Pensions & Investments: Bond managers face reckoning in 401(k) lineups. Higher-rate environment exposes firms that failed to adapt.
NEPC’s Mikaylee O’Connor is quoted in this Pensions & Investments article exploring 2024 trends in corporate 401(k) plan investment lineup changes, particularly within the fixed-income space. View the full article on Pensions & Investments’ site here or read excerpts below.
More than 100 U.S. corporate 401(k) plans made investment option changes during 2024, with more than a quarter of those making changes to the active core-plus bond funds offered in their lineups.
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Mikaylee O’Connor, principal and head of defined contribution plan solutions at investment consultant NEPC, would not comment on specific funds, but she said there have been more manager challenges recently within the fixed-income space.
“While a lot of these active fixed-income managers can continue to outperform,” said O’Connor, “peer rankings do differ quite substantially within the core-plus space. And so when you’ve got kind of performance challenges, and potential other issues, you can see an increase in search activity.”
Before rates began to rise in 2022, low rates meant low returns across the board for fixed-income managers, O’Connor said.
“The range of difference between your top quartile and your bottom quartile manager for so long was so narrow, and now, as rates have risen, that range of difference in manager performance has increased, which has created a little bit more kind of focus within the fixed-income space,“ she said.
Click here to continue reading the full Pensions & Investments article.
S&P Global: S&P 500 rises over 2% in July to extend summer surge
NEPC’s Phillip Nelson shares his perspective in this S&P Global article examining the S&P 500’s more than 2% rise in July and what it signals for the ongoing summer market rally. Visit S&P Global’s website to read the full article.
The S&P 500 posted a monthly gain for the third time in a row while setting multiple record highs along the way in July.
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“You have a massive secular theme in AI that seems to be generating outsized earning and sales expectations for a large number of companies in the US, and those themes are driving people to maintain their market exposure,” said Philip Nelson, partner and head of asset allocation for institutional investment consulting firm NEPC, in an interview. “And there’s still quite a bit of liquidity that’s leftover in markets from the years of easy US Federal Reserve policy post-financial crisis and then also following the pandemic, so there’s a lot of money that can quickly get deployed.”
Chief Investment Officer: Data, Custom Indexing Reshape Public Equity Portfolios
NEPC’s Nedelina Petkova shares insights with Chief Investment Officer on how data-driven strategies and custom indexing are redefining public equity investing. Read the full article on CIO’s website to learn how these innovations are reshaping portfolio construction.
The growing availability of trading data and information increasingly enables institutional investors and other market participants to improve existing portfolio models and build new ones. Providers and allocators can achieve any desired market exposure by matching sector characteristics and risk factors. This has allowed investors to move beyond traditional performance benchmarks and instead construct portfolios that reflect their unique investment theses.
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“Clients are seeking modular, tailored solutions,” says Nedelina Petkova, a senior investment director at NEPC. “Clients now use custom indexes to either amplify exposure to favored sectors, like artificial intelligence or clean energy, or to exclude sectors like tobacco, gambling or fossil fuels that may conflict with organizational values or regulatory guidelines.”
Click here to read the full article on the Chief Investment Officer site.
Chief Investment Officer: Fixed-Income Benchmarks Become More Customized
NEPC’s Aaron Chastain was recently quoted in Chief Investment Officer discussing the growing demand for customized fixed income benchmarks as institutional investors seek more tailored exposures. View the full article on Chief Investment Officer’s site here.
Fixed-income benchmarks have come a long way from when the Bloomberg U.S. Aggregate Bond Index was the main tool asset managers and asset owners used for performance measurement.
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For complex portfolios, custom benchmarks can be an improvement over traditional indexes, since they can track closer to an asset owner’s targeted hedging portfolio; however, they are not a perfect solution, wrote Aaron Chastain, a principal and the corporate solutions leader at NEPC, in an email.
“A hedge ratio of 100% for interest rates and credit spreads still cannot create a perfect hedge against economic outcomes, demographic outcomes and assumption changes,” Chastain wrote.
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NEPC’s Chastain wrote that advisers who work with clients to build a customized index seek to clearly define stakeholder expectations and constraints to ensure the appropriate focus on results is maintained.
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Not everyone is a fan of customized indexes. Chastain wrote their use is being driven by asset managers looking for business because de-risking and pension risk transfers have reduced the need for liability-driven investment portfolios.
Larger pension fund sponsors with unique needs, as well as significantly de-risked plans that are seeking hibernation for their fund, may benefit from customized benchmarks, but NEPC’s Chastain wrote, “We believe the majority of plans remain well served by a thoughtful implementation of [U.S.] Treasurys and corporate bonds, paired with completion management.”
Click here to read the full article on the Chief Investment Officer site.
Financial Planning: When everybody's a 'family office,' what's the term really mean?
NEPC’s Karen Harding, leader of our Private Wealth team, was recently quoted in Financial Planning exploring the evolving definition of “family office” in today’s wealth management landscape. Read the full article on Financial Planning’s website, or the excerpt below, to learn how industry leaders are navigating the shifting expectations and responsibilities of serving ultra-high-net-worth families.
A cliché in wealth management is “When you’ve seen one family office, you’ve seen one family office.”
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Karen Harding, private wealth team leader at the investment consulting firm NEPC, said one distinguishing trait of true family offices is that they have a fiduciary relationship to their clients. This means they exist solely to further the family’s interests and separates them from, say, private bankers, who may have an incentive from their employers to sell investors certain banking products.
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Another difference arises from origins, Harding said. Historically, single-family offices have been built from the ground up by rich families seeking not only wealth management but also help with the myriad complications that can come with the possession of lots of money.
By contrast, many of the multifamily offices and other wealth management firms now using the family office label started as pure-play wealth managers, Harding said. Only over time have they come to see opportunities in providing a greater array of services to rich families, sometimes by adding to their in-house offerings and sometimes by working with outside partners.
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For wealthy families, the real question is: Is this definition-stretching harmful? In most cases, Harding said, probably not.
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“[Clients are] not necessarily hung up on visiting XYZ private bank, XYZ family office, XYZ wealth management,” Harding said.
“They’re really focused on: What are the needs that I have, and can you meet them? I think as long as they are able to kind of look at what that service offering is and make sure it matches their needs, no harm, no foul, in my mind.”
Click here to continue reading the full Financial Planning article.
Pensions & Investments: For universities, new tax proposals demand new tax planning
NEPC’s Kristi Hanson and Colin Hatton share their perspective in this Pensions & Investments byline on how recent legislation is reshaping the tax landscape for university endowments — and the proactive strategies institutions can consider in response. Visit P&I’s website to read the full article.
“For generations, colleges and universities in the United States have enjoyed broad tax-exempt status for their endowments — allowing them to reinvest income and capital gains back into their missions with minimal tax drag. But that traditional framework is beginning to shift.”
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“Historically, investment income and capital gains generated by endowments — through stocks, bonds, private investments, and more — have been exempt from federal taxation. The TCJA changed that for a select group of institutions, introducing a 1.4% excise tax on net investment income for private colleges and universities with at least 500 full-time equivalent (FTE) tuition-paying students and endowment assets exceeding $500,000 per student.”
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“With the new tax law, endowments enter a new era of financial planning as taxable investors. Fortunately, tax strategies that have long been in use in the private wealth space can be adapted to help endowments manage their tax exposure.”
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“Institutions can also manage their tax exposure by making organizational changes with the new tax rules in mind. While the options to do so are numerous, three specific tactics are worth immediate consideration.”
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“With the passing of the bill, the message from policymakers is unmistakable: University endowments are no longer immune from tax scrutiny and the institutions affected must act accordingly. We advise these higher educational institutions to work closely with advisers who are equipped to provide proactive, tax-informed guidance.”
Click here to continue reading the full Pensions & Investments article.
Pensions & Investments: OCIO evaluators are ‘busier than ever’ with huge volume of searches amid policy fireworks
NEPC’s Scott Perry was recently quoted in Pensions & Investments discussing how the evolving corporate defined benefit landscape is reshaping the OCIO space. Visit Pensions & Investments to read the full article and explore how firms are navigating this shifting environment – or read the excerpts below.
An unusually volatile policy environment this year is accentuating the governance charms of outsourced CIOs and swelling the ranks of institutional plan sponsors looking to hire one, market veterans say.
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The way the corporate DB space is evolving, it’s becoming almost project-based in some ways, agreed Scott Perry, a partner and head of OCIO portfolio strategy with NEPC. “You’re going to partner with them for maybe two or three years, helping them get to an end state where they are offloading their plan,” he said.
Click here to continue reading the full Pensions & Investments article.
Chief Investment Officer: Sarah Samuels Named to 2025 Knowledge Brokers List
NEPC’s Sarah Samuels has been named to Chief Investment Officer’s 2025 Knowledge Brokers list, view excerpts from her interview below or the full interview on the CIO site here.
Sarah is a partner in NEPC, which oversees $1.7 trillion in assets under advisement. Sarah leads the firm’s 45-person investment manager selection team across private and public markets, directing $4 billion annually in private markets commitments. Previously, she was managing director at Wellesley College and deputy CIO at Mass PRIM. Sarah serves on several boards, including the CFA Society Boston and Girls Who Invest, and founded the Boston chapter of PEWIN. She holds CFA and CAIA designations. Sarah is an angel investor and author of the children’s book “Braving Our Savings.” She also founded the 30 Seconds of Bravery movement to promote financial literacy.
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CIO: What actionable thing have you learned over the course of your career that has proven itself this year?
SAMUELS: Bias exists in every corner of the investment world, from committees and boards to LPs and GPs. Over the past 20+ years, I’ve studied how to build teams and processes that rise above these biases to make clearer, more rational investment decisions. That means embracing second-level thinking, fostering a CIO mindset and designing structures that filter noise and anchor around true signals. These tools, while underutilized, help us avoid pitfalls like recency bias, herding, mistaking luck for skill or paying active fees for beta exposure. Ultimately, these tools create better investment outcomes and more resilient teams.
CIO: What asset classes look good to you now? Why?
SAMUELS: In today’s environment, characterized by a flatter efficient frontier, narrow market leadership and deal slowdowns across private equity, venture and real assets, this is a prime moment to be a provider of capital. Both LPs and GPs are facing liquidity constraints, driving demand for creative solutions like continuation vehicles, NAV loans and dividend recaps.
This dynamic creates opportunity on two fronts. First: Secondary markets, spanning venture, buyout, credit, real estate and infrastructure, are offering compelling entry points as institutional allocators seek liquidity. Second: Lending to GPs, corporations and real asset sponsors via transitional capital, capital solutions or asset-based lending can generate solid yields and diversified exposure.
But discipline is critical. Success in this market hinges on selecting the right partners who can navigate complexity and deploy capital thoughtfully.
CIO: How has institutional consulting changed in the last five years and what do you expect to change over the next five?
SAMUELS: The growth of OCIO services has reshaped consulting, and that trend will only accelerate. As fiduciary demands grow and internal resources shrink, OCIO offers a path forward. But success depends on alignment. Partnering with an OCIO that isn’t looking to drive profits to other business lines, but is truly focused on investment outcomes, will define the next era of trusted relationships.
Consulting is also becoming more investor-led. Our team at NEPC brings experience as LPs, GPs and asset managers; we’ve sat in every seat at the table. That perspective helps us deliver stronger execution, implementation and empathy for what clients face.
Clients themselves are evolving too: from public funds wanting real-time data access to endowments focused on mission and turnover to DC plans navigating litigation risks. Across the board, there’s a growing demand for technology, governance support and conflict-free advice. Consulting in the future won’t just be about expertise; it will be about empowering clients to operate with confidence, clarity and peace of mind.
Click here to read the full interview on the Chief Investment Officer site.
Pensions & Investments: CalPERS joins growing wave of pension funds offloading private equity stakes as sales volume hits record
In this Pensions & Investments article, NEPC’s Scott Perry discusses how institutional investors are reassessing private equity investments made in higher-valuation years and turning to secondaries as a strategic portfolio management tool. View the full article on Pensions & Investments’ site here or read excerpts below.
The California Public Employees’ Retirement System is exploring plans to reenter the secondary market sales arena, joining a growing list of public pension funds and endowments selling portions of their private equity portfolios.
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While the current moment isn’t marked by the kind of distress asset owners felt during the global financial crisis, a number of big institutional investors still “find themselves overweight to private equity and also have sizable allocations to vintages they don’t have a lot of conviction in,” said Scott Perry, a partner with Boston-based consulting and investment firm NEPC, and head of portfolio strategy for the firm’s $130 billion outsourced CIO business.
“Think 2019, 2020, 2021 — vintages and investments that were made with higher valuations,” Perry said. “And they now have a view that those investments are unlikely to be really strong, successful investments, and so they’re looking to get out (to) free up the capital for investment today, rather than hold on to it and end up with mediocre outcomes,” he said.
Click here to continue reading the full Pensions & Investments article.
PlanSponsor: Retirement Income in DC Plans: The Way Forward
PlanSponsor recently featured insights from NEPC’s Bill Ryan and Mikaylee O’Connor in an article examining the future of retirement income solutions within defined contribution plans. View the full piece on PlanSponsor’s website to learn more about where the industry is headed.
The retirement income conversation within defined contribution plans is reaching a new level. Fueled by legislative tailwinds, technological advances and shifting participant needs, the last five years have seen a surge of new ideas, tools and products.
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“Recordkeepers are expanding their platforms to support more retirement income solutions. From integrating insurance-based solutions to improving education and advice, their capabilities are evolving to meet the changing demands of the DC system. This shift is not just about enabling income payments—it is about building the infrastructure to support decumulation.”
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“Still, the path forward for many is not clear. While industry innovation is necessary and healthy, the current environment feels like “throwing spaghetti at the wall.” There is a lack of consistency and little agreement. With so many new products across both guaranteed and nonguaranteed income—plan sponsors must navigate a maze of features, trade-offs and implementation considerations.”
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“Start by defining the problem: Who are you targeting? For example, only about 14% of all participants in DC plans tend to be retirement eligible. What risks are you trying to address? Spending behavior, volatility, longevity? Are you prioritizing guarantees, flexibility or simplicity? Once these questions are answered, you can begin to evaluate solutions and determine your commitment level as a plan sponsor.”
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“Plan sponsors must also ensure their plan design, recordkeeping and administrative operations are retiree friendly. Review questions about the flexibility of available distribution options and the types and amount of related fees and paperwork. While 93% of plan sponsors offer systematic distributions, we see 18% of older participants (at least 65 years olds) using them. Retirement income is not just about what is in the plan—it is also about how easy it is to get money out in a way that aligns with participants’ real-life needs.”
Click here to read the full article on the PlanSponsor site.