PBGC Hires Investment Advisers
The U.S. House Education and Labor Committee's chairman, Rep. George Miller, called a hearing recently to challenge the Pension Benefit Guaranty Corporation about a $5 billion decline in its investment portfolio. PBGC, hardly alone in seeing its investments sour last year, now has chosen investment firms BlackRock, Goldman Sachs, and J.P. Morgan as "strategic partners" to manage $2.5 billion in assets and provide support to PBGC's in-house investment staff.
"These new strategic partners will do much more than manage assets," said PBGC Director Charles E.F. Millard. "Our strategic relationships will be long-term in nature and will add tremendous value for the PBGC going forward." The firns will manage the agency's allocations to private equity and real estate, two asset classes that PBGC's board added to its portfolio under a diversified investment policy adopted last February.
PBGC chose the firms via a request for proposals. "Our first criterion for prospective partners was an excellent track record in allocating to private equity and real estate," Millard said. "These firms are world leaders in both fields. The three firms will be required to share information among themselves and to give the PBGC unrestricted access "to all intellectual firepower within their respective firms," according to PBGC. "These relationships will benefit the PBGC, not only with private equity and real estate investments, but in risk analytics and mitigation, consolidated reporting, and staff augmentation," he said. "These resources will put the PBGC on a more strategic foundation for its future."
The PBGC currently guarantees payment of basic pension benefits earned by 44 million American workers and retirees who participate in more than 29,000 private-sector defined benefit pension plans.