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 Trading
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”, “AIUSA” and “Aon” refer to Aon
Investments USA Inc. unless the context otherwise
requires.
We provide professional investment advisory and
consulting services to institutional clients including, but
not limited to, defined benefit and defined contribution
plans (public and private), not‐for‐profit organizations,
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, Inc. 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 changed its legal
business name to Aon Investments USA Inc. Beginning
in 2018, the firm also began operating under the
umbrella brand name, “Aon”. 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).
AIUSA is headquartered in Chicago, Illinois and has
offices across the U.S. We provide discretionary
investment management and non‐discretionary
investment advice and certain actuarial related services
related to clients’ investment programs and operations,
including:
o Investment Policy Planning and Asset Allocation;
o Manager Structure and Selection;
o Performance Review and Manager Monitoring;
o Alternative Asset Advisory Services;
o Outsourced Chief Investment Officer (“OCIO”)
solutions;
o Pension Risk Management;
o Direct Investment Funds;
o Bespoke Services; and
o Other 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 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(s);
o Develop investment objectives and a statement of
investment policy;
o Meet cash flow needs; and
o Conduct scenario analyses on their portfolio(s) as
well as evaluate alternative portfolios.
Our Investment Policy Services Team (“IPS Team”)
Investment Manager Research (“IMR Team”) and Global
Asset Allocation Team (“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 proprietary 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 and our capital market assumptions. 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 dynamic “de‐risking”
glide paths 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 appropriate levels of oversight within the
client’s governance structure.
Wealth Management
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 advisory firms not affiliated with Aon, including
certain open‐end mutual fund companies and wrap‐fee
program sponsors in connection with third‐party wrap‐
fee programs.
We do not sponsor any wrap‐fee programs, but we may
provide non‐discretionary investment advisory services
to sponsors of wrap‐fee programs. Under such
arrangements, we provide Model Portfolios containing
our current investment recommendations based on
clients’ model portfolio investment policy statements
and strategic goals or other parameters as agreed to
between Aon and such client. Although we provide
recommendations, we do not have the authority to
implement those recommendations. Ultimately, clients
retain discretion and remain responsible for asset
allocation determinations and securities selections.
Clients also maintain responsibility for effecting all
security transactions in connection with such asset
allocation determinations and securities selections,
which means a client’s portfolio(s) 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 Wealth Management
or other Aon clients. We receive a fee from our clients as
an investment adviser for the services provided in these
programs.
Manager Evaluation and Selection
We rely on investment research generated by the
Investment Manager Research Team (“Research
Team”). The Research Team is dedicated to researching
and evaluating non‐affiliated investment managers
worldwide and consists of investment professionals
from AIUSA and its global investment advisory affiliates.
Our Research Team monitors and rates non‐affiliated
investment managers’ strategies. Certain of the
investment managers the Research Team reviews may
participate in the Aon Global Wealth Insights
Conferences (the “AGWI Conferences”), which are
sponsored by Aon Consulting, Inc., the parent company
of AIUSA (“Aon Consulting”) and further described
below. Participation in the AGWI Conferences is not and
may not be considered in the Research Team’s
investment manager evaluation and selection process.
Please see “Other Services” below for additional detail
and Item 5‐ Fees and Compensation for information
related to indirect compensation AIUSA and/or its
affiliates may receive in relation to the AGWI
Conferences.
The Research Team identifies and evaluates investment
managers and strategies across various asset classes,
including equities, fixed income, real estate equity and
debt, private equity and debt, and alternative asset
classes. Qualitative ongoing periodic due diligence is
then conducted on buy‐rated and certain qualified‐rated
managers. (A discussion of AIUSA’s manager ratings is
contained in the section below entitled “Performance
Review and Manager Monitoring”.) The Research Team
will also conduct periodic quantitative screens on its
manager universe, including investment managers that
are not currently classified as buy‐rated or qualified‐
rated managers. As part of its evaluation of an
investment manager, the Research Team has an
agreement with Aon’s operational risk consulting
practice, the Operational Risk Solutions and Analytics
(“ORSA”) Group of Aon Consulting, an AIUSA affiliate,
to provide due diligence reviews assessing an
investment manager’s non‐investment risks relating to
its business structure, activities, operations, and
compliance practices. The Research Team includes
several former investment fund managers, which we
believe provides further insight into investment
managers. The research generated by the Research
Team is shared among Aon’s investment advisory
affiliates.
The Research Team establishes model building block
portfolios to guide our investment professionals in
reviewing the number and types of managers, funds,
and separate account strategies used by clients. The
Research Team building block portfolios take into
consideration an analysis of factors such as efficiency,
costs, and management oversight. Further, the
Research Team’s due diligence process is leveraged by
our discretionary and non‐discretionary investment
advisory teams to screen, interview, and select manager
candidates that meet each client’s needs.
In certain circumstances, a client may delegate its
authority to Aon, including the authority to allocate
assets, hire investment managers, and terminate the
services of investment managers, as appropriate. Please
see the section “Outsourced CIO” below for additional
information.
Performance Review and Manager Monitoring
Our manager research efforts are driven by several
factors including, but not limited to, efforts to identify
new investment strategies or approaches, monitor
investment strategies to which we have assigned a
rating, and monitor strategies in which clients invest. We
conduct both qualitative and quantitative research and
screening on investment strategies. Qualitative
research includes ongoing discussions and periodic 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 at the research team’s discretion.
For those strategies rated with our quantitative process,
including “not recommended” rated strategies held in
client portfolios, the quantitative assessment is updated
quarterly and serves as a monitoring tool and
information source for our researchers, consultants,
and/or clients that may utilize the strategies in their
portfolio(s). In certain instances, the quantitative
assessment may be updated less frequently than
quarterly due to factors outside of our control. These
factors include but are not limited to insufficient or
incomplete data provided by third parties. Assessments,
whether qualitative or quantitative,
focus on a firm’s
overall business/organization, staffing, investment
process, risk management, operational considerations,
performance, and terms and conditions, (as they relate
to use of a firm’s strategies or pooled fund offerings).
When evaluating investment strategies for a client, the
Research Team also considers the prospective
investment in the context of the client’s investment
objectives and guidelines. We inform clients of
important developments and, when appropriate, may
recommend changing investment managers,
investment strategies, or the asset allocation to such
investment managers or strategies.
Alternative Asset Advisory Services
Our Global Liquid Alternatives (Hedge Funds), Private
Equity, and Real Estate Teams (collectively the “Global
Alternatives Team”) are sub‐groups of the Research
Team discussed above in the section entitled “Manager
Evaluation and Selection”. Members of the Real Estate
Team are dual‐hatted colleagues who provide services
to both AIUSA and The Townsend Group (“TTG”), a
separately registered investment advisory affiliate of
AIUSA.
The Global Alternatives Team is responsible for
maintaining qualitative assessments on buy‐rated
alternative asset manager strategies and keeping
abreast of the conditions in these markets.
We provide both discretionary and non‐discretionary
investment advisory services on strategies such as
private equity, real estate, venture capital
arrangements, hedge funds, leveraged buyout funds,
and distressed securities funds.
With the exception 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 various
types of investments unless directed by the client in
writing to exclude or limit specific investments. Our
investment recommendations are not limited to any
specific product or service offered by any particular
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 to qualified clients
when such recommendation is consistent with the
client's stated investment objectives, including its
tolerance for risk, liquidity, and suitability.
Hedge Fund Advisory Services
We develop and monitor a client’s asset allocation
structure(s) 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 client’s goals, risk tolerances, and
risk qualities of existing portfolios with our manager
research and monitoring capabilities. We 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 on‐site and/or virtual manager
meetings annually on buy‐rated strategies with a due
diligence process that includes an examination of
investment strategy, fund leadership/management,
performance, and other factors. Operational due
diligence is conducted by ORSA in order for a strategy to
receive a buy rating.
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. We
provide clients with performance reporting, portfolio
analysis, and comprehensive portfolio company review.
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. From time to time,
we may engage outside counsel to assist in conducting
due diligence on private equity funds on behalf of
clients. We may also assist the client in the negotiation
of business terms for private equity funds. We do not
provide legal, accounting, valuation or tax advice to
clients under any circumstances in connection with
these services. Clients are responsible for obtaining their
own legal, accounting and tax advice. From time‐to‐
time clients may request a list of service providers that
can assist them in conducting due diligence; Aon may
provide list(s) of service providers upon request as a
courtesy but does not recommend or advise on the
suitability of such service providers. Additionally, Aon is
not compensated by service providers for inclusion on
any such list.
Real Estate Advisory Services
We leverage our real estate research, which is conducted
by The Townsend Group (“TTG”), an affiliate of AIUSA,
to consult with 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 investment solutions offered by TTG.
Outsourced CIO (“OCIO”)
We design and manage clients’ investment portfolios
through our OCIO solutions. For these client
relationships, we are delegated the authority to hire
investment managers, terminate the services of
investment managers, select investments, and
rebalance portfolio assets subject to the client's
investment policy statement and other terms outlined in
the investment management agreement. Please see
Item 16 for more information about our OCIO solutions.
Our OCIO solutions are dedicated to the development,
implementation, and execution of solutions for our
clients within the guidelines of each client and its
Investment Policy Statement, if available. These
solutions also generally utilize investment strategies
designated as “buy‐rated” by the Research Team. (A
discussion of AIUSA’s manager ratings is contained in
the section above entitled “Performance Review and
Manager Monitoring”.) The OCIO solutions team utilizes
a variety of investment managers and investment
vehicles.
Our Portfolio Implementation team leverages the
expertise of individuals with backgrounds in investment
management and actuarial science. The team is
responsible for managing portfolio risk in general,
including performing asset‐liability analyses,
monitoring portfolio positions from an asset‐liability
perspective, and designing custom interest rate risk
management portfolios utilizing derivatives.
Certain clients that receive non‐discretionary
investment advisory services may also have a portion of
their portfolio(s) managed by our OCIO team. In such
cases, we provide non‐discretionary (ERISA Section
3(21)) advisory services and exercise discretionary
management authority (ERISA Section 3(38)) with
respect to the portion of the client’s portfolio(s) for
which such client delegates investment discretion to
AIUSA. AIUSA 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, clients may delegate to
AIUSA the authority to invest in funds for which AIUSA
or an affiliate serves as fund sponsor or investment
adviser (“Aon Funds”) if such funds are suitable for the
client. Client authorization is not required as part of our
OCIO solutions, and we believe that we can offer scaled
pricing to clients investing in Aon Funds that may not
otherwise be available to such clients. Aon Funds
consistently reflect our investment beliefs in terms of
managers and portfolio structure.
Our non‐discretionary investment advisory services do
not include any advice or recommendation as to the
prudence of using AIUSA’s OCIO solutions or other
AIUSA services or products.
Bespoke Services
Some clients elect to customize their investment
portfolios to reflect unique and specific needs and goals,
such as by imposing reasonable investment restrictions
on certain securities, industries, or sectors or managing
a portfolio to a tax‐efficient mandate.
Other Services
AIUSA, in conjunction with certain of its global affiliates
participates in the AGWI Conferences. The AGWI
Conferences provide educational meetings and events.
AIUSA also uses the AGWI Conferences as a format to
identify prospective clients. These meetings and events
may be attended by both prospective and current AIUSA
clients, as well as investment management firms and
investment service providers.
AIUSA Regulatory Assets Under Management
As of December 31, 2022, we had approximately $119.05
billion of regulatory assets under management.
Assets Under Advisement (“AUA”) may appear in client
and sales materials in addition to AIUSA’s regulatory
Assets Under Management (“AUM”). AUA is presented
when, due to the nature of the contractual agreements
with certain clients, we provide consultative advice to
our clients in a non‐discretionary capacity and do not
maintain discretionary authority over the clients’
portfolio(s). In such relationships, the clients maintain
the ability and authority to manage and allocate assets
within their own portfolio(s) independent of our advice.
Therefore, these clients are not reflected within
regulatory assets under management. Instead, these
engagements are represented as part of AIUSA’s AUA.
In the instance that AUA is listed in client or sales
materials it will be accompanied by relevant disclosure
indicating how AUA has been calculated.