Key Takeaways
- • Eastman Kodak will outsource investment management of its pension plan to NEPC after 54 years of in-house management, disbanding a five-person investment team that oversaw about $7 billion in assets, according to Bloomberg's initial report.
- • The Kodak Retirement Income Plan Committee (KRIPCO) chose NEPC as an OCIO to guide the plan through "turbulent times," per Kodak's statement.
- • The plan was overfunded by about $1.2 billion, and Kodak said it is exploring how to preserve and maximize that surplus, which could be used to pay down term loan obligations.
- • Kodak's investment team ranked as the top corporate plan for the five- and ten-year periods ending September 30, 2023, driven by a hedge fund and private markets allocation exceeding 60 percent.
- • Kodak's share price rose nearly 50 percent after the news broke, with the pension (about $7 billion) far exceeding the company's pre-news market capitalization of $286.4 million.
Summary
Eastman Kodak said it will outsource investment management of its pension plan to NEPC, ending 54 years of in-house management. Bloomberg first reported the move on Thursday, and Kodak issued a statement the following day. The five-person investment team, which managed roughly $7 billion for the Kodak Retirement Income Plan (KRIP), is being disbanded. Kodak's statement said KRIPCO "chose NEPC to guide the plan through these turbulent times to ensure the health of the plan's investment portfolio." According to one source, investment staff were not told why the plan was moving to an outsourced chief investment officer (OCIO) model.
The decision was unexpected. Pension industry observers compared it to the 2022 shutdown of Hartford Healthcare's investment office, which also managed a high-performing portfolio. Kodak's pension is now significantly larger than the company itself: before the news, Kodak's market capitalization was $286.4 million, and its share price rose nearly 50 percent after Bloomberg broke the story. Kodak said the plan was overfunded by about $1.2 billion. If excess assets are returned to the company, for example after liabilities are paid down, they would be used to repay term loan obligations. The company said it is working with KRIPCO on how best to preserve and maximize that overfunding for current and former employees and shareholders.
A corporate pension chief investment officer told Institutional Investor that the team's performance was a key factor. The CIO said Kodak's investment team ranked first among corporate plans for the five- and ten-year periods ending September 30, 2023. The CIO attributed those results to placing more than 60 percent of the portfolio in hedge funds and private markets, a "much higher" allocation than most peers. The CIO said the outcome was a result of the team's "different approach," adding, "We all thought Tom was doing a great job." A private equity executive described the team as strong performers and partners, and said the outcome was unfortunate given their results.
The fund was built under Rusty Olson, who joined the investment staff in 1971 and was an early adopter of diversifying strategies including real estate, venture capital and portable alpha. Olson died in December at age 91. Thomas Mucha led the plan from 2011, after stints at Williams College's endowment and Bridgewater, and oversaw a restructuring during Kodak's bankruptcy. Mucha, who declined to comment for this story, said in a 2023 interview that Kodak had committed nearly $2 billion to real estate since inception and about $1.6 billion to buyouts, while less than 1 percent of the plan was in private real estate and 10 percent in buyout funds at that time. He described a single allocation to all private investments rather than strategic sub-allocations. Other team members named in the report are Nick Johnston, Lin Sun, Mike Masso and Jake Conway, who will now seek new roles.
The decision was unexpected. Pension industry observers compared it to the 2022 shutdown of Hartford Healthcare's investment office, which also managed a high-performing portfolio. Kodak's pension is now significantly larger than the company itself: before the news, Kodak's market capitalization was $286.4 million, and its share price rose nearly 50 percent after Bloomberg broke the story. Kodak said the plan was overfunded by about $1.2 billion. If excess assets are returned to the company, for example after liabilities are paid down, they would be used to repay term loan obligations. The company said it is working with KRIPCO on how best to preserve and maximize that overfunding for current and former employees and shareholders.
A corporate pension chief investment officer told Institutional Investor that the team's performance was a key factor. The CIO said Kodak's investment team ranked first among corporate plans for the five- and ten-year periods ending September 30, 2023. The CIO attributed those results to placing more than 60 percent of the portfolio in hedge funds and private markets, a "much higher" allocation than most peers. The CIO said the outcome was a result of the team's "different approach," adding, "We all thought Tom was doing a great job." A private equity executive described the team as strong performers and partners, and said the outcome was unfortunate given their results.
The fund was built under Rusty Olson, who joined the investment staff in 1971 and was an early adopter of diversifying strategies including real estate, venture capital and portable alpha. Olson died in December at age 91. Thomas Mucha led the plan from 2011, after stints at Williams College's endowment and Bridgewater, and oversaw a restructuring during Kodak's bankruptcy. Mucha, who declined to comment for this story, said in a 2023 interview that Kodak had committed nearly $2 billion to real estate since inception and about $1.6 billion to buyouts, while less than 1 percent of the plan was in private real estate and 10 percent in buyout funds at that time. He described a single allocation to all private investments rather than strategic sub-allocations. Other team members named in the report are Nick Johnston, Lin Sun, Mike Masso and Jake Conway, who will now seek new roles.
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