AON INVESTMENTS USA INC.
Aon Investments USA Inc. is a registered investment adviser with the U.S. Securities and Exchange Commission (“SEC”); a Commodity Pool Operator (“CPO”) and a Commodity Trading Advisor (“CTA”) registered with the Commodity Futures Trade Commission (“CFTC”); and is a member of the National Futures Association (“NFA”) with its principal place of business located in Chicago, Illinois. References to “we”, “us”, “our”, “the firm”, and “Aon” refer to Aon Investments USA Inc. unless the context otherwise requires. In 2018, Aon Investments USA Inc. also began operating under the umbrella brand name, “Aon”. We provide professional investment advisory and consulting services to institutional clients including public pension funds, endowments, foundations, not- for-profit organizations, corporate pension funds, defined contribution plans, insurance companies and registered investment advisers/wealth managers. In 2010, Aon plc acquired Ennis Knupp & Associates, Inc. and Hewitt Investment Group, LLC. These entities were merged with Aon Consulting to operate as Hewitt EnnisKnupp, Inc. In January 2015, the business changed its legal business name to Aon Hewitt Investment Consulting, Inc. Subsequently, in March 2020, the firm began operating as Aon Investments USA Inc. The firm is wholly owned by Aon Consulting, Inc., an indirect subsidiary of its ultimate parent, Aon plc. Aon plc shares are listed on the New York Stock Exchange (symbol: AON). Aon Investments USA Inc. is headquartered in Chicago, IL and has offices across the US. We provide non- discretionary investment advice, discretionary investment solutions, and actuarial related services to clients on many matters related to their investment programs and operations, including: o Investment Policy Planning and Asset Allocation; o Manager Structure and Selection; o Performance Review and Manager Monitoring; o Fiduciary Governance Services; o Alternative Asset Advisory Services; o Outsourced Chief Investment Officer (“OCIO”) solutions and Pension Risk Management; o Direct Investment Funds; o Ad Hoc Projects; and o Bespoke Services. Additional information regarding each of the above services is provided below. In addition to the services listed, we offer related services including defined contribution services, trustee/custodian evaluation, and asset transition services.
Investment Policy Planning and Asset Allocation
We help clients to: o Define and control risk for their specific requirements; o Diversify their investment portfolio; o Develop investment objectives and a statement of investment policy; o Meet cash flow needs; and o Conduct scenario analysis on their portfolio(s) as well as evaluate alternative portfolios. Our Investment Policy Services Team (the “IPS Team”) and Global Asset Allocation Team (the “GAA Team”), collectively referred to herein as, the “Teams”, are composed of investment professionals with backgrounds in investment management, economics, and actuarial science. These Teams are responsible for maintaining our “house” investment views and capital market assumptions. The Teams also provide timely, proactive advice and research to our investment consultants regarding the potential investment implications of changes in capital markets. Additional responsibilities include coordinating with our investment consultants to provide clients with top-down, strategic investment advice; researching new investment strategies; and monitoring portfolio positions from an asset allocation perspective. Certain clients hire us to construct a dynamic “de- risking” glide path to help bring their pension plans to a fully funded status, while reducing uncompensated risks, with the goal of reducing the economic cost of plan benefits. The dynamic “de-risking” glide path is directly incorporated into the client’s investment policy to formalize the strategy, permit execution, and seek to ensure the highest levels of governance.
The Wealth Management team provides non- discretionary model portfolios (“Model Portfolios”), manager selection, strategic asset allocation advice, and related advisory services to certain institutional and retail non-affiliated advisory firms, including certain open-end mutual fund companies and wrap-program sponsors in connection with third-party wrap-fee programs. We do not sponsor any “wrap-fee” programs, but we participate as a non-discretionary sub-adviser for wrap- fee program sponsors. Under these arrangements, we provide Model Portfolios containing our current investment recommendations based on our clients’ model portfolio investment policy statements and strategy goals or other parameters as agreed to between Aon and our client. Although we provide recommendations, we do not have the authority to implement those recommendations. Ultimately, the decision making and discretionary responsibility for the asset allocation and securities selection remains with the client. Our client also maintains responsibility for effecting all security transactions in connection with such determinations, which means our client’s portfolio may materially diverge from the Model Portfolio created for such client. There may be differences between the Model Portfolio and the portfolios managed by our client and Aon’s other clients. We receive a fee from our client as an investment adviser for the services provided in these programs.
Manager Structure and Selection
We rely on investment research generated by the Investment Manager Research Team (“Research Team”). The Research Team consists of investment professionals from Aon Investments USA Inc. and its global investment advisory affiliates dedicated to researching and evaluating non-affiliated investment managers worldwide. The research generated by the Research Team is sourced by and shared among Aon’s investment advisory affiliates. Our Research Team monitors and rates such non-affiliated investment managers’ strategies. The Research Team includes several former investment fund managers, which we believe provides further insight for understanding managers. The Research Team identifies investment managers and strategies across equities, fixed income, real estate equity and debt, private equity and debt, and alternative asset classes for our clients, and conducts qualitative ongoing periodic due diligence on buy-rated and select qualified managers. The Research Team will also conduct periodic quantitative screens on its manager universe, including investment managers that are not currently classified as buy- or qualified-rated managers. As part of its evaluation of an investment manager, the Research Team has an agreement with Aon’s affiliate, Aon Consulting Inc.’s Operational Risk and Solutions Advisory (“ORSA”) Group, an operational risk consulting practice, to provide due diligence reviews assessing an investment manager’s non-investment risks covering its business structure and activities, operations, and compliance practices. The Research Team works with our investment professionals to periodically review the number and types of managers, funds, and separate account strategies used by clients, paying careful attention to efficiency, costs, and management oversight. Further, the Research Team’s due diligence process is leveraged by our discretionary and non-discretionary advisory teams to include screening, interviewing, and selecting manager candidates that meet each client’s needs. Observations from this research are summarized within written manager guidelines and performance objectives reports. In certain circumstances, a client may delegate its authority to Aon, including the authority to allocate assets and hire or fire investment managers. Please see the section on our Outsourced CIO solutions below for additional information.
Performance Review and Manager Monitoring
Our manager research efforts are driven by several factors including efforts to identify new investment strategies or approaches, monitor investment strategies to which we have assigned a rating, or monitor strategies in which our clients invest. We conduct both qualitative and quantitative research and screening on investment strategies. Qualitative research includes ongoing discussions and periodic on-site due diligence meetings with investment managers to assess investment strategies offered by the relevant firm. Qualitative research is performed on strategies in which we assign a “buy” recommendation. Qualitative research also is performed on select “qualified”, “not recommended”, or “sell” rated strategies depending on client requirements or the research team’s interest in that strategy or firm. For those strategies rated with our quantitative process, including “not recommended” rated strategies held in client portfolios, the quantitative assessment is updated quarterly, which serves as a monitoring tool and information source for our researchers, consultants, and/or clients that may utilize the strategy in their portfolio. Assessments, whether qualitative or quantitative, focus on business/organization, staffing, investment process, risk management, operational considerations, performance, and terms and conditions. When evaluating investment strategies for a client, the research team also considers the investment in the context of the client’s objectives and guidelines. We inform our clients of important developments and, when appropriate, recommend changing investment managers or the asset allocation to such investment managers.
Fiduciary Governance Services
Our Fiduciary Services Team works with clients and provides fiduciary oversight reviews to help those clients meet their fiduciary responsibilities. These services are provided to both public- and private-sector pension plans and committees as well as other clients such as Taft Hartley, Higher Education, and Healthcare organizations. In most cases, these services are typically a separate retainer-based solution distinct from other investment consulting services. Our fiduciary services include: o Strategic planning; o Fiduciary audits and operational reviews; o Client and fiduciary training; o Board/Committee governance and self-assessment; and o Ad hoc projects.
We assist in the design of strategic plans and development of mission statements and core values as well as reasonable and achievable goals and objectives. We also assist in the implementation of the plans and the evaluation of their success.
Fiduciary Audits and Operational Reviews
We review the client’s policies and procedures to assess their effectiveness and appropriateness and provide recommendations for improvement. These reviews may include:
• Investment portfolio objectives, asset allocation, and policy;
• Investment operations and processes;
• Board oversight, policies, and principals; and
• Organization, staffing structure, and policies. Upon completing our review, we create a report of findings and recommendations for delivery to the client’s governing body and may assist the client in selecting trustees and record-keepers for fiduciary accounts.
Client and Fiduciary Training
Our educational offerings include:
• Written reports that provide background information, alternatives, and recommendations (along with the rationale for the recommendations made as a result of the Fiduciary Audits or Operational Reviews) on a given issue;
• Research or educational materials on topics to discuss with a client’s staff or committees;
• A periodic client conference that covers a variety of investment-related topics.
We assist clients by developing governance manuals, policies, procedures, and monitoring methods appropriate to their oversight responsibilities and reporting structure. We also provide services to support our clients’ administration of their fiduciary requirements, such as preparing meeting minutes and compliance calendars, and assist with board/committee self-assessment.
Alternative Asset Advisory Services
Our Global Hedge Funds, Private Equity, and Real Estate Teams (collectively the “Global Alternatives Team”) are a sub-part of the Research Team discussed above. Members of the Real Estate team are dual-hatted colleagues who provide services to both Aon Investments USA Inc. and The Townsend Group, a separately registered investment advisory affiliate of Aon Investments USA Inc. The Global Alternatives Team is responsible for maintaining qualitative assessments on alternative asset manager strategies and keeping abreast of the conditions in these markets. We provide both non-discretionary and discretionary investment advisory services on partnership interests strategies such as, but not limited to, private equity, real estate, venture capital arrangements, hedge funds, leveraged buyout funds, and distressed securities funds. With the exceptions of mutual funds, exchange traded funds, and non-public securities, we do not typically provide advice or recommendations on specific securities investments. In designing a client’s investment policy, we will typically consider many types of investments, unless instructed by the client to limit our advice to particular sectors or industries. Our investment recommendations are not limited to any specific product or service offered by a broker-dealer, insurance company, or asset manager. Because some types of alternative investments involve an additional degree of risk, alternative investment strategies will only be recommended when consistent with the client's stated investment objectives, tolerance for risk, liquidity, and suitability.
Hedge Fund Advisory Services
We develop, expand and monitor our clients’ asset allocation structures in liquid alternatives or opportunistic strategies (e.g., real and absolute return, global tactical asset allocation, long/short equity including market neutral and 130/30 style funds, commodities, convertible arbitrage, and funds-of- funds). We seek to integrate our understanding of each of our client’s goals, risk tolerances, and risk qualities of existing portfolios with our extensive manager research and monitoring capabilities. Our approach is to take a broad perspective on this opportunity set, covering not only a wide variety of hedge funds, but also those strategies that use “hedge fund like” approaches to investing. We typically conduct both on-site and telephonic manager meetings annually with a due diligence process that includes a robust examination of investment strategy, fund leadership, and operational due diligence.
Private Equity Advisory Services
We review and develop a client’s private equity investment policy, asset allocation, and portfolio design. We conduct global private equity fund selection and due diligence reviews within each relevant sub-sector. In addition, we coordinate the engagement of outside counsel for our clients so that limited partnership agreements are reviewed by legal professionals. Then, we negotiate terms and conditions on behalf of each client. We provide clients with performance reporting, portfolio analysis, and comprehensive portfolio company review. We do not provide our clients with legal advice under any circumstance in connection with these services. Clients have the responsibility to obtain their own legal and tax advice. We educate clients on secondary sale processes and evaluate their portfolio construction decisions. We provide private equity education and market analysis, including commentary on current issues. We recommend commingled private equity investment funds as well as separate accounts that are structured and classified to meet client needs.
Real Estate Advisory Services
We leverage our real estate research, which is conducted by The Townsend Group (“TTG”), to consult our clients on the development, implementation and monitoring of their real estate portfolio investment objectives, programs, and policies and to select managers for our real estate funds. Our real estate investment strategic planning and implementation services include: o Investment pacing, size, and strategy diversification; o Investment vehicle analysis and planning; o Property and portfolio leverage planning; o Manager search, selection, and monitoring; o Performance measurement and attribution analysis; o Topical real estate research and market analysis; and o Transition structure and terms modeling, analysis, and fee negotiations. We will not consult or make recommendations to clients related to TTG solutions.
Through our OCIO solutions, we design and manage certain institutional clients' investment portfolios. For these client relationships, we are delegated the authority to hire investment managers, terminate investment managers, select investment funds, and rebalance portfolio assets subject to the client's investment policy statement and other terms outlined in the investment consulting agreement. Please see Item 16 for more information about our OCIO solutions. Our OCIO solutions are dedicated to the development, implementation and execution of our best thinking for our clients. These solutions also generally utilize “buy- rated” investment strategies, which are researched by the Research Team. OCIO utilizes a variety of tools and providers that seek to pursue the highest quality strategies available in the market. Our Portfolio Implementation team leverages the expertise of individuals with backgrounds in investment management and actuarial science. The team is responsible for managing risk in general, including: performing asset-liability analyses; designing custom interest rate risk management portfolios utilizing derivatives; and monitoring portfolio positions from an asset-liability perspective. Certain clients that receive non-discretionary investment advisory services may also have a portion of their portfolio managed by our OCIO team or provided in connection with our OCIO solutions. In such cases, we provide non-discretionary (ERISA Section 3(21)) advisory services with respect to certain clients, and exercise discretionary management authority (ERISA Section 3(38)) with respect to a portion of these client’s portfolios. Aon Investments USA Inc. qualifies as a “Qualified Professional Asset Manager” under the U.S. Department of Labor (“DOL”) Prohibited Transaction Class Exemption 84-14. As part of our OCIO solutions, if suitable, we have the option to invest our clients in Aon’s affiliated private funds and/or collective funds. While the investment in our private funds or collective funds is not a requirement of our OCIO solutions, we believe that we have the ability to offer scaled pricing to its clients by investing into affiliated private funds or collective funds, which may not otherwise be available to clients separately through the use of separate accounts or other unaffiliated commingled vehicles. Our funds consistently reflect our investment beliefs in terms of managers and portfolio structure. Our non-discretionary investment advisory services will not include evaluations or recommendations on our OCIO solutions.
Some of our client elect to customize their investment portfolio to reflect unique and specific needs and goals, such as by imposing reasonable investment restrictions on certain securities, industries, or sectors; managing a portfolio to a tax-efficient mandate; or by providing us with written instructions when opening an account or at any time thereafter.
Aon Investments USA Inc. Regulatory Assets Under
As of December 31, 2019, we had approximately $136 billion of assets under management. Assets Under Advisement (AUA) appears in client and advertising collateral in addition to Assets Under Management (AUM). AUA is presented when, due to the nature of the contractual agreements with our investment consulting clients, we do not maintain discretionary authority over the clients’ account and provide consultative advice to our clients in a non- discretionary capacity. In such relationships, the clients maintain the ability and authority to manage and allocate assets within their own plan/portfolios independent of our advice. Therefore, these clients are not reflected within regulatory assets under management. Instead, these engagements are represented as part of Aon Investments USA Inc. AUA. please register to get more info
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Shortly after its March 4 board meeting, the pension fund is then scheduled to issue an SFP for investment consultants for its defined benefit and defined contribution plans. Aon Investments USA ...
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