Chief Investment Officer

A Big Year for LDI One of our funniest chief investment officers told us this month that liability-driven investing (LDI) can be a dangerous topic to read because people “risk falling asleep and banging their heads into the sharp pencils on their desks.” CIO took that peril into account when we chose topics for this month’s special LDI issue. We’ve looked for trends in the industry, macro forces, and newsmakers that may shape the future of LDI, and, hopefully, delivered it to you in an interesting way.

I write this letter on the heels of the aggressive proposal released by the House’s Ways and Means Committee, which aims to cut the tax rate by 20%. A flurry of negotiations will begin and some pundits are estimating a tax cut likely to pass by Q1 2018. Meanwhile, US rate hike considerations will commence again in December. The Bank of England is making its first rate hike in 10 years.

As you can expect, tax shelters and rising rates are playing big in the LDI space this year, and are spurring many CIOs to pour more funding into their plans. Q3 showed a 2% improvement in funded status, with the average plan rising to 83% funded as of September 30, according to Conning’s Pension Funded Status Tracker. 2017 is a favorable year to fund, especially since Pension Benefit Guaranty Corporation (PBGC)premiums are going to rise from 3.4% this year to around 3.8% in 2018, and by some estimates, to 4.5% by 2020. According to consultants, another strong trend is for asset owners with frozen plans to primp and bolster their plans to make them attractive to insurance companies to get the liabilities off their balance sheets.

We checked in and interviewed CIOs who have infused at least $1 billion into their plans this year. Some have issued debt to do it, seeing prospects align in 2017. We asked them to offer their advice on the process to their CIO peers, and, as always, they gave terrific insights, even when it came to talking about hard lessons learned. Such is the quality of our CIO community.

Speaking of our community, I am truly looking forward to December 7, the day we honor the most innovative asset owners and asset managers in the world. Many of you will be flying in from overseas and across the country, and the day promises to be fascinating. As always, it will start with a Harvard Club forum under Chatham House rules, in which many of you will share your strategies in the ‘new, new normal’ investment climate of rallying stocks, frothy valuations, and unwinding stimulus.

Then we’ll head to the bedecked New York City Public Library for our awards gala. Our Lifetime Achievement Award will be given to Ash Williams, who left his hedge fund career to become CIO of the fifth-largest US public pension plan, Florida State Board of Administration, directly after the financial crisis. At the time, its assets had dropped from $141.3 billion to $83.7 billion. He brought it back to health. Ash always has plenty to teach and will be leaving his native Florida for a frosty December night in New York to share the CIO evening, and like many of you, to see his friends, toast their success, and learn. Even if it’s cold outside, it promises to be a valuable and warm event. —Christine Giordano, Editor

EDI TORIAL TEAM

Christine Giordano christine.giordano@strategic-i.com

Vishesh Kumar vishesh.kumar@strategic-i.com

Chris Butera chris.butera@strategic-i.com

CREATIVE DIRECTOR

SooJin C. Buzelli, svp soojin.buzelli@strategic-i.com

PUBLISHER

Katie Bacon, katie.bacon@strategic-i.com

EDI TORIAL CON TRIBUTION

Debbie Carlson, Bailey McCann, Amrita Sareen-Tak

DESIGN & PRODUCTION

Lynn Connelly, Chris Kwon, Claire Merchlinsky, Tiffany Pai

CON TRIBUTING ARTISTS

Tim Bower, Jun Cen (cover), Jenice Kim, Lars Leetaru, Victo Ngai, Rose Wong

RESEARCH & SURVEYS

Quinn Keeler, svp, quinn.keeler@strategic-i.com

CONFERENCES

Michael Garity, vp, Carol Popkins, vp, Katie Campbell, Ana-Alyse Castelluccio, Melissa Groccia, Lucille Velander

CUS TOM MEDIA PROGRAM MANAGER Drew Donaldson, drew.donaldson@ strategic-i.com

REPRINTS MANAGER

Michelle Judkins, michelle.judkins@ strategic-i.com

SUBSCRIP TION INQUIRIES

JaCkie Scott, jackie.scott@strategic-i.com

CORPORATE

Chief Investment Officer is a Strategic Insight business.

Joel Mandelbaum, Ceo jmandelbaum@strategic-i.com

Karl Jaeger, Cfo karl.jaeger@strategic-i.com

Tony White, managing direCtor tony.white@strategic-i.com

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Chief Investment Officer (ISSN 2166-2142)

Vol. 9, Number 3, is published 6 times per year, by Strategic Insight, Inc. No part of this publication may be reproduced or transmitted in any form without the publisher’s permission. Authorization to photocopy items for internal or personal use, or the internal or personal use of specific clients, is granted by Strategic Insight, Inc., provided that the appropriate fee is paid directly to Copyright Clearance Center, 222 Rosewood Dr., Danvers, MA 01923, USA. Tel: 978-750-8400. www.copyright.com.