Martin L. Leibowitz
Vice chairman and CIO, Teachers Insurance and Annuity Association —
College Retirement Equities Fund, New York
Marty Leibowitz made at least three major contributions to pension investing.
%A9;He changed the way investors looked at fixed income in terms of risk and return, introducing quantitative ways of analyzing bonds.
%A9;He developed a strategy — surplus protection — for pension asset management, while contributing to the development of immunized and dedicated bond portfolios.
%A9;He played an important role in the development by Salomon Brothers Inc. of a range of indexes, including the Broad Investment Grade index.
Mr. Leibowitz, who received a Ph.D. in physics from the University of Chicago, joined Salomon in 1969 and eventually became a managing director and member of its executive committee, as well as director of research.
With "Inside the Yield Book," co-written with Sidney Homer, a general partner in charge of Salomon's bond market research department, Mr. Leibowitz identified reinvestment risk of a bond. Before its publication in 1972, bond investors generally considered only credit risk and interest-rate risk. The book, reprinted 21 times, will be reprinted again by Bloomberg Press in 2004.
Mr. Leibowitz pioneered the emphasis of total return in bonds, not just yield, and the impact of the yield curve through time on returns.
In the 1980s, while still at Salomon, Mr. Leibowitz developed surplus protection while also contributing to the development of techniques to link to some degree a set of pension assets to liabilities. These techniques included dedicated bond portfolios, immunization and horizon matching, a blend of the two.
Mr. Leibowitz's "shortfall-risk approach more closely matches most investors' intuitive sense of what risk means," said David A. Hershey, managing director at Lotsoff Capital Management, Chicago.
"The problem with the traditional focus on volatility is that it failed to distinguish between positive returns and negative returns. (Mr.) Leibowitz applied shortfall-risk analysis to pension plans in a series of papers that were published in the late '80s. It's taken 15 years for these ideas to receive the attention they deserve. The time has come to put a sound theory into widespread practice."
After 26 years at Salomon, Mr. Leibowitz joined TIAA-CREF in 1995 as chief investment officer and later that year also was named its vice chairman, the first to hold the position. The assets Mr. Leibowitz oversees at TIAA-CREF now total $290 billion. He plans to retire in February.