Deals & People September 11, 2020

Retirement Industry People Moves

Unified Trust joins EdgeCo; Putnam Investments CIO announces plans to retire in 2021; Marathon Asset Management hires senior high-yield portfolio manager; and more.

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Art by Subin Yang

Art by Subin Yang

 

Unified Trust Joins EdgeCo

EdgeCo Holdings has entered into a definitive agreement with Unified Trust Co. for it to become part of EdgeCo’s subsidiary, American Trust Co.

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Unified Trust is a national retirement plan provider and fiduciary based in Lexington, Kentucky, serving financial intermediaries, corporate clients and retirement plan investors, as well as individual and institutional investors through their wealth management division. American Trust is a subsidiary of EdgeCo, a leading provider of technology-enabled retirement solutions for financial intermediaries and their clients.

The transaction remains subject to customary regulatory and shareholder approvals. The agreement with Unified Trust represents the third retirement firm transaction by EdgeCo, with additional acquisitions planned as part of the growth strategy going forward.

“Over the past three years, we’ve made tremendous progress in creating a differentiated offering in the retirement space for financial intermediaries and their clients, with a focus on delivering a high level of personal service backed by a robust technology platform,” says John Moody, chief executive officer of EdgeCo. “We are very excited to bring Unified Trust into the fold. Its extremely talented employees, as well as their expertise and technology, will greatly expand the offering at American Trust and propel us to a new level.”

Unified Trust founder Gregory Kasten will serve in an executive role and on the Board of Directors of American Trust after the acquisition. “Beyond the opportunity to expand our services and solutions, it was also very important to me that both organizations share the same outcomes-focused philosophy and fiduciary mindset,” he says. “Our two companies are incredibly well-aligned and, as a combined force, we will be in a position to make a major statement in the financial services industry for years to come, as well as ensure that we will continue to improve the financial outcomes of investors.”

Micah DiSalvo, chief revenue officer of EdgeCo, says, “As consolidation continues in the retirement space, it is key for advisers to select partners who are committed to investing in their success. I’m very proud that American Trust has been able to become a leader in the industry with our continued investment in fiduciary solutions and digital engagement platforms along with an adviser-focused managed account solution. Adding the resources of the talented staff from Unified Trust to the American Trust team is another step in our ability to better serve our clients and participants in creating better retirement outcomes.”

Upon closing of the transaction, the existing staff will be retained, and the team is expected to grow as the combined company expands its national reach and service offerings with trust offices in Memphis, Tennessee; and Lexington, Kentucky, and recordkeeping services via an affiliate in Dubuque, Iowa.

Keefe, Bruyette & Woods Inc. acted as the exclusive financial adviser to Unified Trust.

Putnam Investments CIO Announces Plans to Retire in 2021

Putnam Investments has announced that D. William (Bill) Kohli, chief investment officer (CIO) of Fixed Income, will be retiring from the firm and industry next June 30. Michael Salm, who has been a fixed income leader and portfolio manager at the firm for more than 20 years, has been named co-CIO effective immediately and will succeed Kohli as Fixed Income CIO in mid-2021. 

“Bill has provided tremendous leadership and vision in his work with the Putnam Fixed Income team for over 25 years and has helped to develop the firm’s highly regarded talent and capabilities in this important investment area,” says Aaron Cooper, Putnam chief operating officer (COO). “In Mike Salm, we have a deeply experienced, savvy investor and thought leader who has worked closely with Bill for many years and is ideally suited to carry on Putnam’s strong fixed income legacy.” 

In discussing his pending retirement, Kohli says, “While excited for my next chapter, I am proud and honored to have represented Putnam for the past 25-plus years and feel privileged to have been associated with my professional colleagues, investors and clients. I have total confidence in Mike’s ability to lead Fixed Income and look forward to our continuing partnership in the coming months.”

Putnam manages more than $75 billion in fixed-income assets for retail, institutional and retirement clients. The firm has a breadth of expertise in areas such as investment-grade and high-yield credit, liquid markets, structured credit, emerging-market debt, money markets, portfolio construction and tax-exempt securities. 

Kohli, who has been in the investment industry for nearly 30 years, joined Putnam in 1994. Prior to becoming chief investment officer of Putnam Fixed Income in 2016, he had been a co-head of the team. In addition to his broader leadership and institutional management responsibilities, Kohli is a portfolio manager of Putnam Diversified Income Trust, Putnam Fixed Income Absolute Return Fund, Putnam Global Income Trust, Putnam Master Intermediate Income Trust, Putnam Premier Income Trust and Putnam Short Duration Bond Fund.  

Before joining Putnam, Kohli held senior portfolio management roles at Franklin Advisors/Templeton Investment Counsel. He has a bachelor’s degree from the University of California, San Diego, and a master’s degree from the University of California, Berkeley.

Salm, a 30-year industry veteran, joined Putnam in 1997 and has served as co-head of the Fixed Income Group since 2011. His responsibilities include managing a number of institutional offerings, as well as alternatives strategies under the firm’s 37 Capital brand. Also, Salm is a portfolio manager of Putnam Diversified Income Trust, Putnam Global Income Trust, Putnam Fixed Income Absolute Return Fund, Putnam Income Fund, Putnam Master Intermediate Income Trust, Putnam Mortgage Securities Fund, Putnam Premier Income Trust and Putnam Ultra Short Duration Income Fund.

Prior to Putnam, Salm held various investment, trading and research responsibilities at BlackRock Financial Management, Nomura Securities, Nikko Securities and Fitch Investor Services. He has a bachelor’s degree from Cornell University.

Marathon Asset Management Hires Senior High Yield Portfolio Manager

Michael Schlembach has joined Marathon Asset Management (Marathon) as a managing director and senior portfolio manager responsible for its long-only high-yield bond investment program. Schlembach joins Marathon after an 11-year tenure at J.P. Morgan Asset Management, where he served as a portfolio manager in its global high-yield department. 

“Mike is an exceptional person who I am highly confident will do a fabulous job for Marathon’s clients, managing risk while generating positive results in our high-yield bond portfolios,” says Bruce Richards, chairman and chief executive officer of Marathon. “Mike has demonstrated a strong track record during his successful tenure at J.P. Morgan and we are delighted that he has joined Marathon to deliver his expertise and high value-add services.”

“The Marathon team is focused on asset selection and portfolio construction and Mike will make a meaningful contribution to our work,” says Louis Hanover, chief investment officer (CIO) at Marathon. “This is a particularly important hire as it comes at a time when investors are increasingly allocating capital to the high-yield sector as the Federal Reserve will keep rates low for many years to come.” 

“Marathon is well-known for its rigorous and intelligent approach to credit investing with its client-oriented culture and commitment to bringing institutional investors offerings to serve needs of our global client base,” says Schlembach. “I am delighted to join a world-class firm and look forward to being a trusted fiduciary for Marathon’s clients, delivering value through thoughtfully, carefully designed and actively managed long-only high-yield investing strategies.”

Dimensional Fund Advisors Adds CFO

Dimensional Fund Advisors has hired Bernard J. Grzelak to serve as chief financial officer (CFO), effective September 14. Lisa Dallmer, chief operating officer (COO), had stepped into directly leading the global team since Greg Hinkle’s retirement in January.

As CFO, Grzelak will oversee all aspects of Dimensional’s financial and accounting functions, both at the firm and fund level. He will sit on Dimensional’s Operating Forum and contribute to strategic and operating decisions. He will reside in Austin, Texas, and report to Dallmer.

“With the addition, we will be in an even stronger position to develop and extend our growing range of investment solutions and client services,” Dallmer says. 

Grzelak brings to Dimensional nearly 30 years of experience in finance, fund administration and investment operations within the asset management industry. He had been a partner at Lord Abbett and most recently served as chief operating officer for global funds and risk. In this role, he worked closely with the board of Lord Abbett’s Family of Funds, UCITS board in Ireland, and the Luxembourg alternative investment fund board. He also served as the funds’ chief financial officer and sat on the Enterprise Risk Management Committee. His previous experience includes serving as vice president at Lazard Asset Management LLC and audit manager at Deloitte & Touche LLP. He has worked in the financial services industry since 1993. Grzelak earned a bachelor of business administration degree in accounting from the University of Notre Dame.

Nationwide and SS&C Partner on Adviser-Sold Retirement Plan Platform

Nationwide and SS&C Technologies have announced a new partnership involving the management of Nationwide’s adviser-sold retirement plan platform. Under the agreement, SS&C Retirement Solutions, a division of SS&C, will provide the software, administration and associated recordkeeping processes for Nationwide’s platform.   

“Partnering with SS&C will allow Nationwide to accelerate our efforts to offer the value-added solutions that today’s plan sponsors and participants demand,” says Eric Stevenson, president of Nationwide’s retirement plans business. “This partnership will move up the timing of our platform modernization efforts and allow us to introduce new and enhanced capabilities, all while delivering an extraordinary experience.”

SS&C is based in Windsor, Connecticut, and is the recordkeeper of more than 20 providers, representing 8.4 million plan participants. Nationwide, based in Columbus, Ohio, is one of the largest providers of retirement plan solutions to both public and private workplaces.  

The partnership will apply to Nationwide’s adviser-sold business and the company will continue to maintain its proprietary DCDirect recordkeeping system. The strategy is to place all adviser-sold business on the SS&C platform beginning in early 2021, with all other existing adviser-sold business converted by the end of 2021.   

“While how we manage our adviser-sold platform is changing, who we are, our value proposition and our history of providing award-winning solutions and experiences will continue to differentiate us in the market,” Stevenson adds.

“We are excited to partner with Nationwide to help transform its adviser-sold retirement plan business,” says John Geli, president, SS&C Retirement Solutions. “We look forward to leveraging our end-to-end digital platform to help Nationwide reduce complexity, increase efficiencies and deliver a more personalized experience to plan participants.” 

The Markets September 11, 2020

Coronavirus Rocks Long-View Capital Market Assumptions

Comparing asset managers’ five-year capital market assumptions published in late 2019 and early 2020 with the newly updated versions being circulated today is an eye-opening exercise that underscores the staggering economic impact of the coronavirus pandemic.

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Given the dramatic national and global events that have unfolded so far in 2020, it can be difficult to bring one’s mind back to the state of affairs in late 2019—before the outbreak of the coronavirus pandemic and the emergence of social and political turmoil that have challenged business leaders, lawmakers and everyday citizens alike.

At the time, asset managers and market observers were contemplating the implications of a record-long bull market that seemed set to enter a new decade with a real measure of stability and momentum. The primary sources of concern were geopolitical in nature—from trade tensions between the United States and China to concerns that new wars could break out in the Middle East—as well as the much-debated inversion of the yield curve.

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Those challenges seemed significant but fathomable at the time, so asset managers continued to voice cautious optimism about short- and mid-term outlooks for the U.S. and global markets. Much has changed in the present moment, however, and comparing asset managers’ five-year capital market assumptions published in late 2019 and early 2020 with the newly updated versions being circulated today is an eye-opening exercise.

The updated reports are notable, of course, for the nearly across-the-board reduction in return expectations for various asset classes. Perhaps even more remarkable is the admission that so much remains uncertain about how the U.S. and global economies may behave in the coming years, as humanity seeks to eradicate, or at least better control, the novel coronavirus.

Northern Trust’s newly updated five-year market outlook report, for example, now projects global stock returns between 3.8% and 8.2%. This is a huge range compared with the normal projections published in such reports. For comparison, the Northern Trust forecasts published in early January flatly predicted 7.5% equity market returns for the U.S. and 8.6% returns for developed markets outside the United States.

More broadly, the Northern Trust’s new outlook projects just 2.6% real average annualized global gross domestic product (GDP) growth over the next five years, along with a continuation of tepid inflation and accommodative monetary policy. The firm predicts interest rates will remain historically low, with the U.S. Federal Reserve not raising its federal funds rate for at least five years. Though interest rates had remained quite low prior to the coronavirus outbreak, the expectation that rates won’t increase again for possibly five years is new.

On a global basis, Northern Trust now foresees average annualized equity returns in the mid-single digits, except for emerging markets in Latin America (8.2%) and in Europe, the Middle East and Africa (7.1%). The next highest equities forecasts are for Australia at 5.8%, the United Kingdom at 5.6%, and Europe, excluding the United Kingdom, at 5.4%. The lowest Northern Trust forecasts are for Japan at 3.8%, Canada at 4.5% and the U.S. at 4.7%. In fixed income, except for a 5.6% return expectation for global high yield, including 5.5% for the U.S. and 5.2% for Canada, the report is calling for returns mainly in the 1% to 3% range.

“Investors need to come to the realization that many of the jobs lost because of the virus are never coming back, with the permanent loss of many brick-and-mortar retail stores a major reason,” says Northern Trust Chief Investment Strategist Jim McDonald. “And, we can’t forget that the pandemic stimulus packages have added trillions of dollars to what were already staggering government debt levels in many countries.”

The report notes that, even as the coronavirus pandemic has created massive new challenges for the U.S. and global economies, there has been no lessening in tensions between the U.S. and China. The report suggests these tensions now extend beyond trade into blame for the virus—and that they affect not only the two countries, but many others around the world. The report suggests other countries and multi-national companies will be “forced to pick a side or remain neutral.”

“Regardless of their choice, they, along with the principal combatants, will suffer from lost economic opportunity or economic inefficiencies, and, very likely, both,” the report warns.

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