PIMCO strife, CalPERS shift lead 2014's top stories
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • BentallGreenOak agrees to acquire Metropolitan Real Estate Equity
      watch video
      0:45
      Private funds weathered 2020 turmoil
      Daniel McHugh
      Aviva Investors promotes from within for real assets CIO
      Marc Rowan
      More alts managers seek expansion to retail market
    • Kieran Mistry
      Hymans Robertson picks head for new non-traditional risk transfer unit
      Troy Saharic
      NEPC brings on director of new business development
      Bill Foley
      Foley-backed SPAC agrees to $7.3 billion deal with Alight
      Jason Schwarz, chief operating officer of Wilshire,
      New owners have big plans for future of Wilshire
    • OMERS CEO Blake Hutcheson
      OMERS records worst loss since 2008 on bad COVID-19 bets
      Mitchells & Butlers turns off tap on pension contributions until April
      Jerome Powell, chairman of the Federal Reserve, adjusts his glasses during a Senate Banking, Housing and Urban Affairs Committee hearing in Washington on Sept 24, 2020.
      Powell says Fed will hold steady during economic recovery
      Institutional investors mobilize for equitable global COVID-19 response
    • Database’s debut focuses on public-sector DC plans
      DC plan sponsors differ on need for annuities – survey
      Biden’s retirement idea getting the cold shoulder
      Few participants tapped savings to weather pandemic – Vanguard
    • Emissions from a smokestack in Poland
      Asset managers facing more scrutiny on ESG issues – report
      Boris Johnson, U.K. prime minister, hosts the U.N. Security Council's virtual meeting on climate change risks in London on Feb. 23, 2021
      Progress in fighting climate change falls short – U.N.
      Justin Trudeau, Canada's prime minister, smiles during a virtual joint news conference with U.S. President Joe Biden in Ottawa on Feb. 23, 2021
      U.S. joins forces with Canada on climate change
      Signage is displayed at Harvard University Health Services in Cambridge, Mass., on April 20, 2020
      Harvard endowment’s fossil-fuel investments drop to 2% of assets
    • Donation illustration
      Jefferies will use trading commissions to do good
      Michael Arougheti
      SPACs ride wave as latest investment darling
      Spirit winners
      Prudential honors young people who are helping out
      2 U.K. pension execs take on ESG investing in new podcast
    • Robert 'Rob' Shafir listens during a Senate Permanent Subcommittee on Investigations hearing in Washington on Feb. 26, 2014
      Sculptor hedge fund hits sixth straight year of outflows
      The WallStreetBets forum on the Reddit Inc. website on a laptop computer and the GameStop logo on a smartphone in an arranged photo.
      GameStop frenzy has hedge fund managers rethinking next moves
      Gabe Plotkin, chief investment officer and portfolio manager of Melvin Capital Management, speaks during the Sohn Investment Conference in New York on May 6, 2019
      Citadel, Point72 back Melvin with $2.75 billion after losses
      Shanghai skyline
      Global hedge funds struggle even in a more open China market
    • Illinois Teachers chalks up $1.3 billion in investments, commitments
      Emissions from a smokestack in Poland
      Asset managers facing more scrutiny on ESG issues – report
      Indiana chooses PIMCO for emerging markets debt
      Boris Johnson, U.K. prime minister, hosts the U.N. Security Council's virtual meeting on climate change risks in London on Feb. 23, 2021
      Progress in fighting climate change falls short – U.N.
    • Margaret Anadu
      GSAM chooses global head of sustainability and impact
      Signage for AMP Ltd. adorns the top of a building in the Docklands area of Melbourne on May 10, 2018
      Ares, AMP eye joint venture
      Thasunda Brown Duckett
      TIAA appoints Thasunda Duckett as president and CEO
      Brightwood Capital adds senior investment professional
    • Thomas Spencer
      Oklahoma Teachers chief Tom Spencer to retire
      Swedish flags fly from a tourist souvenir shop in Gamla Stan in Stockholm on March 26, 2020
      Sweden’s AP1 gains 9.7% in 2020
      CDPQ returns 7.7% in 2020
      Cleveland-Cliffs to pour $202 million into pension plans in 2021
    • Thomas Spencer
      Oklahoma Teachers chief Tom Spencer to retire
      Margaret Anadu
      GSAM chooses global head of sustainability and impact
      Doug Heron
      Lothian Pension Fund to lose CEO this year
      Correction: PGIM Real Estate
    • Carlyle secures $4.1 billion ESG-related credit facility
      Hamilton Lane raises $3.9 billion for fifth secondary fund
      PSG closes first Europe-focused fund at $1.5 billion
      Kohlberg closes latest private equity fund at $3.4 billion
    • Sebastiano Ferrante and Jocelyn de Verdelon
      PGIM Real Estate turns to staff to fill new roles
      European managers key in on specialist strategies
      Ingrid Jacobs
      Jones Lang LaSalle brings on head of diversity and inclusion
      EQT inks deal to buy real estate manager
    • Retirement cartoon
      Hopes rising for retirement readiness in 2021
      Neal and Brady
      Retirement security could be only issue both sides accept
      Shawn O'Brien
      Annuities coming to target-date funds, but not right away
      David Ireland
      Sponsors returning to questions about in-plan annuities
    • Charging Bull, sometimes referred to as the Wall Street Bull or the Bowling Green Bull, a bronze sculpture that stands on Broadway just north of Bowling Green in the Financial District of New York City
      Top-performing managers Q4 2020
      P&I 1,000 largest retirement plans: 2021
      Retirement in emerging markets
      Outlook 2021
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • Illinois Teachers chalks up $1.3 billion in investments, commitments
      Indiana chooses PIMCO for emerging markets debt
      New York Deferred Comp plan re-ups with Goldman as stable value manager
      Ann Arbor Employees taps Artisan Partners for international equities
    • Illinois Teachers chalks up $1.3 billion in investments, commitments
      Indiana chooses PIMCO for emerging markets debt
      New York Deferred Comp plan re-ups with Goldman as stable value manager
      Ann Arbor Employees taps Artisan Partners for international equities
    • Emerging Market Equity Manager Services
      Securitized Credit Manager Search
      Private Placements Asset Manager Search
      Actuarial Consultant Search
    • Taiwan Semiconductor’s No. 1 in the emerging markets book
      U.S. fixed-income returns post another positive year
      Nasdaq delivers an impressive year
      U.S. dollar's recent decline continues
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • Tesla cartoon
      Don’t confuse wealth creation with retirement saving
      Top 1000 cartoon
      Top 1,000 retirement plans weather storm just fine
      Infrastructure cartoon
      You must go big on infrastructure, Mr. President
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
    • Shifting DC Times – Winter 2021
      Bond ETFs show maturity during Covid market mayhem
      Pension Consolidation: Optimizing Scale and Maximizing Efficiency
      China is embarking on a new stage of growth
    • David Blitzstein
      Commentary: Without a national retirement policy, Americans face a future of pension crises
      Lawrence Cunningham
      Commentary: Gensler should keep Clayton’s pragmatic proxy adviser rules
      My-Linh Ngo
      Commentary: Pension funds and the role of the debt market in the fight against climate change
      Bill Peressini
      Commentary: Carbon’s elemental role in the future of impact investing
    • Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
      Focus on manager diversity pushes asset owners’ to walk the talk
    • P&I Content Solutions
      How will gold react?
      To people shaking hands
      P&I Content Solutions
      Lessons From 2020: Today’s OCIO Model Passes a Major Test of Governance
      Sponsored Content By MassMutual
      Leveraging Data to Manage Risk
      Sponsored Content By iShares
      ETFs are becoming a cornerstone of insurance equity portfolios
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • watch video
      0:45
      Private funds weathered 2020 turmoil
      watch video
      0:59
      Secure choice and other retirement plans at a state level
      watch video
      3:33
      P&I 1,000 by the numbers 2021
      watch video
      1:33
      A look at hiring activity in 2020
    • Emerging Markets: Expanding Investors’ View
      2021: A Fixed Income Odyssey
      Technology is the New Oil: The Changing Nature of Emerging Markets
      Powering the Change: The power of diversity and inclusion
    • POLL: Working after the pandemic
      POLL: The year ahead for the 1,000 largest U.S. retirement funds
      POLL: The Biden administration’s economic plans
      POLL: Retirement issues in 2021
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • By the Numbers for February 2021
      Top Performing Managers of Emerging Markets Equity, 4th Quarter 2020
      Top Performing Managers of Global Equity, 4th Quarter 2020
      Top Performing Managers of Inflation-Protected Fixed Income (TIPS), 4th Quarter 2020
  • Events
    • Conferences
    • Webinars
    • Defined Contribution Spring Virtual Series
      DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
    • Emerging Markets: Expanding Investors’ View
      2021: A Fixed Income Odyssey
      Technology is the New Oil: The Changing Nature of Emerging Markets
      Powering the Change: The power of diversity and inclusion
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. Print
January 12, 2015 12:00 AM

PIMCO strife, CalPERS shift lead 2014's top stories

Rob Kozlowski
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Figge Photography
    William H. Gross' unexpected announcement he was leaving PIMCO to join Janus was P&I's top story in 2014.

    Updated with correction

    Change was the keyword for 2014.

    One of the world's most famous money managers left the firm he co-founded, the U.S.'s largest pension fund dropped hedge funds, and U.S. retirement plan assets moved further away from the defined benefit plan model as the pension funding crisis continued this past year.

    The top story of 2014, according to Pensions & Investments' editors, was the yearlong turmoil surrounding Pacific Investment Management Co., the largest bond manager in the world, and the departures of its two top executives.

    Ranking second was the year of change at CalPERS that culminated in the surprise September announcement that the nation's largest pension fund would shut down its hedge fund program.

    The next three stories all dealt with changes that experts said could result in an accelerated movement by U.S. corporations away from defined benefit plans.

    Ranking third was the continuing departure of U.S. corporations from defined benefit plans, as lump-sum offers and annuity buyout activity accelerated in 2014 due to improved funding ratios at the end of 2013; fourth was the movement of interest rates driven by global economics and the approaching end of quantitative easing; fifth was the new mortality tables published by the Society of Actuaries that increased life expectancies and therefore increased pension liabilities.

    No money manager in 2014 experienced change quite like PIMCO, Newport Beach, Calif. The drama began in January with the resignation of Mohamed El-Erian, PIMCO's CEO and co-chief investment officer, the presumed successor to William H. Gross, co-CIO of the firm he co-founded in 1972.

    Mr. Gross, who took on the sole CIO title and tweeted “Batteries 110% charged. I'm ready to go for another 40 years,” on the day Mr. El-Erian resigned, himself resigned a little more than eight months later.

    Even before the exit of Mr. El-Erian, who joined PIMCO for the second time in 2007, the firm was on the kind of shaky ground not previously seen in its storied history. Lagging performance, as well as predictions that the firm could not sustain the kind of growth to which it has long been accustomed, dogged the firm in the months leading to Mr. El-Erian's resignation.

    Reports that Mr. El-Erian left before he was pushed out because of a feud with Mr. Gross, as well as high-profile controversial appearances by Mr. Gross in the months following the break, eventually led to Mr. Gross' resignation on Sept. 26 to join Janus Capital Group.

    In all, PIMCO's U.S. mutual funds had $150.2 billion in outflows in 2014, according to Morningstar Inc., Chicago.

    That number includes $102.9 billion in outflows from the PIMCO Total Return Fund, which Mr. Gross had managed. In addition, numerous asset owners terminated PIMCO from a variety of separate account portfolios. The fallout continues.

    CalPERS ditches hedge funds

    In the second most significant story of the year, officials of the $295.6 billion California Public Employees' Retirement System, Sacramento, announced in September the fund would exit from 24 hedge funds and six funds of funds, becoming the first large institutional investor to shutter completely its hedge fund program.

    Theodore “Ted” Eliopoulos, chief investment officer, cited the $4 billion program's complexity, cost and scale as the primary reasons for the move. He said in a Sept. 25 interview the portfolio would only be meaningful at $30 billion, which was seen as too risky and too expensive. Industry observers, however, also pointed to a muddled portfolio structure that reduced the program's effectiveness.

    Mr. Eliopoulos, appointed interim CIO in June 2013, was named permanent CIO in September after the February death of Joe Dear. In Mr. Dear's tenure as CIO since 2009, the pension fund's assets had grown by almost $100 billion.

    Risk transfer

    In the third most significant story of the year, U.S. corporate defined benefit plan lump-sum offers and group annuity buyouts accelerated in 2014. The move was expected by analysts because of the improved funded status of those plans overall. Several high-profile shifts were made, following a quiet 2013.

    Pension risk transfer activity went into high gear as the end of the year approached, most notably in September when executives at Motorola Solutions Inc., Schaumburg, Ill., announced they had entered into a pension buyout agreement with Prudential Insurance Co. of America. The deal, which totaled $3.1 billion, was the third largest such buyout in U.S. history, behind the 2012 deals by General Motors Co. and Verizon Communications Inc. with Prudential.

    Other companies such as NCR Corp., Norcross, Ga., and Archer Daniels Midland, Decatur, Ill., resumed multiyear risk transfer programs. Both those firms offered lump sums to retirees in 2014 after similar offers to terminated vested employees who had yet to retire in 2012.

    NCR also purchased group annuities for portions of its U.S. and U.K. plans.

    Well over a dozen other corporations took steps toward pension risk transfer in 2014, and more are likely if interest rates rise and improve the pension plans' funded status to the levels required to launch these kinds of transactions.

    Falling interest rates

    The fourth-ranked top story of 2014 was interest rates, which continued falling despite widespread belief among market participants that they could not go lower. Interest rates negatively affected pension funding ratios by increasing liabilities.

    The Federal Reserve Federal Open Market Committee's announcement on Oct. 29 that it would end its bond-buying program provided at least a glimmer of hope that rates might actually rise.

    However, the FOMC said it would keep the federal funds rate in the zero to 0.25% target range. A statement in December said the committee will take a balanced approach because economic conditions “may, for some time, warrant keeping the target federal funds rate below” normal levels.

    Fed Chairwoman Janet Yellen said most committee members believe it will be late 2017 when the funds rate returns to normal.

    Also affecting the funded status of U.S. defined benefit plans was the 2014 announcement of new morality tables, P&I's fifth top story of the year.

    The updated tables, first released in draft form in February by the Society of Actuaries, reflected life expectancy increases. Those new tables increased defined benefit plan liability values as well as liability durations.

    Jeff Leonard, managing director at Wilshire Associates Inc. and head of the actuarial services group of Wilshire Consulting, said in a P&I story in July that the assumption changes would be “another nail in the coffin” of defined benefit plans.

    A recent report from Towers Watson supported that notion, attributing 40% of funding deficit increases in 2014 to the updated tables. That report said the average funding ratio of the largest U.S. corporate defined benefit plans fell to 80% from 89% the previous year.

    GPIF revamp

    Other top stories cited by P&I editors were:

    The largest defined benefit plan in the world, Japan's Government Pension Investment Fund, Tokyo, announcing in October an overhaul of its ¥127.3 trillion ($1.07 trillion) portfolio, more than doubling its total equity target allocation and dropping its domestic fixed-income target to 35% from 60%;

    Vanguard Group becoming the largest manager of U.S. defined contribution assets with $613.47 billion in DC assets as of Dec. 31, 2013, supplanting Fidelity Investments, which had held that honor since 1998 and reported $612.39 billion in DC assets as of year-end 2013.

    The impact on markets, as well as institutional investors, of a bevy of geopolitical crises. The most visible of these was the conflict in Ukraine, but others involved Syria, Turkey and North Korea.

    The growing interest in publicly sponsored private-sector retirement savings plans, with more states — most recently Illinois — moving toward using the Secure Choice model first signed into law in California in 2012, as well as the federal myRA program.

    High-profile federal court cases, most notably a number of lawsuits dealing with the freedom of defined contribution plan participants to challenge their employers when their company stock struggles as well as the U.S. Supreme Court's June decision to allow companies before a class-action lawsuit is approved to show that alleged misrepresentations did not affect stock values. n

    Related Articles
    El-Erian's exit yet another blow to PIMCO
    CalPERS dumping hedge funds
    Gross leaves PIMCO, returns 'to his roots' at Janus Capital Group
    Budget effects on retirement plans captures online readers
    Gross says PIMCO fired him, turned down offer for reduced role
    CalPERS pre-empts asset allocation review with benchmark discussion
    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    Citadel's Ken Griffin gives $125 million to Chicago museum; name will change
    Citadel's Ken Griffin gives $125 million to Chicago museum; name will change
    Gender diversity is improving on FTSE 350 boards
    Gender diversity is improving on FTSE 350 boards
    How will gold react?
    Sponsored Content: How will gold react?
    sponsored
    Events
     
     
    Sponsored
    White Papers
    Shifting DC Times - Winter 2021
    Bond ETFs show maturity during Covid market mayhem
    Pension Consolidation: Optimizing Scale and Maximizing Efficiency
    China is embarking on a new stage of growth
    GP-LED OPPORTUNITIES AT THE SMALLER END OF THE MARKET
    Gold Outlook 2021
    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

    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.

    pilogo-NEW
    About Us

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

    Chicago Office
    150 N. Michigan Ave.
    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 © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center