Letter From the Editor-in-Chief: Defined Benefit/Magazines Are Not Dead Yet

From aiCIO Magazine's February Issue: Like printed magazines, the demise of defined benefit has long been predicted. We're still waiting for those prognosticators to be right.

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To the frigid hinterland of Chicago I ventured in early January for a five-day executive education program at Medill, Northwestern’s vaunted School of Journalism. The intensive course—taken alongside other business-to-business magazine publishers and editors, mostly (oddly enough) from the farming sector—covered a canyon of topics: social media, business exit strategies, integrated selling, and branding. Every small topic, however, fed into one large one: How to survive in a seemingly shrinking and troubled industry. 

The discussions at Medill were reminiscent of the defined benefit world. Ever since aiCIO founder Charlie Ruffel and a select few others accurately predicted in the mid-1990s that “defined contribution” was the future, lesser prognosticators have been dismissing these gargantuan pools of capital. “They’re done,” they’d say. “Why pay attention?” How wrong they were, and are. 

For the same reason that magazines and media still matter—you’re reading this letter, aren’t you?—defined benefit still matters. Forty years from now, people will be consuming financial journalism; at the same time, there will still be trillions of dollars in defined benefit capital invested in the markets, and thus moving them. 

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The problem is that neither industry is great at adapting. One needs only to look at the graveyard of magazines—the likes of Condé Nast’s Portfolio and Global Pensions in the ground and Time and Forbes near burial—to see just how poorly media companies did at adopting new models of delivery and financial reality. Similarly, the “perfect storm” of 2008—which, as is clear to pretty much anyone who thinks about it, was not a perfect storm at all but an all-to-common occurrence—showed the failure of defined benefit pension adaption. If loss of capital is the fundamental risk for a pension plan, the vast majority of pension plans utterly failed to understand and adapt to new asset allocation models (think liability-driven investing), risk management systems (think dynamic asset allocation), and governance models (think Canadian and Dutch pension and endowment structures). 

So how do both magazine editors and defined benefit chief investment and executive officers go from A to B, from old models to new? If I had the silver bullet, I might be teaching at Medill rather than taking courses (or maybe not), but here is my root solution: take risks. Not risks in the vein of blindly upping equity exposure or piling billions into illiquid alternatives, but risks along the lines of exploring new models, of testing the assumptions of ideas such as wider bands on asset allocation, risk parity, and tail hedging. Because, let’s admit it, we’re both in troubled industries and we won’t all survive. But some will. And it’s my bet that those that do will be the ones taking intelligent risks and pushing the boundaries of what our peers—be they in journalism school or your national pension organization—deem normal.

Letter From the Managing Editor: Deepening Our Global Footprint

From aiCIO Magazine's February Issue: Letter from the managing editor on aiCIO's new London-based hire, Elizabeth Pfeuti.

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Putting up with Editor-in-Chief Kip McDaniel can be quite trying at times (Ed. Note: False), so at the beginning of the year I was more than pleased to have Elizabeth Pfeuti join the aiCIO editorial team, if only remotely, in London.

Liz, as we call her, comes to aiCIO with a robust editorial résumé that includes stints at Financial News and Incisive Media—and an unparalleled reputation in the European financial reporting community. Many of you will have known Liz, or have heard of her, long before she joined us. There’s a good reason for that: She is Bob Woodward and Jackie O. rolled into one, the consummate professional and bubbly socializer.

Kip told me the story of how we hired her. Having met her a few years ago through a mutual friend, he turned to her in an advisory role when he started his search for a European editor. While in London interviewing prospective candidates, he met up with Liz for a drink to discuss the process. Liz then invited him and an aiCIO salesperson to a JPMorgan event at London’s Tate Modern. Upon entering, Liz proceeded to work the room, seemingly knowing everyone—and everything about everyone—in attendance. It was one of many obvious signs that Liz was meant to join our team. Three weeks later, and with a lot of wooing, she had agreed to come on board.

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You’ll see Liz making her mark in this magazine, online, and in our conference series. In this issue she tackles the issue of risk parity from a European perspective, as well as profiles the Dutch pension market following a trip she took there in early January. She also helped report on our cover story, which explores recent scandals—and the very business model—with custodial banks and their ancillary services. Online, you’ll see her producing news for our growing website, which will continue to house global content. She’ll lead the charge with our London Chief Investment Officer Summit in late June, following our successful New York City and Sydney Summits in 2011.

Liz’s arrival marks larger plans for aiCIO. Until now, we’ve produced one magazine for the global CIO community. It’s true that a lot of the issues faced by CIOs and their colleagues are the same in South Korea and South Carolina. Yet some issues—regulation, for one—differ by geography. In that vein, aiCIO will soon begin to role out geographical supplements to the magazine, focusing on particular issues that affect a subset of our global audience. With Liz’s arrival in London, you can guess where we’ll be continuing this push to make aiCIO the premier institutional investment magazine worldwide.

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