Goldman Sachs Secures $43 Billion UPS Mandate for Pension Fund Management

Goldman Sachs to manage $43 billion UPS pension funds, marking a strategic push in the $2.5 trillion OCIO market.

By Bill Bullington

5/16, 10:34 EDT
BlackRock, Inc.
Goldman Sachs Group, Inc.
Marsh & McLennan Companies, Inc.
United Parcel Service, Inc.

Key Takeaway

  • Goldman Sachs wins a $43 billion mandate to manage UPS pension funds, aiming to lead in the OCIO market.
  • The OCIO sector is expected to grow over 10% annually, highlighting its potential as a stable revenue source for firms like Goldman.
  • Favorable market conditions make corporate pensions attractive assets, driving outsourcing trends among fully funded plans.

Goldman Secures UPS Mandate

Goldman Sachs Group Inc. has been awarded a significant investment mandate, valued at $43 billion, to manage the pension fund assets of the parcel-delivery giant UPS. This deal marks one of the largest of its kind in the industry and propels Goldman closer to its strategic objective of becoming the leading firm in the outsourced chief investment office (OCIO) space within the next three to five years. Goldman, which currently manages approximately $325 billion in such pension assets, aims to outpace competitors such as Marsh McLennan’s Mercer, BlackRock Inc., and Russell Investments.

OCIO Market Growth

The OCIO sector, which involves managing large pools of company pension money, is anticipated to expand by more than 10% annually over the next five years, according to Cerulli Associates, a consulting firm. This growth projection underscores the increasing attractiveness of the OCIO business as a lucrative revenue source for money managers. Tim Braude, Goldman’s global head for OCIO, highlighted the trend of corporations opting to focus on their core operations amidst a complex regulatory, economic, and market landscape, thereby outsourcing their pension management responsibilities.

Strategic Expansion for Goldman

For Goldman Sachs, the OCIO business represents a stable and scalable source of income within Marc Nachmann’s asset and wealth division. Nachmann has emphasized the attractiveness of managing portfolios for corporate pension plans and other large investors, given the potential for less volatile results. This strategy aligns with Goldman’s broader mission to enhance the performance of its asset and wealth management division.

Pension Plans as an Opportunity

In the United States, favorable market conditions and rising interest rates have transformed certain corporate pensions, specifically defined-benefit plans like UPS’s, from burdensome obligations into valuable assets. This transformation has led many corporate treasurers and financial officers, overwhelmed by the management of these enlarged pension funds, to seek external management solutions. The trend towards outsourcing is particularly pronounced among fully funded or over-funded pension plans, which represent a $2.5 trillion asset pool in the U.S. The assets from UPS, which include its U.S. and Canadian defined benefit plans, are nearly fully funded, and the in-house investment team is set to join Goldman in the third quarter.

Street Views

  • Tim Braude, Goldman Sachs (Neutral on OCIO business):

    "Corporates look around and look at what others are doing, in a more complicated world from a regulatory, economic and market perspective, and are deciding to narrow their focus on their core business."