2017 Industry Innovation Awards

Corporate Defined Benefit Pension Plan Below $5 Billion

Computer Sciences — CSRA Inc.

Brian Reed, Director, Retirement Plan Assets
(Falls Church, Virginia)

Art by Chris Buzelli

When Brian Reed joined Computer Sciences Corporation (CSC) as the director of retirement plan assets in 2012, the company was involved in a major restructuring. Reed was tasked with managing a $3.4 billion frozen plan that was still shaking off poor performance from the 2008 financial crisis. 

Upon arrival at his new post, he had two options: hope that a liability-driven investing (LDI) strategy could eventually get CSRA’s frozen pension to fully funded status, or go active and make sure goals were met. Reed went active, and hasn’t looked back.

Over the next three years, as CSC merged with SRA International to form CSRA, Reed led a transformation of the organization’s retirement assets, creating new defined benefit and defined contribution plans, and changing the investment strategy from passive to active. Reed reorganized the retirement program’s traditional 60/40 portfolio into a 31/23/25/21 plan, including allocations to stocks and bonds, as well as risk parity, global tactical, and alternative strategies.

According to Reed, the new asset mix allows the retirement program to manage longterm liabilities and simultaneously shore up the overall funded status. Reed carries the Chartered Alternative Investment Analyst (CAIA) designation, and relied on his training in alternatives to help the pension fiduciaries craft a portfolio that would meet both goals.

He also enlisted the help of the pension’s consultants to help members of the board understand what the portfolio redesign would mean.

“We worked closely with our advisors at NEPC and I leveraged information from the CAIA program to develop a comprehensive alts education package,” Reed says. “I think some pension committee members hear ‘hedge fund’ and immediately turn off, but if you are able to explain what specific hedge fund strategies do and how the plan will benefit from the allocation, it helps people get past what might be a negative bias.”

For Reed, an active approach made more sense than going to a LDI strategy, because he wasn’t convinced that bond yields were going to help the pension meet its return goals. Going active gave the investment team more options. The decision to make a significant allocation to active strategies also makes CSRA stand out against its peers—a move which Reed stands by.

CSRA’s active management plan is still relatively new—implemented a little more than two years ago with an initial six-year lockup for the hedge fund strategies. The investment team meets twice a year to assess the total portfolio and determine if any adjustments are needed.

The shift to an absolute return strategy enabled the plan to participate in the current bull market and add to the overall stability of the pension plans. Reed notes that anecdotally, his peers are starting to look at more innovative portfolios in the style of what he has accomplished at CSRA to keep momentum going.

“In some cases, plans with a lower funded status that adopt LDI have realized that getting to 105+% funded wasn’t helped by periodically reducing the return-seeking component,” Reed says. “Our committee decided to maintain the return-seeking portion in the plan, but developed a more diversified equity strategy than before so we are better prepared to run to the finish line.”

Corporate Defined Benefit Pension Plan Below $5 Billion Finalists

  1. DTE Energy
    Angela Buk
  2. Essentia Health
    Tom Crook
  3. Eastman Kodak
    Thomas Mucha
  4. NextEra Energy
    Jessica Wang
  • Kim LewFoundation
  • Tom JoyEndowment
  • Brian ReedCorporate Defined Benefit Pension Plan Below $5 Billion
  • Elisabeth BourquiCorporate Defined Benefit Pension Plan Above $5 Billion
  • Matt ClarkPublic Defined Benefit Plan Below $15 Billion
  • Vijoy ChattergyPublic Defined Benefit Plan ($15 Billion - $100 Billion)
  • Scott EvansPublic Defined Benefit Plan Above $100 Billion
  • David HolmgrenHealthcare
  • Bob WatsonDefined Contribution
  • Raphael ArndtSovereign Wealth Fund
  • Jagdeep BachherESG
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