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Fiduciary Matters blog

Insights for institutional investors

January 27, 2015By

With the ten-year Treasury yield this low, don’t expect pension plans to change their positions on LDI

A lot has been said over the past fifteen years about what pension plans ought to do regarding liability-driven investing (LDI) . But, with interest rates having fallen this year to levels we haven’t seen in decades, I think that what many plans will do is: not much at all. Whatever the position a plan is in, low interest rates make it difficult to make changes now.

By January 20, 2015

2014 was another case of “two steps forward, one step back” for pension funded status

Russell’s latest LDI Update confirms what most pension plan sponsors already know: 2014 was not a good year for pension funding. This follows on the heels of an OK 2012 and a good 2013; our representative open plan gained about 16 percentage points of funded status in 2012 and 2013, and lost six in 2014.

Categories: Category: Defined benefit strategy
By January 13, 2015

What should we make of Illinois’ new retirement savings plan?

Earlier this month, the Illinois Secure Choice Savings Program Act was signed into law , to be effective June 1 and fully implemented by 2017. While there have been a number of attempts in other states to mandate retirement saving , this is the first such piece of legislation to get across the finish line. In the words of the lead sponsor of the legislation, State Senator Daniel Biss (D.), the legislation is “an automatic enrollment IRA so that workers without employer sponsored retirement plans still have an easy way to save for retirement using a payroll deduction and benefiting from low fees.”

Categories: Category: General
By January 5, 2015

Two hundred years of trade, not war, has been a good thing for both the U.S. and the UK (and Canada, too)

This week marks the 200th anniversary of the Battle of New Orleans on January 8th, 1815 – the last battle to take place between U.S. and British military forces. The two centuries of subsequent co-operation and friendly trade have been beneficial for both nations, an illustration that good things happen when nations choose to trade instead of fight.

Categories: Category: General
By December 18, 2014

Like the Cheshire Cat, Defined Benefit plans are slow in vanishing

Private sector Defined Benefit plans are seen by many as on their way to becoming part of history . Their total liabilities probably peaked in 2012 at around $2.3 trillion. A growing number are now frozen , or at least closed to new entrants (possibly the majority… unfortunately the PBGC has not published new data on this point for a while now.) It’s generally accepted that the future is DC.

Categories: Category: Defined benefit strategy
By December 10, 2014

“Yale invests in highly correlated asset classes”

The title of this post is taken from a sign held up at the annual Harvard-Yale football game . It’s a low blow: the Yale investment model famously prides itself on the pursuit of diverse return sources.

Categories: Category: Non-profit strategy
By December 4, 2014

New regulatory guidance eases the path to deferred annuities in TDFs

The IRS and the DOL last month issued guidance that removes some of the barriers to the use of deferred annuities as the fixed income part of a Target Date Fund (TDF). Mike Barry of Plan Advisory Services describes this as adding: “what many would consider to be a ‘best practices’ retirement income solution—a life annuity distribution—to what many consider to be … the ‘best practices’ investment solution—a target date fund.”

Categories: Category: Defined contribution strategy