Articles

Structured Equity can Increase Funded Status – A Successful Investment Strategy for the Past, Present, and Future

Structured Equity can Increase Funded Status – A Successful Investment Strategy for the Past, Present, and Future

Challenging investment markets in 2020 have undone years of improvement in the funding levels of corporate defined benefit pension plans. The funding level of a typical plan, as noted in a recent study by Mercer, fell from 88% at the end of 2019 to 80% at the end of April . However, pension plan sponsors do not need to accept that significant funding level declines are the inevitable consequence of tough markets. It is possible to do much better.

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Innovative Investment Strategies in Volatile Times

Innovative Investment Strategies in Volatile Times

We find ourselves in difficult times. The global effects of COVID-19 have wreaked havoc on investment markets, on daily life and on institutional investment pools such as pension funds and endowments. Treasury yields have plummeted, credit spreads have widened, and major equity indices have fallen to levels not seen since 2016. In times like these, many investors are wondering how they can possibly find their way out…

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The Past Decade in 2020 Hindsight: Pension Investing

The Past Decade in 2020 Hindsight: Pension Investing

In 2019 plan sponsors witnessed a familiar, albeit more extreme, combination of returns that has also been the theme of the entire previous decade.  Equities rallied, long term interest rates fell, and funding levels didn’t increase to levels that plan sponsors expected for a typical pension plan.   However, some sponsors utilized equity derivatives to make the investment portfolio work harder while managing risks more efficiently, and consequently saw their plans’ funded ratios materially increase over the same time period.

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Replicating Private Equity

Replicating Private Equity

Private Equity is illiquid and challenging to benchmark. Many investors use “S&P 500 +3%” in order to compare performance in the absence of an observable, investable asset. This paper describes a methodology for creating a private equity proxy or replication strategy using derivatives.

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Target Date Funds: Three Things to Consider

Target Date Funds: Three Things to Consider

This article addresses three major features common to most TDFs’ structure: asset allocation (specifically, equity exposure), management style (including active and passive management, use of proprietary funds, and tactical asset allocation), and fees – which, if not evaluated carefully and on a manager-by-manager basis, could result in a mismatch between an employer’s goals and participant investment results.

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2017 Pension Plan Report Card – An Above Average Year

2017 Pension Plan Report Card – An Above Average Year

Strong markets coupled with favorable changes in corporate tax rates made 2017 a very good year for pension plan sponsors. The continuing run up in the equity markets meant that most plan sponsors saw funded status improvements in 2017 in spite of discount rate declines.

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A Return to Normal Volatility?

A Return to Normal Volatility?

The equity markets have been extremely volatile over the past two weeks. Are these market movements perhaps the start of something big, or just the first step to volatility returning to a more typical level?

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