NEPC's 2023 DEI Progress Report: Redefining Diversity in Investing
BOSTON–(BUSINESS WIRE)– NEPC, a leading research-driven investment consultant and OCIO provider with $1.7 trillion1 in assets under advisement, today published its fourth annual Diversity, Equity, and Inclusion (DEI) Progress Report. The report aims to uncover the investment-oriented benefits of diversity, supporting NEPC’s goal of establishing itself as a pioneer in Diversity, Equity, and Inclusion (DEI)
This year’s report shows the firm’s continued progress toward NEPC’s Diverse Manager Policy goals, which were initially set in 2019. Most notably, the firm released a new DEI rating system in 2023, modeled partially after its successful ESG ratings. The revamped DEI ratings extend beyond measures of ownership diversity to consider DEI standards for the workplace, portfolio management, governance, policies, and community impact.
“Diversity is no easy subject to broach. We believe that the sincerity and frequency of debates on the matter proves the importance of diversity among our clients. We cannot ignore the broad calls for our industry to pursue investing in a responsible way,” said KC Connors, Partner, Chief Consulting Officer. “We’ve used our learnings over the past four years to implement strategies that produce real results, as evidenced by the success of our DEI ratings and Explorer programs.”
NEPC’s 2023 DEI Progress Report provides insight into the firm’s DEI initiatives from a marketplace perspective. Listed below are highlights from this year’s report:
Client Exposure to Diverse Strategies
- 58% of NEPC clients use Diverse Manager(s)
- $45.4B of client’s assets with Diverse Firms
- 218 client strategies managed by Diverse Firms
Increasing Diversity in NEPC’s Recommended Strategies
The firm continued expanding the Explorer Program, which has been the cornerstone of NEPC’s DEI efforts for several years. At the 2023 Explorer Program Pre-Conference event, an event held prior to NEPC’s Investment Conference, NEPC clients were able to make direct connections and introductions to diverse-owned investment managers that are part of NEPC’s Explorer Program.
- In 2023, NEPC once again increased the number of diverse-owned managers on its Focus Placement List, positioning the firm to reach its goal of 15% diverse manager representation by the summer of 2024.
- NEPC conducted 284 interactions with Diverse Management firms in 2023, including both manager meetings and emerging manager conferences.
“Of course, the conversation does not stop here,” said Connors. “The road to diversity in investing is not linear. We see 2024, and every subsequent year, as a year for evaluation and improvement. DEI is integral to NEPC, and we are constantly exploring new ways to make data-driven cases for investing with diverse managers.”
To download the full results of NEPC’s 2023 DEI Progress Report, click here.
ABOUT NEPC, LLC
NEPC is an independent investment consultant, private wealth advisor, and OCIO provider serving over 400 retainer clients and $1.6 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 and families. To learn more about NEPC, visit nepc.com.
Contact:
Emma Rayder
[email protected]
NEPC Hires Former PGIM Principal To Lead DC Solutions
BOSTON– April 1, 2024–(BUSINESS WIRE)– NEPC, LLC, one of the industry’s largest independent investment consulting firms, overseeing $1.6 trillion in assets under management and advisement, announced that Mikaylee O’Connor will join the firm as Principal, Head of Defined Contribution (DC) Solutions, effective April 1st, 2024. O’Connor will be responsible for leading the way NEPC’s DC practice delivers innovative and creative solutions to clients. As the retirement space continues to evolve, O’Connor, in addition to serving clients, will oversee NEPC’s DC plan trends research and data analytics, guiding strategic initiatives related to target date funds, managed accounts, retirement income solutions, and other investments that are vital to the retirement outcomes of participants. She will report directly to Bill Ryan, Partner, Defined Contribution Team Leader.
“As a team, we are focused on helping our clients navigate and leading the discussion around issues relating to retirement income,” said Bill Ryan, NEPC’s Partner, Defined Contribution Team Leader. “Mikaylee’s extensive experience and deep expertise working with a diverse client set will position NEPC to continue identifying innovative solutions that help alleviate those concerns.”
Before joining NEPC, O’Connor was a Principal, Senior Defined Contribution Strategist within PGIM DC Solutions. She provided thought leadership to clients and supported the development of forward-thinking solutions designed to improve participant outcomes. Prior to that, O’Connor spearheaded RVK’s DC practice as their Head of DC Solutions overseeing strategic direction and growth of the practice. Her unique perspective will continue elevating NEPC’s DC Solutions platform as an industry-leading consultant and trusted partner.
As a thought leader in the DC space, Mikaylee sits on the DCIIA Operating and Executive Committees and has been influential across many other industry groups, such as NAGDCA, where she is on their Legislative Committee.
“Joining NEPC’s esteemed and innovative team marks an exciting phase in my career,” said O’Connor. “We are currently undergoing a unique transition in the retirement space. I am eager to contribute to the firm’s trajectory and partner with our DC team and clients to lead the creation and delivery of world-class DC solutions.”
About NEPC, LLC
NEPC is an independent investment consultant, private wealth advisor, and OCIO provider serving over 400 retainer clients and $1.6 trillion in total assets. Combining a proprietary investment 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 families. To learn more about NEPC, visit nepc.com.
Pensions & Investments: Participant Interaction Minimizes Losses
NEPC’s Emma O’Brien was quoted in a recent Pensions & Investments article which focuses on Defined Contribution trends despite last year’s market meltdown. View the article on Pensions & Investments’ site here.
Despite last year’s equity and fixed-income rout, DC participants and sponsors take long-term view.
. . .
Last year’s market meltdown didn’t derail certain DC trends and didn’t trigger new ones, said Emma O’Brien, the Boston-based senior consultant for the NEPC LLC defined contribution team.
Clients maintained their long-term perspective, Ms. O’Brien said, adding that the industry doesn’t make quick changes.
“What will drive changes is target-date funds” at the expense of core menu options, she said.
. . .
Ms. O’Brien said there were “no significant trends in outflows” from DC plans last year. In 2023, some clients will review their investment structure, a typical client response.
“We’ve heard limited feedback from plan sponsors that participants are asking for change in lineups, and that’s driven by the fact that our clients generally have well-structured investment menus that offer core menu options that span the risk spectrum,” she said. “Participants have the option to be conservative, aggressive, or somewhere in between based on their own goals or their market views.”
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Pensions & Investments: Social Security's Woes Highlight Need for Holistic Plan
NEPC’s Bill Ryan was featured in a recent Pensions & Investments article which focuses on the uncertain future of Social Security and what plan sponsors can do to prepare participants. View the article on Pensions & Investments’ site here.
Given Social Security’s uncertain future, defined contribution executives say that it’s important for plan sponsors to offer participants holistic retirement planning and encourage additional savings.
. . .
A reduction in Social Security benefits would lead to an increased strain on the defined contribution system, according to Bill Ryan, Chicago-based Partner and Head of Defined Contribution Solutions at NEPC LLC.
In the case of lower benefits, many individuals would need to rely more on their 401(k) plan for retirement income, he said. To do so means that “it’s going to put more pressure on the 401(k) balance, draw down faster, and you could see it depleting sooner,” Mr. Ryan said.
Mr. Ryan called it a “compound effect: Social Security reduces; more money comes out of the 401(k) plan (and) runs out quicker. And so, assuming returns are constant for everyone, the only way to start planning for this is to incrementally save more to backstop that.”
. . .
NEPC’s Mr. Ryan said Social Security needs to be discussed more within the retirement industry, as well, since it “tends not to be (at) the forefront of the participant communications.”
“I think Social Security should get more attention (from) consultants and plan sponsors, especially in light of the attention towards annuities,” Mr. Ryan said. “Social Security is an annuity, and it’s a lower-cost annuity. So it’d be unfortunate if that wealth management strategy was compromised.”
. . .
If Social Security benefits are reduced, “it’s not going to change a person’s need to pay their mortgage, pay their car loan, (or) pay whatever they were planning,” Mr. Ryan said. “That (loss) is going to have to come from other forms of savings like DC, and if we’re not planning for that,” it could cause people budgetary issues.
That’s why Mr. Ryan said “there should be more guidance to encourage faster escalation of savings rates or maybe tax credits for higher matches.”
. . .
Mr. Ryan said delaying the age at which someone takes Social Security is still valuable, but it’s a hard sell.
“If someone were to take it later, it puts less of a strain on the trust,” he said. “And there’s an absolutely incremental value that the participant will actually be able to get more from it, but it’s hard to make that human trade,” and give up immediate money for possible money in the future, especially given the system’s uncertain future.
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Pensions & Investments: Retirement Tiers Emerge from Hiding in DC Plans
NEPC’s Bill Ryan was quoted in a recent Pensions & Investments article which focuses on the ABA Retirement Fund’s investment tier for those approaching or in retirement. View the article on Pensions & Investments’ site here.
In December 2020, as the world grappled with the pandemic, the ABA Retirement Funds program — a retirement plan used by some 4,100 law firms and organizations connected with the practice of law — rolled out an investment tier designed specifically for retirees and those nearing retirement.
. . .
The majority of plan sponsors already offer retiree-focused investments but haven’t spent the time to package and market them as a retirement tier, said Bill Ryan, a partner and head of defined contribution solutions at NEPC LLC in Chicago.
Plan sponsors haven’t gone the extra step of saying, “Of the 10 options we provide, these three are the best to use for short-term needs in retirement to draw down,” he said. “The majority are not marketing it, even though they have the parts.”
Mr. Ryan cited NEPC client data showing that 76% of plan sponsors offer stable value funds, 43% offer money market funds, and almost a third offer inflation-protection funds, three of the essential building blocks in a retirement tier.
. . .
For some consultants, the traditional target-date fund, which is pervasive in plans, is the ultimate retirement tier, even though it isn’t marketed as such.
“We believe that the No. 1 retirement income solution is a target-date fund plus systematic distribution as the first line of defense,” Mr. Ryan said.
While the target-date fund feels like a “vanilla concept,” it is “probably the best option in retirement because some professional has built a portfolio that’s targeting a 4%, 5% or 6% rate of return in retirement,” he said. “If an individual is taking out 4% or 5%, it matches the dividend that they need to draw for an income without depleting the balance in retirement.”
For Mr. Ryan, the target-date fund is akin to Batman. “It’s the hero we need; maybe not the hero we want,” he said.
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Financial Advisor IQ: Retirement Plan Sponsors Find Pain Point in Income Solutions: Report
NEPC’s Bill Ryan was recently quoted in a Financial Advisor IQ article to discuss how defined contribution plans are seeking help navigating target date funds as a result of recent regulatory and legal actions, according to our 2022 DC Plan Trends & Fees Survey. View the article on Financial Advisor IQ’s site here.
Retirement income products remain popular among defined contribution plans, but sponsors are increasingly seeking help navigating them, including by tapping the services of outsourced chief investment officers, according to a recent report.
Target date funds, which offer installment withdrawals as a source of income in retirement, continue dominating among retirement income solutions, with 96% of DC plans reporting using them, unchanged from 2020, investment consultant and OCIO provider NEPC said it found in a survey of 119 clients and 207 DC plans, representing 2.2 million plan participants and $283 billion in combined assets.
. . .
“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,” Bill Ryan, partner and head of DC Solutions at NEPC, said in a statement. “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.”
Read the full article on Financial Advisor IQ’s website here.
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
Pensions & Investments: Sponsors Mull New Methods to Fight Inflation
NEPC’s Bill Ryan was quoted in a recent Pensions & Investments article to discuss what he believes should be the primary defense against unexpected inflation for retirees. View the article on Pensions & Investments’ site here.
Defined contribution plan sponsors have shied away from putting inflation-sensitive investments in their plan menus, but with inflation still high, some are starting to re-evaluate their thinking.
. . .
“The participants who probably would benefit the most are those over 60 in retirement who are taking withdrawals from their account and they’re trying to maintain their spending on gas and bread,” said Bill Ryan, a partner and head of defined contribution solutions at NEPC LLC in Chicago.
Retirees will need a “higher weight to inflation-sensitive assets because they’re trying to hedge against the unexpected change that would compromise their spending ability,” Mr. Ryan said.
Even then, though, Mr. Ryan and other consultants would be wary of adding new investments, preferring instead to allow target-date funds to do the heavy lifting in fighting inflation risk.
“I do think the primary defense against unexpected inflation or even unexpected equity rallies or shocks is through a target-date fund or some diversified portfolio because they help each of the asset classes play a certain role that counterbalance each other,” Mr. Ryan said.
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Pensions & Investments: SECURE 2.0 Fails to Provide All of the Help Sought by 403(b) Plans
NEPC’s Bill Ryan was quoted in a recent Pensions & Investments article expressing his disappointment that CITs failed to cross the finish line for 403(b) plans. View the article on Pensions & Investments’ site here.
The retirement industry’s effort to have 403(b) plans offer collective investment trusts looks like the political version of the famous Peanuts cartoon featuring Lucy, Charlie Brown and a football.
Lucy holds the football. Charlie Brown tries to kick it. She pulls the ball away at the last minute.
After several years of lobbying Congress, retirement industry trade groups thought they had a breakthrough with the retirement security package SECURE 2.0, which, among other things, made enhancements in the use of auto enrollment, annuitization and linking corporate retirement plan matches to student loan payments.
. . .
“SECURE 2.0 was allegedly a slam dunk,” said William Ryan, the Chicago-based partner and head of defined contribution plan solutions at NEPC LLC, expressing disappointment that CITs failed to cross the finish line for 403(b) plans and wondering when Congress might try again.
“It took four years to go from SECURE 1.0 to SECURE 2.0,” said Mr. Ryan, noting that those laws were achieved through bipartisan support. With divided government, “it could be a decade” before the law is changed, he said.
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Pensions & Investments: Opportunities Still Exist for CIT-Like Group Trusts in 403(b) Plans
NEPC’s Bill Ryan was quoted in a recent Pensions & Investments article to discuss 403(b) plan investment options after Congress’ failure to let executives offer collective investment trusts. View the article on Pensions & Investments’ site here.
Thwarted by Congress’ failure to let them offer collective investment trusts, executives of some 403(b) plans could offer a CIT-like investment thanks to laws and regulations already on the books.
However, and it’s a big however, the process for offering this type of pooled investment vehicle — a group trust — by investment managers can be challenging for 403(b) plans because it requires cooperation from record keepers, custodians and trust companies as well as convincing investment committees and educating participants.
To qualify, sponsors that invest in group-trust investment managers must beware of guidelines contained in several no-action letters from the Securities and Exchange Commission to avoid running afoul of prohibitions in securities laws that Congress didn’t address in the SECURE 2.0 retirement package.
. . .
“There is a pathway,” said William Ryan, the Chicago-based partner and head of defined contribution plan solutions at NEPC LLC. “If you have more than $2 billion in assets, I would kick the tires on this.”
Mr. Ryan said perhaps 1% to 2% of all 403(b) plans might be able or are interested to pursue creating a white label separate account containing pooled investments that aren’t available to others outside of a specific sponsor and aren’t considered investments requiring SEC registration.
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