Robin Diamonte, CIO of UTC is on
CIO’s Power 100 list for 2018.
From Nuclear Subs to Life Income Strategy
Since 2013, Robin Diamonte has been CIO of United Technologies, where she has forged a reputation as a superbly innovative financial manager. Prime example: introducing a life income strategy, including annuities and other products, as a future income source for UTC’s retirees.
A one-time electrician who served on a nuclear submarine, she moved into the financial world working for what’s now Verizon, before coming to UTC in 2004 to manage the pension program. Today, Diamonte oversees $50 billion in global retirement assets, and also serves as a member of the advisory committee at the Pension Benefit Guaranty Corp. and as a director at asset research firm Morningstar.
CIO: What are some of the recent accomplishments you are most happy to have achieved as a CIO?
Diamonte: UTC’s US plan is finally fully funded at 104% and 100% on a global basis. We also have been able to take significant risk out of the plan while still maintaining a higher expected return of assets. Our LDI program contains an asset class we call structured duration. Structured duration is a portable alpha program where alpha from market-neutral hedge funds is ported over US interest rates via liquid exchange-traded futures contracts. We will use this product as we de-risk and shift assets from structured equity to structured duration instead of only buying additional corporate bonds. This is a somewhat unique LDI strategy that diversifies our exposure to credit and can provides higher alpha (YTD it has added 400 bps over credit spreads).
Last October, we entered into strategic partnerships with Neuberger Berman and Wellington. The goals of these portfolios are for the managers to construct a well-diversified nimble portfolio using the vast resources they have across their asset management platforms to meet our objectives of 8.0-8.5% return and 10-12% volatility targets. Combined with our two risk parity strategies, these four portfolios act as an alternative to a typical strategic institutional asset allocation and have provided alpha relative to the plan’s portfolio without them.
Outside of UTC, I have been chair of the PBGC advisory committee since 2013. The PBGC just announced that the single employer plan has closed the deficit gap. The committee has worked with staff to modify the investment policy and introduce LDI as funded status improved. The fund is now hedging a significant portion of its interest rate risk and a glide path policy has been developed so that the fund can move toward immunization as funded status gets to a self-sufficiency level.
I also continue to be a board member of CIEBA (an industry organization of corporate CIOs). I am chairing a newly created public policy committee put into place to put more structure around our public policy advocacy.
Finally, I am excited to participate on the advisory committee for Aspen Leadership Forum on Retirement Savings. Its focus is on expanding retirement security through public and private innovation. More than 80 policymakers, financial services executives, industry association leaders, academics, and consumer advocates met last year. We are planning our third annual event for next spring.
CIO: Are there any key goals you are looking forward to in the near future?
Diamonte: There is a good probability that UTC will break up into three companies. My goal is to create state-of-the art DC plans for the two new companies. If we do decide to transfer pension liabilities to the spin companies, my goal would be to set up an efficient and effective investment policy, investment manager line-up, LDI program, and pension governance structure. I have incredible talent in my organization that could run those funds, if needed.
My future goal for UTC is to get it to a funding level where we can effectively immunize the plan from all market and longevity risks.
CIO: What are some of the key challenges the industry faces?
Diamonte: The challenges depend on what part of the industry. For corporate pension plans, the challenge will be to de-risk effectively as they become fully funded. This is easier said than done for several reasons; it requires companies giving up pension income and is a hit on EPS. Also, if LDI continues on its current trajectory and supply doesn’t increase, there may be a shortage of high-quality bonds to de-risk.
In DC plans, it will be difficult to get widespread adoption of guaranteed Lifetime Income options unless certain safe harbors are provided by the Department of Labor. Innovation in the DC world will also be hampered going forward by litigation unless something changes where plan sponsors are not afraid to be a unique player in the industry.
CIO: What aspects about the future of the industry do you find most promising and exciting?
Diamonte: I haven’t seen many truly new and innovative products in the industry in a while. I think technology and big data will change our industry. Active managers will hopefully be able to find unique ways to exploit data and add alpha. The use of fintech will be disruptive in our industry, and I am excited to see how the next generation will access investments and create new asset classes like cryptocurrencies.