In a world of shrinking corporate pensions and companies concerned more about risk than returns, it takes guts and know-how to successfully manage a plan. Carol McFate has both. When Harvard Business School told her she needed to get some experience before they would accept her, she went to work for Bethlehem Steel Corp. Following her graduation from HBS in 1979, she joined Citibank as a commercial banker, then spent five years at publishing company Macmillan as assistant treasurer before getting into the insurance business at Prudential Financial and later American International Group. Not long after arriving at Norwalk, Connecticutbased Xerox Corp. in late 2007 as CIO, she overhauled the companys $4 billion-plus frozen pension plan, reduced the risk and implemented a liability-driven investing program. It was an accident waiting to happen, says McFate, whose mandate was to build an investment team and determine whether the company should bring the management of its pension plan in-house from a third-party outsourcer. By June 2009, Xerox was once again running the plan itself, with McFate and eight colleagues overseeing it. The pension is divided into two parts, with about one half hedged against liabilities and the other invested in a diversified portfolio of risk-seeking assets. Seven years ago what I was doing was outside the norm, she says. The race were trying to win now is against liabilities.