2019 Industry Innovation Awards

Corporate Defined Benefit Pension Plan Below $20 Billion

Delta Air Lines

Jonathan Glidden, Chief Investment Officer
Jonathan Glidden
Art by Nigel Buchanan

When Jon Glidden took over Delta Air Lines’ retirement program in late 2011, the defined benefit plan was woefully underfunded. It sat at 38% funded, in 2012. That meant the pension liabilities were four times larger than the company’s market capitalization at the time.

Nowadays, as managing director for Delta Air Lines’ pension program, he and the firm have accomplished a lot: The DB plan is at the 68% level and headed for 73%. As of year-end 2018, according to its filing with the Securities and Exchange Commission, the plan had assets totaling $13.46 billion. Glidden says the goal is to be above 90% funded by 2025.

This performance illustrates why Glidden, who oversees both DB and defined contribution plans, richly deserves the Innovation Award for plans below $20 billion. “I love what I do,” he says.

Glidden uses portable alpha—a strategy that invests in securities not included in the market index from which his portfolio’s beta (measuring how much it moves with the market) is drawn. Delta’s portfolio employs derivatives for diversification. “This lets us focus on the less-efficient part of the market,” Glidden notes. It combines index derivatives with cash and hedge funds to beat benchmarks by 250 basis points. Plus, there’s an emphasis on market neutral hedge funds.

Given its small investing staff, Delta makes heavy use of outside managers. In addition to primary managers who run its money directly, Glidden also employs secondary and co-investing strategies, which allows the fund to spread risk exposure.

The support of Delta, the plan sponsor, has been vital to the plan’s progress. “Deep integration with the sponsor” has been a constant priority, Glidden points out.  He defines success consistently to the plan’s investment committee. “They must be comfortable with our long-term strategy,” he says.

Before Glidden arrived at Delta, the carrier took a tour through Chapter 11 (2005-07). But the company, along with others in the airline industry, has recovered well and is solidly profitable. One happy consequence is that the sponsor has contributed  over $10 billion to the DB plan, which was a big help. The emergence from bankruptcy gave the Delta plan some flexibility “to work our way out of” its large unfunded liability, he notes.

Certainly, Glidden was well-prepared for his job. He served as director of portfolio construction and manager research at Wilmington Trust and director of investment analysis at the Emory University Endowment. At his current position, he says, “I’m lucky here. Pensions are very meaningful to Delta.”

—Larry Light

Corporate Defined Benefit Pension Plan Below $20 Billion Finalists

  1. Exelon
    Doug Brown
  2. 3M Investment Management Corp.
    Dennis Duerst
  3. CenturyLink Investment Management
    Kathleen Lutito
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