NEPC Survey Shows Defined Contribution Plans Challenged by Booming Retirement Income Market, TDF Scrutiny
BOSTON–MARCH 7, 2023–(BUSINESS WIRE) — NEPC, LLC, one of the country’s largest research-driven investment consultants and OCIO providers, today published the 17th annual edition of its Defined Contribution (DC) Plan Trends and Fee Survey, which examines current plan investment trends, features, and innovations across major sectors, and how these plans have evolved over the years. Respondents to the 2022 survey included 119 clients representing $283 billion in aggregate assets and 2.2 million plan participants.
This year’s data showcases that retirement income solutions are more prevalent than what is typically discussed, with 84% of respondents currently offering their participants a retirement income solution – most often in the form of a Target Date Fund (TDF) that includes the flexibility to take installment withdrawals as a source of income in retirement. However, the survey also points to two major challenges for plan sponsors:
- There is still no consistency or real industry consensus on how to create meaningful retirement income solutions in pooled employer plans.
- A concurrent poll of NEPC consultants shows that retirement income solution selection is a pain point for many defined contribution clients. As the dedicated retirement income solution market has boomed over the past several years, many plan sponsors have struggled to evaluate their options strategically.
“As participants continue to demand retirement income solutions, plan sponsors are seeking trusted stewards to help them simplify what’s become a pretty complex evaluation and selection process,” said Alison Lonstein, Principal and Senior Consultant on NEPC’s Defined Contribution (DC) team. “This trend mirrors what we’ve seen in other segments of the retirement space – especially the increasingly complex ESG and legal environments. We’ve seen a significant uptick in clients asking for fiduciary training on the ESG landscape and requests for more insight and intel around legal news.”
NEPC’s 2022 survey also shows the continued dominance of TDFs in investment menus. Currently, 96% of respondents offer TDFs (unchanged from 2020) with 46% of total plan assets invested in TDFs (compared to 42% in 2020). While TDFs remain a popular option, plan sponsors are increasingly seeking guidance from investment consultants to help them better navigate rising scrutiny around these funds.
“Off-the-shelf and custom TDFs can have wide-ranging risk allocations, expenses, and best practices for management and reporting – something recent regulation and court cases are looking to address,” added Bill Ryan, Partner and Head of Defined Contribution (DC) Solutions. “As we’re likely to see continued focus on America’s retirement crisis in the years ahead, plan sponsors should be having hard conversations today about their fiduciary decision making and monitoring process for TDFs on their menu.”
Other key trends highlighted in NEPC’s new survey:
- Increased adoption of passive tier options: 2022’s data shows 83% of plans currently offer a passive tier (three or more index funds), an increase from just 66% in 2020.
- The growth of the DC plan OCIO market: As plan sponsors’ workforces and governance structures change, they are increasingly looking for OCIO solutions to streamline their plans. Throughout 2021, NEPC saw a 94% increase in OCIO assets (largely driven by a 17% increase in OCIO clients). Overall, 10% of NEPC’s DC clients are using the firm’s OCIO solution.
NEPC’s Defined Contribution (DC) Practice team will discuss the survey’s findings during a webinar on Thursday, March 8, 2023. Those interested in hearing how DC consultants are advising plans to address emerging opportunities can register for the webinar here.
The 17th Annual Defined Contribution (DC) Plan Trends and Fee Survey results can be downloaded here.
About NEPC, LLC
NEPC, LLC, is one of the country’s leading investment consultants and OCIO providers, servicing over 400 retainer clients with $1.4 trillion in assets1 with $301.2 billion in alternative assets2. Combining a proprietary research team dedicated to the long-term challenges facing investors with our unique client-centric model, NEPC builds forward-looking investment portfolios for institutional investors and ultra-high-net worth individuals. To learn more about NEPC, visit nepc.com.
1 As of 10/1/2022
2 As of 12/31/2021, NEPC provides some form of advice to all clients counted but does not advise all clients on all asset classes.
Media Contact:
Laura Nascimento
The Wall Street Journal: Pension Investment in Private Credit Hit Eight-Year High
NEPC’s Oliver Fadly was quoted in a recent Wall Street Journal article to provide insight on how the industry and investors are thinking about the asset class. View the article on The Wall Street Journal’s site here.
North American pension-fund investment in private-market loans reached an eight-year high in 2022, even as banks pulled back on lending and default rates inched upward.
The average share of these retirement funds parked in the illiquid, typically unrated debt has crept up steadily to 3.8%, the highest on record, according to analytics company Preqin. Though a fraction of the overall portfolio, private credit now amounts to more than $100billion in the retirement savings of U.S. and Canadian teachers, police and other public workers, according to a Wall Street Journal estimate based on Federal Reserve data and pension financial reports. And the pensions are planning to add more: Their average target allocation is 5.9%.
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Investment consultant NEPC said in a presentation to the Ohio workers fund last year that many private-credit NEPC managers have had trouble liquidating funds by the promised maturity date.
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But the small scope of private credit in the late 2000s means it is hard to draw conclusions about how the asset class would perform in another crash.
“It’s a little bit more of a nascent asset class and so we try to stress caution there,” said Oliver Fadly, head of private debt at NEPC. “It’s not fully tested.”
Click here to continue reading the full Wall Street Journal article.
In a Year of Growth and Expansion, NEPC Elects New Partners and Announces Promotion of Principals
BOSTON–December 15, 2022–NEPC, LLC one of the industry’s largest independent, research-driven investment consulting firms, today announced the election of seven new partners and the promotion of eleven new principals across the firm. These new elections and promotions will be effective January 1, 2023.
“NEPC continues to be an industry leader simply because we believe in identifying, attracting, and fostering world-class talent,” said Michael Manning, Managing Partner of NEPC. “These new partners and principals represent the best and brightest in our industry. Through either crafting tailored, research-driven strategies that ensure our clients’ long-term financial sustainability or supporting our clients and workforce with creative solutions, this team is ensuring that NEPC remains a premier destination for investment services.”
The newly elected Partners are:
- Josh Beers – Head of Private Equity Investments
- Sebastian Grzejka, CAIA – Senior Consultant, Endowments and Foundations
- Matt Lombardi – Chief Financial Officer
- Dulari Pancholi, CFA, CAIA – Head of Credit and Multi-Asset Investments
- Kelly Regan – Senior Consultant, Corporate
- Matthew Ritter, CAIA – Head of Real Asset Investments
- Elton Thomaj, CAIA – Senior Investment Director, Portfolio Construction
NEPC’s new Principals are:
- Kelly Bruns – Senior Finance Manager
- Jason Castonguay – Director, Discretionary
- Thomas Cook – Senior Consultant, Defined Contribution
- Tim Fitzgerald, CAIA – Senior Consultant, Defined Contribution
- Brandon Jones – Senior Investment Director, Portfolio Construction
- Ashlee Lazzari – Director of Marketing and Communications
- Heather Martone – Senior Marketing Manager
- Kevin Novak – Senior Consultant, Healthcare
- Brian Parnell – Director, Discretionary
- Keith Stronkowsky, CFA – Senior Consultant, Public
- Eric Vallo, CFA – Senior Consultant, Healthcare
For NEPC, 2022 has been a year defined by talent expansion. Key highlights include:
- Former Meketa Partner and Chief Operating Officer Kellie Kane joined NEPC as its new COO in May 2022.
- In July 2022, NEPC expanded its Corporate Consulting practice group by acquiring a team from Goldman Sachs Asset Management (GSAM).
- Real estate industry leader Shelley Santulli joined the firm in October, 2022 as Principal and Senior Investment Director, Real Assets.
For more information on NEPC’s employee workforce and to explore open opportunities, click here.
About NEPC, LLC
NEPC, LLC, is one of the country’s leading investment consulting firms, servicing 411 retainer clients with $1.4 trillion in assets1 with $301.2 billion in alternative assets2. Combining a proprietary research team dedicated to the long-term challenges facing investors with our unique client-centric model, NEPC builds forward-looking investment portfolios for institutional investors and ultra-high-net worth individuals. To learn more about NEPC, visit nepc.com.
1 As of 10/1/2022
2 As of 12/31/2021, NEPC provides some form of advice to all clients counted but does not advise all clients on all asset classes.
Media Contact:
Laura Nascimento
NEPC Survey: Majority of Pension Plans See Fed and Soaring Corporate Profit Margins As Biggest Threat to Markets
BOSTON–(BUSINESS WIRE)–NEPC, LLC one of the industry’s largest independent, research-driven investment consulting firms, today announced new data showcasing what corporate and healthcare pension plan sponsors believe are the biggest risks to markets over the next 12 months. The new report also gives insight into how plan sponsors are assessing their glide path and managing their asset allocation against the backdrop of this year’s heightened market volatility.
Plan sponsors overwhelmingly agree that the three biggest risks to markets over the next 12 months are: the Fed’s ability to fight inflation (93%), rising interest rates (79%), and corporate profit margins (57%). Interestingly, geopolitical risk seems to have taken a backseat to these three relatively domestic concerns. Of all respondents, 43% listed geopolitical concerns in Europe as one of the three biggest threats, with only 16% listing geopolitical risk in China as one of their top concerns.
“It’s been nearly a decade since plan sponsors have had to keep factors like rapid inflation and rising rates in mind when rebalancing or determining their asset allocation strategies,” said Bradley Smith, Partner and NEPC Corporate Defined Benefit and Defined Contribution consultant. “With rising concerns about how corporate profits will likely impact the market in the year ahead, our priority right now is helping ensure that our pension and defined contribution clients are well equipped to mitigate risk and have a clear plan of action in 2023 and beyond.”
Other notable findings include the following:
- The majority of respondents have an established glide-path. 49% of respondents have a one-way (de-risking only) glide path, compared to 16% that utilize a two-way (de-risking and re-risking) glide path. 35% of respondents indicated they are not currently utilizing a glide path.
- Most plan sponsors are not currently rebalancing back to existing targets. 23% of respondents are only partially rebalancing back to targets, with 21% of respondents delaying rebalancing until the market stabilizes. Only 35% of respondents are rebalancing to existing targets. Notably, 0% of plan sponsors are re-risking.
- Smaller pensions (less than $1 billion AUM) are more likely to consider a Pension Risk Transfer (PRT). Overall, 15% of respondents are either moving forward with some form of PRT while 21% are considering some form of PRT in the near future. 80% of those respondents considering a PRT say the current market environment has not impacted their views. 77% of pension plans with over $1 billion in assets are not currently considering any PRT activity.
This survey was conducted online by NEPC’s Corporate Defined Benefit Practice in September 2022. For the full results of this survey, click here.
For more information on NEPC’s Corporate Defined Benefit Practice, click here.
NEPC, LLC
NEPC, LLC, is one of the country’s leading investment consulting firms, servicing 403 retainer clients with $1.5 trillion in assets1 with $301.2 billion in alternative assets2. Combining a proprietary research team dedicated to the long-term challenges facing investors with our unique client-centric model, NEPC builds forward-looking investment portfolios for institutional investors and ultra-high-net worth individuals. To learn more about NEPC, visit nepc.com.
1 As of 4/1/2022
2 As of 12/31/2021, NEPC provides some form of advice to all clients counted but does not advise all clients on all asset classes.
NEPC Expands Real Assets Team, Hires Real Estate Industry Veteran
BOSTON–(BUSINESS WIRE)–NEPC, LLC, one of the largest independent, research-driven investment consulting firms, today announced that real estate industry leader Shelley Santulli has joined the firm as Principal and Senior Investment Director, Real Assets, effective October 10, 2022.
Santulli brings more than two decades of real estate investment and advisory experience to her new role, and will help NEPC identify and report on emerging investment themes across real asset markets, which include real estate, energy, renewables, natural resources, and infrastructure.
As a part of NEPC’s Real Assets Team, Santulli will be responsible for providing clients with market viewpoints, sourcing investing ideas, conducting manager due diligence, creating educational materials for various real estate and real asset strategies, and advising clients on the implementation of investment strategies.
“It’s only through our best-in-class talent that we’re able to consistently deliver actionable, best-in-class investment ideas to our clients,” said Matt Ritter, CAIA, head of NEPC’s Real Assets Team. “We’re thrilled to be adding yet another experienced leader like Shelley to our team. I know our clients will benefit from her diverse investment experience across markets, property sectors, strategies, investment structures, and market cycles.”
Prior to joining NEPC, Santulli was Executive Vice President, Portfolio Management at American Realty Advisors, where she helped lead the portfolio management and strategy of a diversified, open-end value fund. Throughout her career, she has held several other senior positions in notable investment management firms like Berkshire Group, AEW Capital Management, and Fidelity Investments.
“I’m joining a team that prioritizes delivering research-driven investment solutions tailored to clients’ unique investment goals,” said Santulli. “I have a proven track record of helping institutions navigate turbulent markets, and I’m excited to put that to work for NEPC clients every day.”
Learn more about NEPC’s Real Assets Team here.
About NEPC, LLC
NEPC, LLC, is one of the country’s leading investment consulting firms, servicing more than 400 retainer clients with $1.5 trillion in assets with $301.2 billion in alternative assets. Combining a proprietary research team dedicated to the long-term challenges facing investors with our unique client-centric model, NEPC builds forward-looking investment portfolios for institutional investors and ultra-high-net worth individuals.
To learn more about NEPC, visit nepc.com.
Contacts
Emma Rayder
NEPC Survey Finds Institutions Want More OCIO Services But Gaps Exist
BOSTON–(BUSINESS WIRE)– NEPC, a leading research-driven investment consultant with $1.5 trillion in assets under advisement, today published its 2022 Governance Survey, which examines how institutions like pensions, endowments and foundations, and healthcare organizations are making strategic investment decisions and engaging with investment consultants to preserve and grow their capital across different asset classes and market cycles.
This year’s survey showcases data from 247 respondents, 47% of which are senior executives within their organization, while 28% serve on their organization’s board or investment committee.
The data across all respondents shows a desire for more OCIO services from investment consultants. Currently, 12% of respondents say their most trusted advisor handles everything like an OCIO. 17% of respondents expect their most trusted advisors to perform the role of investment manager that handles everything like an OCIO in the next 5-7 years.
However, the new report also showcases potential gaps in the OCIO market. When comparing NEPC’s 2018 Governance Survey to 2022, the data shows that expectations haven’t materialized. In 2018, respondents believed the share of trusted advisors acting as an OCIO would increase to 15% by 2023. The general survey results mask a decided shift toward OCIO for certain market segments, including endowments, foundations, healthcare, and defined contribution relative to 2018, and likely increased migration in the years ahead.
“As investment programs have grown over the past several years, we’ve also seen firsthand the increased desire and need for ways to streamline management and operational functions,” said Steve Charlton, Partner and Head of Client Solutions. “There are often good reasons to maintain trusted advisory relationships, which has slowed the overall progression to OCIO. Some clients look to maintain decision-making responsibility or hand off only portions of the governance process, whereas others have decided to move entirely to OCIO. We believe advisory and OCIO can co-exist within our firm and intend to provide the best services consistent with our clients’ objectives.”
Beyond OCIO relationships, the data also helps show how institutions are remaining committed to their ongoing diversity, equity, and inclusion (DEI) investment goals even amid a tough economic landscape. While data shows that more than half of respondents expect an economic recession and 67% are concerned about rising interest rates, the survey also shows:
- 80% of all respondents said it is important to incorporate DEI in their investment program, with 18% saying it is extremely important.
- Healthcare organizations were more likely to believe that incorporating DEI in their investment programs is a top priority, with 29% of these respondents saying it is extremely important.
- Alternatively, pensions and insurance organizations were slightly less likely to recognize the importance of incorporating DEI into their investment programs, as 23% of these respondents stated DEI was not an important piece of their program.
For more information about NEPC’s, click here, and about NEPC’s OCIO Services, here. To download the full results of NEPC’s 2022 Governance Survey, click here.
ABOUT NEPC, LLC
NEPC, LLC, is one of the country’s leading investment consulting firms, servicing more than 400 retainer clients with $1.5 trillion in assets with $301.2 billion in alternative assets. Combining a proprietary research team dedicated to the long-term challenges facing investors with our unique client-centric model, NEPC builds forward-looking investment portfolios for institutional investors and ultra-high-net worth individuals. To learn more about NEPC, visit nepc.com.
Bloomberg: Stocks See Late-Day Rebound After Unnerving Twists: Markets Wrap
NEPC’s Phill Nelson was quoted in a recent Bloomberg article to discuss what to expect from the 9/21/22 Fed meeting’s announcement on interest rates. View the article on Bloomberg’s site here.
Stocks pushed higher in the final hour of New York trading, with a rally in megacaps like Apple Inc. and Tesla Inc. driving a rebound that followed the worst weekly rout for the market since mid-June.
Major equity benchmarks had a tough time finding direction Monday as traders geared for another super-sized US rate increase amid fears on whether the Federal Reserve could overtighten and raise the odds of a hard landing. Treasury 10-year yields hovered near 3.5% while the two-year rate, which is more sensitive to imminent policy moves, hit the highest since 2007.
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“The question to focus on isn’t whether the Fed will hike rates by 75 basis points or 100 basis points,” said Phillip Nelson, head of asset allocation at NEPC. “What we’re looking for is how aggressive Powell will be in the next six to 12 months. The messaging we get in the next few weeks could be a bigger data point and a shock to investors.”
The Wall Street Journal: Almost Half of Stock Pickers Beat the Market in Early 2022 Selloff
NEPC’s Tim McCusker was quoted in a recent Wall Street Journal article to discuss how active managers have benefitted from monetary tightening in early 2022. View the article on The Wall Street Journal’s site here.
Nearly half of large-cap U.S. stock-picking funds beat the S&P 500 during the brutal selloff in the first half of the year, putting active managers on pace for their best year since 2009.
Bruised by sky-high inflation and rising interest rates, the S&P 500 fell 20% on a total return basis, which includes dividends as well as price changes, in the first six months of 2022. That was the index’s worst first half in data going back to 1988, according to Dow Jones Market Data.
. . .
“In the first half, active managers being compared against the market may have benefited from the environment of monetary tightening as the Federal Reserve began raising interest rates”, said Tim McCusker, chief investment officer at investment consulting firm NEPC.
“That’s a helpful thing for active managers,” he said. “Instead of money just flooding into equity markets and pushing all assets higher, you’re starting to see some differentiation.”
Click here to continue reading the full Wall Street Journal article.
NEPC Continues Expansion of Corporate Consulting Teams, Adding Leadership
BOSTON–(BUSINESS WIRE)– NEPC, a leading research-driven investment consultant with $1.5 trillion in assets under advisement, has expanded its Corporate Consulting practice group by acquiring a team from Goldman Sachs Asset Management (GSAM). The additions include three new Principals – Alison Lonstein, Matt Maleri, and Joe Nankof – and a new Senior Consultant, Emma O’Brien, all of whom will support clients across NEPC’s business.
Prior to joining NEPC, Lonstein, Maleri, O’Brien, and Nankof served as Consultants and Lead Portfolio Managers at GSAM. The team formed while at Rocaton Investment Advisors, which was acquired by GSAM in 2019.
“Bringing this team on board is a direct reflection that the best consultants in the industry continue to choose NEPC as a place to grow,” said Craig Svendsen, Partner and Corporate Practice Director at NEPC. “This team’s experience and skillset strengthens our position as an industry-leading strategic partner capable of helping our clients weather volatile markets.”
Today’s news is part of a broader trend of former executives from Aon, Mercer, and Meketa recently joining NEPC’s leadership team.
Lonstein and O’Brien will join NEPC’s Defined Contribution practice group, while Maleri and Nankof will join NEPC’s Corporate Defined Benefit practice group. The new team members will also help support NEPC’s healthcare and insurance clients.
“We’ve had the utmost respect for NEPC’s leadership for years and are excited about joining at such a critical time for clients,” said Nankof. “As we began considering our next step, we wanted to find an independent firm with a close-knit, client-first culture. NEPC provides that culture and is an excellent fit on many different levels.”
For more information about NEPC’s leadership team, click here.
ABOUT NEPC, LLC
NEPC, LLC, is one of the country’s leading investment consulting firms, servicing 403 retainer clients with $1.5 trillion in assets1 with $301.2 billion in alternative assets2. Combining a proprietary research team dedicated to the long-term challenges facing investors with our unique client-centric model, NEPC builds forward-looking investment portfolios for institutional investors and ultra-high-net worth individuals. To learn more about NEPC, visit nepc.com.
1 As of 4/1/2022
2 As of 12/31/2021, NEPC provides some form of advice to all clients counted but does not advise all clients on all asset classes.
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NEPC Appoints Former Meketa Executive To COO Role
BOSTON–(BUSINESS WIRE)– NEPC, a leading research-driven investment consultant with $1.4 trillion in assets under advisement, today announced that Kellie Kane will join the firm as Partner and Chief Operating Officer (COO), effective May 2, 2022. Kane will be responsible for overseeing the execution and implementation of NEPC’s forward-looking operational strategy, including the firm’s performance reporting, technology, and discretionary operations teams. She will be an active member of the firm’s Executive Team, and will report directly to Managing Partner Mike Manning.
“I am happy to announce that Kellie Kane has joined our team as Partner and Chief Operating Officer,” said Manning. “Her skillset and industry experience make her uniquely suited to this role. I know she will play a large part in helping us achieve our strategic operational goals.”
Prior to joining NEPC, Kane spent 24 years at Meketa Investment Group where she most recently served as Partner and Chief Operating Officer. In this previous role, Kane oversaw a large staff across teams like IT, systems development, data, performance reporting, investment analytics, administrative, and transfer operations.
“Joining NEPC means I’m joining a firm with an incredible reputation, earned through its employee-led culture and client-focused philosophy,” said Kane. “I know I’ll be connecting and collaborating with dynamic leaders here – leaders who are just as passionate about improving the financial lives of their clients as I am.”
For more information on NEPC’s Leadership Team, click here.
ABOUT NEPC, LLC
NEPC is an independent investment consultant and private wealth advisor, serving over 400 retainer clients and $1.4 trillion in total assets. Combining a proprietary research team dedicated to the long-term challenges facing investors with our unique client-centric model, NEPC builds forward-looking investment portfolios for institutional investors and ultra-high-net worth individuals. To learn more about NEPC, visit nepc.com.
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