Key Takeaways
- • Jason Richards, Managing Director of Willis Towers Watson's Retirement Risk Management Group, was profiled by CIO as a 2019 Knowledge Broker, a consultant list in which he is recognized for advising large defined benefit pension plans.
- • Willis Towers Watson reports assets under advisement of over $2.3 trillion and AUM of over $120 billion, per the profile.
- • Richards argues that falling interest rates over the past decade have left many pension sponsors with large deficits despite strong global market performance, and that sponsors must balance bond-like liability-hedging assets against equities.
- • Richards advises a long-term strategic allocation focus over short-term tactical trading, stating that strategic allocation decisions generally have the largest impact on performance.
- • Richards says outsourced CIO (OCIO) models and outsourcing of sub-strategies such as private markets and alternative credit can deliver economies of scale, diversification, and governance, with US corporate pension obligations of about $3 trillion cited as a backdrop.
Summary
CIO's 2019 Knowledge Brokers profile features Jason Richards, a more than 20-year consulting veteran at Willis Towers Watson who works with large-scale defined benefit pension plans through the firm's Retirement Risk Management Group. The role covers plan funding, liability transfer options, and the investment of plan assets. The profile cites Willis Towers Watson's assets under advisement of over $2.3 trillion and AUM of over $120 billion.
Richards told CIO that many sponsors face large pension deficits because of falling interest rates over the last decade, despite strong global market performance. Because changes in interest rates are the primary driver of year-over-year revaluations of obligations, pension investors must balance assets that move with liabilities, such as bonds, against assets expected to outearn liabilities, such as equities. He said the time needed to eliminate a deficit must be weighed against expected cost and risk, which leads to a wide range of approaches.
Richards said macro events, including the US-China trade war and policy announcements made via presidential tweets that have driven equity volatility, have limited influence on his investment advice. He said his approach emphasizes long-term strategy over short-term tactical adjustments and that high-level strategic allocation decisions generally have the biggest impact on performance.
On outsourcing, Richards said more sponsors are seeking diversification beyond global equities and adopting glide paths that require more frequent monitoring. He said an outsourced CIO model can supply governance and expertise, often at reduced overall cost, for sponsors with limited internal resources. He also said investors with large internal staffs may outsource specific asset classes, citing private markets and alternative credit, where scale and scope can add value. He noted that a $100 million alternative allocation is hard to diversify efficiently on its own but can gain access to broader diversification and manager research within a larger pool.
Richards also distinguished defined benefit plans from endowments and foundations. For frozen plans fully funded through liability transfers or immunization, he said surplus gains may have limited economic value while losses must be replenished, creating a severe risk asymmetry. Richards concluded that pension investment decisions, given roughly $3 trillion in US corporate pension obligations, will have far-reaching implications for corporate finances and capital markets. The profile was written by Steffan Navedo-Perez.
Richards told CIO that many sponsors face large pension deficits because of falling interest rates over the last decade, despite strong global market performance. Because changes in interest rates are the primary driver of year-over-year revaluations of obligations, pension investors must balance assets that move with liabilities, such as bonds, against assets expected to outearn liabilities, such as equities. He said the time needed to eliminate a deficit must be weighed against expected cost and risk, which leads to a wide range of approaches.
Richards said macro events, including the US-China trade war and policy announcements made via presidential tweets that have driven equity volatility, have limited influence on his investment advice. He said his approach emphasizes long-term strategy over short-term tactical adjustments and that high-level strategic allocation decisions generally have the biggest impact on performance.
On outsourcing, Richards said more sponsors are seeking diversification beyond global equities and adopting glide paths that require more frequent monitoring. He said an outsourced CIO model can supply governance and expertise, often at reduced overall cost, for sponsors with limited internal resources. He also said investors with large internal staffs may outsource specific asset classes, citing private markets and alternative credit, where scale and scope can add value. He noted that a $100 million alternative allocation is hard to diversify efficiently on its own but can gain access to broader diversification and manager research within a larger pool.
Richards also distinguished defined benefit plans from endowments and foundations. For frozen plans fully funded through liability transfers or immunization, he said surplus gains may have limited economic value while losses must be replenished, creating a severe risk asymmetry. Richards concluded that pension investment decisions, given roughly $3 trillion in US corporate pension obligations, will have far-reaching implications for corporate finances and capital markets. The profile was written by Steffan Navedo-Perez.
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