With the needs of traditional defined-benefit-plan clients evolving, pension managers are embracing new attitudes toward risk and adding high-level services.
Best Pension Manager | J.P. Morgan Asset Management
One of the largest asset management organizations in the world, with $1.8 trillion under its wing as of the end of March, J.P. Morgan has done a deep dive into two of the livelier trends in the pension and institutional fields. While multiasset portfolios have long been a staple for the firm, multiasset and alternatives strategies are now its largest categories—including investment strategies that seek to outperform an explicit benchmark over a market cycle and outcome-oriented approaches addressing specific challenges such as risk mitigation, a return goal, or a need to outperform liabilities. This speaks as well to large pension investors’ growing desire for a tailored approach to their portfolio, as risk-mitigation and more explicit actuarial goals become priorities. In 2014, investment solutions—tailored investment strategies that cut across investment styles and asset classes—totaled $9 trillion of institutional assets under management (AUM), or 13% of the global total, according to Boston Consulting Group. This was up from $2 trillion, or 6%, in 2003. That same year, J.P. Morgan created a global unit explicitly devoted to investment solutions. Rapid growth then followed.
Best Customer Service | State Street Global Advisors
State Street Global Advisors (SSGA) took its place in the limelight in March, when it planted a statue of a “fearless” young girl firmly in front of Wall Street’s famous statue of a bull to call attention to the importance of female leadership, then called on the 3,500-plus companies in which it invests to place more women on their boards. To investors, however, SSGA maintains its profile as a dominant player in passive equity and fixed income funds, which make up the large majority of its $2.5 trillion in worldwide assets under management as of last December. As part of a major custody bank, and with deep fiduciary expertise, SSGA has also built up a track record for strong customer service. Now it is attempting to stretch that capability. Last year it purchased GE Asset Management for $485 million, adding about $100 billion to SSGA’s assets under management along with a wider range of active-management capabilities and a bevy of defined-benefit plan clients, including General Electric’s own pension fund.
Most Innovative | NISA Investment Advisors
Pension systems are maturing across the industrialized world: Employee populations are aging and beneficiary populations are growing, challenging sponsors of traditional defined-benefit plans to balance their responsibilities to their people with a shareholder mandate to control costs. Tackling this issue means placing risk management at the heart of the plan’s asset management strategy. Firms that want to work with these clients must learn to combine portfolio management with some of the elements of a pension consultant: determining what benchmark to use and ensuring that a steadily appreciating portfolio continues to cover pension liabilities while enabling the client to keep plan contributions to a minimum. NISA Investment Advisors, whose equity, fixed income and (notional) derivatives assets under management total some $220 billion, has made a specialty of working with plan sponsors—especially corporate defined-benefit plan sponsors—to put their plans on an investment path using a mix of investment-grade bonds, derivative overlays and index-like equity investments. Unlike many institutional and pension managers, NISA manages only separate, customized accounts; and the firm works closely with clients to tailor their benchmark and derisking strategies. While its business is largely US-based, trends in the pension world are not dissimilar elsewhere. NISA anticipates managing more non-US accounts in investment-grade fixed income, derivative overlays and indexlike equity investments going forward.
Best Up-and-Comer | Brookfield Asset Management
Brookfield Asset Management began its history more than a century ago as a Brazilian electricity and transport infrastructure builder. It has now taken the title of best up-and-comer globally, confirming the rising importance of alternative assets and investment strategies for pension funds worldwide. Brookfield has identified itself as an asset management company since 2005, although it still focuses on real assets in real estate, renewable energy, infrastructure and private equity. It manages $250 billion in assets for institutional clients worldwide. A value investor, Brookfield has benefited recently from Wall Street’s interest in infrastructure. Over the past year, the firm reportedly has closed a record-breaking $27 billion in private funds, including $14 billion in infrastructure investments. Its investments cover most regions of the world, from London’s Canary Wharf to the Colombian power generation company Isagen. But its list of holdings is in some respects more complex and potentially headache-inducing than many pension sponsors are accustomed to: A shopping mall project brought allegations of bribery against Brookfield officials in Brazil, but after a 3-year investigation, none were charged. Yet the firm believes that infrastructure holds huge opportunities over the next 25 years; its portfolio suggests it considers the risks worth the return.
Best Knowledge of Local Markets | BNP Paribas ASSET MANAGEMENT
Pension managers that have dominated their local markets for many years are encountering competition from some powerful foreign rivals. A recent study sponsored by Market Strategies International found that French pension executives include brand reputation and financial stability among their top considerations in choosing a manager—and that US-based firms Vanguard and Invesco rival France-based giants like BNP Paribas Asset Management and AXA Investment Managers for the most unaided mentions. The double dilemma for parent BNP Paribas is that asset management is more profitable than traditional banking—yet, active management is losing ground to index investing with many institutional clients. To keep in step with client needs, BNP Paribas Asset Management—one of the most geographically diverse asset managers in the world, with €580 billion ($647 billion) under management and advisory in 75 countries—is offering more bespoke services, such as advice on risk control, including using dynamic investment strategies; constant-risk multiasset portfolios; and low-volatility equity strategies. The firm is also building its pension and institutional business in other markets, including Germany, the US and China. In May, chief executive Frédéric Janbon, who assumed control nearly two years ago, announced a goal of increasing assets under management by 5% a year through 2020 while cutting costs.
Best Pension Manager | Schroder Investment Management
Undoubtedly one of the oldest firms among the giants of the asset management industry, Schroders for some time now has been tailoring its investment focus to what it believes is the future direction of pension and institutional investment: longer time horizons and less emphasis on liquidity; greater risk sensitivity; an increasing focus on investment outcomes over and above benchmarked returns; and a greater hankering for multiasset and smart beta investing strategies. None of this would have been familiar to someone observing Schroders 15 years ago, when the firm was almost purely an equity house. Since then, it has remade itself into a diversified manager offering fixed-income as well as multiasset strategies that encompass structuring, derivatives trading, construction of risk systems, economic strategy, manager research and liability management, along with portfolio management. Schroder’s assets have tripled in the last 15 years, making it the UK’s largest pure-play investment manager, with €486.7 billion ($544.6 billion) in AUM as of March. Schroders now operates in 27 countries. Some of this growth has been through acquisitions: In 2013, Schroders bought venerable manager Cazenove Capital; and in April, it spent $7 billion to acquire Adveq, a Swiss private equity firm, filling a significant gap in its product offerings. Adveq brought with it a crop of Swiss and German clients, augmenting Schroder’s presence on the continent.
Best Customer Service | Baillie Gifford
Baillie Gifford claims that its ownership structure—it is wholly owned by the current partners—enables it to put clients’ needs first, rather than the requirements of a corporate parent or a universe of external shareholders. That may or may not have helped pave the way for the firm’s standing now as provider of the best customer service among pension managers in Western Europe. But a focus on clients’ needs will likely become an ever-greater imperative in Baillie Gifford’s home market in the coming years, as some of its biggest clients—UK local pension funds—combine into larger units. Bigger funds have more latitude to demand not only performance but responsiveness from their managers. This is an even greater challenge when the firm is expanding its business in other parts of the world as well. The 110-year-old firm, which manages £158 billion ($200.9 billion) of assets for pensions and other institutions worldwide, includes more than $30 billion managed for US public pension funds in that figure. It also has clients in Canada, Australia, East Asia, the Middle East and South Africa, as well as Western Europe. Baillie Gifford, a longtime growth investor, has also mounted an attention-getting move into life sciences and healthcare stocks over the last two years, committing more than $1 billion to large stakes in companies like Ginkgo Bioworks, Zymergen and Flatiron Health.
Most Innovative | AG2R La Mondiale Gestion d’Actifs
Agicam, the asset management unit of French social insurance group AG2R La Mondiale, which changed its name in April to AG2R La Mondiale Gestion d’Actifs, is no newcomer. With €25.8 billion ($29 billion) in assets under management at the end of March, the firm is the product of a 2008 merger between La Mondiale Gestion d’Actifs and pension group AG2R. The firm has been an innovator in socially responsible investing for more than 15 years, and it now manages a series of socially responsible collective investment schemes covering a range of asset types and investment styles that held a total of €9 billion at the end of last year. This makes AG2R La Mondiale a leader in SRI in France, which has one of the most developed markets in Europe for these products. Today, the firm’s SRI management team consists of five managers and three analysts. Decision-making incorporates findings from three nonfinancial rating agencies (Vigeo, MSCI ESG Research and Oekom). The firm flows this data into its proprietary decision-support database, Ethis Screening. The team applies three sets of indicators to supplement its financial analysis: environmental (eight areas), social (three domains and 19 subdomains) and governance (two domains and eight subdomains). This process enables the firm to select what it considers to be the best performers in each sector or category of issuers.
Best Up-and-Comer | Mercer Global Investments
The shift to passive indexing is the most dramatic demonstration that investors are dissatisfied with traditional active management, but not the only one. Multimanager investing is also gaining ground, suggesting that pension sponsors and other institutional investors are no longer convinced that a single manager can master every market or that a single firm can run an entire asset class. Multimanager solutions give investors access to a mix of styles and, at least in theory, minimize the risk of portfolio bias, delegate much of the administrative burden to an outside manager, and enable pension sponsors to enjoy additional economies of scale. Though Mercer Global Investments is the only multimanager among this year’s winners, its experience illustrates the trend. Mercer has offered multimanager strategies in some form for years—and now has $170 billion in AUM worldwide—but lately its approach has caught on rapidly in Western Europe; Mercer has added clients in Germany, Spain, Portugal, Italy and the Nordic countries, to push regional AUM over $70 billion. One element fueling this growth has been the rising demand for infrastructure investments, which Mercer addreses through both a public and a private, less liquid, infrastructure fund.
Best Pension Manager | J.P. Morgan Asset Management
As companies seek to untangle the increasingly complex business of running defined-benefit pension plans, many are turning to outsourced-CIO arrangements. Market turbulence, regulatory structures and, increasingly, the need to meet sharply defined investment goals are propelling the trend, creating opportunities for large, resource-rich asset managers with access to the broadest range of investments. Among these is J.P. Morgan Asset Management, which has relationships with 79 of the top 100 corporate, public and Taft-Hartley plans. J.P. Morgan concentrates this business with its multiasset solutions team and offers several different approaches: single-manager outsourcing; multiple-manager outsourcing, in which several managers run distinct portfolios with complementary styles; and multiasset allocation, with the majority of assets maintained in-house. J.P. Morgan has also benefited from its global reach and participation in alternative and real assets, enabling it to manage Asian portfolios, for example, or offer participation in real estate deals across regions. Last year, the California Public Employees’ Retirement System provided $250 million to J.P. Morgan’s Asia-Pacific Property Fund, which will invest across office, industrial, retail and residential markets. The deal helped CalPERS to reweight its real estate portfolio toward core, income-producing assets.
Best Customer Service | State Street Global Advisors
When State Street Bank first established an asset management division in 1978, two of its first three products were index funds: one domestic and one international. Since then, the firm has made its fortune providing passive investment strategies to institutional and retail investors and to pension plans. That changed noticeably last year, when State Street Global Advisors (SSGA) bought GE Asset Management. GEAM was a more traditional active manager, primarily serving pension plans and other institutional clients. It offers a far wider range of products and services, including alternative assets—such as direct private equity, real estate and hedge funds—and outsourced-CIO mandates. The acquisition also potentially adds another element to SSGA’s client servicing capability. One of GEAM’s specialties is offering asset-management training to clients in exchange for important pension mandates. While some asset managers shied away from this, owing to fears that clients could then go their own way, GEAM saw it as an opportunity. One of its clients, the $54 billion Alaska Permanent Fund Corporation, used the knowledge it gained to launch a series of exchange-traded funds. Lacking the distribution network and marketing acumen to do so on its own, the APFC partnered with SSGA through the firm’s SPDR platform.
Most Innovative | NISA Investment Advisors
While NISA’s origins stretch back more than 20 years, its approach to liability-aware investing has caught on dramatically in the last five to 10, during which time it has enjoyed significant growth. Its fixed-income assets have grown from $73 billion to $142 billion, for example, the majority of this in the US corporate defined-benefit plan market. Developments that propelled its growth include the new funding requirements of the Pension Protection Act; the global financial crisis and the pain it imposed on companies with traditional pensions; and the decision by many employers to freeze plans, closing them to new hires. Along the way, NISA’s investment approach has evolved. The firm began as a specialist in fixed-income investing, and particularly interest-rate risk management and immunization for both tax-exempt and taxable institutional clients, but its business has since expanded to include target-date strategies for defined-contribution plans, while synthetic overlays have become a bigger part of its risk-sensitive investment strategy. Today, its derivatives notionals total some $80 billion, mostly beta, completion and duration overlays.
Best Up-and-Comer | Brookfield Asset Management
Although much of its roots are in Latin America, Brookfield has built up a considerable portfolio of properties to the north as well, including commercial real estate, shopping centers, hydroelectric and wind power facilities, electricity transmission and natural gas pipelines, along with private equity investments. In the past several years, and especially since it began to cast itself as an institutional asset manager, public pension funds in the US and Canada have made up a larger portion of its institutional business, along with sovereign wealth funds, financial institutions, endowments and foundations, and family offices. The firm has institutional capital advisory subsidiaries in both countries to advise Brookfield’s strategic real estate partnership in the US and its infrastructure partnership in Canada, among others.
Best Pension Manager | BNP Paribas ASSET MANAGEMENT
BNP Paribas’s presence in China extends, with interruptions, all the way back to 1860, when a predecessor company set up an agency in Shanghai. In its present incarnation, Asia has been an area of intense interest for the bank for nearly 20 years. In 2004, it was one of the first foreign institutions to receive a license from the China Securities Regulatory Commission to buy Chinese stocks and bonds under the Qualified Foreign Institutional Investor scheme. Today, 10 of the 35 markets in which BNP Paribas operates geographically are in Asia, where it manages more than €60 billion ($67.6 billion) in assets. Its offices there both develop investment strategies and funds within the region and offer global investment opportunities for local institutional, pension and retail investors. The firm also makes use of strategic partnerships with local firms. Since 2003, it has comanaged HFT Investment Management, a joint venture with Haitong Securities that provides asset management services to Chinese domestic investors and investment advisory services to foreign institutions investing in Chinese stocks and Chinese companies listed in overseas markets.
Best Customer Service | J.P. Morgan Asset Management
A milestone in a maturing investment market comes when pension and institutional investors start to diversify, adding overseas assets and uncorrelated investments to their portfolios. Working with these clients is a priority for J.P. Morgan Asset Management, which manages more than $140 billion for Asia-Pacific clients. At the same time, the firm is pushing to supply more services and more types of investments to its clients in the region. Three years ago, it acquired Aviva Investors’ Asia-Pacific real estate business, consisting of $1.2 billion of diversified assets—primarily office and industrial real estate—in Australia, New Zealand, Japan and Singapore, to complement a presence it already had in India and China. The firm has also launched a major expansion into private equity investment; it has committed an initial $750 million to midmarket opportunities in the region. Last year, J.P. Morgan was granted a business license to operate a fully owned fund-management business in China, enabling it to set up an office in the Shanghai free-trade zone. And in February, the firm announced a new push into Australia, which is, according to Willis Towers Watson, now the world’s fourth-largest pension market.
Most Innovative | BNP Paribas ASSET MANAGEMENT
BNP Paribas has long been a leader in bringing new instruments and investment strategies to Asian institutional, pension and high-net-worth investors, including smart beta strategies, multiasset solutions and private debt capabilities. Last year, the firm took a minority stake in a new, Hong Kong–based joint venture with Orion Partners, an Asian private equity and real estate firm specializing in acquisitions, management buyouts, corporate divestitures and private company sales. The partnership, which will develop and launch new alternative investment funds, cements a decade-long relationship with Orion that has enabled BNP Paribas to develop and distribute Asia-focused alternative investments to its institutional and pension clients in other regions.
Best Up-and-Comer | Mitsui & Co. Alternative Investments (Formerly Japan Alternative Investment CO.)
Japanese institutional and pension funds are relative newcomers to alternative investments. Since nearly all are defined-benefit schemes, with a large capital cushion and appetite for assets that throw off regular cash flow, they also have a natural affinity for investments like real estate, real assets and infrastructure. That may be the reason Japan Alternative Investment took the title as Best Asia-Pacific Up-and-Comer. The firm itself is not new: It opened its doors in 2001 as a wholly owned subsidiary of Mitsui & Co. and remains so today. But it’s only recently that the firm became a more central part of its parent’s strategic plan as an asset manager. In April, Mitsui announced that it was injecting some ¥4.35 billion ($39.1 million) of new capital into the firm, which changed its name to Mitsui & Co. Alternative Investments. The newly designated firm will also be expanding its current product lineup—primarily hedge funds and private equity funds—to include real estate, infrastructure and other real assets: areas that intersect with some of Mitsui’s key businesses to take advantage of the parent’s global business relationships. Mitsui had announced in February a deal to acquire 20% of the US real estate and infrastructure fund manager CIM Group. The deal gives Mitsui access to a major segment of the alternatives market—US real estate—and includes Mitsui & Co. Alternative Investments supporting the marketing of CIM’s funds to its Japanese institutional and pension clients.
Best Pension Manager | BTG Pactual
Our respondents named Brazil’s BTG Pactual the best pension manager and the most innovative firm in Latin America – despite its fall from grace two years ago, when its CEO was swept up in an insider trading investigation. Nevertheless, BTG Pactual built up a position as one of the largest independent pension managers in Brazil as well as Chile and Colombia. Today, it has $37 billion AUM. One reason BTG Pactual has maintained its high standing with pension clients may be the distinctive partnership structure it created in 2012. When partners cash out shares, they can only sell back to the partnership’s holding company at book value, whereupon the shares are reassigned to the other partners. This lessens the incentive for key managers to depart when a crisis hits. Another plus, according to COO and managing partner Allan Hadid, is a strong local presence and the market knowledge that comes wtih that.
Best Customer Service | Santander Asset Management
Latin America has been a primary target for expansion by Spain’s Banco Santander asset management business for more than a decade and a half, beginning with its acquisition of fund managers in Chile, Brazil, Mexico, Argentina and Colombia in 2000. As of March, Santander Asset Management had €181.4 billion ($204.7 billion) in assets under management across the region. Initially, the firm focused on retail banking and asset management, but it has gradually increased its institutional and pension fund business as part of an effort to provide the widest spectrum of services to corporate and other large clients. That includes an emphasis on customer service, which has prompted Santander in the past several years to build up its custody banking business, in part as a way to tie together all of its businesses in the region. Banco Santander reaffirmed its bet on Latin American asset management last fall when it bought back the 50% share it had sold to two private-equity firms, Warburg Pincus and General Atlantic, when it was faced with economic difficulties in Spain in 2013.
Most Innovative | BTG Pactual
A value investor, BTG Pactual Asset Management has built a big business with pension-fund clients by developing and exploiting alpha-generating ideas. Unlike its larger competitors, it does not focus on offering index or basic money market funds. Two other characteristics distinguish BTG Pactual as well, particularly in Latin America. The firm’s portfolio managers take charge of strategies rather than specific funds or managed accounts, an arrangement intended to reassure clients that its best ideas have a chance to take root in any fund for which they might be appropriate. This may also have helped it to weather the scandal that erupted with the arrest of the parent company’s chief executive in 2015. Also, the firm splits its fee structure in two, charging a relatively low management fee and a “success fee” with a high water mark, resulting in lower costs than many of its competitors. [See interview, above.] BTG Pactual has been expanding into new businesses in the past couple of years as well: a Treasury bill operation in its core markets of Brazil, Colombia, and Chile, and an infrastructure fund.
Best Up-and-Comer | SURA Asset Management
A testimony to the growth of Latin America’s pension market is the fact that one of the biggest asset managers in six key markets effectively did not exist seven years ago. SURA Asset Management was set up in 2011, when Grupo SURA, the Colombia-based regional insurance and investment banking firm, purchased the Latin American business of ING Group. Grupo SURA then brought in five minority shareholders, including Grupo Bolivar, to inject capital that has enabled the firm to expand rapidly in Chile, Colombia, El Salvador, Peru, Mexico and Uruguay. In 2015, it bought RSA Insurance Group’s Latin American operations as well. As of December, it had some $113 billion in assets under management. In March, the firm further bolstered its capital with a $350 million international bond issue. Currently, 90% of its business is with mandatory pension plans; going forward, it expects individually directed plans to grow to 25%.
Middle East & Africa
Best Pension Manager | SHUAA Asset Management
While Middle East sovereign wealth funds focus much of their attention on investments elsewhere, institutional and pension funds in these countries still concentrate heavily on development-related investments within the region. Firms like SHUAA Asset Management and its parent, investment bank SHUAA Capital, both based in Dubai, provide a conduit for much of this activity. The asset manager pioneered with the establishment in 1999 of the Arab Gateway Fund, the first pan-Arab equity investment fund. SHUAA Capital has spent years recovering from the 2008 economic crisis and a series of scandals that followed; SHUAA Asset Management, by contrast, has continued to grow. Last year, it reported a 492% increase in full-year profits, on revenues that rose to 27.4 million Emirati dirhams ($7.5 million) from 16 million Emirati dirhams in 2015. The firm manages discretionary accounts as well as institutional real estate funds, the latter mostly invested in the Saudi and Emirati markets. Its equity strategy combines a dynamic asset allocation and top-down macro-driven approach, with leeway for some bottom-up stock selection. SHUAA Capital recently has returned to expansion mode. In March, it broadened its product portfolio by acquiring two smaller firms.
Best Customer Service | Alawwal Invest
Saudi Hollandi Bank’s rebranding as Alawwal Bank last fall coincided with the announcement of Bernd van Linder’s departure as managing director after a 10-year term and the naming of Soren Nikolajsen, a nonexecutive director at Saudi Hollandi Bank and formerly head of the executive office, Corporate and Institutional Banking, at Royal Bank of Scotland, as his successor. At the same time, RBS decided to sell its 40% stake in Saudi Hollandi, now Alawwal. The name change extends to the bank’s asset management unit. In April, Alawwal Bank announced it was in initial merger talks with HSBC-affiliate Saudi British Bank. Alawwal Invest offers one of the most comprehensive menus of investment services in the kingdom, including managed accounts for high-net-worth and affluent individuals as well as corporate and institutional clients such as pension funds. It also offers structured products that use derivatives and are typically linked to the behavior of single securities, baskets of securities, and other assets. As such, it benefits from its parent’s recent focus on serving a more tech-savvy client base, including a state-of-the-art mobile banking platform and infrastructure for delivering services to customers through more digital channels.
Most Innovative | Prescient Investment Management
Established in Cape Town in 1998, Prescient Investment Management has emerged as one of South Africa’s leading quantitative investment houses. With R76.1 billion ($5.9 billion) under management, up from R61.9 billion five years ago, the firm has both retail and institutional clients, including retirement funds, medical aid plans and trusts. Its focus is to preserve capital and manage downside risk, an approach well suited to a period of low interest rates, uncertainty in equity markets, and a weak economy in the home market. Prescient has also been a facilitator for investors looking to diversify outside South Africa; its Income Provider Fund can invest 25% offshore and a further 5% elsewhere in Africa, again seeking to preserve capital, principally through exposure to high-yield, short-duration, fixed-interest instruments. South Africa is not the only developing market where Prescient has an institutional presence. In 2012, it received the first Qualified Foreign Institutional Investor license granted to a financial institution based in Africa, providing access to the Chinese capital markets, and in 2015 it opened an investment consulting practice in Shanghai. The firm also has access to EU institutional and pension funds through Prescient Investment Management (Ireland).
Best Up-and-Comer | Alistithmar Capital
Alistithmar Capital (ICAP), a subsidiary of The Saudi Investment Bank that provides a full range of corporate finance, brokerage and asset management services, is only 10 years old. It climbed into the ranks of Saudi Arabia’s largest firms in 2011, when it merged with SAIB BNP Paribas Asset Management. Most of its clients are now large institutions, including pension funds. The firm may have opportunities for faster growth, thanks to the 2015 opening of the Saudi Arabian stock market, the Tadawul, to foreign investors. This was quickly followed by an expansion in the types of securities that can be listed on the market and a relaxation of restrictions. To meet expected demand for more-sophisticated services, the firm has invested heavily in technological infrastructure, including a state-of-the-art online trading platform, Istithmarcom. Two years ago, it expanded its repertoire with the launch of two real estate funds. ICAP has enjoyed especially rapid growth over the past three years, beating its benchmark each year, and is beginning to cross-fertilize its portfolio management and brokerage capabilities with plans to launch new funds for retirement and child education as well as a private equity fund in 2018. Some 90% of its business is concentrated in Saudi Arabia, however, where ICAP continues to see great opportunities.