THE INTERNATIONAL NEWSPAPER OF MONEY MANAGEMENT | MAY 20, 2024 | PIONLINE.COM | $16 AN ISSUE / $350 A YEAR
S PE C IA L RE P O RT IN S U R ANCE ASSETS
Insurers’ stodgy reputation no longer fits Expanded private-lending business highlights their growing appetite for risk By ROB KOZLOWSKI
MORE ON INSURANCE ASSETS n Asian insurers are looking at outsourcing assets. Page 14 n Cathay Financial CIO is all-in on responsible investing. Page 14 n Managers are adding staff to go after insurance assets. Page 16
of capital efficiency. That has often meant the significant majority of insurance company portfolios consists of investment-grade fixed income. As of Dec. 31, 2022, fixed income
comprised 62.3% of the entire universe of affiliated and non-affiliated insurance company assets totaling $8.15 trillion, according to the latest NAIC Capital Markets Bureau special report on the U.S. industry’s cash and invested assets. Common stocks comprised 13.2% of all U.S. insurance assets as of that date, followed by 8.9% mortgages, 6.6% schedule BA and other assets, 4.6% cash and short-term investments, 1.6% contract loans, 1.2% derivatives, 0.5% each real estate and Rob Augustynowicz
Insurance companies have spent more than a decade trying to find returns in private markets, during a historically low interest rate environment. But even as interest rates have
rebounded, insurers are still more willing to take on illiquid risk as they embrace newly evolved roles as private lenders. While those higher rates have resulted in insurers re-embracing traditional fixed income, the days of insurance companies being a sleepy, boring place to invest are over, experts said. To be sure, that sleepy sentiment existed for decades due to strict regulations under state laws and the National Association of Insurance Commissioners, which require a high level
other receivables, 0.4% preferred stocks and 0.3% securities lending (reinvested collateral). Non-traditional assets, reported by insurers as schedule BA investments, include private equity, private credit and hedge funds. That allocation had increased from 6.5% at the end of 2021 and represented a total of $534.9 billion in assets as of Dec. 31, 2022. Five years previously, at the end of 2017, the allocation to bonds was 65.3% and nontraditional assets was 5.5%. SEE PRIVATE ON PAGE 15
Pension Funds
UPS delivers $40B boon to Goldman Leader in outsourced CIO assets gets bigger; UPS team to join GSAM By DOUGLAS APPELL
CalSTRS’ Scott Chan Page 17
BlackRock’s Anne Ackerley Page 17
Vanguard’s Salim Ramji Page 21
Industry execs on the move Big personnel changes were afoot in the institutional investing community recently, with CalSTRS naming Scott Chan as CIO, succeeding Christopher Ailman; Anne Ackerley stepping back from her position as head of BlackRock’s retirement group to become senior adviser; and Vanguard Group naming Salim Ramji as its next CEO, succeeding Tim Buckley. Pension Funds
Tussle at Ohio State Teachers continues with lawsuit by AG By ROB KOZLOWSKI The latest chapter in the ongoing tussle for control of the $94 billion Ohio State Teachers Retirement System opens with a lawsuit filed by Ohio Attorney General Dave Yost against two trustees, alleging they have breached their fiduciary duties. He also wants them removed from the board. Filed May 14 against board members Rudy Fichtenbaum and Wade Steen, the law-
suit alleges the two trustees “seek to steer as much as 70% of STRS’s current assets (about $65 billion in teacher pension funds) to a shell company that lacks any indicia of legitimacy and has backdoor ties to Steen and Fichtenbaum themselves.” “Pension board members are required by law to act in the best interest of the teachers whose money they invest,” Yost said in a news release a day later. “I will take whatever action is necessary to protect teachers SEE OHIO ON PAGE 22
The fiduciaries of United Parcel Service’s North American pension plans appointed Goldman Sachs Asset Management as outsourced CIO for the Atlanta-based delivery company’s more than $40 billion in U.S. and Canadian defined benefit assets. UPS’s in-house investment management team is expected to join GSAM’s Atlanta office as part of the deal. That legacy team will become part of a broader GSAM team managing those assets but especially on day one, they will be focused on ensuring “continuity in service and investment knowledge” in overseeing UPS’ pension assets, said Tim Braude, global co-head of multiasset solutions at GSAM, in an interview. The UPS mandate will extend GSAM’s lead in Cerulli’s latest rankings of U.S. OCIO providers, where it led the field with $210 billion in assets under supervision as of March 31. By the third quarter, when both UPS’ pension fund assets and its inhouse team are expected to transition to GSAM, that total could swell to more than $250 billion in U.S. OCIO assets under supervision. GSAM’s global OCIO assets under SEE UPS ON PAGE 23
SOUND BITE CATHAY FINANCIAL’S SOPHIA CHENG:
‘ESG is not that difficult. Whoever says it is difficult, ask them to call me. I can explain.’ Page 14
Deadline for Best Places looms The deadline to register for P&I’s Best Places to Work in Money Management program is coming soon. For the rules and an entry form, go to pionline. com/bptw2024.