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PBGC Solicits Strategic Investment Partnerships, Will Allocate $2-$2.5 Billion to Private Equity and Real Estate Portfolios

August 01, 2008

WASHINGTON-The Pension Benefit Guaranty Corporation (PBGC) today announced it has published a request for proposals (RFP) to form strategic partnerships with outside firms to assist the Corporation in carrying out the new investment policy adopted by the PBGC Board of Directors earlier this year.

The new policy directs 10 percent of PBGC assets (currently about $5.5 billion) to private equity and real estate investments. Under the current RFP, the Corporation seeks two to three firms to manage $2-$2.5 billion in these asset classes. The firms must have global operations and must have successfully managed private equity or real estate allocations, as well as at least $1 billion in strategic partnerships within the past 3 years. The official solicitation, including full details on the services required and instructions for submitting proposals, appears on the U.S. Government's FedBizOps centralized procurement Web site:

Reviewing today's announcement, PBGC Director Charles E.F. Millard commented, "As our investment portfolio has become increasingly diversified, we are using more sophisticated techniques to mitigate risk and safely enhance returns. By entering into strategic partnerships with firms that have top-tier expertise in alternative investment classes, we seek to build capacity to better oversee our portfolio. PBGC already has a deep bench of experienced money managers and financial advisers, and we expect the firms selected under this RFP to beef up our roster of talent. We also seek the deep consultative dialogue and other services that world-class firms can provide in strategic partnership."

Through the strategic partnerships, the PBGC will leverage the entire array of financial, quantitative and qualitative resources of each firm. The Corporation anticipates that these resources will include asset management, consolidated performance reporting, risk mitigation, staff training and other resources that bidders may propose.

To assist in developing the RFP and evaluating proposals, the PBGC has hired EnnisKnupp + Associates of Chicago, which advises clients, including the Teacher Retirement System of Texas, on strategic partnerships. "The use of strategic partners by institutional investors has increased over the past several years," said Steve Cummings, president and CEO of EnnisKnupp. "Strategic partners build on the traditional asset management relationship but broaden and deepen the interaction between partners. Investment managers gain the benefit of a significant and long-term client, and institutional investors benefit from a broad range of products and services not confined solely to asset management."

Millard emphasized the responsibility of the PBGC and its investment advisers in the face of the Corporation's $14 billion deficit. "With our new asset allocation, asset managers with top-tier performance, and the help of excellent strategic partners, PBGC will have a much sounder foundation for the future," he said.

The PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It currently guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in over 30,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by PBGC's investment returns.

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PBGC No. 08-42