UPS Driver
Landmark Deal with UPS
Goldman Sachs Group Inc. has secured a monumental $43 billion mandate to manage the pension fund assets of parcel-delivery giant UPS. This deal marks one of the largest of its kind, significantly bolstering Goldman Sachs' position in the competitive field of investment management.
This latest mandate pushes Goldman, which currently oversees approximately $325 billion in pension assets, closer to its goal of outpacing key rivals such as Marsh McLennan’s Mercer, BlackRock Inc., and Russell Investments within the next three to five years.
Growth in the OCIO Market
The global business of outsourcing investment management responsibilities for large pools of corporate pension money, known as the outsourced chief investment office (OCIO) model, is anticipated to grow more than 10% annually over the next five years, according to consulting firm Cerulli Associates. This presents a lucrative opportunity for money managers seeking new revenue streams.
“Corporates are increasingly focusing on their core businesses amid a more complex regulatory, economic, and market landscape,” said Tim Braude, Goldman’s global head for OCIO, in an interview.
Strategic Importance for Goldman Sachs
For Goldman Sachs, the OCIO business is a stable component of Marc Nachmann’s asset and wealth management division, providing a reliable income stream at scale. Nachmann has emphasized the attractiveness of managing portfolios for corporate pension plans and other large investors as a way to deliver less volatile financial results. His mission is to enhance the division’s performance by securing more of these lucrative mandates.
The rising stock markets and increasing interest rates across the US have transformed a segment of corporate pensions—defined-benefit plans like that of UPS—from financial burdens into unexpected financial windfalls. These substantial funds have become challenging for corporate treasurers and financial officers to manage internally, prompting many to seek external management solutions.
External Management of Pension Funds
The trend of companies outsourcing the management of large pension plans is growing, particularly for plans that are fully funded or over-funded. In the US alone, these types of pension plans represent a $2.5 trillion pool of assets available for potential external management by firms like Goldman Sachs.
The assets from UPS, which includes the nearly fully funded plans in the US and Canada, will be managed by Goldman. The in-house investment team from UPS is expected to join Goldman in the third quarter of this year.
This move underscores the increasing reliance on external financial services for managing complex and sizeable investment portfolios, further cementing Goldman’s role as a leader in the OCIO space.
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