Goldman’s OCIO Scores a Massive Pension Mandate — And Another Liftout

BAE Systems’ $28.8 billion was the largest ever OCIO mandate in the U.K. Goldman Sachs is getting its investment team, too.

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Illustration by II

People are celebrating at Goldman Sachs Asset Management. The bank unit’s outsourced chief investment office announced Wednesday that it won the largest ever OCIO mandate in the United Kingdom: $28.8 billion in pension assets belonging to aerospace company BAE Systems.

In addition to the handsome fees for managing the BAE Systems Pension Scheme and BAE Systems Executive Pension, the OCIO scored BAE Systems’ in-house investment team, which is joining the asset manager.

“We always expected that over time, as markets mature, there would be a transition of in-house teams towards asset managers,” said Tim Braude, global co-head of multi-asset solutions and global head of the OCIO at Goldman Sachs. “While it’s not necessarily a line item in our strategy, it’s something that we have expected would accelerate and we’ve prepared ourselves appropriately.”

GSAM, which oversees $2.7 trillion in client assets, has a history of bringing on investment teams that have experience with pension funds, insurance companies, and other institutional investors, sometimes while simultaneously establishing or expanding an OCIO relationship with their employer.

In 2015, GSAM acquired Pacific Global Advisors from the Pacific Life Insurance Company, an $18 billion group that predominantly worked with large pension plans. Two years later, it bought a $21 billion OCIO business from Verus. In 2018, GSAM acquired Aptitude Investment Management, a group focused on hedge fund solutions for institutional investors that was previously an in-house team for Weyerhaeuser Company’s defined benefit pension trusts.

Last year, GSAM won a $5.4 billion pension and insurance mandate with the Canadian jet manufacturer Bombardier and folded in members of its in-house investment team.

“Oftentimes, the decision to outsource is not driven by any dissatisfaction with the internal team, but rather with a focus on enhanced governance and risk management and more resources to navigate an increasingly complex investment landscape. Being able to gain all of those things, plus the economies of scale of a leading global asset manager — while at the same time still maintaining the engagement with the same people that have been doing this historically — feels like a win-win-win. It’s a win for the trustees, it’s a win for the employees and it’s a win for Goldman Sachs,” Braude said.

GSAM has a deep talent pool of portfolio managers but still “relishes” opportunities to lift out professionals that bring something special to it, Braude added.

BAE Systems has been doing “novel” cashflow and liability-driven investing while managing its pensions assets, according to Braude. Now that the in-house team has joined GSAM, it can do the same for other institutions, making the OCIO that much more attractive to prospective clients.

“To be able to incorporate that and integrate it into our overall process, I think is going to be incredibly beneficial for our business,” he said.

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