THE INTERNATIONAL NEWSPAPER OF MONEY MANAGEMENT | MAY 6, 2024 | PIONLINE.COM | $16 AN ISSUE / $350 A YEAR
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Corporate plans are fully funded. Now what? By ROB KOZLOWSKI U.S. corporate defined benefit plan executives are mulling over how to take advantage of a new era of funding stability after a second straight year of being fully funded on average, experts said. The publicly traded U.S. companies with the 100 largest defined ben-
efit plans can now boast an average funding ratio of 99.9% as of Dec. 31, according to Pensions & Investments’ analysis of the latest 10-K filings. That’s a slight drop from the average ratio of 100.2% in the P&I analysis a year earlier, but it still represents a level of stability for funding among corporate pension plans not seen in years. While not all the 100 measured plans are fully funded, 49 had funding ratios of 100% or more as of Dec. 31, and 30 plans even have funding ratios of 110% or more. Those are nearly the same numbers as in 2022, when 50 plans were 100%
RELATED CONTENT n A list of the funding ratios of the 100 largest corporate DB funds appears on Page 17.
or more funded and 31 plans were 110% or more funded. Even among the 51 measured plans that had ratios of under 100% as of Dec. 31, only three plans had ratios below 80% and all were above 70%. “(The) combination of improved funding and derisked asset allocation has proven to be incredibly powerful,” said Jared Gross, manag-
ing director, head of institutional portfolio strategy at J.P. Morgan Asset Management, in an interview. The last time corporate pension plan funded status looked this healthy was as of Dec. 31, 2007, when P&I’s analysis showed an average funding ratio of 108.6%. That all came quickly crashing down, however, with the global financial crisis. Just one year later, the average funding ratio plummeted nearly 30 percentage points to 79.1%. Now, however, there is new stability, and it began in 2022. Corporate pension plans benefited mightily Buck Ennis
New era of stability has fund execs pondering how to take advantage
Money Management
Active management is needed now, says Man Group’s Grew ‘Unprecedented times,’ political and economic, require custom solutions By LYDIA TOMKIW
ALL TOGETHER: In times
SEE LACERA ON PAGE 24
SEE FIDUCIARY ON PAGE 26
LACERA CIO’s methodical approach pays off
has LACERA beating benchmarks.
First lawsuit filed against fiduciary rule; more expected
total fund approach, brought private equity co-investments in-house and launched a cash overlay program that has produced a total of about $500 million in gains so far. In the pension fund’s most recent performance report, it beat its benchmarks in the one-, three-, fiveand 10-year time periods ended Feb.
Pension Funds
FLEXIBILITY: Jonathan Grabel’s approach
Regulation
Stakeholders with competing views and interests expected legal challenges against the Department of Labor’s new fiduciary investment advice rule, and on May 2 the first such lawsuit was filed. The Federation of Americans for Consumer Choice, which represents annuity and life insurance firms, and five insurance agents and firms collectively filed the lawsuit in U.S. District Court in Tyler, Texas, arguing that the new rule exceeds the Labor Department’s authority and is arbitrary and capricious, in violation of the Administrative Procedure Act. Stepping back, one side of the debate says the rule, which covers onetime advice such as rollovers to individual retirement accounts or annuity purchases, will better protect retirement investors by expanding the universe of financial professionals who have to put the investors’ best interests first, while the other says it will hurt those investors’ ability to get the advice they seek when making crucial financial decisions. “Here’s the bottom line: We’re putting this rule in place to ensure that America’s workers can enjoy the retirement that they’ve earned, paycheck by paycheck, year after year,” said Lisa M. Gomez, who leads the
SEE ACTIVE ON PAGE 27
Jonathan Grabel, CIO of the $77 billion Los Angeles County Employees Retirement Association, which just adopted a new asset allocation reflecting the higher interest rate environment, said pension fund officials there take a methodical approach, adjusting its targets rather
CONTINUED ON PAGE 16
By BRIAN CROCE
like these, ‘all of the Robyn Grew has helmed the world’s largest effort and all of the publicly listed hedge fund manager, Man acumen and depth of Group, for eight months now and contends experience we have investors are living in “unprecedented times” across the organization that favor active management. can be put to work,’ says “I think we are in a period of unprecedentMan Group’s Robyn ed geopolitical, geo-economic impact,” Grew Grew. said in an exclusive and wide-ranging interview with Pensions & Investments. “I’m not a forecaster, I’m an observer. But ever were that the case in the moment, translating some of the geopolitical events alongside a different market environment alongside things like climate — these are unprecedented times.” Man Group has changed dramatically from its founding over 200 years ago and grown from its roots
By ARLEEN JACOBIUS
from rising interest rates during the year. The average discount rate rose to 5.25% as of Dec. 31, 2022, from 2.88% the year before, which caused liabilities to plummet and offset poor investment performance during the period. That dramatic rise in discount rates came primarily as a result of the Federal Reserve’s aggressive fight against inflation, that would eventually reach its end point in July when the central bank raised the federal funds rate to a range of 5.25% to 5.5%.
than making sweeping changes. But that doesn’t mean that the Pasadena, Calif.-based pension fund is opposed to change. In the seven years since Grabel joined LACERA from the $16.3 billion New Mexico Public Employees Retirement Association, Santa Fe, where he was CIO, the pension fund has ditched asset class buckets for a
SOUND BITE COPIA GROUP’S SHUNDRAWN THOMAS:
‘People talk about private credit as a monolith, and that’s not the case.’ Page 4
Emerging markets investing in flux Investors are keeping a close eye on election results, while exploring ex-China options in Asia, and looking at options in Vietnam and Turkey. Page 12