The Rise of Mega-Defined Contribution

From aiCIO magazine's April issue: Kip McDaniel on the emerging DC giants, and the unassuming group behind their ascendance.

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On a cold night in early December, in a Ritz Carlton ballroom on the southern tip of Manhattan, chief investment officers from across the globe gathered for dinner. Scattered across 30 tables and interspersed with asset managers and the odd consultant, ostensibly they were there to collect awards. For most of them the real purpose, however, was to socialize—to spend time with peers they may see only once a year, to compare notes, and to ponder the state of their industry. And yet for one group of CIOs, the dinner was more of a continuation of a constant stream of contact.

Unlike many other CIOs, this group knows each other's problems intimately. They are familiar with each other's portfolios, relied-upon lieutenants, and investment board issues. They know each other's spouses, their alma maters, the schools their children attend, and where they vacation. As the dinner progressed, their assigned seats—centered around two managers shared by most, Bridgewater Associates and NISA Investment Advisors—became more suggestion than obligation. Increasingly they stood off to the side, gossiping like the close friends they are.

"Did you see who got up on stage to get Prudential's award?" one was overheard asking a colleague. "That woman from that bank, the one pushing PRT [pension risk transfer] on my CFO."

"Her and about six others," another responded, chuckling.

"It takes a village…."

These CIOs are not the rock-star endowment managers frequently asked to be talking heads on CNBC. They are not the public pension heads who band together against a hostile press and creeping conservative criticism. They aren't the sovereign wealth leaders, sought after by every asset management unit on earth. They are the CIOs of America's corporate pension systems. And of all these groups, they are the tightest knit, brought together by regulation, interest rates, and, increasingly, their accelerating involvement in the defined contribution (DC) plans that now dominate the retirement landscape.

"So, this dinner is only focused on defined benefit [DB]?" one CIO asked the host of the event as the evening moved from ballroom to bar. For the pensions in attendance, at least, it was. "That's a pity. What we're doing with our DB plan is pretty normal. What we're doing with our DC plan, though—that's the really challenging, the really interesting stuff."

Another corporate CIO, wine in hand, agreed. "You really should look into that stuff. Actually, you really should talk to CIEBA."


CIEBA, unsurprisingly, is not a person. It is a group—the Committee on Investment of Employee Benefit Assets—the organization that represents America's largest corporate pension plans and the industry group under whose auspices they most frequently interact.

It was with the purpose of "talking to CIEBA" that two months later, in early February, three dinner attendees-Robin Diamonte, Ray Kanner, and Kathy Lutito-met again, this time on the 21st floor of a non-descript Manhattan office building. Diamonte had travelled from Hartford, Connecticut; Kanner from Rye, New York; Lutito from Denver, Colorado. Despite being the lead defined benefit pension managers at their organizations—United Technologies, IBM, and CenturyLink, respectively—and overseeing, in total, nearly $100 billion in DB assets, they were not there to speak about investing this capital. 

Instead, they were there as the chair and two vice-chairs of CIEBA, and they were talking about how, under pressure from events far beyond their control, the organizations they lead are changing. Defined benefit plans are closing and de-risking. Increasingly, politicians in Washington are involving themselves in retirement issues. Defined contribution is ascendant.

And CIEBA that existed 10 years ago is no longer.

Change, of course, comes at a measured pace to an organization that meets four times a year—three times for a core group of working group members, once for all members—and represents more than 100 organizations (largely Fortune 500 companies), controlling north of $1 trillion in assets across DB and DC plans. Like the organizations that it represents, CIEBA is a cruise ship: it can turn, but it turns slowly and deliberately.