This story has been updated to include Bridgewater’s Co-CIO Robert Prince.
On Dec. 12, CIO will celebrate Robin Diamonte, corporate vice president and chief investment officer of UTC, with a Lifetime Achievement Award in recognition of her contributions to the industry.
It’s no secret that Diamonte has been one of the most innovative CIOs. As we canvassed the CIO universe for the names of the most respected CIOs in the business for the Lifetime Achievement Award, Diamonte’s name continuously came up—although she’s nowhere near retirement—as one of the most intelligent, savvy CIOs who truly cares about her beneficiaries.
Case in point, upon hearing that she’ll be given CIO’s Lifetime Achievement Award, Robert Prince, co-CIO of Bridgwater commended her on her leadership, her contributions “and for being a role model to many.” He noted, “For more than 20 years Robin has been among our smartest, most innovative clients and over time emerged as a key leader in the global pension industry. She has that rare combination of abilities; the vision to see what could be and the analytical and execution abilities to make it a reality.”
A Career with a Mission
At the start of her finance career in the 1990s, when she saw that pensions were vanishing, Diamonte made it her mission to help find practical solutions for the average worker to retire in comfort. As a result, she constantly sought answers through networking and chairing industry groups so that she could learn from her peers. Early to liability-driven investing and early to considerations of mortality risk, now Diamonte is often the go-to CIO when it comes to walking the fine line of being both fiduciary and corporate CIO. She is an advisor to officials from the White House and Department of Labor, was appointed by President Obama to the Pension Benefit Guaranty Corporation (PBGC) Advisory Committee on retirement investing considerations in 2013, former chair of the Committee on Investments of Employee Benefits Assets (CIEBA), is on the advisory committee for Aspen Leadership Forum on Retirement Savings (focusing on expanding retirement security through public and private innovation), and is considered one of the strongest voices for both beneficiaries and corporate pension funds in the industry.
This year has been quite a whirlwind for Diamonte, as her company spins off Otis and Carrier while keeping the vast majority of its liabilities, (including the more complicated in the UK and international areas). She headed the pension due diligence behind her company’s merger with Raytheon, after helping to onboard the acquisitions of aircraft components maker Goodrich Corp (2012) and aerospace company Rockwell Collins (2018). She was on the board at Morningstar as it bought the global credit rating agency DBRS. Her UTC fund of defined benefit and defined contribution assets is due to swell from $66 billion to $100-plus billion, making it one of the largest corporate plans in the United States as the company sorts through how to align the benefits.
“The good news is, Robin will be leading us through this process, and I think she’s more capable than most to handle all of the changes that are coming,” said UTC CEO Gregory Hayes.
The UTC fund’s return has been in the top decile for one, three, five, and 10 years compared to the Wilshire Trust Universe Comparison Service (TUCs) universe. Yet Diamonte’s approach is not simply to be ahead of her benchmarks. In fact, when she took her CIO post at UTC, she discussed whether benchmarks should be her sole goalposts.
If the investment team’s performance was tethered to the benchmark, she argued, the only thing it would be trying to do was search for the best managers and try to beat the benchmark. That meant that if the S&P was down 10% and the fund beat its benchmarks by only being down 8%, it would be considered a success, but that wouldn’t be what was important to the underfunded plan. “What the company wanted was strategy and ideas on how to save on pension costs, how to close the deficit and improve funded status and ways to reduce volatility,” Diamonte told CIO.
Instead, she sought to understand the needs of the entire company and also help the 200,000+ beneficiaries as a fiduciary with the type of empathy that allows her to tread the fine line of helping both sides of the company.
As one speaks with her, one feels listened to, as if she has a finely tuned understanding of people from all walks of life. Early in her career, before she earned her MBA, Diamonte was a working-class daughter of a toll booth operator (mother) and seat upholsterer (father) from Connecticut. She had worked as an engineer on a nuclear sub, gone back to earn her engineering degree, and worked in telecommunications while earning her MBA.
Serendipitously, just as she was completing her MBA, she found herself supervising the hardware and software of the computers in T. Britton (“Britt”) Harris’ pension office when he was CIO at then GTE (now Verizon). In 1994, she developed a fully integrated information delivery system for investment research, record keeping, pricing, and analytics. She asked Harris if she could work in his research department, and discovered her true calling.
Harris promoted her to research manager, and eventually, managing director and co-head of company-directed assets.
When Harris learned CIO would be giving Diamonte a Lifetime Achievement Award, he wrote in an email, “Robin Diamonte has it all. She is a terrific leader and a great investor. Her lifetime achievements are enormous.”
She worked with Harris for 10 years, and also began a relationship with Robert Prince of Bridgewater around the hedge fund’s All Weather Fund.
In 2004, Diamonte was reluctant to leave GTE, but was offered the top CIO post at UTC at a time when the industrial conglomerate was seeking to embrace change and needed to find solutions.
UTC CEO Greg Hayes (then co-CFO) also observed what Harris saw in her and quickly appointed her to the Finance Council at UTC, where she became part of business decision-making at the most senior level of the organization.
Fixing the Pendulum
When she joined UTC in 2004, the pension plan, like many others, had swung on the pendulum that followed the markets. After 2004-2005, the once fully funded pension plan dove down to 72% funded after the tech bubble burst. By 2007, it was 103% funded again, but in the post financial crisis of 2009, it swung down to 74%. Diamonte built a small but world-class investment team, introduced liability-driven investing, hired hedge fund managers for a portable-alpha strategy, oversaw pension risk transfers with a sharp eye toward the various market risk factors and the impact on the company’s results.
“We talked a lot about different strategies, about hedging and going to liability-driven investing,” recalled her CEO Hayes. “She has been such a thought leader for us. We morphed from what was historically a 70% allocation to what’s now 30 or 35% equity, limiting the downside from interest rate volatility and brought the funded level back to 100%.”
To Diamonte, being a strategic CIO was key. It wasn’t just about saving the company money, or finding the brightest investment managers. It was about doing pension risk transfers, term vested buy-outs. It was about partnering with the accounting and human resource department to understand the design of UTC’s pension fund and digging in to how to change things to alleviate some of its costs—things CIOs didn’t typically do—but Diamonte sees the world changing and wants to keep UTC ahead of the curve.
It was exploring merging plans to save on PBGC costs, and adding risk parity, and thinking about what can be done at a total portfolio level to diversify growth assets with less volatility. UTC became one of the first funds to thinking more broadly about asset classes, asset allocation, and strategy rather than picking managers by eliminating style and size mandates and thinking about global equity instead of regional equity.
UTC also became one of the first firms to use derivative exposures in US fixed income, US equity, and international equity. This became useful for all of the rebalancing needs, and the cash needs of pension funds, which draw from the derivative portfolios (as opposed to actually taking cash from managers).
Using its portable alpha program, UTC was been one of the first plans to think about market-neutral hedge funds in which the alpha is ported over US equity or US interest rates via liquid exchange-traded futures contracts. “We will use this product as we derisk and shift the underlying beta from structured equity to structured duration instead of buying additional corporate bonds. This is a somewhat unique LDI strategy that both diversifies our exposure to credit and provides alpha within the LDI portfolio,” she told CIO. (Since inception, the portable alpha portfolio has added 400 bps of alpha).
UTC recently formed strategic partnerships with Neuberger Berman and Wellington with goals for the portfolio managers to construct a well-diversified nimble portfolio using the vast resources they have across their asset management platforms to meet UTC’s objectives of 8.0-8.5% return and 10-12% volatility targets.
In 2009, Diamonte and Hayes (then CFO before he became CEO in 2014) went to the board to talk about the sunset of the FAE plan, a plan calculation that is based on employees’ final average earnings. It would be replaced by an enhanced 401(k) defined contribution plan.
Diamonte knew that UTC’s new employees, many whom were not well versed in finance, would now need to make their own investment allocation decisions and, more importantly, figure out how to withdraw their retirement balance efficiently so they didn’t outlive their money in retirement (a key security feature of traditional pension plans). “She came back within about a year with a plan that was the first of its kind in an American Business Group from a pensions standpoint,” said Hayes. It used target date funds as a replacement vehicle for an FAE plan with assured income. “She worked with the insurance company, the investment advisors, and she came up with something that is second to none as far as retirement security planning for our employees,” he said.
She worked with the investment management and research firm AllianceBernstein (AB) to design a custom plan and AB helped to negotiate contracts with Lincoln, Nationwide, and Prudential.
Her annuity strategy now has 35,000 people enrolled, with $1.8 billion dollars in assets.
Similarly, when there was barely a mention of mortality risk, Diamonte brought it to the forefront of discussions and prepped for it. “She was two years ahead of it and suggested a path so that we could spread some pension income out,” said Hayes.
To Hayes, Diamonte is always able to understand the expense side of things, not just the investing side, and what it does to the P&Ls of UTC’s respective businesses. She works with business leaders to try to find ways to minimize year-over-year volatility, to minimize expenses, and to find creative solutions that are within the rules. “She has been such a solid partner to me over the years in terms of coming up with solutions so I don’t have a $1 billion pension charge one year and a billion of income the next,” Hayes said.
Diamonte said, “A lot of people don’t understand the pension accounting but every time you de-risk the plan, there is a significant increase in pension expense that falls right through their EPS [earnings per share]. So you really have to understand the impact of investing decisions on your customer, the customer being the CEO and the CFO. At the same time, you need to be wearing your fiduciary hat and put the participant’s best interests first. So I am always looking for strategies that are a win-win for the company and our participants.”
The echoes of CIOs in the industry sound far and wide, noting Diamonte as both natural leader and mentor.
“I am so pleased that Robin will be receiving the Lifetime Achievement Award as it is very well-deserved. Robin is a true investment professional and one of the finest CIOs in the institutional investment community,” Douglas Brown, chair of CIEBA and CIO of Exelon, told CIO. “She is an industry leader as demonstrated by her initiatives in retirement income, her advisory role with the PBGC, and her continued leadership at CIEBA, the Committee for Investment of Employee Benefit Assets. Robin is highly respected by her peers and is a pleasure to work with.”
Said Bridgewater’s Co-CIO Robert Prince, “The list of Robin’s innovations are long, but certainly include early adopter of Risk Parity, alpha overlay, institutional adoption of hedge funds, and sophisticated liability hedging, as well as cutting edge thinking on defined contribution portfolio construction. And in these endeavors her intentions have always been to do her absolute best for the company and employees whom she is serving. She is a person who truly cares for the well-being of others.”
Hayes concurred. “She has been phenomenal in both her intellect and her compassion for people,” he said. “She’s modest, but I will tell you that intellectually, you’re not going to find a more thoughtful business leader out there.”
CIO’s Innovation Awards, celebrating Robin Diamonte with the Lifetime Achievement Award, will take place at the New York Public Library on December 12. Reserve your seats here.