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    Pension Solutions

    Pension Solutions

    Overview

    As corporate defined benefit plan sponsors face an increasingly complex investing landscape, our dedicated pension specialists draw on decades of experience partnering with the world’s leading pension plans to provide innovative and bespoke solutions. We aim to help pension plans achieve improved total investment outcomes by allowing them to focus their resources on their core missions.

    Our Philosophy

    Every pension plan has unique investment goals and risk objectives.
    We work directly with organizations and their staffs, investment committees, actuaries, record-keepers and consultants to understand their:
    • Pension ‘end game’ and deliver customized pension solutions, from traditional long duration fixed income strategies to liability-oriented solutions.
    • Defined contribution plans, including menu design, external manager selection, and other customized solutions.
    Dedicated resources are key to helping plans navigate evolving market environments.
    In today’s complex market and regulatory environment, we understand the continued need for innovative investment solutions and implementation expertise.
    A robust risk management strategy is critical.
    We develop a risk management strategy based on clients’ stated objectives, leveraging sophisticated analytics and dynamic portfolio monitoring that provide our clients transparency and oversight throughout the investment process.

    Our Approach: How We Partner With Clients

    We partner with corporate defined benefit plan sponsors to navigate shifting dynamics that impact both their existing asset allocation and long-term investment strategies. We aim to assist global pension plans in navigating these multi-faceted dynamics, with a holistic view of each pension plan.

    Holistic Approach to Pension Management
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    Assist fiduciary committees in better understanding the impact of their decisions on the sponsor’s overall balance sheet.

    Risk Management
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    As liability management becomes a priority for the plan, our liability strategists and proprietary analytics can help plans manage toward end-game solutions.

    Financial Markets
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    GSAM’s global team provides access to expertise across financial markets and instruments.

    Regulatory Environment
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    Our dedicated pension strategists can help plans navigate a changing regulatory environment.

    Key Differentiators

    Deep bench of expertise

    We draw on specialized experts including actuaries, risk managers and strategists. We also engage investment professionals spanning asset classes, including credit and rates teams with, on average, over a decade of experience.1

     

    Holistic implementation approach

    We take a holistic approach to portfolio management and provide tailored investment strategies, with a highly curated investment approach and fiduciary mindset.
    Strategic insights and knowledge transfer

    We address our clients’ key challenges and provide timely insights on a variety of topics relevant to the pension landscape, including real-time viewpoints on market and regulatory changes, liability management perspectives and corporate finance.

     

    Extensive risk management

    To directly align our investment process with a client's objectives, we leverage sophisticated analytics and dynamic portfolio monitoring that provide our clients with oversight throughout the investment process.

     

    Our Process

    1
    Analyze and Diagnose
    Plan-specific considerations, including:
    • Investment objectives
    • Plan size and funded status
    • Materiality
    • Discount rate methodology
    • Liability sensitivities
    • Derivatives usage
    2
    Construct and Implement
    Bespoke portfolio solutions through:
    • Custom liability benchmarks
    • Liability-hedging portfolios
    • Capital allocation to external managers, where appropriate
    3
    Monitor and Manage
    Portfolio solutions, utilizing a proprietary, fully integrated risk management system, including:
    • Liability-hedging program
    • Risk exposures based on evolving market dynamics

    Examples of Our Partnership with Clients

    Client Description

    A large multinational with pension plans in multiple jurisdictions that had taken steps to reduce the overall risk their pension plans posed to the overall organization.

     

    Client Objective

    The client was seeking a strategic partner to assist them in developing a more holistic, liability-oriented investment strategy. The client had developed a glide path and had hit a number of funded status triggers, increasing their Liability Driven Investing (LDI) allocation to approximately 60%. The client had several active long-duration fixed income managers and was seeking a completion manager to ensure the total LDI portfolio matched the client’s liability risk exposures.

     
    GSAM Solution

    GSAM was hired by the client to serve as an anchor fixed income manager. We maintained a role within the active long-duration roster and completed the LDI portfolio to a customized liability benchmark based on accounting cash flows and discount rate methodology. Since the inception of the mandate, we have served the client as a strategic partner, assisting as they work through various de-risking exercises, rebalancing between the long-duration managers based on desired target allocations, raising cash for benefit payments as needed, and serving as the Outsourced Chief Investment Officer (OCIO) for one of its international pension plans.
    Client Description

    A leading mobile & telecom multinational with a legacy US pension obligation representing over 50% of the organization’s market capitalization. Prior to mandate, their asset allocation was approximately 60% equities and 40% bonds.

     

    Client Objective

    The client had frozen their US pension plan to new entrants and future accruals, and was seeking support as they embarked on a large-scale pension plan restructuring with an increased focus on liability-driven investing. The client needed assistance in developing a more diversified strategic asset allocation for remaining pension plan assets, and structuring a retiree buy-out and a lump sum offer to terminated vested participants.
    GSAM Solution

    We worked with the client to carve out assets to use in the transaction and ran scenarios to determine the value of held bonds given a tradeoff between (a) maximizing the insurance discount and (b) hedging versus the roll-forward. In addition to managing the annuitized plan pre-transfer, and developing a derivative overlay to mitigate the market risk between the roll-forward index and the amount to be delivered to the insurer, we served as the Outsourced Chief Investment Officer (OCIO) and implemented a modernized LDI program to revamp its growth portfolio.
    Client Description

    A 401(k) plan looking for a full review of investment options available to its participants. At the time, the plan had approximately $500 million in assets and 19 different investment options.

     

    Client Objective

    The client had two main goals:

    1. To ensure they were providing an adequate number of choices across asset classes.
    2. To seek simplification within each asset class.
    GSAM Solution

    After discussing the goals and objectives with the client’s investment committee, the GSAM team advised the client to replace the growth and value style options in all asset classes with core options. They also recommended that they remove blended options, replace passive core fixed income with an active option, remove intermediate-term and long-term treasury options and move all investments to lower fee share classes. As a result, the client removed nine investment options, added a small cap core strategy, added an actively managed core bond strategy, and moved to lower fee share classes for all investments.

    Related Insights

    May 25, 2023

    Public Pension Quarterly 1Q2023: Clawing Back

    May 02, 2023

    Corporate Pension Monthly

    April 20, 2023

    No Time For Corporate Pension Complacency: An Interview with Michael Moran

    April 13, 2023

    Corporate Pension Quarterly 1Q2023: Surplus Season

    For more information, please contact your GSAM relationship manager