Key Takeaways
- • Nokia USA shed its in-house pension investment staff and hired Mercer Investments to oversee its U.S. defined benefit portfolio, according to Institutional Investor.
- • Mercer took control of Nokia's $13.8 billion pension plan and Lucent Technologies' $4.2 billion plan in October, and also serves as fiduciary for Nokia's $9 billion 401(k) plan.
- • The mandate reflects a broader trend of corporate pension outsourcing, following Goldman Sachs' takeover of UPS's $43.4 billion DB portfolio, NEPC's assumption of Eastman Kodak's $7 billion DB plan, and Shell's hiring of BlackRock.
- • Mercer has expanded its OCIO business by acquiring Vanguard's U.S.-based OCIO shop, which gives it a substantial boost in scale.
- • Recruiters and industry observers describe corporate pension management as low-margin, liability-driven work with limited upside for managers, while OCIOs benefit from scale and asset growth.
Summary
Nokia USA has shed its in-house pension investment staff and handed oversight of its U.S. defined benefit portfolio to Mercer Investments, according to Institutional Investor. Mercer took control of Nokia's $13.8 billion pension plan and Lucent Technologies' $4.2 billion plan in October, while also serving as fiduciary for Nokia's $9 billion 401(k) plan. Nokia's investment team members were offered comparable positions at Mercer to continue managing the company's retirement assets. The transition comes as CIO Jeanmarie Grisi prepares to retire in March.
The move is part of a growing trend of corporate pension outsourcing. Goldman Sachs previously assumed management of UPS's $43.4 billion defined benefit portfolio, NEPC took control of Eastman Kodak's $7 billion DB plan, and Shell hired BlackRock to take over its pension assets. Mercer, which has been aggressively building its OCIO business, recently acquired Vanguard's U.S.-based OCIO shop, substantially increasing its scale.
Industry participants characterize corporate pension management as structurally unattractive for asset managers. Executive recruiter Charles Skorina told Institutional Investor that corporate pensions are "just bonds with a little bit of stocks" and that "you don't make much money off of that." Brad Alford, founder of OCIO search firm Alpha Capital Management, said that outsourcing is becoming more common because of the costs of maintaining in-house staff. He noted that many of these plans are fully funded and focused on fixed income, leaving limited opportunity to add value. Skorina also said managing a corporate pension carries little career upside.
For OCIOs, however, the economics are more favorable. Recruiters say these mandates are profitable, albeit at low margins, and Alford described OCIOs as "one of the most profitable and scalable businesses" he has seen, noting that private equity firms are buying OCIOs rapidly. Corporate pension management centers on liability matching and bond-heavy portfolios, requiring only a small team to monitor bonds and interest rates.
The move is part of a growing trend of corporate pension outsourcing. Goldman Sachs previously assumed management of UPS's $43.4 billion defined benefit portfolio, NEPC took control of Eastman Kodak's $7 billion DB plan, and Shell hired BlackRock to take over its pension assets. Mercer, which has been aggressively building its OCIO business, recently acquired Vanguard's U.S.-based OCIO shop, substantially increasing its scale.
Industry participants characterize corporate pension management as structurally unattractive for asset managers. Executive recruiter Charles Skorina told Institutional Investor that corporate pensions are "just bonds with a little bit of stocks" and that "you don't make much money off of that." Brad Alford, founder of OCIO search firm Alpha Capital Management, said that outsourcing is becoming more common because of the costs of maintaining in-house staff. He noted that many of these plans are fully funded and focused on fixed income, leaving limited opportunity to add value. Skorina also said managing a corporate pension carries little career upside.
For OCIOs, however, the economics are more favorable. Recruiters say these mandates are profitable, albeit at low margins, and Alford described OCIOs as "one of the most profitable and scalable businesses" he has seen, noting that private equity firms are buying OCIOs rapidly. Corporate pension management centers on liability matching and bond-heavy portfolios, requiring only a small team to monitor bonds and interest rates.
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