How should a retirement fund that must make fixed payments to retirees invest its portfolio? This case introduces students to a variety of concepts in fixed income investing, focusing how on the need to make fixed payments changes portfolio management strategy. Students consider the advantages and disadvantages of asset-liability matching as an investment strategy and learn how to implement such a strategy in practice.

In the Spring of 2014, Rudy Adolf, CEO and founder of Focus Financial, and the two other co-founders of the firm are considering alternative growth strategies to solidify Focus Financial position as a leading aggregator of independent wealth management firms in the U.S. Focus has grown from $3.5B in client assets at its inception in 2006 to over $70B in and it has acquired more than 30 RIA (Registered Investment Advisor) firms, capitalizing on a secular shift in investors' preferences from a traditional product and commission-driven brokerage model to a fiduciary, fee-based client advice model.<br/><br/> Since the 1970's, independent SEC registered investment advisors (RIAs) have been a growing segment of U.S. wealth managers, steadily winning market share from the dominant, traditional wirehouse broker-dealers. But, with more than $1.4 trillion in assets under management in 2013, the RIA industry is also at a crossroads, with aging advisors with limited succession plans and limited access to capital to fund intergenerational transfers, rising compliance and regulatory complexity, competition from new advice delivery models, and fragmentation. The case examines the RIA business model, the opportunities for growth through consolidation in this industry, and the competitive landscape in the wealth management aggregator sector through the lenses Focus Financial business model, its acquisition and M&A model for RIAs, and its wirehouse breakaway programs. The case examines Focus Financial strategy in the face of rising competition, potential growth paths, and IPO scenarios.<br/><br/> The case presents opportunities for students to explore similarities and differences between the broker-dealer and the RIA retail wealth management business models, strategies for growth and consolidation in the retail wealth management business, and issues related to incentives, organization and valuation of retail wealth management businesses.

In November 2012, Prudential Financial and General Motors closed on a $25.1B pension risk transfer (PRT) transaction, the largest of its kind to date by an order of magnitude both in the U.S. market and globally. In exchange for an in-kind transfer of $25.1B in assets, Prudential Financial agreed to irrevocably guarantee the full payment of pension benefits to approximately 110,000 participants of General Motors Retirement Program for Salaried Employees and assume all risks related to investment, interest rate, and longevity as well as all operational and administrative requirements to make those payments for as long as necessary. As they gear to close another significant PRT transaction with Verizon, Dylan Tyson and Phil Waldeck, senior managers of the Pension & Structured Solutions group at Prudential, consider the strategic importance of these deals for Prudential business strategy and the potential growth of the PRT business in light of trends in interest rates and longevity, the regulatory and reporting landscape for defined-benefit pension plans, and the appetite for pension funding risk of plan sponsors. The case examines the pension fund industry, drivers of pension funding risk including investment risk, interest rate risk, and rising participant longevity, the regulatory and reporting landscape for pension funds, and the strategies available to pension funds to de-risk their plans. It then examines insurance companies and specifically Prudential Financial's competitive advantage in managing pension risk and implementing de-risking strategies for pension funds in the context of Prudential Financial's decision to commit resources to expand its PRT group that resulted in the pension liability buy-out deal with General Motors. Finally, the case examines the development and implementation of a PRT deal of this size and complexity, and explores the implications of such deals for the future of the asset management industry.