The global financial crisis was a searing test of nerves for most investors and money managers, but a minority skated through relatively unscathed, helped by fortuitous timing, safe haven charms or geography.
For Hewlett-Packard Co., which froze its roughly $4 billion U.S. defined benefit plan effective Dec. 31, 2007, a well-timed liability-driven investment program left the Palo Alto, Calif.-based firm's investment team largely watching the market carnage from the sidelines.
Kenneth Frier, who became chief investment officer of Hewlett-Packard's retirement assets in 2007, said he and then director of investments Gretchen Tai worked out a plan to hedge the corporate defined benefit plan's liabilities, and executed it with what turned out to be fortuitous timing.
Mr. Frier said the investment team sold "most of our equities at the peak of the market in late 2007," and then hedged 100% of the plan's interest rate liabilities with 10-year swaps and long-term STRIPS.
With those long-dated interest rate swaps and STRIPS yielding 5.5% at the time, they became "extraordinarily valuable" when the wheels began falling off the financial bus in 2008, Mr. Frier said.
That hedging left Hewlett-Packard's defined benefit plan "pretty well protected" as the crisis picked up steam in 2008, said Ms. Tai, who together with Mr. Frier joined SECOR Asset Management last year as principals and portfolio managers in the New York-based firm's Palo Alto office.
Even so, the two pension executives would get a second chance to experience the GFC's fury when Hewlett-Packard acquired Texas-based Electronic Data Systems Corp., and its underfunded $4.9 billion defined benefit plan, three weeks before the bankruptcy of Lehman Brothers Holdings Inc.
With credit spreads at unprecedented wide levels, "we added significantly to positions in long-term credit in early 2009," said Mr. Frier.
For Deborah Cunningham, chief investment officer for global money markets at Pittsburgh-based Federated Investors Inc., being able to offer investors a safe haven in a storm made the GFC a pretty good — if not entirely smooth — time for the company.
With wonky investments popping up here and there in money market funds as 2008 progressed, Ms. Cunningham said the biggest challenge for Federated's team that spring and summer was "answering questions from shareholders about what we did own."
Having managed to avoid the land mines that affected some competitors, "thankfully our answers were good," and Federated managed to avoid outflows in the lead-up to the Lehman bankruptcy, she said.
Then, the day after Lehman failed, the Reserve Primary Fund, a money market fund with roughly $65 billion in assets under management at the time, "broke the buck" — announcing that the value of its money market units had fallen to 97 cents and imposing gates on withdrawals, she said.
That's when investors started to panic, withdrawing money from prime money market funds invested in corporate paper while seeking the safety of money market funds investing solely in government paper, said Ms. Cunningham.
"Our prime funds shrank probably by 25% ... but that plus a whole lot more went into our government money market funds," she said. People were "redeeming from quant firms, redeeming from credit firms and prime money market funds" and rushing into government money market funds, Ms. Cunningham said.
"Our AUM ballooned," she said.
Federated's assets under management jumped to a record $409.2 billion as equity markets were bottoming during the March 2009 quarter, from $259.7 billion in June 2007, itself a record for the firm at that time, as the crisis was picking up steam.
Federated's AUM stood at $379.7 billion as of June 30, 2018.