The DC market is evolving from an asset-only growth mentality to one that explicitly targets secure income as the main objective. Through collaboration with clients, we continue to deepen and expand our solutions for DC plans. We apply a liability driven mindset focused on income generation for the fullness of retirement, accompanied by return-seeking index and active portfolios that employ a truly differentiated, “fiduciary-forward” approach. We believe clients will find value in better understanding the nuances, hidden costs and hidden risks in index capabilities. We take the steps needed to reduce potential conflicts and increase transparency.

Most public and multi-employer plans are looking for innovative ways to close their funding gaps, reduce fees, and increasingly use their assets to make a positive difference in society and in long term investment results. We are working with clients on choosing low-cost indexing strategies that we believe are the best fit for their plan needs. In addition, some clients are seeking to replace active equity managers or complement market capitalization weighted index exposure with diversifying factor-based index strategies. These strategies are a low-cost alternative that we believe can enhance overall risk/reward profiles for many plans. We are also working with clients on innovations in more liability aware fixed income portfolios that we believe better manage short term cash flow needs while also improving the efficiency of their return seeking assets. Often these solutions include multi-asset overlays that help clients maintain desired policy allocations, hedge tail risks and seek to add value through tactical asset allocation decision-making.

While many corporate DB plans face similar challenges, our experience shows that each one has unique perspectives, needs, and objectives. We work with clients to help them envision and pursue their desired DB pension “endgames.” Over the past decade, we have seen clients follow a path of reducing funding ratio risk by adopting long duration credit benchmarks, implementing custom liability-driven programs and using sophisticated risk management overlays to achieve their endgame objectives. In some cases, this endgame has meant building an active long-duration, low-turnover portfolio whose cash flows are designed to closely track the expected benefit payments of the plan in the future. These solutions are particularly attractive to plans with a goal of long-term self-sufficiency, or even with an endgame goal of pension risk transfer. To round out our range of solutions, we launched our private credit capabilities in 2017, that can provide a yield and diversification enhancement for solutions that don’t need the liquidity of the public credit markets.

By working with clients locally and drawing upon the Sustainable Investments intellectual capital we have developed globally, we believe we can add significant long-term value for our clients in every segment. We do this through a focus on three pillars: stewardship, integration and solutions. In the area of stewardship, we have established a leading global position through our approach to active ownership, utilizing a global consistent engagement process and proxy voting policy to encourage a focus on sustainable long-term results and best practices. We continue to proactively integrate Sustainable Investment factors into our investment decision making and risk management processes. And last, but not least, we work closely with clients to co-design solutions targeted to their unique needs and preferences.