In September, the $30 billion Korea Investment Corp., Seoul, unveiled SPARK, its strategic partnership for asset allocation, research and knowledge program, which provided multiasset class mandates to three firms that participate in round tables about their investment strategies. Selected were BlackRock, J.P. Morgan Asset Management and Wellington Management Co. LLP; mandate sizes were not disclosed.
KIC joined a number of major Korean institutional investors hiring strategic partners in Korea and across Asia (P&I, Aug. 23).
Korean pension fund officials see the $4 billion strategic partnership program at the $106 billion Teacher Retirement System of Texas, Austin, as somewhat of a benchmark for their own efforts, Austin Kweon, head of retirement and benefits consulting for Aon Hewitt in Seoul, said at the time.
Chief Investment Officer T. Britton Harris IV brought the idea to the Texas fund after setting up the first strategic partnership program in 1995 at the defined benefit plan of what then was GTE Corp. The merger of GTE and Bell Atlantic Corp. in 2000 created Verizon Communications Inc. and the pension funds were merged the next year. Mr. Harris maintained the strategic investment partnership structure when he became president of Verizon Investment Management Corp., which managed the company's defined benefit plan.
Texas Teachers' Mr. Harris in 2008 gave $1 billion each to four strategic partners — BlackRock, J.P. Morgan, Neuberger Berman Inc. and Morgan Stanley Investment Management — and challenged them to generate excess return using a pre-set multiasset allocation benchmarked against 14 indexes.
The quartet of managers is meeting expectations. Over the 12-month period ended Sept. 30, Texas Teachers' four strategic partners collectively returned 12.8%, 1.4 percentage points above the return of the customized benchmark, according to the fund's third-quarter performance review.
Corporate pension funds that also have forged strategic relationships with their money managers include Ford Motor Co. and Constellation Energy Group Inc.
In 2008, Ford Motor, Dearborn, Mich., hired Neuberger Berman to manage about $3 billion in alternatives investments, including hedge funds, private equity and real estate, for the automaker's $38.6 billion plan.
Neuberger Berman was hired to collaborate with Ford investment staff to build the alternative investment portion of the pension plan from 5% at the time of hire to as much as 25%. As of Sept. 30, Ford's alternative investments totaled 15% of the portfolio, according to data from P&I's annual pension fund directory (P&I, Feb. 7).
Baltimore-based Constellation Energy took a close look at its $1.4 billion defined benefit plan after the market crisis in 2009 with the goal of improving the funded status and moving to a liability-driven approach.
After much internal discussion and “lots of meetings,” David Erculiani, director-trust investments, said the plan's investment committee decided to capitalize on the “incredible depth of knowledge and breadth of resources that these large firms bring to the table.” In 2010, the fund hired four strategic investment partners, each with a different function within the pension fund.
c BlackRock's solutions group runs a $750 million global equity portfolio that is 50% active and 50% passive and is benchmarked to the Morgan Stanley Capital International All Country World index;
c UBS Global Asset Management manages $350 million in a long-duration active bond portfolio and also runs a liability hedging overlay;
c J.P. Morgan Asset Management handles $170 million multiasset class alternative investment portfolio that encompasses hedge funds, private equity and real estate; and
c in an unusual move, Constellation Energy also decided to include its investment consultant as a strategic partner and hired Aon Hewitt to help advise on the integration of the investment partnership program. “As our fourth partner, Aon Hewitt is meaningfully involved as a real partner, working with us and with our managers,” Mr. Erculiani said.