Overfunded pension plans like Kodak’s pose $137B opportunity

investmentnews.com:

Inside Eastman Kodak Co., the once iconic camera maker, a small pension investment team reaped such large gains in recent years that they windfalled themselves out of a job.

The group, managing a pool of retirement assets for more than 37,000 people, poured money into hedge funds and private equity and, in seven years, turned a $255 million deficit into a $1.1 billion surplus.

That represents a potential fortune for a company that spent the past decade stumbling to find a post-bankruptcy direction, lurching from crypto to Covid vaccines and back to a niche resurgence in film. Earlier this month, Kodak said it was moving management of the pension to an outside firm while it weighed how best to utilize the extra assets, which amount to almost triple the company’s market value.

The photography pioneer isn’t alone.

Across corporate America, buoyant markets and rising rates have turned a subset of employee pensions — defined-benefit plans — from a costly legacy of past promises into an unexpected nest egg.

The question now is how to tap it: a complex dilemma that’s shaping merger talks and corporate strategy, while attracting insurers and asset managers that see a lucrative opportunity in companies that want out of this volatile game altogether.

“This is the pension opportunity of a lifetime,” said Scott Jarboe, a partner at consulting firm Mercer. “Pension plans are better funded than ever.”

Companies with defined-benefit pensions in the S&P 1500 Composite Index — including household names such as Coca-Cola Co., Kraft Heinz Co. and Johnson & Johnson — were sitting on a combined $137 billion surplus as of Feb. 29, according to Mercer. In late 2016, they had a deficit of more than $500 billion.

The flush status of these frozen