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Pension Problem: Future Values
The true objective of a pension is to secure promised benefits in a cost-effective manner with prudent risk. Pension benefit payments are future value numbers. We do not know the future value…
Bond Math… Let THE FORCE be with you!
Defined Benefit pension planseverywhereface serious risk factors: Liquidity Risk The true objective of a pension is to fund liabilities in a cost-efficient manner with prudent risk. Pension liabilities are a...
Cash… A Risky and Costly Investment For Pensions
Pension funds tend to have a cash portfolio, which is usually held by the custodian bank and often has an average maturity/duration of about 3 months. That cash “bucket” is...
What Do Pension Sponsors Want For Christmas?
When asked this question, most pension sponsors would answer lower or stable pension cost and lower volatility on funded status, yet the asset allocation of most pension plans is...
Pension Doctor: Specialist or Generalist?
Pension Doctor: Generalist or Specialist When a person gets sick or has an injurythey go see a doctor. Usually, they prefer to see a Specialist who is the recognized expert...
Pension Conundrum: Same or Similar ROA
The Funded Ratio (FR) of a pension is usually based on the actuarial value of assets / actuarial value of liabilities. The Funded Status (FS) is the actuarial value of...
How Bonds Can Enhance the ROA
Given the volatility and uncertainty of the financial markets, bonds can provide Pension Plan Sponsors a strategy to mitigate some of that volatility. Bonds, through the certainty of their cash...
The Smartest Beta
The term “beta” is credited to William F. Sharpe, Ph.D. in his 1964 work in development of the “Capital Asset Pricing Model (CAPM)”. It means (1) the covariance of the...
Cash Flow Matching Overview
Cash Flow Matching Pension Objective Fund benefits in a cost-efficient manner with prudent risk Pension Needs Liquidity to fund benefits Reduce Contribution costs Reduce Volatility of Funded Status Strategy Value...
The Pension ROA is Plural…ROAs
The pension return on assets (ROA) assumption is a critical calculation since it affects both assets (asset allocation) and liabilities (discount rate). Most plan sponsors and their consultants focus on...
How Bonds Can Enhance the ROA
Given the volatility and uncertainty of the financial markets, bonds can provide Pension Plan Sponsors a strategy to mitigate some of that volatility. Bonds, through the certainty of their cash...
Best way to hedge pension inflation
Ronald J. Ryan, CFA, CEO July 2020 Executive Summary Pension inflation is what a plan sponsor agrees to as a cost of living adjustment (COLAs) benefit increase for retired lives...