The healthcare trust affiliated with the United Auto Workers named a former Stanford University official and Hewlett-Packard Co executive to manage its $54 billion in assets earmarked for retiree medical benefits.
Kenneth Frier will be chief investment officer of the UAW Retiree Medical Benefits Trust effective August 1, the trust said in a press release on Tuesday. In this new role, Frier will manage assets that will pay for the healthcare benefits for 840,000 retired U.S. auto workers.
Frier takes on the role at a time when healthcare costs are rising swiftly. The fund-- which describes itself as the largest non-governmental buyer of retiree healthcare in the United States-- is also under pressure to get better and more reliable returns on its assets.
The UAW trust, which is known as the VEBA or voluntary employee beneficiary association, was underfunded by roughly $20 billion at the end of 2010, according to its most recent publicly-available financial filings.
"The trust has a unique mission to serve as a source for retiree health care coverage for nearly one million members over time," said Robert Naftaly, chairman of the UAW trust. "Ken's strength is managing risk, which will help the trust create a customized investment strategy to meet its long term needs."
The VEBA was established in 2007 to take on the responsibility of paying for retiree healthcare from the three Detroit automakers, General Motors Co, Ford Motor Co and Chrysler Group LLC. The automakers, which funded the trust, said the liability made them uncompetitive against foreign rivals who were not saddled by the obligation.
In the press release, officials at the UAW trust highlighted Frier's background in pension and endowment asset management as a key reason he got the job. He will replace Eric Henry, who left in March to join the Hershey Trust Co.
Frier was CIO of Stanford Management Company, a unit of Stanford that manages the school's financial and real estate assets, from 2010 to 2011. He worked for HP for about 10 years and managed $33 billion in the company's retirement plan assets from 2007 to 2010. He also oversaw pension assets at Walt Disney Co, according to the statement.
"The trust is a hybrid. While not a pension or an endowment, the trust has characteristics of both," said Adam Blumenthal, chair of the investment committee. "Ken's familiarity with both pension and endowment investment strategies is what attracted the trust to Ken." (Reporting by Deepa Seetharaman)