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Fiduciary Matters blog

Insights for institutional investors

December 18, 2014By

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
By November 26, 2014

401(k) brokerage windows are all about the “nudge”

Last week was the submission deadline for comments on the Department of Labor’s request for information regarding brokerage windows in retirement plans. The DOL’s interest can be seen as a natural consequence of the change in attitudes toward defined contribution plans over the past decade.

Categories: Category: Defined contribution strategy
By November 17, 2014

Defined Ambition: has the UK found a viable middle path between defined benefit and defined contribution?

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 November 10, 2014

Hedge long first for a different kind of LDI

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.

Categories: Category: Liability driven investing
By November 3, 2014

Latest earnings calls confirm the trends amongst the pension world’s $20 billion club

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.