November 17, 2014
What comes out of a pension system is the same as what goes in. And only two things go in: contributions and investment returns.
By Bob CollieNovember 10, 2014
What is the goal of an LDI portfolio? If you answered “to behave as much like the liabilities as possible” then you are not alone, and doing so can be a material first step toward reducing the volatility of the plan’s overall surplus/deficit (or “surplus volatility”.) But there is another possible answer to the question, and that leads to a different approach to LDI.
By Bob CollieNovember 3, 2014
The October round of earnings calls (Q3 for most U.S.-listed corporations) provide a handy guide to the state of corporate pension plans in advance of the full 10-K reports that mostly come out in February. This year, there has been no single theme that dominated the pension-related comments of the sponsors of large DB plans.
By Bob CollieOctober 29, 2014
In recent weeks, CalPERS and Motorola have both made headlines in the investment press for taking significant steps in their investment programs. Motorola are paying $3.1bn to Prudential to buy pension annuities, moving both assets and liabilities off of their corporate balance sheet; the third biggest such annuity buy-out ever in the U.S., trumped only by GM and Verizon’s 2012 mega-deals . Meanwhile, CalPERS are pulling the plug on a $4 billion hedge funds program. Neither action was driven by a desire to follow the herd: indeed, both actions involve significant “maverick risk”, the extra risk that comes from being different.
By Bob CollieOctober 22, 2014
2014 has not been a strong year so far for corporate pension plan funding, with a large part of 2013’s gains given back: our representative plan hit 88% funded at the end of 2013, but ended September at 84.2%.
By Bob CollieOctober 15, 2014
While the details of recent changes to IRS segment rates for pension plan funding are complicated, their impact is not: corporations will be allowed to put less money into their defined benefit pension plans for the next few years if they choose.
By Bob CollieOctober 7, 2014
Behavioral finance should be a part of every investor’s education. Understanding how widespread are traits such as overconfidence, hindsight bias, and frame dependence is helpful if we are to avoid their traps.