Reflections on his first year, de-risking, and how IBM got
to the enviable position of having a fully funded plan.
Reported by Christine Giordano / Art by Tim Bower
Harshal Chaudhari became IBM’s new CIO barely a year ago, in 2016, upon being tapped internally from his CFO post. It followed a
gradual ladder climb, which he began as
a senior consultant to IBM in 2002. The
former software engineer and PwC consultant appears to come to the position with a
multi-faceted understanding of both technology and investments.
IBM’s liability-driven investing (LDI)
strategies are the major reason it is fully
funded today. It began its LDI strategies in
the 1990s, originally with a small part of
its portfolio. Chaudhari inherited his position from Ray Kanner, who had taken the
CIO post right before the financial crisis.
Kanner quickly boosted the liability hedge
and de-risked it further by reducing equities by 10 percentage points in the second
part of 2007, which provided IBM’s pension
fund with more shelter than most funds had
during the crisis. Then, in the middle of the
crisis, IBM almost completely increased the
hedge, shielding the pension fund from the
impact of the crashing rates.
When Chaudhari took over the $50
billion fund, it was 98.4% funded and fully
hedged. When we last checked, it was up to
102%. He recently reviewed his first year
CIO: How has your first year been?
Have there been any developments,
or changes to your plan? New asset
allocations? New philosophies? New
Chaudhari: The first year has gone by fast.
I had a strong financial markets background
coming into the role, but I had little familiarity with our external managers. So, I spent