July 15, 2024 | PIONLINE.COM | $16 AN ISSUE / $350 A YEAR
Arnold Adler
S P E C I A L R E P O R T O C I O M A N AG E R S
Outsourcing managers look beyond DB funds Total assets hit $3.07 trillion, a 16.7% increase, but assets from DB plans dropped 1.9% B y DOUGLAS APPELL Institutional demand for outsourced CIO services motored ahead in 2023, even as the baton in the race to drive industry growth showed signs of passing from defined benefit pools to endowments, foundations and defined contribution plans. Pensions & Investments’ annual survey of leading OCIO managers for the year through March 31 showed worldwide outsourced assets under management rebounding 16.7% to $3.07 trillion, from a 2.8% drop the year before. Outsourced AUM for U.S. clients, meanwhile, rose 14.4% to $2.15 trillion, following a
MORE ON OCIO MANAGERS n There’s no consensus among managers on the benefit of scale. Page 16 n Standardized reporting could help the market grow. Page 17 n IBM’s about-face has OCIO managers hoping it’s a trend. Page 19 n For the full report, including a full set of data, go to PIonline.com/specialreports/ OCIO-2024
flat prior year. By U.S. client segment, DB plans — which the year before had posted stronger gains in outsourced AUM than endowments, foundations and defined contribution plans — went from first to last in the latest tally. Outsourced AUM for U.S. DB clients — SEE OCIO ON PAGE 26
BANNER YEAR: Mercer’s Rich Nuzum said 2023 ‘was really good in terms of outcomes for our clients.’
Regulation
Pension Funds
OCERS’ Molly Murphy prefers Post-Chevron, challenges taking the road less traveled the facing DC plans Outside-the-box style shapes her approach to investment management
County Employees’ Molly Murphy says the firm has embraced AI.
SEE PROXY ON PAGE 21
SEE CHEVRON ON PAGE 23
SEE MURPHY ON PAGE 26
This year’s proxy season sees investors stress governance When the United Nations coined the term “ESG” in a June 2004 report, it called on corporations to adopt “environmental, social and corporate governance principles and policies.” It also asked investors and asset managers to “explicitly request and reward research that includes” ESG factors, and to develop proxy
voting strategies on such issues. Twenty years later, shareholders seem to be embracing the “G” in ESG more than the “E” and the “S” on the ballot, according to proxy advisory service providers. Investors this year voiced their say on issues affecting the companies in their holdings, voting on governance topics such as who should be on the board of directors at Exxon Mobil
B y ROBERT STEYER
and how much compensation Elon Musk should receive as the CEO of Tesla. With more than 90% of annual general meetings completed, many proxy advisers are still tabulating and analyzing the full results of the 2024 season. The number of proposals related to environmental and social issues in 2024 is
Molly Murphy says that she is more of an investor than an allocator at heart and the Orange County Employees Retirement System’s outside-the-box approach to investments seems to reflect her preference for diving into the details.
ESG
B y CARYL ANNE FRANCIA
could get worse
More lawsuits and more uncertainty affecting plan management. That’s the expected outcome for defined contribution plan sponsors now that the Supreme Court has tossed out the longstanding Chevron deference MORE ON standard, attorneys said. CHEVRON Given the trends in n Judges gain ERISA litigation, “this more power after decision is likely to lead ruling. PIonline. to continued claims that com/judges courts should not defer n Republican to regulatory guidance AGs, feds argue to resolve lawsuits, thus over DOL ESG potentially causing sigrule. Page 4 nificant burdens for plan sponsors and fiduciaries,” said David N. Levine, principal at Groom Law Group. The Supreme Court’s majority opinion said scrapping the Chevron deference would create more predictability for businesses because they wouldn’t be whipsawed by the changing policies of changing political administrations
B y ARLEEN JACOBIUS
NEW IDEAS: Orange
Since she joined the $23.3 billion Santa Ana, Calif.-based pension fund as its chief investment officer in 2017, the board has become a partner in Capital Constellation, a consortium of institutional asset owners investing in emerging alternative investment firms, as well as helped seed Collective Global, a venture capital firm. “Higher-for-longer makes everything easier because every risk asset has reset from zero to a 5% risk-free rate. You don’t have to
SOUND BITE NORTHWESTERN UNIVERSITY’S AMY FALLS:
‘When you’re really siloed I think you have trouble identifying opportunities across markets.’ Page 3
ESG, at 20, faces a crossroads Since its birth in 2004, the investment movement has seen spectacular growth, but it now faces political pressure. Page 3