Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. Print
April 14, 2008 01:00 AM

Solid foundation: Face to Facewith Drew Carrington

Head of UBS' DC group is drawing on the strength of automatic solutions to build the business

Jenna Gottlieb
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Michael A. Marcotte
    Drew Carrington

    • Position: head of defined contribution and retirement solutions at UBS Global Asset Management Inc.
    • Assets under managment: $4 billion
    • Employees: 15 in the DC group
    • Education: BA, Harvard University
    • Other activities: Playing golf and riding his motorcycle
    • Personal: Married, one child

    UBS' defined contribution group was built on a three-word motto: Improve retirement outcomes. Led by Drew Carrington, UBS Global Asset Management entered the DC arena shortly after the passage of the Pension Protection Act of 2006.

    The firm was inspired by the law's endorsement of automatic solutions. Automatic enrollment and auto-escalation programs are “game-changing,” said Mr. Carrington, in terms of getting participants to where they need to be. He believes UBS is poised to do just that.

    In building up its DC business, UBS partnered with record keeper Affiliated Computer Services Inc. and Genworth Financial Inc. for an annuity investment option.

    Mr. Carrington has a background that helps him connect with plan executives.

    Before joining UBS in 1999 as a senior fixed-income portfolio manager — eventually becoming head of defined contribution and retirement solutions — he worked closely with plan executives as a consultant.

    Mr. Carrington was a principal at Mercer Investment Consulting, where he worked with public and private defined contribution and defined benefit clients, as well as foundations and endowments. He assisted plan sponsors with portfolio strategy, manager selection, investment policy and ongoing management of their investment programs.

    Now is the time when some of the most important plan design changes are occurring, he said.

    What are the newest investment trends you're seeing in DC right now? There are two main trends we're seeing. There's the target-date (fund) component to DC right now that is very exciting. There's movement from a lot of folks that have balanced or risk-based funds ... to target-date (options). Many plan sponsors see that as the simplest default investment option.

    The second trend is the focus on the distribution phase. Plans are thinking about how participants are going to access the assets they've saved when in retirement and what the next step is. There is a lot of activity in that right now.

    What are the biggest trends? Plan sponsors are looking at the second phase of automatic solutions. The first step is automatic enrollment. This is the most fascinating part of the last 10 years. Plan sponsors want to deliver better outcomes for participants. You especially hear this from corporate plan sponsors.

    The second step to automatic solutions is auto-escalation. Plans are putting more emphasis on employees saving by automatically enrolling them, but auto-escalation has become a big trend, especially in light of the (Pension Protection Act). It's about building the assets, not just keeping (participants) at the initial default rate.

    Are you seeing a “DB-ization” of the DC world? I like to look at it as the institutionalization of DC. There is more professional management, with customized solutions, collective funds and the like. The “DB-ification” piece, in my mind, focuses on decumulation. You have not DB'd until there is a stream of payments, until you annuitize. There has to be a holistic approach. What I mean is, you have to manage all the risks involve. Plans need to think about risk and longevity components as well.

    What's your view on annuities as a DC plan investment option? Do we think income products make sense? Of course. There are five main things individuals are looking for regarding annuities: unlimited upside, limited downside, unlimited flexibility, a guaranteed paycheck for life and the assets will go to heirs, not ... the insurance company.

    What are the challenges in offering annuities? They can be complicated and could lead to decision paralysis if the wrong product is chosen. You want to make this as easy as possible to explain to employees. That said, there are always going to be people that feel annuities are a gamble, in any form. There is a lot of talk about what the right solution is. Plan sponsors, consultants, providers ... we all have our opinion on what the best solution might look like.

    What does UBS offer in terms of income products? We think lifetime income is crucial. What we did was partner with Genworth (Financial Inc.) that addresses all five issues we just discussed. It offers a stream of payments with flexibility. (Genworth Financial offers an annuity as a 401(k) option. Participants could elect to annuitize a portion of their assets, while still having upside potential.)

    What are some of the biggest challenges plan sponsors are facing? The biggest unspoken challenge is the lack of clarity around what people should do. Issues like, if they are defaulting new employees (into a plan), what do they do about employees that are already in the plan? What do they do about company stock? One of the things we talk to prospects or clients about is how far can they go in plan design. Plan sponsors want to make sure they are fulfilling their fiduciary responsibilities. There is renewed focus on that.

    Why? Because of the fee lawsuits and the activity in Washington. It's a very interesting time for DC. Plans want to make sure they are ahead of the curve and doing things right.

    What are some of the new things plan sponsors are doing? We hope plan sponsors feel comfortable doing more. Some plans are doing a postcard opt-in/opt-out strategy. We're seeing more of that. It's a good thing and leads to much better outcomes for participants in the end. And that's the business we're in.

    Which QDIAs do you offer? We offer target-date and balanced funds. I have to say that we attack the problem differently and we're very excited about it. What we have done is offer more than one glide-path and clients could choose the right one for them. ... We're big believers in target-date funds. Perhaps we'd offer managed accounts down the road, through a partnership, but not now.

    UBS expanded its DC group last year, why? It was a big decision for us. We felt it was an opportunity to do the right thing for participants. Asking them to build a portfolio without a complete tool kit isn't really fair.

    What the rise of automation has done, (is) build optimal portfolios and better outcomes for participants. And with target-date funds, plan sponsors don't have to worry about "How can I explain, say, a high-yield bond fund'? Well, you don't have to. You inverted the communication challenge. You can put asset classes in those offerings, classes that help diversify, that plan sponsors wouldn't choose on their own. Classes like emerging market debt, for instance. We all drank the Kool-Aid. We really think we can change the world and we're all fired up about it. We have a three-word motto: Improve retirement outcomes. The transition is occurring. To get 401(k) plans right is one of the best opportunities we have.

    Why did UBS decide to link with a third party to offer record keeping? We saw people in the business that were doing special things. Like with our partnership with Genworth, we saw an opportunity with ACS for record keeping. We see it as an opportunity for best of breed across multiple disciplines. We have asset management expertise, but prospective clients could also come to us and get a package deal (with record keeping).

    Is there too much emphasis on fee disclosure now? Of course we think plan sponsors should pay attention to the fees they pay. Disclosure at the plan sponsor level is a very good thing. At the participant level, it could be counterproductive if there's too much detail. A real danger is a race to the bottom, who could offer the cheapest plan without taking value into consideration. There's no such thing as a passive target-date fund, for instance. All the decisions: asset classes, weights, that's all active management decisions. Solving the retirement puzzle is complicated and going passive isn't necessarily the best solution.

    What keeps you up at night? The last discussion we had we talked about the legislative mandate that indexing is the only acceptable route. We are concerned about that, of course. We'll see how that plays out. On the flip side, we think we could do something game-changing. I don't want to say it keeps me up at night, but it gets me up in the morning. On behalf of the team, we think there is a huge opportunity to make a difference. It's a very, very exciting time.

    Contact Jenna Gottlieb at [email protected]

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    How low is low? Projections say it's not low enough
    How low is low? Projections say it's not low enough
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    SPDR® ETF’s New Approach to Bond Liquidity
    Sponsored Content: SPDR® ETF’s New Approach to Bond Liquidity

    Reader Poll

    June 6, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Nearing the finish line: Ideas on end-state investing for corporate DB plans
    The Meaning of "Portfolio Intelligence"
    Credit Indices: Closing the Fixed Income Evolutionary Gap
    Forever in Style: Benchmarking with the Morningstar® Broad Style Indexes℠
    Crossroads: Politics, Inflation, & Bonds
    Is there a mid-cap gap in your DC plan?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    June 20, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit