Federal Pension Watchdog Picks Advisors for Shift into Real Estate

The federal Pension Benefit Guaranty Corp. has revealed the investment firms that will act as its strategic partners in managing $2.5 billion in assets and supporting PBGC’s in-house investment staff. The firms are BlackRock, The Goldman Sachs Group and J.P. Morgan Chase, all headquartered in New York City. The PBGC guarantees payment of basic pension benefits to 44 million workers and retirees in more than 29,000 defined-benefit private-sector pension plans. “Our first criterion for prospective partners was an excellent track record in allocating to private equity and real estate,” PBGC director Charles Millard said in a prepared statement. “These firms are world leaders in both fields. Second, the firms had to demonstrate their commitment to a complete partnership. They will be required to share information among themselves….” Pensions & Investments reported last February that PBGC was drastically changing its previous liability-driven investment approach and reallocating nearly $15 billion to equities and alternative investments. Millard was quoted at that time as saying, “We have a very long time horizon. If you need to send your kid to college next year, you should be in bonds. If you’re making a payment to retirees in 20 years or so, then you should be more diversified.” The new policy, approved in February by the PBGC’s board, aims to put 45 percent of the $55 billion available for investment into equities, 45 percent into fixed income and 10 percent into alternative investments, including private equity and private real estate, according to P&I. The earlier scheme, in place for the previous four years, was 75 to 85 percent in fixed income and 15 to 25 percent in equities. The holder of a law degree from Columbia Law School, Millard was formerly a managing director with Lehman Brothers, Prudential Securities and Broadway Partners. As a cabinet official in the administration of New York City Mayor Rudolph Giuliani, Millard was president of the New York City Economic Development Corp. and chairman of the New York City Industrial Development Agency. He also served on the New York City Council.