in pushing that and that being part of my vision. last question, where does | One your passion for the energy transition come from?

I’ll go all the way back to my A | parents, my dad’s goal was to make the world a better place after you’ve been there. I have always cared about, growing up in California, nature and the environment. But I have to say, honestly, my life changed when we had grandkids. There is something absolutely magical about looking in a grandchild’s eyes. And suddenly thinking, “Woah, dude, you’re going to be around almost until like 2100, what in the world is the world going to be like, what have I left you?” And feeling that way to that responsibility of knowing when they’re 20 or 30, they’re going to ask, “What did you do about that? You had to have known there was a problem. What did you do about it?” Even my daughter is a teacher in our system. I think about when she’s (going to be) in her 60s and getting a retirement check, what is the investment environment going to be like, what is the cost of living going to be like? That all matters about what we do now, so that’s a big driver to me. 

Delta, Amazon tout benefits of offering emergency savings By BRIAN CROCE Two of the nation’s largest companies have had early success in offering employees emergency savings accounts and see no signs of a slowdown. Representatives from Delta Air Lines Inc., and Amazon.com Inc. on Jan. 23 preached the usefulness and effectiveness of employer-sponsored emergency savings accounts at the Employee Benefit Research Institute-Milken Institute 2024 Retirement Symposium. After hearing from employees about their collective lack of emergency savings, Delta last year launched a program to help. To entice employee takeup, the airline offered $1,000 with some strings attached. “We knew that we’d have employees’attention with this $1,000 carrot in front of them,” said Josh Jessup, general manager of global retirement and financial wellness at Delta, during the symposium. To get the $1,000, employees have to meet one-on-one with a financial coach, establish an emer-

gency savings account and set up automatic payroll contributions to it. After they meet with the coach, Delta contributes $750 to their emergency savings account and once employee contributions hit $250, Delta provides another $250, Jessup explained. To date, more than 25,000 Delta employees have earned the $1,000 and 90% of the people who have contributed continue to do so, added Jessup, who said Delta has been “blown away” be the employee response. Amazon in mid-2023 launched an emergency savings program of its own that has seen early success, said Justin Roberts, principal, global financial health, during the symposium. Though he said it’s too early to measure what success looks like, Roberts said Amazon has made a big effort to make employee enrollment as easy as possible. The company has integrated the emergency savings program into the employee app where workers check their pay stubs and other vital information. “We want it front and center

Cyber CONTINUED FROM PAGE 17

ploit it,” said Nathan Wenzler, chief security strategist at Tenable, in an email. “Cybersecurity measures that help plan sponsors understand where (their technology is) at risk of cyberattack and prioritize what to fix first” are fundamental to a successful cybersecurity program, Wenzler added. The most common types of issues seen from plans include “poor password hygiene, third-party risks, software vulnerabilities, cloud exposures and misconfigurations, and excessive privileges,” according to Wenzler. Excessive privilege refers to the access, or privilege, that a user or application has to systems, as increased privilege often increases the opportunities for hackers to access important information. According to NCPERS’ Kim, plan sponsors rely on in-house experts, including chief technology officers and information technology professionals, “but they also rely on external vendors, who maybe focus exclusively on cybersecurity.” And while public retirement plans are not governed by the Department of Labor, they are still aware of the department’s cybersecurity guidance and may look toward it, Kim said. “The guidance is more advisory for us,” Kim added, but “we recognize experts” like the department’s EBSA, and “the plans that they do regulate have similar profiles as we do.” Kim also highlighted a group called the Public Retirement Information Systems Management, or PRISM, which brings together IT professionals from public pension funds for an annual conference. “Obviously, cybersecurity is al-

RESOURCE: NCPERS’ Hank Kim said

public plans, while not governed by the DOL, still look to its cybersecurity guidance.

ways a major topic and something that’s talked about (at the annual conference) … and best practices and the latest developments (are shared),” he said. According to their website, PRISM member fund representatives also share information with each other throughout the year.

A growing threat

Part of the reason for an increased focus on cybersecurity in the retirement space is that breaches are increasingly common, Gower said. “Breaches are increasing, and many of the breaches that are occurring are impacting huge swathes of plans,” Gower said. Due to consolidation in the retirement industry, each plan vendor “has a larger and larger share of the market,” meaning each cybersecurity breach of a vendor impacts a greater share of plans, Gower explained. Vendor-level breaches are most common, he said, which often affect most, if not all, plans with which a vendor works. According to Wenzler, “cyber criminal organizations are now functioning more like formal corpo-

and easy to do,” Roberts said. The only way to keep somebody from having a financial shock and having to use the emergency financial coaching benefit — another Amazon offering — “is to make sure that they have adequate emergency savings,” he added. The Department of Labor on Jan. 17 issued guidance for plan sponsors and participants to establish, maintain and utilize “pension-linked emergency savings accounts,” but both Jessup and Roberts said they don’t plan to link their companies’ emergency account offerings to their retirement plans just yet. “Part of our motivation for implementing an emergency savings account is we have a higher utilization of 401(k) loans than we would like to see,” Jessup said. “We want to disconnect people thoughts of their retirement account as the place to go to for emergencies.” As of Sept. 30, Delta had $27 billion in defined contribution assets, and Amazon had an estimated $19 billion in DC assets, according to Pensions & Investments data.  rations and are more aggressively targeting anyone or anything which can net them a financial gain,” which includes retirement plans. However, “not all cybersecurity breaches are super technical,” Gower said, and often involve someone picking up the phone and slowly gaining access to an account by gaining enough information to reset the password. In July 2022, a former Colgate-Palmolive employee sued the company’s employee relations committee, her retirement plan’s record keeper and the plan’s custodian, alleging a breach of fiduciary duty after she said an individual accessed and stole all the money in her retirement fund, which totaled over $750,000. The perpetrator successfully accessed the account through updating the phone number, email address and physical address on file, creating a new personal identification number, and changing the user ID and password, according to the plaintiff’s complaint. Kim noted that in the public sector, “because of our commitment to transparency,” many public officials have their personal information publicly available. Therefore, “bad actors can get some of the information more readily.” Recognizing that threat, “we are doing everything we can to protect our systems and our participants,” he added. Gower also warned that an increase in the offering of financial wellness products inevitably means that more personal information is collected from participants, which increases the amount of data that a record keeper already holds. It’s an area that he warns plans to “tread cautiously in and thoughtfully in,” he said, because the more data provided to record keepers, the greater potential impact a cybersecurity breach can have. 

February 12, 2024

Pensions & Investments

HIRINGS ACCESS Pool , Essex, England is strong environment for equities going to use two infrastructure fund forward, it makes sense to pursue a vehicles managed by IFM Investors modest reduction in risk, White said. and J.P. Morgan Asset Management The firm would charge Arkansas following a review by consulting firm Teachers a fee of 18 basis points. Mercer. In total, the ACCESS Pool commit Chicago Firemen’s Annuity & Benefit Fund hired Capital Fund ted £1.5 billion ($1.9 billion) toward the infrastructure funds, as confirmed Management, a quantitative and in a statement. systematic manager, to run a $15 According to ACCESS, the IFM million liquid diversifying/liquid Global Infrastructure Fund, focused alternative portfolio. on core, core-plus and value-added The $956 million pension fund’s investments, has been “very board approved the hiring at its Dec. successful” in acquiring positions in 18 meeting, recently released large assets. The fund also focuses meeting minutes showed. on transportation, social infrastrucThe pension fund issued an RFP in ture, energy, and telecommunications. July for liquid diversifying/liquid The J.P. Morgan Infrastructure Stratalternative managers that offered a egy is a global mandate focused on strategy with low or negative core and core-plus investments, with correlation to public equities (with an an asset base split between regulated average equity beta equal to or less utilities, GDP-sensitive assets and than 0.25) and moderate volatility contracted power and energy assets. (with an average target equal to or ACCESS is made up of local less than 15%), as well as monthly government pension liquidity as a minimum. schemes in England and HAVE SOME manages a total of £35 Chicago Municipal NEWS? Employees’ Annuity & billion on behalf of its Please submit Benefit Fund made two member pension funds. news of changes new private equity to John Fuller, Alaska Permanent commitments totaling $40 news editor, at Fund Corp. , Juneau, million. john.fuller@ disclosed $175 million in The $3.4 billion pension pionline.com. new alternative investment fund committed $20 commitments completed million each to Abbott through the end of the third quarter Secondary Opportunities III, a of 2023. secondary private equity fund Within its private income and managed by Abbott Capital Manageinfrastructure asset class, the $78.3 ment, and HighVista Private Equity X, billion sovereign wealth fund a lower-middle-market private equity committed $100 million to LS Power fund managed by HighVista StrateEquity Partners V, an energy private gies, said Stephen Wolff, investment equity fund managed by LS Power officer. Equity Advisors, and $75 million to The pension fund had issued an private credit fund LBC Credit RFP in June for private equity Partners VI, according to a report on managers that offer small- and its website. middle-market buyout funds, growth APFC previously committed $200 equity funds, secondary private equity million to LS Power Equity Partners IV funds and co-investment funds to in 2018 and $75 million to LBC Credit bring the pension fund closer to its Partners V in 2020. 4% long-term target to private equity, As of Jan. 15, APFC’s actual Wolff said at the time. In his Jan. 22 allocation to private income and email, he said the search is still in infrastructure was 8.6%. progress for other strategies. Arizona State Retirement System , Phoenix, rehired NEPC as general investment consultant, spokesman David Cannella said. The $51.2 billion pension fund also awarded contracts to Callan and Wilshire Advisors as backup consultants and for optional services, Cannella said. Those services could include investment research on an as-needed basis, he said. Arkansas Teacher Retirement System hired Baird Advisors to manage $800 million in core-plus fixed income as part of an effort to trim the $21.3 billion pension fund’s risk exposure by shifting assets to fixed income from equities. The Little Rock-based board, at a Feb. 5 meeting, unanimously voted to lift Arkansas Teachers’ fixed-income target to 20% of its portfolio from 15%, while trimming its equity allocation to 48% from 53%. The board’s decision to raise the pension fund’s equity holdings and reduce fixed income more than five years ago had paid off handsomely but “circumstances have changed,” said Mark White, the pension fund’s executive director, speaking earlier in the day at a meeting of the pension fund’s investment committee. With higher interest rates now and a number of challenges on the horizon that could cloud what has been a

Cook County Pension Fund , Chicago, approved three infrastructure fund commitments totaling $250 million, its first to the asset class. The $12.7 billion pension fund’s board approved commitments of $150 million to secondaries-focused closed-end fund Pantheon Global Infrastructure Fund IV and $50 million each to Brookfield Super-Core Infrastructure Partners, an open-end fund managed by Brookfield Asset Management, and IFM Global Infrastructure Fund, an open-end fund managed by IFM Investors, at its Dec. 7 meeting, recently released meeting minutes show. The pension fund has a target allocation of 2% to private infrastructure, but the pension fund had yet to make any infrastructure commitments. Florida State Board of Administration , Tallahassee, disclosed just over $1.8 billion in commitments and investments completed during the fourth quarter, a new manager report on its website showed. The board oversees $225.4 billion in state assets, including the $176.3 billion Florida Retirement System. Within real estate, the board committed $300 million to iStorage II, a self-storage real estate portfolio in a joint venture between the board and

N.J. SLATES $2 BILLION FOR ALTERNATIVES FUNDS New Jersey Division of Investment made eight new alternative investment commitments totaling up to $2 billion for the $95.1 billion New Jersey Pension Fund, Trenton. The division, which manages investments for the pension fund, announced the commitments Jan. 31 at a quarterly meeting of the State Investment Council, which formulates investment policies for the division. The division made three absolute-return commitments totaling up to $900 million, with $300 million to each strategy. It invested in Man NJ Solutions, managed by Man Group, as part of New Jersey’s risk-mitigation strategy. This is a customized fund-of-one portfolio containing five uncorrelated strategies “seeking to mitigate equity market drawdowns while providing a positive long-term return,” said a division report that described all commitments. It also invested in Graham Diversifying Alpha-NJ RMS Solution, managed by Graham Capital Management, a fund-of-one customized portfolio investing in five uncorrelated strategies that is also part of the risk-mitigation strategy, and PIMCO Arculus Fund, managed by Pacific Investment Management Co., as a fund-of-one customized portfolio. It is part of the risk-mitigation strategy, containing six uncorrelated strategies. The division also made a real assets commitment of up to $500 million to StepStone Real Assets manager Heitman; $78 million to value-added real estate fun Alterra IOS Venture III; and $75 million and $35 million, respectively, to real estate co-investment fund Landmark Real Estate Partners Sunshine Co-Investment Fund and secondary real estate fund Landmark Real Estate Fund IX, both managed by Landmark Partners. Within global equities, the board invested an additional $1 billion with active global equity manager Morgan Stanley Investment Management. As of June 30, MSIM managed about $2.2 billion for the board, according to its annual investment report. Within its strategic investments asset class, the board made follow-on commitments of $200 million to Juniperus Insurance Opportunity Fund, an insurance fund managed by Pillar Capital Management; $123 million to Aeolus Property Catastrophe Keystone PF Fund, an opportunistic/alternative reinsurance fund that specializes in property catastrophe insurance coverage managed by Aeolus Capital Management; and $75 million to Tintoretto Reinsurance Partners, an insurance fund managed by RenaissanceRe Fund Management. The board previously committed $150 million, $100 million and $125 million, respectively, to the funds during the second quarter of 2019. G-III Apparel Group Ltd. , New York, hired Fidelity Investments as record keeper of its $163 million 401(k) plan, said Sheldon Geller, president of Stone Hill Fiduciary Management, the clothing company’s fiduciary adviser. Fidelity replaced Principal Financial, Geller said. Stone Hill had issued an RFP on behalf of the company for record keepers to “improve service and responsiveness,” he said. Principal was not invited to rebid for the services, he said.

SMA, a separate account managed by StepStone Group. It will initially focus on infrastructure co-investments, primarily in North America. The division made three private equity commitments totaling up to $450 million: up to $250 million to Tiger Iron Garden Fund, a fund of funds managed by Tiger Iron Capital that focuses on investing in established and emerging managers in venture capital; up to $100 million to PSG VI, which makes North America investments in lower-middle-market software, data and technology service providers; and up to $100 million to Silver Lake Partners VII, a buyout fund that acquires “controlling interests in large and complex technology and technology-enabled businesses.” The division also made a real estate commitment of up to $150 million to KSL Capital Partners Tactical Opportunities Fund II, which focuses on real estate-related assets in the travel and leisure sectors, primarily in U.S. hotels and resorts. The division also restructured a private credit commitment of up to $414 million to Blackstone Tactical Opportunities Fund-A. Division officials said this is a restructuring of an existing partnership with Blackstone to fund a private credit component with proceeds from New Jersey’s existing private equity, real estate and real assets investments in the Blackstone fund. Also, the division announced a follow-on commitment of $150 million to Cerberus Institutional Real Estate Partners VI, managed by Cerberus Capital Management that focuses on “opportunistic, undervalued and/or distressed real estate.” The division made a $200 million commitment in October.

According to the most recent Form 5500 filing for the G-III Apparel Group Ltd. 401(k) Plan released Oct. 12, the plan transitioned to Fidelity effective Nov. 1, 2022. Houston Police Officers’ Pension System committed $40 million to GEMS Fund 6. The $7.3 billion pension fund’s board approved the commitment to the direct lending fund managed by Golub Capital at its Nov. 9 meeting, recently obtained meeting minutes showed. The pension fund has made multiple commitments to prior Golub Capital funds, most recently making a commitment to Golub Capital Partners 12 in 2019. Howard County Retirement Plans , Ellicott City, Md., committed $15 million to Dover Street XI. The joint committee for the Howard County Retirement Plan and the Howard County Police and Fire Employees’ Retirement Plan approved the commitment to the secondary private equity fund managed by HarbourVest Partners at its Dec. 11 meeting, recently released meeting minutes showed. The pension funds previously committed $10 million to HarbourVest Partners Co-Investment Fund IV in 2018. As of Dec. 31, the pension funds’ actual allocation to private equity was 13.6%; the target is 13%. The pension funds have $1.5 billion in combined assets. Ireland Strategic Investment Fund , Dublin, committed €50 million ($55 million) to P Capital Partners Fund V, a debt strategy that finances companies in Northern Europe. The €8.5 billion sovereign wealth fund said in a news release that the fund will “provide loans to growing entrepreneur-led and family-owned

businesses in Ireland,” adding that the allocation aligns with its investment theme of supporting the scaling of Irish indigenous businesses. Jacksonville (Fla.) City Retirement System committed $15 million to IPI Partners III, a real estate fund that acquires and operates core-plus, value-added and build-to-suit data centers. The $2.3 billion pension fund’s board approved the commitment at its Dec. 21 meeting, recently released meeting minutes showed. IPI Partners is a joint venture between real assets firm Iron Point Partners and ICONIQ Capital, Mark Zuckerberg’s family office. It is the pension fund’s first commitment to the joint venture. Jacksonville (Fla.) Police & Fire Pension Fund committed $15 million to Harrison Street Real Estate Partners IX. The $2.2 billion pension fund’s board approved the commitment to the opportunistic real estate fund at its Jan. 26 meeting, a summary of the meeting on its website showed. It is the pension fund’s first commitment to a Harrison Street fund. As of Sept. 30, the pension fund’s actual allocation to non-core real estate was 1.2%; the target is 5%. Kansas Public Employees Retirement System , Topeka, committed up to $75 million to Kinderhook Capital Fund VIII. The $24.8 billion pension fund’s board approved the commitment to the middle-market buyout fund managed by Kinderhook Industries at its Jan. 19 meeting, spokeswoman Emily Wilson said. Also at the meeting, the board approved follow-on commitments of up to $50 million each to Apax XI, a middle-market buyout fund managed

Pensions & Investments

February 12, 2024

HIRINGS by Apax Partners, and mega-buyout fund Platinum Equity Capital Partners VI. KPERS’ board originally approved commitments of up to $25 million each to the two funds at its meeting in May 2022. As of Sept. 30, the pension fund’s actual allocation to private equity was 11.3%; the target is 11%. Laredo (Texas) Firefighters Retirement System committed $2 million to Kohlberg Investors X. The $196 million pension fund’s board approved the commitment to the buyout fund managed by Kohlberg & Co. at its Nov. 29 meeting, recently released meeting minutes showed. It is the first disclosed commitment by the pension fund to a Kohlberg fund. Los Angeles Fire & Police Pensions committed a total of $370 million to alternatives — up to $280 million combined to seven private equity funds and up to $90 million total to real estate and private credit, said a report for the $30.4 billion pension fund’s board. Pension fund officials committed up to $75 million to Clearlake Capital Partners VIII, a private equity special situations and value fund managed by Clearlake Capital Group. The board also committed up to $50 million each to buyout fund Court Square Capital Partners V, venture capital and growth equity fund Insight Partners XIII and buyout fund Trive Capital Fund V. LAFPP also committed $30 million to buyout fund Wynnchurch Capital Partners VI. The pension fund’s original commitment of up to $50 million was reduced due to oversubscription. And the board committed up to $15 million to venture capital fund Work-Bench Ventures IV and up to $10 million to Turnspire Value Fund II, a North American lower-middle-market buyout fund managed by Turnspire Capital Partners. The pension fund also committed up to $50 million to Ares Senior Direct Lending Fund III, a private credit direct lending fund managed by Ares Management , and up to $40 million to Principal Data Center Growth & Income Fund, a data center real estate fund managed by Principal Global Investors. Louisiana State Police Retirement System , Baton Rouge, hired GQG Partners to manage about $37 million in active emerging markets equities, according to recently released Oct. 25 board meeting minutes. The $1.1 billion pension fund’s investment committee recommended the hiring at its Aug. 23 meeting, to be funded by the termination of existing emerging markets equity manager Vontobel Asset Management due to performance concerns, according to minutes of that meeting. Massachusetts Pension Reserves Investment Management ’s investment committee voted Jan. 30 to recommend a commitment of up to $500 million to an actively managed U.S. large-cap equity strategy managed by RhumbLine Advisers. Funding for the strategy would come from shifting a little more than 2% of the $101 billion pension fund’s $20.8 billion allocation to passively managed S&P 500 exposures.

Boston-based PRIM, like many big institutional investors, has favored low-cost, passive exposures to U.S. large cap equities, reflecting a conviction that the market’s efficiency makes it challenging for money managers to add value. But Michael McElroy, PRIM’s director of public markets, addressing the Jan. 30 meeting, said that over the past three years, his team has been thinking about “ways that we could enhance this area and get additional value (for) the fund” from that large pool of assets. The RhumbLine strategy — combining a top-down monetary policy regime indicator with a bottom-up stock selection model, designed by Economic Index Associates, a New York-based index design company – is the first to be identified as a target for adding value to PRIM’s huge U.S. large-cap equity exposure. Merced County (Calif.) Employees’ Retirement Association rehired Meketa Investment Group as general investment consultant. The $1.1 billion pension fund’s board approved the hiring at its Dec. 14 meeting, recently released meeting minutes showed. The minutes said four firms bid for the services and there were no finalists. Monroe County (Mich.) Employees Retirement System hired Fifth Third Bank as custodian. The $232 million pension fund’s board approved the action at its Nov. 13 meeting, recently released meeting minutes showed. The pension fund issued an RFP in October. At its Oct. 3 meeting, the pension fund cited an internal software update by its incumbent custodian Comerica as the impetus for conducting a search for a replacement. New Mexico State Investment Council , Santa Fe, N.M., at its Jan. 23 meeting committed a total of up to $460 million to three private asset funds. Pension fund officials committed up to $350 million to Oak Hill Advisors’ Senior Private Lending Fund, which will look to invest in middle market and larger private equity-backed companies. The council will be able to recycle the proceeds, reinvesting the income generated back into the fund. Council officials are seeking opportunities to keep capital invested given SIC’s cash positive position, Tom Lofton, director of fixed income told the council. Private credit staff are “emphasizing structures that will allow it to take advantage of recycling,” a staff report to the council said. The council also committed up to $100 million to Kinderhook Capital Fund 8, a middle-market buyout fund managed by Kinderhook Industries, and for its New Mexico private equity investments program, an up to $10 million commitment to Next Frontier Venture Fund IV, an early stage venture capital fund focusing on seed and series A companies in the Rocky Mountain region. Separately, the council heard for the first time from its new State Investment Officer Jon Clark, who announced that the council’s total assets including permanent, reserve and endowment funds as well as governmental clients was more than

$50 billion for the first time as of Dec. 31. The total fund earned about a 5% return for the year, he said.

New York State Common Retirement Plan, Albany, made five commitments to alternative investments in December totaling $770 million, according to the website of Thomas P. DiNapoli, the state comptroller and the $246.3 billion plan’s sole trustee. The plan made two real assets commitments. One commitment for $275 million was to Digital Bridge Partners III, managed by Digital Bridge Group, which is a new relationship. This is a closed-end fund which seeks to acquire “digital infrastructure assets, including macro cell towers, data centers, fiber, small cell networks, edge infrastructure and other related businesses,” the website said. The other real assets commitment was for $200 million to Carlyle Renewable & Sustainable Energy Fund II, managed by Carlyle Group, an existing relationship. This closed-end fund focuses on middle market transactions targeting “traditional renewable energy — wind and solar — and newer energy transition strategies” such as industrial applications and electric vehicle infrastructure, the website said. The pension fund also made three private equity commitments: $175 million to Altaris Health Partners VI, making health care investments primarily in North America, and $100 million to Empire Co-Invest II, managed by Insight Venture Management, an existing relationship. “Insight will invest additional capital in co-investment opportunities alongside Insight Partners XIII,” the website said. It also committed $20 million to Contour Venture Partners V-A, managed by Contour Venture Partners, an existing relationship. Contour will seek seed-stage investments in areas such as financial services technology and digital health services, primarily in New York City. Separately, the pension fund announced it had terminated the Wellington Asia ex-Japan Contrarian Fund, an international equity fund managed by Wellington Management Co. The termination occurred Dec. 8. The fund’s $243 million was allocated to cash. Ohio Police & Fire Pension Fund , Columbus, approved four new commitments totaling up to $110 million. The $17.4 billion pension fund’s board at its Jan. 24 meeting approved commitments of up to $50 million to Cerberus Levered Loan Opportunities Fund V, a direct lending fund managed by Cerberus Capital Management; up to $30 million to Clearlake Capital Partners VIII, a private equity special situations and value fund managed by Clearlake Capital Group; and up to $20 million and $10 million, respectively, to venture capital funds Spark Capital Growth Fund V and Spark Capital VIII, spokesman David Graham said. As of Dec. 31, the actual allocations to private markets and private credit were 8.2% and 2.9%, respectively; their respective targets are 10% and 5%. Pension Protection Fund , London, selected Aviva to provide a defined contribution solution for the

TESCO CHOOSES SCHRODERS AS OCIO FOR DB FUND Tesco PLC, Cheshunt, England, outsourced the management of its U.K. defined benefit fund to Schroders, transferring assets and some in-house staff. The pension fund had £12.9 billion ($15.9 billion) in assets as of March 31, according to the latest trustee report for the Tesco PLC Pension Scheme. Spokespeople said the value of assets transferring to Schroders was not being disclosed. The assets will be managed by Schroders Solutions, which provides outsourced CIO services to pension funds and runs more than £100 billion in OCIO and outsourced arrangements. The assets of the closed pension fund had been run by in-house firm Tesco Pension Investment since 2011. The pension fund is fully funded on the trustee’s funding basis, a Schroders news release said. A small number of Tesco Pension Investment staff will move to Schroders, a Tesco spokesperson said. The decision to hire Schroders followed a review of the long-term needs of the pension fund, the release added. plans under its care that have hybrid arrangements. The PPF is the lifeboat plan for the pension funds of insolvent U.K. companies. However, some have both a defined benefit and DC element to them — known as hybrid plans, according to an Aviva news release. The DC part of these plans will now be run under the Aviva Master Trust as the chosen PPF partner. However, DC trustees also have access to the wider market if they wish to use a different provider, the release added. Aviva Master Trust had more than £9 billion ($11 billion) in assets as of Sept. 30. Rhode Island Employees’ Retirement System , Providence, approved a commitment of up to $30 million to buyout fund Wynnchurch Capital Partners VI. The Rhode Island State Investment Commission approved the commitment at its monthly meeting Dec. 6, according to a recent monthly performance report. The $10.9 billion pension fund previously committed $40 million to Wynnchurch Capital Partners V in 2020. As of Dec. 31, the pension fund’s actual allocation to private equity was 16.7%; the target is 12.5% San Antonio Fire & Police Pension Fund committed $20 million to Tiger Infrastructure Partners Fund IV. The $3.7 billion pension fund’s board approved the commitment to

the infrastructure fund at its Dec. 18 meeting, recently released meeting minutes showed. San Mateo County Employees’ Retirement Association , Redwood City, Calif., committed $60 million to the Eaton Vance Emerging Markets Debt Opportunities Fund as part of SamCERA’s opportunistic credit portfolio under the growth category. The commitment was approved at the board meeting Jan. 23, according to a notice on SamCERA’s website. SamCERA had $5.9 billion in assets as of Sept. 30. On that date, opportunistic credit accounted for 11.4% . Scottish Borders Council Pension Fund , Melrose, Scotland, hired Nuveen for its first allocation to natural capital assets, with an initial commitment to a timberland strategy. A spokesperson said the size of the commitment was not disclosed. The £900 million ($1.1 billion) local government pension fund committed to Nuveen’s flagship global timberland strategy and will potentially make further allocations across the $1.1 trillion money manager’s natural capital solutions, including forestry and farmland, a news release said. The commitment is the latest step in the pension fund’s move to decarbonize its portfolio. Texas County & District Retirement System , Austin, committed $100 million to Chorus Capital Credit Fund V, a strategic credit fund focused on bank risk-sharing transactions. The $43.8 billion pension fund disclosed the Jan. 26 commitment in an investment activity report on its website. As of Sept. 30, TCDRS had a target allocation of 29% credit, including 9% to strategic credit. The pension fund also committed $50 million to Carnelian Energy Capital V, a Houston-based private equity fund focused on the traditional North American energy sector. The pension fund has a 25% target allocation to private equity. Texas Teacher Retirement System , Austin, committed a total of $175 million to private equity funds in January, according to a transaction report from spokesman Rob Maxwell. The $187.1 billion pension fund committed $125 million to CVC Capital Partners Asia VI, an Asia-focused buyout fund. The pension fund also committed $50 million to Trinity Hunt Partners VII, a domestic buyout fund. As of Sept. 30, the pension fund’s actual allocation to private equity was 17.7%; its long-term target is 14%. Vermont Pension Investment Commission , Montpelier, committed $50 million to the Copenhagen Infrastructure V fund on behalf of the $6.2 billion Vermont State Retirement Systems, according to Katie Green, VPIC’s deputy chief investment officer. The commitment to the infrastructure core fund managed by Copenhagen Infrastructure Partners was approved at a VPIC meeting on Jan. 23 and represents VPIC’s first investment with the asset manager, Green said in an email. As of Dec. 31, VPIC had no assets allocated to private infrastructure. Its target allocation is 3%.

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Brazil CONTINUED FROM PAGE 2

the next few years.” In November, CDPQ agreed to acquire Integracao Transmissora de Energia, a strategic power transmission network in central Brazil, from Equatorial Energia for C$108.5 million. Intesa’s transmission network “extends across central Brazil, where significant renewable electricity output is generated for consumption in the south and south-east of the country,” CDPQ said in a Nov. 1 release. Eduardo Farhat, the Sao Paulo-based managing director, infrastructure-Latin America at CDPQ Brasil, said that CDPQ currently has C$19 billion of assets in Latin America, including C$7 billion invested in Brazil, representing about 2% of CDPQ’s global portfolio. CDPQ had total net assets of C$424 billion as of June 30. “Our strategy for Brazil is mainly focused on infrastructure investments, as they provide longterm, stable and predictable returns,” Farhat said. “Brazil also displays a solid regulatory framework supported by a well-functioning legal system, which has helped provide a strong and diversified pipeline of opportunities.” Aside from TAG, CDPQ also has major investments in power transmission firm Verene Energia; and FiBrasil, a fiber optic infrastructure company. CDPQ also holds stakes in joint ventures focused on real estate in Brazil.

February 12, 2024

attract new investment, something that has been challenging in several geographies given the context of high global interest rates and the intense demand for capital in the energy transition.” CDPQ’s strategy is to invest for the long term, he added, and “we are confident that we will be in Brazil for a long time.”

Canada Pension Plan

CPP Investments, which manages the assets of the C$576 billion Canada Pension Plan, Toronto, has been investing in Brazil since 2009 and now has some 36 employees there. From its Sao Paulo office, which opened in 2014, CPP focuses primarily on the five key Latin American markets of Brazil, Chile, Colombia, Mexico and Peru, said a spokesperson. The fund has a total of C$35 billion invested in Latin America — across infrastructure, sustainable energies, real estate, public and private equities, funds and credit — which represent about 6% of the fund’s total assets, according to CPP’s website. CPP’s investments in Brazil represent some C$15 billion in net assets, or more than

18-year presence

CDPQ has been present in Brazil since 2006, having initially invested in government bonds and publicly listed equities. “In 2015, we made our first investments in the real estate sector — via our subsidiary Ivanhoe Cambridge — and we opened a physical office in the country in 2018,” Farhat noted. “CDPQ currently has eight employees based in our Sao Paulo office.” Farhat also said that CDPQ plans to invest an additional C$4 billion to C$5 billion in Brazil by 2027. “While our ambition is to continue growing rapidly, it always depends on finding the right transactions, the maintenance of a high-quality regulatory framework and the stability of the country’s economy,” he cautioned. “Today, Brazil has by far the most active pipeline of projects in Latin America and we are actively analyzing several different opportunities.” Brazil has many advantages as an investment destination, Farhat noted. “From a macro perspective, it’s a vibrant democracy with strong institutions,” he said. “It’s also a modern country and has been implementing structural reforms around social security, independence of the central bank — combined with stable borders and sectors like agriculture and energy production, which are experiencing strong tail winds — that will all help support growth.” Regulatory stability is no more of a concern in Brazil than anywhere else in the world, Farhat asserted. “We are comfortable with this market, and we have a productive dialogue with the government,” he added. “On a comparative basis, Brazil is well positioned globally to

OPTIMISTIC: Ramiz Chelat said rising

commodity prices and falling inflation in Brazil are two pros for investors.

40% of the fund’s total regional exposure. CPP’s active equities Latin America group invests in public and private equities directly and through funds, while the sustainable energies and infrastructure department invests in various energy and non-energy assets including power generation, sanitation and telecommunications. CPP also has a real estate investment team in Brazil that invests in office, retail, logistics and residential assets, and a credit investments team that provides debt funding solutions across the capital structure. The spokesperson noted that some prominent individual investments in Brazil include Auren Energia, one of Brazil’s largest platforms for renewable energy and energy trading. CPP first invested in Auren in 2018 and now owns a 32% stake in the firm valued at C$1.25 billion. Another top stock investment is Smart Fit, Latin America’s largest fitness chain, an investment that began in 2019 and is now valued at C$252 million. CPP also has a C$256 investment in Totvs, a Brazilian software developer. A spokesperson for CPP said the fund plans to “increase exposure to Brazil and Latin America over the long term but is focused on finding the right opportunities and does not have a particular target allocation.” CPP’s Latin American investments generated a net return of

8.4% for the fiscal year ended March 31, vs. a 1.3% return for the total fund. Latin America was the top-performing geographical region for the year, according to the latest annual report. CPP cited this strong performance mainly to the “appreciation of select currencies in this region against the Canadian dollar.” For the five-year period ended March 31, the Latin American assets returned an annualized net 6%, compared with a 7.9% performance for the total fund. It was the second-best regional performer, behind the U.S.

Why invest in Brazil?

Ramiz Chelat, portfolio manager and senior research analyst at Vontobel Asset Management, said that despite Brazil’s image of political instability, the recent re-election of Luiz Inácio Lula da Silva as president actually occurred smoothly, despite threats from supporters of the incumbent, Jair Bolsonaro. Chelat noted that while Lula is a leftist, the Congress is dominated by conservatives, meaning any radical policies proposed by Lula will be watered down. As such, the Brazilian political climate seems rather stable for now. “Late last year, Brazil’s finance minister Fernando Haddad reiterated his vow to eliminate the country’s budget deficit in 2024,” Chelat said. “Adding to some optimism are rising commodity prices, which have raised projections for GDP growth to 2.5%-3% for this year.” Chelat also noted that investors are increasingly confident that inflation will come down this year. Indeed, Brazil’s annual inflation rate finished 2023 at 4.62%, falling within the central bank’s target range of 1.75% to 4.75% for the first time since 2020. Moreover, the central bank has been steadily cutting rates since August. The central bank also expects the Brazilian real currency to strengthen this year relative to the U.S. dollar, Chelat added. While Brazil is often considered a commodity play by foreign investors, Chelat said the national economy is quite diverse, with “high quality businesses generating high returns on capital across consumer, financials (traditional banks and fintechs) and software industries.” But there are some risks inherent in investing in Brazil — including an overall fiscal deficit that expanded to 7.9% of GDP in September, up from 4.6% at the end of 2022, and the fact that Brazil is still an emerging market, Chelat cautioned. Giampaolo Isolani, the London-based head of emerging markets investment solutions and market intelligence at Amundi, said he is not surprised that some Canadian pension funds are investing significantly in Brazil, given that the country’s domestic economy is reasonably stable, its real currency has stabilized and inflation, while high by western standards, has been easing. “We also expect Brazil to become a net exporter of oil by 2025,” he said. Isolani also noted that Brazil’s fairly diverse and sophisticated economy — particularly its strong consumer, financials and banking industries — can buttress the well-established energy sector. n

SAVE: Alicia Munnell asserted that people cannot fully rely on Social Security in retirement.

Proposal CONTINUED FROM PAGE 2

“We need to be doing more to actively encourage participants to save in retirement, not enact any kind of legislation that would in any way dissuade individuals from saving inside 401(k) plans,” Blanchett said. “I don’t want any negative signals when it comes to how individuals are encouraged to save.” The American Retirement Association’s Graff is also worried about a potential negative impact on savings. “Social Security alone is insufficient for most people in retirement. If you eliminate the tax incentives for private savings to ‘pay for’ Social Security, you are making the situation only worse for most Americans,” he said in a statement.

Academics respond

Academics also snubbed the proposal. In a blog post on Feb. 1, Adam Michel, director of tax policy studies at the Cato Institute, refuted the argument that tax-advantaged retirement accounts do little to increase retirement saving, calling the assertion “an overconfident misinterpretation of the academic literature.” “The overwhelming evidence is that tax-advantaged accounts significantly increase private savings,” he said in the blog post. While aware of the concerns, Munnell and Biggs nevertheless contend that the removal of the incentive is unlikely to stop people from saving, particularly wealthy individuals who must replace a much greater portion of their current income in retirement to maintain their lifestyle. “People have to save for retirement,” Munnell said. “Social Security was never intended to be the sole source of support. People above the lowest earners really need to save some additional amount, and it would be foolhardy not to do so.” Critics also argued that eliminating tax deferrals would deter employers from offering plans, a fear that Munnell and Biggs contend is not supported by the facts. The authors point to a preliminary study Biggs conducted that showed no statistically significant difference in retirement plan coverage between states with low-income taxes and those with high-income taxes, where greater plan coverage would be expected given the higher value of the tax preference. If the tax deferral mattered, states with high-income taxes, such as New York and California, would have higher retirement plan coverage than states with low or no taxes, such as Texas or Florida, but there was no statistically significant correlation, Biggs said of the study he expects to expand. Nevertheless, to offset any potential decreased interest in offering retire-

ment plans or potential decreased interest in saving, the authors recommend pairing the removal of the deferrals with a mandatory retirement savings program that employers must offer their employees if they don’t offer one themselves. The authors point to the success of the U.K.’s National Employment Savings Trust, a retirement savings plan that all employees are automatically enrolled in if their employers don’t offer a plan. Since NEST’s creation in 2018, retirement plan coverage in the U.K. jumped to about 80% from about 40%, Biggs said. “If you can get to 80% at much, much lower cost, why not get to 80% at (a) much lower cost?” he asked, noting that plan coverage in the U.S. has remained stuck at about 50% since 1989. Critics also challenged the idea that tax deferrals are a government expenditure in the way that tax deductions are. “401(k) deferrals are a loan, and it’s a function of government accounting that it’s viewed as an expenditure because the government will eventually make the money back when those monies come out of the plan,” PGIM’s Blanchett said. The authors immediately squashed the criticism, saying that deferrals lose the government money. “On the simplest level, they don’t get the money for 20, 30 years,” Munnell said. “Money today is worth more than money in the future.” Munnell explained that the $185 billion cost attached to tax deferrals represents the difference between how much the government would get in tax revenue from individuals saving in taxable investment accounts and how much it would get in tax revenue from individuals saving in a tax-preferred retirement accounts. “That’s a permanent loss in money. That’s not money that’s recouped later,” she said. “That’s taking the difference between two present values.” Critics, however, wholeheartedly supported the need to fix Social Security, with some suggesting tax increases to fix Social Security’s funding problem. Currently, the combined Social Security trust funds face depletion in 2034. “If you want to target ways to improve Social Security funding, you can just make the taxation more progressive,” Blanchett said. “I would tax wealthy Americans more so that it’s more of a blanket increase to fund this social assistance program vs. kind of trying to pull it away from — in any form or fashion — retirement savings.” Biggs disagreed, saying the removal of tax deferrals is a less painful way to get at the problem. An increase in the payroll tax rate, he said, is “a disincentive to work,” and lifting the payroll tax ceiling means “a 12-percentage point increase in the top marginal tax rate” that almost all economists say will be a problem. “Rolling back the tax preference strikes me as a less problematic way to get money,” Biggs said. n

February 12, 2024

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bolstered by COVID-19 relief payments the government distributed to counter fallout from the pandemic. Going into 2023, “we were definitely focused on a continuation” of the previous year’s challenges, and a “possible recession scenario,” said Jase Auby, CIO of the $181.7 billion Texas Teacher Retirement System, Austin. In the event, “it was very gratifying to have the opposite happen,” helped by a wave of new investment focused on artificial intelligence, Auby said. The economy defied consensus calls by economists and pundits for a mild recession in 2023, agreed Michael Trotsky, executive director and CIO of the $95.2 billion Massachusetts Pension Reserves Investment Management board at a Jan. 30 investment committee meeting. Instead, inflation peaked and markets took off, with an “astounding” 26% gain for the S&P 500 — a humbling outcome for prognosticators, he added. Bond prices, by contrast, ended little changed following a year of considerable volatility, with yields rising sharply early on in tandem with Fed rate hikes, only to retreat late in the year amid growing expectations for rate cuts in 2024. The Bloomberg U.S. Aggregate Bond index rose 0.64% over the 12 months through Sept. 30.

DC assets climb 12.4%

In other survey results, defined contribution assets for top 1,000 retirement plans — following a rare year of underperformance vis-a-vis defined benefit assets — reestablished their claim to being the fastest-growing segment of the U.S. retirement industry, jumping 12.4% to $5.32 trillion while DB assets were rising a modest 3.7% to $7.71 trillion. At that pace, DC plan assets could surpass DB assets within five years’ time. The respective figures for the top 200 retirement plans showed defined contribution assets rising 12.1% to $3.18 trillion and defined benefit assets increasing 4.4% to $6.27 trillion — a trend accentuated

Exxon CONTINUED FROM PAGE 1

SEC and brought its case straight to court. “We’re disappointed that Exxon is circumventing the SEC’s shareholder proposal process by proceeding directly to litigation in federal court which will result in silencing investors that voice climate-risk concerns,” said Natasha Lamb, chief investment officer at Arjuna Capital, in a statement. “Not only is the company sidestepping a critical corporate accountability mechanism that has upheld shareholder freedoms for decades, this amounts to tactics of intimidation and bullying.” In December, Arjuna Capital and Follow This submitted a shareholder proposal calling for a “further accelerating” of Exxon’s emission reduction plans that include Scope 3 emissions, which are the indirect emissions generated from Exxon’s supply chain. A similar proposal last year gained just over 10% of shareholder

FUTURE: Kevin Turner believes that if

employment gains are sustained, some DC plans will rival the largest DB plans. by corporate sponsors’ continued efforts to shrink DB pools that leave them shouldering the risks of ensuring adequate retirement outcomes for employees in favor of DC plans that shift those risks onto employees. For the year, with few exceptions, increases in retirement assets for top 200 public defined benefit plans kept to a fairly tight range of 4.5% to 9%. The Connecticut Retirement Plans & Trust Funds’ 17% gain to $50 billion in defined benefit assets made it an outlier, with roughly half

of that windfall due to investment gains and the other half resulting largely from $2.5 billion in fiscal transfers approved unanimously by the state’s legislature. Year-on-year changes in retirement assets reported by corporate plans, by contrast, were all over the map, with 22 sponsors at one end of the spectrum finishing the period with a decline in assets while at the other end leading growth companies, including members of the socalled Magnificent Seven, saw surges of 20% to 30%. That dispersion is unsurprising, given corporate sponsors’ various mixes of growth assets and liability-driven investment hedges, noted Jonathan Camp, a Chicago-based managing principal with consulting firm Meketa Investment Group advising clients on LDI programs.

Corporate clients

In the wake of last year’s big rebound in equity markets, corporate clients with large exposures to growth assets would have reported relatively strong gains. But even clients with large LDI programs — liable to suffer a decline in assets in a rising rate environment — had reason to be “very, very happy with their

Growth of DB and DC plan assets Among the top 200 funds; assets are in trillions as of Sept. 30. $8.0 $7.5

Defined benefit Defined contribution

$7.0 $6.5 $6.0 $5.5 $5.0 $4.5 $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0

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support, down from 27% in 2022. “The 2024 Proposal does not seek to improve Exxon Mobil’s economic performance or create shareholder value,” Exxon said in its complaint. “Like the previous proposals, it is designed instead to serve Arjuna’s and Follow This’ agenda to ‘shrink’ the very company in which they are investing.” Even though the proposal was withdrawn, Exxon said it’s continuing with the lawsuit because “there are still important issues for the court to resolve.”

SEC changes

Changes made by the SEC in recent years make the litigation route more appealing, said Charles Crain, vice president of domestic economic policy at the National Association of Manufacturers. “The proxy process has been increasingly hijacked by politically motivated activists, the SEC is increasingly allowing those activists access to the proxy ballot and denying companies’ attempt to exclude those proposals from the ballot,” he said. “Companies are bearing the

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brunt of this, so it is not surprising to me at all that a company would seek to get around the SEC in the way that Exxon has sought to do.” The SEC’s division of corporation finance issued a legal bulletin in November 2021 that rescinded the division’s previous three legal bulletins — promulgated under the Trump administration — related to Exchange Act Rule 14a-8 that concern shareholder proposals. The November 2021 bulletin also 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. The bulletin made it easier for more environmental and social shareholder proposals to appear on company proxy ballot. “The pendulum has swung way in favor of being able to have proposals included in the proxy statement, particularly with respect to E and S, and this litigation is really a response to the pendulum swinging pretty heavily one way,” Donahue said.

Pensions & Investments

results in 2023,” as higher discount rates reduced their liabilities, leaving funded status intact, Camp said. Many big corporate plans, meanwhile, have taken additional steps in recent years — such as pension risk transfers to insurance companies — to accelerate the drop in their DB assets, Camp noted. P&I’s latest survey results showed the estimated DB portions for a number of big corporate retirement plans declining rapidly. For example, an estimated 10.3% drop in Ford Motor’s retirement assets to $54.7 billion reflected a $7 billion decline in DB assets to $32.9 billion that more than offset a 4.2% gain in DC assets to $21.8 billion. Similarly, an estimated 3.9% drop in Lockheed Martin’s retirement assets to $76.8 billion reflected a more than $7 billion drop in DB assets to $25.4 billion overwhelming an 8.7% rise in DC assets to $51.4 billion. The story was markedly different for some of the highest-profile growth companies last year, with stellar gains for defined contribution-only retirement programs propelling them up the top 200 rankings. Google parent Alphabet, with an estimated 25.1% jump in retirement assets to $31 billion, climbed to 78th place in the latest rankings from 95th the year before. Amazon, with an estimated 30.8% gain to $19 billion, rose to 141st place from 167th, and Apple, with an 18.6% gain to $16.1 billion, moved up to 165th place from 179th. Some analysts see that momentum auguring a reversal of a longterm trend of corporate plans figuring less prominently in the upper reaches of P&I’s retirement asset rankings. Growth in retirement assets is affected by a number of factors beyond how well plan investments are doing, such as company and participant contributions but also, for larger growth companies, a “demographic factor” — the number of people in the plans, noted Kevin Turner, a Seattle-based managing director with Russell Investments and co-head of the firm’s outsourced CIO business. Alphabet and Amazon, by way of example, have reported gains in their employee rolls of tens of thousands and hundreds of thousands, In 2021, before the bulletin, the SEC granted no-action relief — meaning it allowed a given company to exclude a proposal from its proxy ballot — to a record 80 environmental and social proposals during the 2021 proxy season, according to data from proxy advisory firm Institutional Shareholder Services’ governance and research unit. After the guidance, while the number of environmental and social proposals introduced increased, the number of no-action approvals dropped to 36 in 2022 and ticked up to 45 through the first eight months of 2023, ISS found. Also, in July 2022, the SEC issued a proposal to make it more difficult for public companies to exclude shareholder proposals from proxy statements and make it easier for proponents to resubmit proposals. “The message across the board from the SEC is very clear to corporate America: that politically motivated shareholder proposals deserve a place on the proxy ballot,” Crain said. A federal judge last year granted the National Association of Manufacturers’ motion to intervene in a

February 12, 2024

respectively, over the past five years. If employment gains such as those can be sustained and compounded, at some point in the future “these DC plans will rival some of the biggest DB plans by a multiple,” Turner said.

Long-term growth of DB and DC plan assets

Asset mix

$6.5

If the close of the latest survey period found many market veterans in a glass-half-full mood, conflicting views on whether a recession has been avoided or simply postponed could leave asset owners positioning their portfolios with a sense of humility in 2024. The past year “was a year of sur-

prise in the sense that the late cycle really lasted and is lasting more than a lot of investors would have expected” but market participants’ seeming conviction now that the Fed is poised to make a series of rate cuts in 2024 could set the stage for another, less pleasant surprise, said Chris Pariseault, head of institutional portfolio managers with Boston-based Fidelity Investments. Higher capital costs as the more than 500 basis points of rate hikes over the past two years work their way through the economy, for example, could undermine the potential for continued earnings gains that have to come through to justify the current “priced to perfection” market environment, Pariseault said. Texas Teacher’s Auby likewise sees a mild recession looming. Classic signals — like the ISM manufacturing index dipping below 50, real rates going up, leading economic indicators falling into deeply negative territory — are flashing amber or red, he noted. The coming recession should be “fairly gentle,” as there are no extreme dislocations in the economy that need to be corrected, but with equity valuations so stretched “I don’t think the stock market reaction will be gentle,” he said. Some market veterans say they’re positioning themselves to take advantage of such opportunities, with the return of yields on both Treasuries and shorter-term notes providing options to do so without having to sacrifice portfolio returns. Shoaib Khan, director and CIO of the New Jersey Division of Investment, said with so many moving parts at the start of 2022, his team opted to raise the $88.8 billion pension plan’s cash and cash equivalents to 9% or 10%, even as an asset allocation review in 2023 slashed the portfolio’s long-term target to 2% from 4%, to have the dry powder at hand to take advantage of opportunities. “I think the verdict and the conclusions are still out (regarding) whether it’s going to be a meaningful recession” or a slowdown and a soft landing, Khan said. But for now, with cash yielding about 5.4%, it’s “a great place to be” while retaining the ability to take advantage of dislocations if the economy takes a turn for the worst, he said. n

“If you’re a small investor, the idea that you’re going to go through a lengthy court case and then potentially be subject to paying legal fees, it’s a pretty high hill to climb to justify that,” Logan said. Exxon, he added “has won the battle but not the war. They’ve pushed this vote off and maybe this has the effect of scaring off small investors in the future, which I think is really unfortunate because it’s often been from these smaller investors that we’ve seen some of the more important issues come to light.” A chilling effect? But investors won’t stop But not everyone agrees pushing for change at big with Exxon’s decision. companies, Logan said. Exxon went to “an ex“Exxon knows very well treme length” to prevent that if investors don’t see a shareholders from considpath to progress through ering the proposal and the normal channels, they will decision from Arjuna Capitake more extraordinary tal and Follow This to with- EFFECT: Natasha Lamb argued that Exxon’s jump to litigation measures like going at the draw it points to the vast will contribute to silencing investors with climate concerns. board of directors,” he said. disparity in resources between the two camps, said Andrew energy, oil and gas at sustainability “So if we end up in a world because of this case and others that investors Logan, senior director of climate and non-profit Ceres.

don’t feel like they can make change through the normal shareholder process, they won’t give up, they’re going to find other ways to pressure the company. So the company may end up regretting its approach here.” Amy Borrus, executive director of the Council of Institutional Investors, said in an email that companies always have a right to bypass the SEC no-action process and go to court. “But these straight-to-court challenges may be used as a scare tactic to deter proponents — particularly smaller ones with limited resources — and they can generate ill will within the proponent community,” she said. “While we don’t always agree with the SEC’s no-action determinations, we view the SEC as a trusted, respected and generally fair referee.” Donahue said more companies may follow Exxon’s lead. “The strategy worked,” he said. “The proposal is not in their proxy. So if you’re a company counsel like me you’re saying, ‘The point of the litigation was to not have this in your proxy and it’s not included in your proxy.’ The immediate goal has been achieved.” n

In other survey results, asset mix data for the top 200 defined benefit plans showed a surprising degree of stability for a period marked by considerable policy shifts and capital market volatility over the past two years. For example, the survey showed U.S. equities accounting for 21.9% of top 200 public defined benefit plan portfolios as of Sept. 30, up a mere 20 basis points on year despite a more than 20% gain for leading U.S. equity benchmark indexes over the period. Mark White, executive director of the $20.7 billion, Little Rock-based Arkansas Teacher Retirement System, said those relatively stable equity figures could reflect ongoing moves by institutional investors to trim risk assets as they consider whether allocations that made sense for them in a zero-rate environment continue to do so in the higher-rate environment prevailing now. Arkansas Teachers did really well over the past five to 10 years of zero rates — including a strong 9.2% gain for its fiscal year ended June 30 — by taking on a little more risk, reflected in its relatively large 53% allocation to public equities, White said. But with interest rates back up now, Arkansas Teacher’s board moved on Feb. 5 to take a modest amount of risk off the table, approving a 5-percentage-point drop in the fund’s equity target to 48% and a corresponding boost to its fixed income exposures to 20% from 15%. Other asset segments exhibiting stability for the past year included private equity, which claimed a 15.1% share of top 200 public plan DB portfolios, down marginally from 15.2% as of Sept. 30, 2022 — despite a plunge in equity and bond prices the year before, which might have been expected to constrain new allocations due to the denominator effect. (The denominator effect occurs when plunging equity or bond prices boost the weightings of private markets assets that can take months or years to mark to market — such as case challenging the SEC’s authority to approve or disapprove whether a given shareholder resolution must appear on a public company’s proxy statement. The motion to intervene allows NAM to state its case before the court even though it’s not a plaintiff or defendant. Oral arguments in that case — National Center for Public Policy Research vs. SEC — will be heard next month in the 5th U.S. Circuit Court of Appeals in New Orleans.

Among the top 1,000 funds; assets are in trillions as of Sept. 30. $8.0

DB assets Public DB assets DC assets Public DC assets

$7.5 $7.0

$6.0 $5.5 $5.0 $4.5 $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0

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private equity, venture capital or infrastructure, potentially lifting them above an institutional investor’s asset allocation ceiling.) With stock and bond indexes both down by double digits for the survey period ended Sept. 30, 2022, for example, the weighting of private equity in top 200 defined benefit portfolios jumped to 15.2% from 12.8% the year before while real estate equity climbed to 11.8% from 8%. But public fund CIOs described the denominator effect as more of an annoyance than an obstacle to additional allocations for the latest year. The denominator effect didn’t affect the allocations of $104 billion DB plan of the Virginia Retirement System “in any significant way,” said Andrew Junkin, the Richmond-based fund’s CIO. “We ended up overweight private equity” by 2.5 percentage points but still within the fund’s allowed range, in part due to the denominator effect but also due to the strong performance of the fund’s private equity exposures, Junkin said. Asset allocators said the multiyear spans private equity firms take

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to put commitments from institutional investors to work likewise makes the denominator effect less constraining. “The thing to really keep in mind is the money we’re allocating today isn’t going to be funded for three, four or five years from now,” said Texas Teacher’s Auby. “So, we did have reduced capital plans in 2023 but we were still very much open for business,” he said. In any case, torrid gains for equity and bond holdings alike in the final quarter of calendar year 2023, on the back of growing hopes for Fed rate cuts, have effectively defanged any denominator effect challenges. “It’s essentially reverted now so it’s probably last year’s news,” said Russell’s Turner.

Year of surprise

February 12, 2024

Pensions & Investments

with Apollo’s John Zito

CONTINUED FROM PAGE 1

it is, what it is to certain people. Obviously for a long time post the financial crisis, it was really providing capital to small and medium-sized businesses in the middle-market direct lending space. So effectively servicing sponsors that generated EBITDA somewhere between $10 million and $50 million. What’s happened in the last 15 years, for us, we’re trying to get everybody to agree on what private credit is. For us, it’s everything that doesn’t have a CUSIP that sits on a bank balance sheet, that sits on an insurance company balance sheet. (A CUSIP number identifies most financial instruments, such as stocks, commercial paper and government bonds as well as the issuer.) Historically, it’s majority of which is investment-grade. And that marketplace is much larger than the traditional, what people would call the direct lending space for sponsors, which is subinvestment-grade. So I think our first step is just really trying to educate and just get some consensus around the market, around what private credit is, and then we can talk about the risk associated or potential risk associated with it. But we view it as majority investment-grade, and that’s where we’ve been spending almost all of our time. contributed to its growth Q | What in the last several years?

It’s always been very big. It’s

A | providing capital to the entire

economy. So it’s mortgages, financing cars, financing any sort of real estate. Receivables finance, solar finance. You name it, it touches the economy, we’re probably providing capital. The banks have historically provided that capital, and insurance companies have provided that capital. And so historically, it’s set within those balance sheets. Our retirement service business is growing really quickly. And so today we’re $450 billion, $300 billion of which is our own balance sheet. And of that $450 billion, about a third is asset-backed, which is what I’m describing. And the other two-thirds, the other $300 billion, is our corporate business. seems particularly well| Apollo placed to take more share of this market. Given your cost of capital and origination capabilities, can you explain your model and how it differs from other private credit players?

We’ve we’ve spent a lot of time

A | growing our business assuming rates would be zero forever.

Q | I think everybody felt that way. Yeah, so I think we really A | missed the growth. We missed the parts of the real estate business. We were going all in on our retirement service business, and really generating assets for our own balance sheet and for other retirement service balance sheets. Really rated

capital. To do that at scale, we had to go and build or buy our own origination capabilities. So whether that’s a mortgage originator, or fleet finance business, or any sort of direct-associated loan. We’ve built 16 different origination platforms, which, the largest and most recent was acquiring Credit Suisse’s warehouse finance business (Atlas), which we acquired about a year ago. We’ve spent just under $10 billion of our own capital to acquire or build our own capabilities. So you look at our employment numbers, today we have about 2,500 people who sit at Apollo, another couple thousand who sit at Athene. People don’t realize we have 4,000 originators that sit out there outside of affiliated companies that are actually just originating assets on behalf of Apollo. We really touch almost all parts of the economy, and we built direct source to service our own balance sheets. talk about Atlas. Where Q | Let’s do you see the private asset-backed security market over the next five years?

Yeah, so I think we’ll look back at

A | the Atlas transaction as one of the most innovative transactions that we’ve probably done as a firm. I’m most excited about the ability to grow that balance sheet. We touch over 200 originators, where we provide warehouse financing. So when they originate a loan, we’ll provide a short-dated one- to two-year financing, and then we’ll securitize that pool of loans. Three hundred employees, over 200 origination relationships, just under a $40 billion balance sheet, which I think could double over the next five years. Super excited about just being able to scale that business. And I think from everything I can tell, having now owned it for nine months, it’s vastly exceeded what we think we could have built on our own, so we’re pretty excited about it. just going to segue into the Q | I’m enthusiasm with market risk. Higher base rates that make deployment attractive can also stress current borrowers and credit portfolios. What’s been the impact of higher rates on the portfolio to date, and what kind of cycle lies ahead?

There’s no doubt that, histori-

A | cally, higher rates should slow down the economy. We’ve seen it slow in certain pockets, but by and large, the economy’s held up thus far. There’s been a couple episodic forced refinancings, where you’ve seen amend and extends, or things like that happen in the marketplace. But by and large, that refinancing wave is coming in the next two years. If you raised debt in 2018, ’19 or ’20, when interest rates were zero, it’s highly likely that when you have to roll that debt, you’re either need to put new equity, you’ll have to put new pref, (preferred return, or the first to get paid) or you’ll have to get some sort of PIK (payment in kind)

Ari Oshinsky

Opportunities remain in resilient economy

element to the debt. So we’ll see what that looks like over the next 18 months or 24 months. is it going to look like? Q | What Are you worried?

Look, I suspect you’re going to

A | see lots of lenders participate or

assist sponsors to help them extend their option to see if the interest rate environment changes, or access to capital changes, or the IPO market changes. In many situations, it’s not so much that the debt would be impaired, it’s just there’s too much debt. And it’s more of an equity problem than it is a debt problem. And so, how lenders partner with sponsors to work with them in this higher rate environment. Clearly the rate environment, if you look at the forward market, they’re saying rates will go down significantly in the next 12, 18 months. So clearly, many sponsors and many corporates are going to try to wait and see if that actually plays out. Because it’ll make their capital structures much more serviceable. But if you raise trillions and trillions of debt when interest rates are zero, then you raise rates by 500 basis points in 12 months, it’s likely you’re going to see stress points. We’ve seen that with the failure of many banks. We’ve seen that with the failure of some pretty aggressive companies in the crypto arena. You’ve seen that in all the weak points that sit with any sort of asset liability mismatch. and parcel to the default Q | Part cycle, are you concerned by recoveries? Historically, that’s been about 70% for all loans, 60% for leveraged loans?

Look, there’s no doubt that in

A | the traditional performing market, the documentation has gotten extremely weak. And their sponsors have the ability to be pretty aggressive with traditional loans. And so in certain cases, recoveries are going lower when there’s a default, because there are some pretty aggressive tactics around the capital structure. And I suspect you’ll see more of that as people, again, try to extend their runway and extend their options on their capital structure. In the direct space, the thing we love about it is that the documents are much tighter than the traditional BSL (broadly syndicated loans, a

form of leveraged bank loans) market. And I suspect that since most of the market now is first lien, it’s a bit deeper in terms of first lien, but the second lien market has really slowed down. I suspect a lot of the weakness and a lot of the losses will end up happening in the mezzanine and subordinated tranches. Which we have ... really, really pulled back. When I took on the CIO role coming up on four years, we had about $6 billion of second liens. We have less than $1 billion now. We’ve really taken down our balance sheet. People don’t realize our balance sheet today is close to 60% investment grade. On our retirement service balance sheet, it’s 95% investment-grade. So we’ve really gone senior and gone with less-levered companies. And really in our credit business, really gotten out of the mezzanine and subordinated tranche business. are you going to see that Q | When below-investment-grade level as an opportunity?

When everybody wants to be

A | doing it, we usually aren’t big buyers. We’re usually going senior. And when everybody doesn’t like the market, we typically are probably pretty much more aggressive than most. In COVID, we drew 100% of all of our capital. The three weeks after COVID in March, we deployed $40 billion in less than four weeks, mostly in the secondary market. So we were the largest buyer and market participant in that environment. And we came into that environment, again, being really senior and having the capability to do that. So I think you’ll see us, if you look at our (business development company), you look at our retirement, our own balance sheet, almost all of our business is less levered than our peers, more first lien, more senior. And when there’s dislocation and when there’s time to provide capital, we’ve really set up our business to be the provider of capital when people really need it. talked about resilience in Q | You the economy. Are you surprised by it?

Yeah. Construction lending has A | effectively gone to a halt with respect to commercial real estate,

new CRE development lending, and there’s typically some sort of correlation to anything that goes into building, such as asphalt and crane businesses. You’ve had mixed factors where you have construction lending collapsing, but you have big infrastructure projects that are going on in the states, which are really bolstering and stabilizing what otherwise would be a real cycle. The backlog from COVID-19 — you’ve never seen an environment where you shut off the economy for a year. And so the backlog’s been much higher. So even though you were raising rates by 500 basis points, lots of these companies ... still had demand from ’20 and ’21 on delayed projects. I think this year and into ’25, you’ll really see how the rate hikes start to flow through the overall economy. Bank lending should slow. CRE lending should slow. Home Depot grew at 2.5%, GDP plus or minus a little bit, for 30 years. In COVID, it grew at 30% to 40% a year for two years. Did that pull forward demand for 10 years? Because everyone was at home, wanted to fix their bathroom, fix their porch, fix whatever they were doing at home a lot. Add an office. Is that going to cause a significant slowdown or are we going to go back to growing at 2.5% a year? I think that there’s lots of reasons to believe that you’re going to see some big revenue gaps because you pulled forward lots of demand during COVID. You already fixed everything at your house you were going to fix. You don’t need to go and spend anymore. So we’ve yet to see it. But things like hotel prices, which doubled, anyone who’s gone to a hotel in a major city, New York, London, any big city, saw double to triple prices in certain cases. Aviation doubled and is back to 2019 levels. So most ticketed prices, most travel, most leisure, is back or above 2019 levels. Which, given all the rate hikes, has surprised us a little bit. But it’s good for the economy, good to see that we’re actually functioning with the amount of rate hikes. So, we’ll see. The market is effectively pricing in a near certainty of a soft landing at this point. a previous interview, you Q | In mentioned 15% of companies will be up for refinancing this year. Which presumably will create some

Pensions & Investments

cash flow constraints and stress in the market, especially for those models that relied on a much lower cost of capital. What types of opportunities and risks might this create?

Again, over the next two years,

A | we’re close to $1 trillion of refi-

nancings. It’s $500 billion this year. Another, I think, $350 billion to $400 billion the following year. Now we’re a year forward from that interview. It’s nice to see the CLO market is back on, because without that, you really need the private market for everything. Anybody who’s over-levered and has baskets, you can do super senior, senior tranches that’ll give companies runway. I think you’re going to see lots of capital solutions-type things that will get on to, just, again, all about sponsor solutions, extending runways. We’ve done close to $15 billion of (net asset value) lending last year. So against great collateral, super low loan to value, 8% to 12% types of return. So we’re really trying to allow sponsors to extend their runway in safe credit, and let them play through this difficult time where there hasn’t been a lot of sponsor-to-sponsor business. There hasn’t been an IPO market to really bridge the gap. But with the refinancings due, you’re going to have to pay a higher cost of capital. If cash is paying you 5% to 6%, and how you service that, how much debt you have, I think there’s probably a several hundred billion dollar hybrid preferred opportunity. Because many of these companies can’t just take on debt for debt, they need a little bit of equity capital. And you’ve seen some companies go out and raise preferred, and then the existing lenders will roll their debt. So it’s about putting all the pieces together between financing at the fund level, getting a little bit of equity capital either from the sponsor or some strategic, and then also rolling your debt and giving the company an extra two or three years. And maybe you add some level of PIK interest as, effectively, a bridge to get the lenders more return, but not tighten the cash flow statement from the company.

February 12, 2024

they’re going to do 100% of it. are you seeing appetite Q | And from pension funds, foundations and endowments for this over investment-grade? Are they also diversifying their portfolios?

It’s the early innings of seeing

A | the transition from the tradi-

tional fixed income into fixed-income replacement, as defined as the broad swath of private credit. And almost all of that capital sits in, a lot of it, sits in daily liquid funds that doesn’t need daily liquidity. And so we’re trying to figure out exactly, and educate people on, that the risk is very similar. That you are taking a little bit illiquidity risk, but you don’t need the liquidity in a long-duration retirement account. So if you can earn 100, 150, 200 basis points of excess yield with the

same exact rating, with really similar type counterparty risk, having a portion of that being less liquid fixed income vs. daily liquid fixed income, we think that’s going to be a big market and people are going to realize that it’s worth going into some of those more illiquid structures. talk about how private | There’s credit’s in a bubble, and there’s really no oversight or concrete regulation.

There is regulation across the

A | entire insurance industry. And

private credit, I think, when people say it’s in a bubble, they’re really defining the traditional non-investment-grade sponsor-lending market. They’re not talking about mortgages, and they’re not talking about all types of other lending, fleet finance, aviation lending. Because

PRIVATE MARKETS

that activity is stuff that everybody does and is regulated. But I’m pretty certain that all that activity I just listed in the investment-grade space that sits on banks is pretty regulated. So I feel pretty good about the risk that sits on our balance sheet today. surprises you the most Q | What about this credit cycle, and what worries you the most?

When I take a huge step back,

A | we had effectively a 14-year run

where we printed $11 trillion. We kept rates at zero. And then we decided to raise rates in the fastest period that we ever have, at the fastest pace and the largest quantum we ever have. And we sit here today, 18 months into it, 20 months into it, and everybody’s saying it’s a 100% certainty of a soft landing, and that we can cut rates, and we’ll land the plane.

And it’s hard to imagine that there’s not going to be more pain from a 14-year printing press, and then raising rates really quickly, and stressing the economy and stressing the consumers. So far I’ve been surprised how resilient the economy’s been. I think part of it is, I think the biggest, probably the most bullish thing this cycle around is that the home prices and structural home prices, and there’s close to $20 trillion of home equity, which is very different than ’08, where you have effectively negative equity in people’s homes. This is a ton of positive equity. And I think that’s what’s kept the wealth effect, and kept people more willing to spend, and willing to go out and do traditional spending, despite maybe feeling a bit more uncertain around their month to month payments. n

in partnership with

April 9-10 CHICAGO

Th e L P P e r s p e c t i ve

2024 SPEAKERS INCLUDE:

Andrew Abtahi CFA, CAIA Investment Manager Northwestern Medicine

Maggie Coleman Chief Investment Officer, North America Manulife Investment Management

Daniel Crews, CFA, CAIA Director of Private Equity Tennessee Consolidated Retirement System

Kevin Fahey, CFA Managing Director, Private Markets CAAT Pension Plan

Daniel Gottlieb Chief Investment Officer Southern Ute Indian Tribe

Brett Graffy Managing Director Aksia

Bruce Ingram Partner, Private Equity Aon

Steve Kim Partner Verdis Investment Management

Doug MacBean Deputy CIO Caltech

Scott Parrish Head of Private Equity State of Wisconsin Investment Board

Tamara Polewik Private Equity Principal Investments/ Co-Investments Teacher Retirement System of Texas

Elisabeth Roth Senior Portfolio Manager – Alternative Investments University of Chicago

Kirk Sims, CFA MD of Emerging Managers Program Teacher Retirement System of Texas

Kevin Tatlow, CAIA Senior Portfolio Manager – Private Markets New Mexico Educational Retirement Board

Hien Tran Director AdventHealth

back to private investQ | Going ment-grade, issuers like AB-InBev, AT&T, Air France, are turning to Apollo directly. Why does an investment-grade company choose a private solution over the corporate bond market?

If you’re running that business,

A | do you want to have a single

source of financing, or do you want to have a little bit of diversification of financing? And what you’re seeing is, if you have a $100 billion of debt doing a $5 billion tranche of private IG, to have a diversified funding source that may be able to fund a project differently, or do it on a non-recourse basis against specific collateral, or in times of dislocation, maybe they have a forward flow agreement with that lender; there’s value there. We also bring lots of expertise around capital structure, and ideas around capital structure or strategic view from the entirety of our firm. So I think what you’re seeing is those companies are actually valuing us being in the capital structure as a different source. Again, the narrative of the banks vs. Apollo, I don’t see that at all. I think that a majority of their funding, these companies, AT&T, they’re still going to access the traditional CUSIP market, but it doesn’t mean

ASSOCIATE SPONSOR:

*Only limited partners and a select number of consultants are invited to attend on a complimentary basis. All registration requests are subject to verification. P&I reserves the right to refuse any registrations not meeting our qualifications. The agenda for the Private Markets Conference is not created, written, or produced by the editors of Pensions & Investments and does not represent the views or opinions of the publication or its parent company, Crain Communications Inc. PM24 Spks 40'.indd 1

February 12, 2024

Pensions & Investments

AT DEADLINE Va. Retirement commits Virginia Retirement System disclosed commitments and investments totaling nearly $7.4 billion in materials prepared for the $110.2 billion pension fund’s Feb. 8 board of trustees meeting. The commitments were made between Dec. 8 and Feb. 8. Within dynamic strategies, which is part of multiasset public strategies, the pension fund invested $700 million in the VRS BLK Global Dynamic Allocation Strategy Fund, a multiasset absolute-return portfolio managed by BlackRock, and $350 million to the MAS Global Dynamic Allocation Fund managed by J.P. Morgan Asset Management. Within public equity, VRS hired WCM Investment Management to run $500 million in its Focused Global Growth Fund, a long-only equity strategy. Also within public equity, VRS committed $5.5 billion to Bearfence, an internally managed global low-volatility equity strategy, replacing U.S. and non-U.S. internally managed low-vol strategies. In real assets, the pension fund committed $200 million to a PGIM energy lending separate account and another $100 million to DigitalBridge Partners III, an infrastructure fund investing globally.

Hedge fund rules expand The Securities and Exchange Commission and Commodity Futures Trading Commission jointly adopted amendments to expand reporting requirements for large hedge funds and other private fund managers. Under the amendments to Form PF adopted Feb. 8, hedge funds with more than $500 million in net assets are required to provide additional information that includes investment exposure, country and industry exposure, investment performance by strategy, portfolio liquidity, and borrowing and financing arrangements. The amendments, originally proposed in August 2022, are designed to improve oversight of systemic risk in the private fund industry. Form PF, adopted by the SEC and CFTC in 2011, provides the agencies and the Financial Stability Oversight Council with confidential information about the basic operations and strategies of private funds.

Apollo eyes 401(k)s Apollo Global Management executives during a Feb. 8 fourth-quarter earnings call said they see an opening for private investments to edge into the more than $12 trillion global defined contribution market and replace a larger chunk of investors’ public fixed-income portfolios with private investment-grade credit and active equities with hybrid investments. “I look at the largest pool of investable capital anywhere in the

world, some $12 trillion in 401(k), these are people in our country, who need returns the most, and we force them to be daily liquid,” said Marc Rowan, a co-founder and CEO of Apollo Global Management, during the earnings call. “I don’t think there’s a good reason why, and we’re beginning to see cracks, even in the 401(k) market of an allocation to privates, which is different than an allocation to risk.” The 401(k) market is not limited by legal restriction but “by a risk mentality” that resulted from substantial litigation over a long period of time, Rowan said. He said that he sees a change, particularly as private market products are expanding beyond high fees and funds with more than 10-year lock ups.

ETF advantages favored More than 80% of investors surveyed would be more inclined to invest in an active strategy if packaged as an ETF rather than a mutual fund, according to Trackinsight’s fifth annual Global ETF Survey, which was released Feb. 7. According to the report, 80.1% of respondents said they would be more inclined to invest in an active strategy if packaged as an ETF rather than a mutual fund, the survey showed. The survey also cited recent regulatory filings in the U.S., which it said were seeking approval to “launch active ETFs as a share class of an existing mutual fund.” The survey said that a “substantial majority (81.9%) would be inclined to transfer an existing mutual fund holding to an ETF share class if a tax-free exchange were available, emphasizing the attractiveness of the ETF structure’s tax efficiency.”

Blue Owl, Lunate team up Alternative investment managers Blue Owl Capital and Lunate launched a joint venture to take minority stakes in midsized private markets firms. Blue Owl is a $157 billion credit, general partner strategic capital and real estate manager based in New York. Abu Dhabi-based Lunate, which is backed by Abu Dhabi Developmental Holding Co., known as ADQ, according to Bloomberg, manages $105 billion in assets across private equity, venture capital, private credit, real assets, public equities and public credit. The two firms will look to acquire minority stakes in private market investment managers with less than $10 billion in assets under management. Its targets will be GPs with a “clear sector specialization, differentiated approach, strong leadership and culture, and an established foundation of a durable, stable platform with identifiable key drivers of franchise value,” a joint news release said.

DCIIA

value. For the vice president and head of industry engagement and learning at Morgan Stanley, Bolden gravitated toward financial educaCONTINUED FROM PAGE 4 tion. “It’s important not only internally of groups focused on women and to advance the cause of equity and Black and African Americans. “Do however little you want to do inclusion and belonging but also the or whatever you want to do, and I communities we serve and how we guarantee you, you’ll want to do can better serve those communities,” he added. more,” he said. After starting his career in private wealth management, Bolden worked Open conversations As a senior manager of the client as a branch manager at a commersuccess group at the Vanguard cial bank in Brooklyn, N.Y., where he Group, Talia Hanby leads the Mal- grew up. In a community with a large vern, Pa.-based firm’s Women’s Ini- Caribbean American population, he tiative for Leadership. An employee asked small-business owners and reached out to her asking for guid- pastors what he could do to help. ance on taking a role in another de- Listening to problems related to unpartment, telling her, “I’m not sure if derstanding credit scores and securI should go for it because no one ing loans, he realized there were disparities in financial knowledge there looks like me.” between different races “That question and ethnicities. should never come up, At Morgan Stanley at but the reality is that it Work — the business does, so we can’t shy unit that provides finanaway from it or act like it cial wellness services for isn’t the case,” Hanby companies — Bolden said. “We have to have helps develop particithat uncomfortable conpant education curricula versation and have that for diverse employees to dialogue to say ‘why is address racial inequities. this,’ right?” A member of the InBy giving people ACCESS: Duncan digenous Metis people, space to share their sto- Robinson is looking to Robinson ries, others may find it ‘strengthen and broaden’ Allspring’s said that “tribal commuhelpful and realize they recruiting pipelines. nities may not have can relate or act to bring changes, said Rachel Weker, head of equal access to opportunities within retirement plan services marketing the financial markets or asset manand client experience at T. Rowe agement space,” so with members of ERG, he conceived of initiatives to Price. Through a colleague, Weker had “strengthen and broaden our reparticipated in an “eye-opening” cruiting pipelines.” One thing he’s conversation with a transgender working on now is developing a curwoman who wanted to “open the fi- riculum to improve financial literacy nancial services industry’s eyes to among tribal communities. Among other Allspring efforts to the challenges of her community.” As an example, the drop-down bolster equity, the manager teamed menu for online income projection up last year with Wells Fargo to calculators give only male and fe- launch a new philanthropic share male as gender options. In the wom- class for Allspring’s $113 billion an’s experiences, people have as- Government Money Market Fund sumed that she was “married to benefiting U.S. tribal communities. Currently a member of the Native someone of the opposite gender” and that “her female dependent was American Financial Officers Association, Robinson is putting together a a child as opposed to a partner.” “It was just such a reminder that I mentorship program to offer career can’t make assumptions,” Weker add- guidance, mock interviews, resume reviews and shadowing opportunied. ties — things he wishes were available to him when he was younger. Community engagement To improve DEI, Rodney Bolden When he was looking for jobs, he advises others to look around their said that someone had to teach him communities because “there are ar- how to dress professionally and style eas that need (their) help” and to his hair, and that helped him get inassess where they can be of the most ternships and start his professional

Carlyle CONTINUED FROM PAGE 6

Before joining Carlyle, Schwartz had been president and co-chief operating officer of Goldman Sachs Group before retiring in 2018. At Carlyle, he succeeded William Conway Jr., Carlyle’s co-founder, former co-CEO and currently co-chairman of its board, who had served as interim CEO since Kewsong Lee stepped down in August 2022.

Big fundraising quarter

Carlyle Group reported $426 billion in assets under management as of Dec. 31 on its Feb. 7 fourth-quarter earnings call. AUM was up 11% from three months earlier and up 14% from a year earlier. “We finished the year with significant momentum, which sets us up for success in 2024,” Schwartz said

on the call. Carlyle raised $17 billion in the fourth quarter, the firm’s third best fundraising quarter ever, he noted. The alternative investments firm took in a total of $37 billion in capital commitments in all of 2023. Carlyle attributed the 2023 fundraising results to its $188 billion global credit business, its largest, with that segment’s AUM increasing 28% last year, mainly from the growth of its reinsurer, Fortitude Re. Carlyle and T&D Holdings purchased a 76.6% interest in Fortitude from American International Group for about $1.8 billion in 2020. The growth in AUM in the year also came from a 21% increase in Carlyle’s secondary alternative investment markets business — its global investment solutions unit — as a result of fundraising by AlpInvest secondaries and co-investment funds, Schwartz said. “You know, I showed up a year ago, literally almost to the day, and I

career. “I would like to pass that on to other young people that just need a chance,” Robinson said.

Talent acquisition

“Being open-minded (and) hearing some of the challenges and opportunities to create equality in the workplace” to drive better business results is part of the work done by honoree Colleen Tycz, head of strategic accounts and insurance distribution, retirement and insurance – U.S. at Franklin Templeton. In a meeting with leaders of the firm’s client sales desks, the panel topic that was requested most “was around hiring and retaining diverse and quality talent,” she said. “There’s a big appetite,” she added. “Everyone’s focused on it, and there’s just a lot of powerful momentum when we come together.” With asset management being a “people business,” it’s important to recruit the right talent and develop an inclusive culture where talent chooses to stay, said Gayle Baldwin, senior vice president, senior research analyst and portfolio manager – equities at AllianceBernstein. Baldwin manages the AB Diversity Champions Equity Portfolio, a strategy that includes companies that align with at least one of the United Nation’s Sustainable Development Goals. In addition, she participates in the firm’s mentoring and training programs to develop junior talent. The goal of these programs is to have “more junior colleagues grow their long, successful careers at AB.” At the University of Pennsylvania, where she studied as an undergraduate, she also interviews prospective international students to “help support (and) bring in an engaged, diverse student population.” Being vocal in the workplace is key to DEI efforts, honorees said. “We also have to call out any behavior that’s not in line with our thinking and our values,” said Stephanie Pierce, CEO of Dreyfus, Mellon and exchange-traded funds, BNY Mellon Investment Management. “That can be hard.” At the firm, Pierce said there are coaching sessions on unconscious bias, or the act of unintentionally behaving in a way that is in favor of or against an individual or group. “When there’s unconscious bias in the way people are taking a decision or running a meeting, we need to be able to call that out in a professional way,” she added. n was the lucky recipient of some amazing franchise businesses and some great talent,” Schwartz said during the call. “One of those things is our secondary business. And over the course of the year … we’re expecting a doubling of FRE (fee-related earnings).” Carlyle’s second-largest business, its $161 billion global private equity business, saw its AUM dip by 1% during the year ended Dec. 31. Carlyle’s private equity business includes real estate, infrastructure and natural resources, as well as corporate private equity. “I think in private equity, like the rest of the industry, specifically … corporate private equity, I think we’ll still be seeing headwinds in the industry,” Schwartz said. Carlyle set a target of inflows to exceed $40 billion in 2024 and despite those headwinds in corporate private equity, Schwartz added that Carlyle executives “feel good about the $40 billion number.” n

Pensions & Investments

February 12, 2024

Credit

its target allocation, which is now 23% from 3% in 2012, said Paul Matson, executive director of the $50.7 billion pension fund. Currently, the CONTINUED FROM PAGE 3 pension fund is tactically overweight surge to continue much longer as the to its strategic allocation, he said. spark that fired up the asset class’ Private credit accounted for 23.9% of rapid advancement could fade if ASRS assets at the end of the third bond yields hold, industry insiders quarter. “Our initial foray into this asset said. “Investors have been focused on class was expected to be temporary, income generation, and for a long lasting only while the capital martime they weren’t getting that from kets were in post-2008 turmoil,” public markets, which led to the Matson said. When the market turmoil subsidboom in the private credit market,” said Karin Anderson, director, North ed and new banking regulations that America credit manager research at required banks to shore up their balWillis Towers Watson. “Now that ance sheets took hold, pension fund high yield and loans have better executives decided to not only to yields than they’ve had for a long keep its private credit allocation but time, some investors may have a to increase it due to the high rates of harder time adding to private credit expected return, the limited interallocations because of the liquidity est-rate duration because of the loans’ floating rates and the modest trade off.” Many investors are turning to term of the underlying loans, among middle-market direct lending as a other reasons, he said. ASRS officials complement to high yield and loans, also invested in a “series of separate account structures that embed a sigAnderson said. nificantly higher degree “There’s a lot of deof liquidity, alignment of mand because the ininterest, with often evvestment time horizon ergreen structures,” is shorter compared Matson said. with more opportunistic ASRS’ expected reprivate credit strategies” turn for the asset class is such as venture capital 9% to 10% over multidirect lending and infrayear periods with modstructure credit, she est volatility, he added. said. Ranked second on “Still, investors need P&I’s list of private patience because mid- PAID: Paul Matson credit investors, CalPdle-market direct lend- expects private credit to ERS’ private credit porting has a five- to sev- return 9%-10% with folio increased 41% in en-year time horizon,” modest volatility. the 12-month period Anderson said. Venture capital direct lending or ending Sept. 30 to $10.8 billion. Offiinfrastructure lending can have a cials at the $450.3 billion California 10- to 30-year outlook, she said. Public Employees’ Retirement Sys“You’re going to be clipping a nice tem, Sacramento, attribute the incoupon but it’s a much longer hori- crease in what it calls private debt to zon for the return of capital,” Ander- its 5% target allocation that it adopted on Nov. 15, 2021. son said. “Although early in its development, the private debt asset class is Still a draw Investors in this year’s survey said performing as expected in the curthey are continuing to shift assets to rent market environment,” said private credit for its current income, James Scullary, CalPERS spokesdiversification from equity risk and man. “The focus for the portfolio is to continue to look for deployment higher expected returns. Arizona State Retirement System, opportunities with high-quality Phoenix, again tops the list of retire- managers and issuers to benefit ment plans with the most assets in from the rate increase while avoidprivate credit, with $12.1 billion, up ing default and/or losses.” For CalPERS, the role of its pri5.3% from the prior year. ASRS was an early adopter of private credit. Its vate debt asset class, like its other board has been steadily increasing private market asset classes, is to

SLC CONTINUED FROM PAGE 6

$1.7 trillion private credit market doesn’t give investors as much transparency on ratings. To counter that, SLC spends “a lot of time thinking about what is the rating that would go on investment-grade private credit. Sometimes there is a rating from S&P or Moody’s; often there’s not. We have an extensive internal rating process. We worked with S&P to develop models for different industries” using more than a dozen inputs, he said. As SLC markets these private credit funds, clients “like that rigor. We’ve been able to show a long history … of low loss ratios.” Fees charged to clients investing in private credit are “higher than in high yield. It’s a very labor-intensive endeavor. You have to go out and source these deals. Unlike high yield, where (Wall Street’s) bringing you deals.”

Growth of private credit/debt in DB plans Among the top 200 funds; assets are in billions as of Sept. 30. $140 $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0

2018

2019

2020

boost its entire portfolio’s risk-adjusted returns, Scullary said. “Our general view is that private assets, as a whole, offer a greater return opportunity per unit of risk relative to the public markets, lower realized volatility and diversification that is critical to our portfolio.”

Risks weighed

CalPERS officials acknowledge that there are risks inherent in the private credit asset class. These risks include that the assets are below investment grade, illiquid, opaque and in a relatively new asset class, said Jean Hsu, managing investment director and CalPERS global head of private debt at the most recent private debt review in March. “If you think about private debt, we are doing things which are not investment grade,” Hsu said. “So they are supposed to have risk. They are supposed to have defaults.” It is up to investors to invest in ways that mitigate the probability of default by selecting managers that offer investment opportunities with a lower default risk and that have the internal capabilities to increase recoveries when issues arise, Hsu said. Another risk inherent in private credit is its lack of liquidity, she said. “You cannot sell it. You have to

2022

2023

work it through,”Hsu said. Private credit also lacks transparency. There is less statistical data that investors could use to model potential outcomes, she said. Moreover, the private credit asset class has a shorter performance history, Hsu said. The majority of the private credit funds were created after the financial crisis during a “very, very benign credit cycle and credit environment,” Hsu said. To counterbalance this risk, CalPERS is looking for managers with longer credit histories, preferably before the global financial crisis, she said. In a downturn, manager performance will vary significantly, Hsu said. “If there is a lot of money chasing this area (then) you will see spread compression and then you will see loosening of ... underwriting standards,” Hsu said. Interest rates are also a factor because private credit produces higher returns and yields when interest rates are rising because most of the loans are floating rate, Hsu said.

Outperformance expected

New York State Common Retirement Fund, Albany, ranks third among private credit investors with its portfolio increasing 21% to $10.2 billion during the survey period. age is improving.” The definition of infrastructure, too, is expanding, to include hospitals, universities, data centers, charging stations and fiber optic cable, he said. “We’re seeing the needs are great, and the capital is there,” he said. What he calls “greenfield infrastructure” can generate double-digit returns, he said. “We’re a major player in infrastructure lending. We lend against a lot of projects over the long-term basis, wind farms, hydro projects, buildings for energy efficiency. “

In addition, “there’s the monitoring of the company. That accounts for the higher fees,” he added, citing typical management fees of 1% and carry in the mid-teens. Pension funds a lot of times invest in “below-investment-grade private credit and put that into the alternatives bucket.”

Real estate, infrastructure

Through its real estate investment arm BentallGreekOak, or BGO, SLC has for a number of years “heavily focused on ‘all things industrial’ in Europe and North America,” Peacher said. “It’s had tailwinds with COVID and ordering from home.” Beyond that, other sectors of interest are cold storage, data centers and specialized warehouses. BGO managed $80 billion in assets as of September 30. Real estate’s current yield of 5% was attractive when rates were at zero; it’s “less attractive now that you get that in a money market. It’s less attractive relative to fixed income.” “Retail we’ve been underweight a long time. With few exceptions, office

2021

TARGETED: Steve Peacher said SLC has had a big focus on ‘all things industrial,’ with COVID providing a tailwind.

is more challenged. We’re starting to see bargains.” Underlying demand for infrastructure investments, he said, “is very strong. There’s a revolution going on with sustainable, renewable energy. Wind and solar energy is very cost competitive. The challenge is around zoning. Also, battery stor-

A DB rebound?

Peacher said decisions by companies such as IBM to revive their defined benefit plans is a positive “from a societal standpoint. The decline in DB pension funds has been a net negative for savers and for workers. There’s a lot of benefits to DB plans, they can be lower cost, with professional management, and as a participant in the plan the company’s standing behind it. “The 401(k) is a nice vehicle, but

The increase was due to returns as well as new investments, said spokesman Matthew Sweeney. The $246.3 billion pension fund has had a 4% allocation to credit since 2020 when the credit allocation was added, he said. Pension fund officials expect private credit to outperform its 6.8% actuarial return target “while maintaining a relatively low correlation to other asset classes outside of the traditional fixed-income markets,” Sweeney said. In New York State Common Retirement Fund’s fiscal year ended March 31, the private credit portion of the pension fund’s credit allocation produced a return of 3.5%, largely because of the floating rate nature of those loans, according to the fund’s annual report. By comparison, over the fiscal year, liquid credit funds generated -7.6% due to the steep rise in interest rates that mostly impacted fixed-rate securities, such as high yield, the report said. The pension fund with one of the largest increases in private credit during the survey period was the $72.2 billion Los Angeles County Employees Retirement Association, Pasadena, Calif., whose $5.3 billion portfolio increased 57%. The increase reflects the implementation of a change in strategic asset allocation in 2021 that boosted the illiquid credit allocation to 7% from 3%, said Vache Mahseredjian, principal investment officer, whose team is responsible for LACERA’s private credit portfolio. At the same time, LACERA’s target allocation to liquid credit was reduced to 4% from 9%. The increased private credit allocation resulted in increased commitments to existing managers and the addition of new managers, which subsequently made capital calls, he said. For example, two existing managers, Napier Park Global Capital and Magnetar Capital, saw their mandates increased to $1 billion each from $800 million each over the 12 months ended Sept. 30, Mahseredjian said. At LACERA, its private credit portfolio is designed to provide moderate levels of current income and total returns as well as to diversify equity risk, the dominant risk in its total portfolio, Mahseredjian said. “Our objective is to have credit be the primary source of risk as opposed to interest rate risk,” he said. n it takes the burden and puts it on the individual. Now that the interest rate decline has run its course, it may be more conducive” to maintain a defined benefit plan. “I hope you see a resurgence” in DB plans, he said. “It fits nicely next to a 401(k).” Peacher sees interest rates staying higher. “I think we’ll be in a period of more stable rates; like what used to be normal” for interest rates, where the 10-year Treasury settles in a range of 3% to 5% yields, or “low to mid-single digits,” he said. “That will be the norm.” His personal view: “the Fed’s been pretty clear they stopped raising rates and the next move is to cut. The consensus is more cuts than the Fed is signaling. The Fed will be slower to cut than many people think. Inflation has come down, but we’re in this anomaly. Economic growth still feels pretty strong.” In 2024, “we’re going to feel it at the consumer level and for companies that have debt tied to (the secured overnight financing rate). That has yet to fully bite.” n

February 12, 2024

Pensions & Investments

CHANGES AHEAD Ohio University Foundation, Athens, is searching for one or more non-discretionary investment consultants for the school’s $934 million long-term endowment pool. The university is seeking proposals from firms that provide general investment consulting services and/or alternative investment consulting services, according to an RFP posted on the university’s purchasing website. Registration is required. Proposals are due by 3 p.m. EST on Feb. 15.

Charlotte (N.C.) Firefighters’ Retirement System is searching for an investment consultant. The $604 million pension fund is seeking proposals from a firm to advise its board on its investment management, according to an RFP posted on the city of Charlotte’s procurement website. Registration is required. Proposals are due by 2 p.m. EST on Feb. 15. HAVE SOME NEWS?

Maryland State Retirement & Pension System, Baltimore, is searching

Please submit news of changes to John Fuller, news editor, at john.fuller@ pionline.com

for a non-discretionary real estate consultant. The $63.3 billion pension fund is searching for a consultant to assist its investment staff in the development of goals, strategy and objectives for the real estate portfolio, according to an RFP. The RFP is available on the pension fund’s procurement website. Proposals are due by 5 p.m. EST on Feb. 27.

Milwaukee County Employees’ Retirement System is searching for a custodian. The $1.7 billion pension fund is seeking proposals from banks that can provide custody and securities lending services, according to an RFP on the county’s procurement website. Registration is required. Proposals are due by 5 p.m. CST on Feb. 27. Taunton (Mass.) Contributory Retirement System is searching for two active domestic midcap equity managers to run a total of $32 million. The $382 million pension fund is planning to hire two managers to run $16 million each in growth and value strategies, said Kevin Condy, director of research at investment consultant Dahab Associates, which is assisting with the search. The RFPs are available on Dahab’s website. All proposals are due by noon EST on March 1.

Chicago Metropolitan Water Reclamation District Retirement Fund is searching for an investment consultant. Current consultant Marquette Associates is invited to rebid. The RFP is available on the $1.4 billion pension fund’s website. Proposals are due by 4 p.m. CST on March 1.

Commonwealth of Puerto Rico Plan of Adjustment Pension Reserve Trust, Guaynabo, is searching for investment-grade corporate credit managers to run $660 million and multiasset managers to run a $130 million allocation, according to two RFPs on the trust’s website. For the multiasset manager search, PRT is looking for managers that run long-only (non-hedge fund structure) investments across liquid, global investable markets designed to express the managers’ best ideas among global opportunities. The allocation will be about $130 million. Both RFPs are available on the trust’s website. Proposals are due March 1.

Colorado Public Employees’ Retirement Association, Denver, is searching for a firm to provide investment research access and/or operational due diligence for its alternatives asset class. The $57.6 billion pension fund’s board decided to move from a full consulting services model to a research-only model for the alternatives asset class, said spokesman Patrick von Keyserling. The pension fund’s alternatives asset class includes opportunistic credit, private credit secondaries, specialty lending, infrastructure equity, agriculture and timber, and risk-mitigation hedge funds. The RFP is available on the pension fund’s website. Proposals are due on March 1.

St. Louis Firefighters’ Retirement Plan issued an RFP for a core fixed-income manager to run about $23 million. Investment consultant Dahab Associates is assisting the $150 million pension fund with the search. The RFP is available on Dahab’s website. Proposals are due by March 8 by 5 p.m. EST.

South Carolina Public Employee Benefit Authority, Columbia, is searching for a bundled provider for the state’s $3.9 billion 401(k) plan and $1.1 billion 457 plan to provide record keeping and administration, communication and education, custodial and trustee services, and investment management services for the plan, according to an RFP posted on the state’s procurement website. Proposals are due by 11 a.m. EST on March 18.

PERA CONTINUED FROM PAGE 1

fund’s exposure to private assets: increasing private equity by 5 percentage points to 17% and private credit by 2 percentage points to 8%. The board also eliminated the fund’s 3% emerging markets debt portfolio and increased alternative credit by 3 percentage points to 7%. “The main thrust was increasing exposure to private equity and private credit,” Shackelford said in an interview. Since it takes a long time to ramp up exposure to private market asset classes, New Mexico PERA executives increased commitments to private equity and private credit managers that plan officials had hired, but had not yet signed the documents, he said. They also looked for new managers, Shackelford said. “The private credit ramp up is a little bit faster than private equity,” he said, adding that one manager called capital right away. In October, the board took apart its portable alpha program, he said. “If you are going to take leverage, say you’re taking leverage rather than doing it by stealth,” Shackelford said. “We got rid of the of the overlays,” which were matched against bonds. “When the rates began to rise, they tanked,” he said. New Mexico PERA had $2.4 billion in portable alpha as of Sept. 30. Its portable alpha managers included Dorsal Capital Partners, Elliott Associates, Garda Capital Partners, Glazer Capital Management, Millennium Management, PAG, Systematica Investments and Two Sigma Investments.

Second round of changes

In December, the board adjusted its asset allocation again, increasing public stocks by 11 percentage points to 27%, private equity by 2 percentage points to 19%, illiquid real assets by 3 percentage points to 11% ,private credit by 1 percentage point to 9% and liquid credit by 4 percentage points to 8%. At the same time, New Mexico PERA added a 6% hedge fund allocation and eliminated its 8% risk parity allocation, 5% global low-volatility equity asset class, 7% alternative credit allocation and 3% liquid real assets allocation. It also cut its core fixed-income portfolio by 4 percentage points to 13%. Pension fund officials eliminated the global low-volatility equity portfolio in favor of higher-returning public and private equity and eliminated risk parity, a multiasset portfolio, replacing it with hedge funds with lower risk and lower-to-no correlation with equities, according to a report by general investment consultant Verus for the investment committee’s Dec. 12 meeting. New Mexico PERA officials also simplified the portfolio, Shackelford said, renaming some of the asset

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classes. Risk reduction and mitigation became core fixed income. Credit-oriented fixed income is now credit. Multirisk was renamed absolute return. The investment team also eliminated alternative credit, rolling the investments into either liquid or illiquid credit depending on the underlying assets of each investment, Shackelford said. Pension fund officials also consolidated the fund’s credit managers, keeping those that are “best in class,” he said. Even those managers that were best in class may have been cut from the roster if the manager didn’t also offer a competitive fee, he said. “A couple of managers didn’t want to lower their fee,” which leaves a lot of return on the table for the pension fund, Shackelford said. “We found other managers that were best in class but had lower fees.” The result was a $3.1 billion portfolio of credit-oriented fixed income

‘If you are going to take leverage, say you’re taking leverage rather than doing it by stealth. We got rid of the of the overlays,’ which were matched against bonds. NEW MEXICO PERA’S MICHAEL SHACKELFORD with a handful of managers and lower fees, he said. The ultimate goal is to boost the fund’s risk-adjusted returns, Shackelford explained. “Our portfolio was more conservative than peers” with lower allocations to equities, hedge funds and private credit, he said. “We were not earning as much return and finding it difficult to meeting our assumed rate of return,“ Shackelford said. New Mexico PERA’s assumed rate of return is 7.25%, he said. “The board feels like that is appropriate, which leaves it on the higher side, but we’re not completely an outlier and need an asset allocation that is still conservative but a little less conservative,” he said. The pension fund earned 7.5% for the year, 5.1% annualized for the five years, 5.9% annualized for the 10 years and 6.3% annualized for the 20 years ended Sept. 30, the Verus report said. The plan was 67.7% funded as of June 30.

Blockchain investments

New Mexico PERA officials are open to their private equity managers investing in companies using new technology. For example, the pension fund disclosed $1.3 billion in digital assets in its private mar-

kets portfolio. Shackelford explained that although the pension fund doesn’t invest in cryptocurrency, its private equity and venture capital managers invest in companies that use blockchain. “We have venture capital and private equity managers that sometimes invest in companies that service those (cryptocurrency) companies. They might provide the trading platform for coin trading companies,” Shackelford said. Other firms invest in companies that use blockchain for other uses such as to securely track and store data such as mortgages and banking, he said. “Managers have asked us to allow them to invest in blockchain technology,” Shackelford said. In real assets, the board eliminated public real estate and public infrastructure because officials expect better returns and less volatility from private real estate and infrastructure, Shackelford said. “The overarching theme for the last year and a half was to try to take a little more prudent risk,” he said. The pension fund is managing risks in private equity by investing roughly 80% of the portfolio in buyouts, with the remaining 20% in growth and venture capital. What’s more, most of the portfolio is in North America, with some in Europe and very little in the rest of the world, he said. Pension fund officials may increase the growth equity portion of the portfolio, which Shackelford said is a little bit safer than venture capital. As for private credit, the investment team avoids novel assets, meaning investment strategies that do not have a long track record, Shackelford said. Most of the portfolio is focused on corporate credit and asset-based finance and those sectors are going to continue to be the core of the credit strategies the team will be looking at, he said. Officials steer clear of litigation finance and other newer strategies to avoid “the unforeseen bad things that haven’t happened yet and we don’t know what that could look like,” Shackelford said. There’s been a long history of lenders lending against hard assets and investors know what capabilities a manager needs to manage through a crisis, he said. To that end, pension fund officials look for teams that have long history working together, preferably at the same firms, focusing on cohesive teams that have been through the Great Recession, the COVID-19 crisis and the tech bubble, Shackelford said. “We want teams that have been around over 20 years if possible,” which can be hard to find, with people who know how to take control of the underlying asset in a crisis and work through a bankruptcy, he said. At the same time, pension fund officials want a team that makes good decisions at the outset of an investment, he said. n

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