The End of an Era: With Eli Lilly’s longtime CIO Susan Ridlen retiring, the pharmaceutical giant is handing over its $25 billion retirement portfolio to Goldman Sachs, making this the OCIO giant’s fourth-largest corporate pension mandate. This move marks the end of Eli Lilly’s celebrated in-house maverick investment team and continues a growing trend of allocators outsourcing their portfolios.

Since posting my story, Goldman confirmed that it will not be bringing Eli Lilly’s investment team on board like it did with UPS, and that many of the original staff for the $43 billion portfolio have since departed.

While more institutions are outsourcing, particularly corporate DB plans, one investor reminded us to be mindful of what we could be losing when institutions outsource. Following the deal’s announcement, MEMCO’s Justin Young wrote on social media how sad he was to see Ridlen’s portfolio “generate consistent excess returns … to pay all promised benefits — only to be shut down, sold off, and have the portfolio carved up like an estate sale.”

And with plans now fully funded, this trend will likely continue (although what companies do with these surpluses will vary).

When a pension becomes overfunded, companies often dismiss their internal team. Accessing the surplus triggers heavy taxes, though these can be reduced by boosting employee benefits. Strategies vary: Kodak absorbed the tax hit, while IBM used its surplus to replace its 401(k) match (which frustrated employees).

Companies could share the surplus by increasing retiree or employee benefits. Yet, most prefer to divest the assets entirely instead of maintaining them. Amid this trend of consolidation and cost-cutting and eliminating the human touch, all accelerated by the continued push towards AI, there’s the potential to lose a great deal of institutional knowledge.  (And some of this short-term cost-cutting is already showing signs of being costly over the long-term.)

Young noted that before companies dismantle their successful pension operation, they should consider what they’re giving up: “the potential for continued alpha generation that can reduce corporate contributions, the optionality of having a proven investment team during market dislocations, and whether outsourcing fees will exceed the cost of maintaining internal expertise.”

So. I know you have thoughts, so let me have them — and let’s hear from some new folks, don’t be shy!

Lifted by Equity and Hedge Funds in a Combative Year: In a year defined by political tension that saw endowments fight for federal funding, Brown University’s $8 billion endowment posted double-digit returns, powered by strong public equity performance and savvy hedge fund picks — a strategy that also buoyed Harvard.

The Providence-based Ivy League reported an 11.9 percent return for its fiscal year ending June 30, 2025, with annualized returns for the five, 10-, and 20-years at 13 percent, 11.4 percent, and 9.5 percent, respectively.

The university endowment’s asset allocation as of June 30, 2024, was 42 percent to private equity, 21 percent absolute return, 13 percent public equity, 12 percent real assets, 7 percent fixed income, and the rest in cash and receivables.

Despite Congress expanding the federal excise tax on university investment gains in July, the per-student value of Brown’s endowment keeps the University in the 1.4 percent tax bracket — a significant reprieve, as industry observers warn that even a potential 10 percent tax hike would cripple universities' ability to fund research and provide financial aid.

These results also come as Brown recently rejected a deal from the White House offering a funding preference to schools that aligned with President Trump’s priorities—the second school after M.I.T. to do so, reinforcing its commitment to institutional autonomy amid increasing federal pressure.

We’ll be covering more university endowment returns as they get released, so stay tuned for that.

And that’s it for this week’s edition of Essential Allocator. In the meantime, let me know what’s on your mind. Who knows? We could be thinking the same thing. 

Other Items on the Radar

• NYC’s CIO Steven Meier is stepping down next month to take on a new investment role. I asked a city spokesperson where he was going, but she wouldn’t say (to be fair, he hadn’t told her). Since Meier became investment chief in August 2022, the city’s $300B public pension funds have delivered a 9.4 percent return, beating the state mandated target of 7 percent. City Comptroller and ACA finalist Brad Lander (you know the guy) thanked Meier for his “strong and steady leadership during a time of economic volatility,” noting that “he has delivered great returns.” Executive deputy comptroller Francesco Brindisi will serve as interim CIO until a permanent one is elected on November 4.

   

• The South Carolina Retirement System Investment Commission has named Bryan Moore permanent CIO. Moore was appointed interim investment chief for the $50.3B pension in July after then-CIO Geoff Berg left to oversee Rochester’s $5B endowment. Since joining RSIC in June 2012 as a senior PE officer, Moore has held several positions before being named Deputy CIO in August 2023. CEO Michael Hitchcock said in the release that Moore “has established himself as the investment team’s leader and firmly set his vision for managing the portfolio.” I for one am keen on learning that vision, so expect a call from Yours Truly soon, sir.

   

• Investors often use managed futures and global macro funds interchangeably as portfolio hedges. But this year, managed futures have been among the worst performing categories (even after a recent rebound), and global macro has been one of the best. One reason for the split: in a year when AI dominated the news, this is one case where the humans are winning (which is nice to see). The PMs at global macro funds outwitted managed futures algorithms. For example, they ignored their models to react quickly to April's tariffs, while managed futures funds must wait for confirmed trends. J.P. Morgan’s Paul Zummo said: “Even when discretionary macro is not working, I can sit down with somebody, and I think that inherently gives you more comfort… The staying power is different.” Julie Segal has the story on InstitutionalInvestor.com.