As overfunded plans blow through glide path triggers, nontraditional fixed income assets can be a secret weapon to help reduce concentration risk and tracking error, and preserve funded status.
Most U.S. plans are now 110% funded. Pivoting to cash flow driven investing can reduce admin costs while better managing liquidity needs.
A third consecutive year of improved funded status for U.S. pension plans, IBM re-opens its DB plan, and the importance of diversifying and de-risking.
Next year’s alts themes are pension funds’ move into private credit, the IRA-driven appeal of renewables infrastructure debt, and big opportunities in mortgage derivatives.
With attractive yields, robust covenant protection, and a surprising amount of liquidity, investment grade private credit is a growing favorite of both investors and borrowers.
Sponsors have waited over a decade for rates to rise and funded status to improve. Although both have now occurred, pushing most plans over 100% funded, many still carry elevated allocations to equities and other risk-seeking assets. Here is why de-risking is now not just beneficial, it’s mission critical.
Funded status improved once again for S&P 500 pension plans, rising for the fourth consecutive quarter to 108.7%—the highest level since 2007.
Funding ratios rose again in 2022, putting plan sponsors in another surprisingly strong position. But with critical decisions looming, de-risking and diversification are paramount.
June’s decline in funded ratios reinforced the need for pension plan sponsors to de-risk portfolios through higher fixed income allocations.
Improved funded status is driving conversations around the inclusion of non-traditional fixed income assets in ALM modeling, including investment grade private placements, CMLs and CMOs.