After spending 27 years at Lumen Technologies’ Centurylink Investment Management, president and chief investment officer Kathleen Lutito is retiring.
The longtime CIO’s last day is May 3. Flora Hedrick, who was previously head of private investments at MissionSquare Retirement, has been named her successor.
“It’s been an incredible journey because our company has had an incredible journey,” Lutito said of her tenure at the Denver-based corporate pension fund.
Outgoing Exelon CIO Doug Brown pointed out that Lutito’s work in the industry has not only benefited the retirees of Lumen and its predecessors, but also the beneficiaries of the Exelon and Chevron pension plans, and the plans represented by her fellow CIEBA members.
“Her impact — direct and indirect — on the retirement system and plan participants in this country has been pretty remarkable,” Brown said. “She’s just a great person. She’s really smart, has great investment expertise and ethics, and the way she conducts herself is so professional.”
Few allocators are as well-acquainted with the notion of long-termism as Lutito. In her 27 years at Lumen, she has seen the company through a series of mergers and divestments, from its early days managing pension assets on behalf of the telecommunications company U.S. West, through its recent rebrand to Lumen Technologies. During her tenure, Lutito has managed a portfolio that ranged in assets under management from $11 billion to $25 billion.
Lutito joined Lumen as an international equity portfolio manager in 1997 and quickly moved into a role managing fixed income for the pension fund. She progressed to director of fixed income, then head of asset allocation. When former CIO Kimberly Walker was hired by the Washington University in St. Louis endowment in 2006, Lutito was promoted to CIO.
Since then, her team weathered the Global Financial Crisis, the U.S.-Europe debt ceiling crisis, the Covid-19 pandemic, and recent inflation and rapidly rising interest rates. The team also navigated a series of mergers and divestments that led to nine different management reporting structures in 18 years. During that time, though, the investment office has contributed $10.8 billion in investment gains to the portfolio.
“Even through all this, every new management team that comes on sees the value in what we’re doing,” Lutito said. “I’ve been incredibly blessed, but I think we’ve earned it.”
Lutito’s team operates as a separate investment management company, giving it more autonomy during the investment process, and more flexibility in compensation. This bolstered Lutito’s ability to attract talent to her 12-person team, and to have less turnover than one might expect from a company that has undergone as much change as Lumen has.
The group initially managed the portfolio with a total return approach, focusing on overall growth of the fund. Between 2000 and 2010, when the portfolio was run with a total return objective, it exceeded its benchmark by $1.1 billion. When the Pension Protection Act passed in 2006, the team was required to move to a liability-driven investment approach. At the time, Lutito was worried about what it would be like to manage a more vanilla, fixed-income heavy portfolio.
“When we moved into LDI world, I didn’t think it would be that exciting, but I did find it incredibly challenging, especially the way we’ve done it with my talented team,” Lutito said. But the investment team was able to use interesting approaches to liability-driven investing, including synthetic overlays and growth assets.
Since the implementation of LDI in 2011 to fit the company’s changing needs, the portfolio has exceeded its liability proxy by $3.5 billion.
“That has been incredibly successful,” Lutito said. “We’ve really just continued to focus the team on managing what’s best for the plan participants, both pension and 401k.”
But Lutito’s tenure as CIO hasn’t been all serious — she has found time to connect with her team, industry peers, and their money managers on a deeper level. As an example, Lumen’s investment team takes their GPs and fellow limited partners on an annual hike up one of Colorado’s 14,000-foot-high mountains.
In a nod to her love for hiking, one of Lutito’s first orders of business upon retirement is an 11-day hike of the last 100 miles of Spain’s El Camino trail. “That will be a nice break to get used to the emails no longer coming in,” Lutito joked. “I definitely am looking forward to writing my next chapter, though.”
Lutito plans to remain involved in the investment industry. Lutito serves as an external advisor for other corporate plans, including Exelon and Chevron, and acts as an independent board member and trustee for Lord Abbett and Company. Lutito is also a member of the investment committees at the University of Colorado Foundation and the Denver Foundation.
“I’d like to continue to stay involved,” she said. “Investing is just part of me.”
