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A recent survey of large corporate plan sponsors by Institutional Investor Conferences showed that 60 percent of respondents intend to curtail, phase out or terminate their firm’s DB plans. Additionally, 43 percent of that same pool of respondents listed “changes in laws and regulations” as their top concern for the next year. Accordingly, Institutional Investor’s Corporate Funds Symposium will address these issues within the context of what is necessary and what needs to be decided in order to break with the paradigm of the past and address the issues of the present.
For instance, what retirement benefits will take the place of the DB plans being curtailed, phased out, or terminated?
Isn’t DB a better and less expensive option, if properly managed? How are firms coping with the potential impact reduced benefits—and
thereby ultimately reduced compensation—will have on their ability to retain key talent and intellectual capital, especially as labor markets tighten?
Can broken plans be fixed? Are there plans that can be made workable with improved investment
practices (possibly involving a whole scale rejection of the classic 60/40 or 70/30 asset allocation model)?
Aren’t the tools out there for well-managed plans to earn assets meaningfully in excess of the cost of capital? Are plan sponsors taking full advantage of the full palette of investments available to earn sufficient returns?
Or do legacy costs and other aspects of many traditional defined benefit plans make them fundamentally and insurmountably unviable? Can investment performance make up only so much of the difference?
This day-and-a-half program will be an intensive seminar for investment professionals from the larger US corporate pension plans. While discussion of the various investment strategies and the role of different asset classes will be threaded throughout the program, the context for this meeting will be a discussion of the crisis facing US corporate funds. Recognizing that the eventual solution to this crisis is multifold, the Symposium’s program will take a holistic view of the pensions crisis and will examine possible solutions in the form of plans’ earning higher returns as well as in addressing the ongoing viability of retirement benefits for American workers.
Invited guest speakers will address the larger impact of the pensions crisis on the corporate parents of these funds, such as ramifications for balance sheets and credit ratings, rationalizing actuarial assumptions, and—for many companies—dealing with legacy costs and how defined benefit pension plans can ultimately hinder competitiveness.
Preliminary program as of May 3, 2007
Advisory Board
Janice Dollmann Director, Funds Management
Koch Industries
Robert HunkelerVice President, InvestmentsInternational Paper Company
Theodore Economou, CFAAssistant TreasurerITT Corporation
William RauhDirector of Pension FundsJohnson & Johnson
Karin E. Brodbeck, CFADirector, Retirement InvestmentsNestle Business Services
William DonovanDirector-External Investments and Treasury OperationsPartners Healthcare System Inc.
Michael AllanVice President and TreasurerPraxair, Inc.
David IsaacsonTreasury ManagerS.C. Johnson & Son, Inc.
Robin DiamonteChief Investment OfficerUnited Technologies Corporation
Sponsoring Organizations
AXA Rosenberg Investment ManagementBear Stearns Asset ManagementCitigroup Alternative InvestmentsCredit Suisse Asset ManagementInvestec Asset ManagementJanusINTECH Institutional Asset ManagementPermal Group Inc.Putnam InvestmentsPyramis Global Advisors, a Fidelity Investments CompanyQuantitative Management Associates, LLCUBS Global Asset Management
Monday, May 14
7:20-8:00am Registration and Continental BreakfastLibrary (Second Floor)
8:00-8:05am Welcome and Opening RemarksLincoln Hall (Second Floor)
Symposium Chairman:Dwight KadarFormer Director, Investment ManagementCooper Industries Ltd.
8:05-9:00am Panel Session: The Future Is Now Out of Plan Sponsors’ Control: Enter
the CFOs and the Regulators_______________________________________________
Institutional Investor’s Corporate Funds SymposiumSucceeding by Breaking with the Paradigm of the Past
May 14-15, 2007 ~ Union League Club, New YorkPage 3 of 13
Lincoln Hall
Moderator:Dwight KadarFormer Director, Investment ManagementCooper Industries Ltd.
Panelists:Warren L. MacholSenior Managing DirectorBear Stearns Asset Management
Stephen McCaffreySenior Counsel for PlansKeySpan Corporation
Drew LawtonPresident and Chief Executive OfficerPyramis Global Advisors, a Fidelity Investments Company
David Hammerstein, CFAPrincipalYanni Partners, Inc.
Plan sponsors have never worked in a vacuum. They’ve always been obliged to listen to their beneficiaries, their corporate parents, and sometimes their consultants. Increasingly, however, more influence than ever is being given to CFOs, CEOs, actuaries, and regulators. This panel will set the stage for the following sessions by positing that the future is increasingly out of the control of plan sponsors and what this means to our attendees.
9:00-9:30am Presentation: The Magic of Pension AccountingLincoln Hall
Presented by David Zion, CFA, CPAUS Accounting and Tax Policy AnalystCredit Suisse Asset Management
The smoothing mechanisms in the accounting rules and funding rules protected companies from their pension plans for a long time, making the plans appear almost risk free. The deteriorating health of the plans in 2001 and 2002 made it clear they’re not. Clearly pension plans are exposed to a number of risks, including inflation, longevity, liquidity, and many are making huge bets on interest rates. As the rules change (FAS 158 brought the pension plans funded status on balance sheet for the 2006 year end, the Pension Protection Act will start affecting pension funding requirements in 2008, and the FASB should begin phase 2 of its pension project this year) and become more mark to market oriented. the risks in the plan become
_______________________________________________Institutional Investor’s Corporate Funds Symposium
Succeeding by Breaking with the Paradigm of the PastMay 14-15, 2007 ~ Union League Club, New York
Page 4 of 13
even clearer. That has more companies at least thinking about better managing the risks in their pension plans, possibly sparking significant changes in behavior, including three big ones: (1) more plans being frozen; (2) plans being terminated; and (3) changes in asset allocation. Remember, defined benefit pension plans are still a $4 trillion industry in the U.S. that includes both corporate and public pension plans. Changes in behavior by pension plan sponsors could have far reaching macro and capital market implications.
9:30-10:00am Coffee BreakLibrary
10:00-10:45am Panel Session: The Legislative and Regulatory Context for the Decisions
Plan Sponsors are MakingLincoln Hall
Panelists:Christian E. Weller, Ph.D.Senior EconomistCenter for American Progress
James M. Delaplane Jr., Esq.PartnerDavis & Harman LLP
Dallas L. SalisburyPresident and Chief Executive OfficerEmployee Benefit Research Institute
As the previous session argued, much of what corporate plan sponsors are dealing with today is being driven by powers increasingly beyond their control. Or at least it seems that way sometimes. This session will deliver insiders’ perspectives on that bastion of out-of-controllness, Washington, DC, and what those meddling politicians are doing that will change your lives, the lives of your employees and retirees, and your corporations.
10:45-11:15am Presentation: Trends in the Institutional MarketplaceLincoln Hall
Presented by:Michael MaquetManaging DirectorQuantitative Management Associates, LLC
It is often said that the markets are driven by fear and greed. This discussion will examine the factors that are impacting institutional investors' decisions, and will look at some of the resulting behaviors and product demand that arise as a consequence.
_______________________________________________Institutional Investor’s Corporate Funds Symposium
Succeeding by Breaking with the Paradigm of the PastMay 14-15, 2007 ~ Union League Club, New York
Page 5 of 13
11:15-11:45am Presentation: Engineering Quantitative Tools for Hedge Fund Risk
Management and Structuring PortfoliosLincoln Hall
Presented by:Julian ShawHead Risk ManagerPermal Group
Hedge funds are generally considered to present unique analytical challenges for structuring portfolios and managing risk. Further, serial correlations, fat tails, abnormal distributions, a lack of data, problems with linear optimizers and other issues complicate the task. This session will explore engineering techniques that when applied to quantitative tools can respond to these difficulties.
11:45-12:15pm Presentation: Asset-Liability Solutions for Defined Benefit Pension
PlansLincoln Hall
Presented by:Aaron H. Meder, FSA, EAHead of Asset-Liability Investment Solutions, Americas and
DirectorUBS Global Asset Management
Defined benefit pension solvency issues, along with pension accounting and funding reform are bringing increased transparency and scrutiny to corporate balance sheets—and are causing many to ask the question, "What should I do with my pension plan?” The answer to this question is multifaceted, and requires a holistic view of the sponsoring entity's financial situation, goals and human resource policies. What better ways are there of managing the funding ratio volatility of plans while simultaneously focusing on the return generation required to defease future liabilities? This session will discuss steps that can be taken to make plans more efficient relative to their liabilities and show how a client’s unique situation drives the appropriate and most efficient solution for them.
12:15-1:00pm Facilitated Working GroupsLincoln Hall
Facilitator:Eddie DeschapellesSenior Vice PresidentPermal Group
_______________________________________________Institutional Investor’s Corporate Funds Symposium
Succeeding by Breaking with the Paradigm of the PastMay 14-15, 2007 ~ Union League Club, New York
Page 6 of 13
Aren’t the tools out there for well-managed plans to earn meaningful returns in excess of the risk-free rate? Are plan sponsors taking full advantage of the full palette of investments available to earn sufficient returns? So what are these solutions? Learn—by speaking with them—what your peers have done. Discussion will include the following issues:
Do you link your actuarial liability analysis to your asset allocation? How are asset allocation decisions optimized? Who is responsible for these allocation decisions? The staff or the
trustees of the plan? How much do you rely on consultants for these decisions? Are you using alternatives, LDI, portable alpha to best effect?
1:00-2:15pmLunch with Guest Presentation: Pension Asset and Liability Management from a Group Treasury Perspective: A Case
StudyMary Murray Room (Fourth Floor)
Presented by:Niels MadsenFormer Pensions ManagerElectrolux AB
Since international accounting standards rewrote the rule book, heads of corporate finance have been grappling with the pension problem. So, what have they come up with? What solutions have they identified? In this case study, we will examine how corporate treasuries might see the pension issue differently from investment staff and committees.
2:15-2:45pmGuest Presentation: Town Hall Meeting on FAS 158 and Other Issues
Lincoln Hall
Presented by:George J. BatavickBoard Member Financial Accounting Standards BoardFormer ComptrollerTexaco Inc.
This expert will make himself available to answer delegates’ questions about the accounting and attendant issues that are having such an enormous impact on corporate plans today. He will provide us with of-the-moment insights into FASB’s current and future priorities as they relate to the accounting for pension plans, including Phase II of the Board’s pension accounting project.
2:45-3:15pmPresentation: To be determinedLincoln Hall
_______________________________________________Institutional Investor’s Corporate Funds Symposium
Succeeding by Breaking with the Paradigm of the PastMay 14-15, 2007 ~ Union League Club, New York
Page 7 of 13
Presented by:Leo M. TilmanChief Institutional StrategistBear Stearns & Co.
3:15-3:45pmPresentation: Alpha Investing: Promises and PitfallsLincoln Hall
Presented by:Vineet BudhrajaDirector, Global ResearchCitigroup Alternative Investments
Alpha beta separation can be extremely powerful. In theory, it enables investors to choose the best sources of alpha, and reduce risk by combining multiple alpha sources within a portfolio. Unfortunately, few investors have realized these benefits in practice, and many have implemented alpha beta separation in a limited fashion. In this session, we examine some of the practical challenges investors face when separating alpha and beta, and describe new tools that they can use to extract more value from the alpha portion of their portfolios.
3:45-4:15pmPresentation: Today’s Pension Investing Playbook: Key Strategies for a
New EraLincoln Hall
Presented by:Peter ChiappinelliSenior Vice President, Strategic ServicesPyramis Global Advisors, a Fidelity Investments Company
U.S. corporate and public pensions are wrestling with new legislation, accounting standards, reporting requirements and funding status questions. This session will present the results of the 2007 DB survey, which polled DB plan sponsors in Q4 2006 to assess the impact of these decisions and provide a comprehensive look at pension investing strategies in a new era.
4:15-4:45pmCoffee BreakLibrary
4:45-5:15pmPresentation: How Human Behavior Creates Inefficient Markets
Lincoln Hall
Presented by:James HandSenior Portfolio Manager, Head of 4Factor Global Equity
Research_______________________________________________
Institutional Investor’s Corporate Funds SymposiumSucceeding by Breaking with the Paradigm of the Past
May 14-15, 2007 ~ Union League Club, New YorkPage 8 of 13
Investec Asset Management
In this session, the speaker will look at the issue of market efficiency and discuss how investor psychology helps to create inefficient markets. Through some very interesting interactive examples, he will show how all of us react to information and commit behavioral investment errors. Finally, he will address the key question of whether these behavioral inefficiencies can be consistently exploited from an investment perspective to generate alpha.
5:15-6:00pmPanel Session: Can DB Plans Be Taken Off Life Support?Lincoln Hall
Moderator:Matt Stroud, CFA Practice Leader, Greater New York Watson Wyatt Investment Consulting
Panelists:Thomas R. O’ConnorAssistant TreasurerThe Aerospace Corporation
Thomas C. Deas, Jr. Vice President & Treasurer FMC Corporation
Michael AllanVice President and TreasurerPraxair, Inc.
It might be argued that some plans, whether due to legacy costs or other issues, are not fit to survive, while other plans can be made viable with the appropriate asset allocation, investment strategies, and willingness to take risks within certain parameters. This session will discuss the factors that are within plan sponsors’ ability to control and which may determine the immediate, medium-, and long-term viability of their plans. One of the panelists will argue that it’s basically for naught for many corporate plans.
6:00pm Departure for cocktail reception and dinner at Country
Some things are worth the wait, and according to The New York Times, the restaurant Country – “inanely named, impressively realized” – is among them. The article went on to describe the restaurant as a first-rate experience, united and distinguished by (its) classically French inclinations and unusually expert cooking. Join us, and more importantly your colleagues and associates, for an incomparable evening at one of New York’s newest and finest establishments.
Tuesday, May 15_______________________________________________
Institutional Investor’s Corporate Funds SymposiumSucceeding by Breaking with the Paradigm of the Past
May 14-15, 2007 ~ Union League Club, New YorkPage 9 of 13
8:00-9:00am Breakfast with Panel Session: Managing Global Pension Schemes:
Challenges for US Multinational FirmsLibrary and Lincoln Hall
Moderator:David IsaacsonTreasury ManagerS.C. Johnson & Son, Inc.
Panelists:Jim DwyerVice President, Worldwide Benefits, Health and SafetyAmerican Express
Niels MadsenFormer Pensions ManagerElectrolux AB
Jack MillerChief Client OfficerGeneral Motors Asset Management
Peter KraneveldInternational Pensions ExpertFormer Chief EconomistPGGM
If a US multinational company historically sponsored a DB retirement plan for its US workforce, it also likely sponsors similar DB retirement plans in many of its non-US operations. Improving the management and oversight of these non-US plans has become critical in light of shifts in the pension landscape including changes in pension accounting (i.e., FAS 158, FRS 17, IAS 19) and local pension regulation, as well as other factors such as SarBox, mortality changes, and HR strategy migration that favors DC plans over DB plans. US multinational firms must decide how best to coordinate a variety of pension management activities including actuarial valuation work, funding choices, investment management and consulting efforts, as well as custodial and other administrative areas.
9:00-9:45am Panel Session: An Action Plan for Corporate Funds’ Investment Success
Lincoln Hall
Moderator:Paul C. MorganSenior Investment ConsultantEvaluation Associates, LLC
_______________________________________________Institutional Investor’s Corporate Funds Symposium
Succeeding by Breaking with the Paradigm of the PastMay 14-15, 2007 ~ Union League Club, New York
Page 10 of 13
Panelists:David BeemanHead of Multi Alpha StrategiesCitigroup Alternative Investments
Joseph CherianManaging Director and Head of Quantitative Strategies GroupCredit Suisse Asset Management
Steve W. PaddonManaging Director, US InstitutionalInvestec Asset Management
Amy B. Walls, CFAManaging DirectorDirector, Strategic Research TeamPutnam Investments
Many corporate plan sponsors feel strongly that an adherence—overt or in disguise—to the classic 60/40 (or 70/30, if you will) allocation is one of the fundamental factors crippling US pension funds. This session will look at the ways that investors can improve the financial viability of their plans by investing better. Does this mean jettisoning the classic asset allocation model or can layers of portable alpha and other returns-enhancing strategies do the trick? At the same time, how can investors be smatter about beta (eg, reducing their reliance on equities, including more diversity, and using more leverage) as well as smarter about alpha (decoupling allocations to alpha and beta, utilizing alphas in combination in the same way beta allocations are made, and differentiating between alpha and what is really underlying beta).
9:45-10:15am Presentation: The Best of Both Worlds: Leveraging the Strengths of DB
for Your DC PlansLincoln Hall
Presented by:Christopher C. ThompsonManaging DirectorDirector, Defined Contribution Institutional BusinessPutnam Investments
Defined contribution plans and the tools available to them are evolving very rapidly. Specifically, they are increasingly including investment strategies and vehicles that have been reserved historically for DB plans. This trend is accelerating and provides an opportunity to increase our reliance on DC without being constrained by traditional structures. This session will
_______________________________________________Institutional Investor’s Corporate Funds Symposium
Succeeding by Breaking with the Paradigm of the PastMay 14-15, 2007 ~ Union League Club, New York
Page 11 of 13
explore the future of DC, specifically as it relates to taking the strengths of DB plans and incorporating them into this new framework.
10:15-10:30am Coffee BreakLibrary
10:30-11:00am Presentation: Why All Growth is Not Created EqualLincoln Hall
Presented by:Stephanie PierceSenior Vice President & Managing Director, Client Portfolio
ManagementJanusINTECH Institutional Asset Management
Growth alone does not lead to value creation; therefore, executives must consider the cost of that growth. Failing to do so will most likely lead to value destruction. Because investment capital drives growth and has an underlying costs, companies should seek to maximize the return on shareholder capital and the return on each incremental dollar of cash flow generated. This session will provide key insights into how the Return on Investment Capital (ROIC) metric can help identify a company’s sustainable, long-term value creation potential, and the benefits this can have for investors.
11:00-11:45am Panel Session: 130/30 StrategiesLincoln Hall
Moderator:Stephanie PierceSenior Vice President & Managing Director, Client Portfolio
ManagementJanusINTECH Institutional Asset Management
Panelists:Michael MaquetManaging DirectorQuantitative Management Associates, LLC
Thomas J. Digenan, CFA, CPANorth American Equity Strategist and Managing DirectorUBS Global Asset Management
Florian Weber Senior AssociateWilshire Associates Incorporated
With recent capital market returns below plan sponsors’ required rates of return—and the future not looking much brighter—what can plan sponsors
_______________________________________________Institutional Investor’s Corporate Funds Symposium
Succeeding by Breaking with the Paradigm of the PastMay 14-15, 2007 ~ Union League Club, New York
Page 12 of 13
do to improve the return on their pension assets? This presentation will examine one strategy that can increase returns without dramatic increases in a plans risk profile: The use of long-short equity strategies such as 130/30. This session will explore how these differ from an equitized long-short strategy as well as the benefits and risks of the strategy, differing investment styles, and the right mix of long and short positions. Ultimately, is 130/30 the most appropriate leverage ratio?
12:00-12:30pm Presentation: To be determinedLincoln Hall
Presented by AXA Rosenberg Investment Management
12:30-2:00pm Lunch with Guest Speaker: Lessons from the Corporate World to Us
TaxpayersMary Murray Room
Speaker:Thomas Mackell, Jr.ChairmanFederal Reserve Board of RichmondPresidentAssociation of Benefit Administrators
Media headlines show that the pension liability issues that corporations have been dealing with are now becoming a problem for public pension funds. Recent labor actions in New Jersey give evidence of the potential for these problems to grow as public employees expect rising benefits and taxpayers become increasingly hesitant about funding seemingly unlimited and rising liabilities. This speaker will provide his expert perspective on how the lessons learned in the corporate world might or might not be applied to the public world and the ramifications for us all.
2:00pm Symposium Concludes
_______________________________________________Institutional Investor’s Corporate Funds Symposium
Succeeding by Breaking with the Paradigm of the PastMay 14-15, 2007 ~ Union League Club, New York
Page 13 of 13
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