Contributor: Richard R. Ratkowski, CFA
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Stable Not Stale: Keeping Stable Value Fresh
Stable value investment options have experienced an evolution. Immediately after the Great Financial Crisis 13 years ago, wrap insurance providers, without exception, reassessed the risk implicit within the contracts they issued. They recalibrated risk budgets, developed stricter investment guidelines and raised fees, leaving stable value managers with something of a “take it or leave it”…
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Standing Out From the Junk (Fallen Angels)
If it wasn’t for the “high yield” classification or the less flattering term, “junk,” fallen angels (i.e., bonds downgraded below investment grade) may not need to fall as far. While high yield may seem like a homogenous asset class, upon further inspection fallen angels would stand out in a “high yield” crowd. While part of the…
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The Fall of Fallen Angels
On Dec 21st 2020, Tesla entered the S&P 500 with a market value of around $600 billion, representing ~1.7% of the index. Tesla became one of the five largest stocks by market value in the S&P 500. Newsworthy to be sure, but such transitions between indices due to eligibility are much more disruptive in the bond market. When…
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LDI Takes Center Stage for Some Multiemployer Plans
Executive Summary On Friday, July 9th, the PBGC released the interim final rules regarding the multiemployer Special Financial Assistance (SFA) program pursuant to the American Rescue Plan Act of 2021. As mentioned in a previous publication, the program provides much needed relief to multiemployer plans and provides greater benefit certainty for plan participants for years…
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Much Needed Multiemployer Financial Assistance: But Don’t Count on 30 Years
Executive Summary The Special Financial Assistance (SFA) provisions of Sec. 9704 of the American Rescue Plan Act of 2021 (ARPA) provides a needed lifeline to many multiemployer plans facing insolvency in the coming decade. Eligible multiemployer plans will be able to apply for direct financial relief in the form of a single lump sum payment from…
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The Dynamic Duo: Interest Rate Levels and Volatility
When volatility increases for a particular market (e.g., interest rates, credit spreads, or equity), the potential pain felt by the wrong move or satisfaction felt by the right move can be amplified. Over the last few months we have seen risk increase across a multitude of markets. Our last piece “Are Static Hedge Ratios Really…
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What a Difference a Decade Makes!
While the COVID-19 crisis is certainly new for everyone, heightened volatility, a declining equity market, falling rates and widening credit spreads are not. So although funded status has fallen this time around, as compared to the Global Financial Crisis (GFC), plans have been better positioned to weather the storm. The NISA PSRX index is structured…
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Are Static Hedge Ratios Really Static?
Authors’ note: The timing of this piece may seem curious in these crazy times – specifically, a post that explores how “bond math” leads to increasing interest rate exposures in a low rate environment. We aren’t sure which reason is more appropriate to describe the timing; the fact that we started on this idea before…
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Two Alternatives in the End-state
Many plan sponsors find themselves in the fortunate position of approaching the end of their plan’s glidepath. Favorable market conditions and a contribution nudge from tax reform have made the end state appear on the horizon. This proximity to the finish line is certainly welcome and we expect plans are giving additional thought to what…
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Investing in Alternatives: What’s Trending
While we have seen shifts from active to passive across public markets, most notably large cap U.S. domestic equity, the alternatives space has historically been insulated to this change. While this may remain true for a large portion of the alternative investment universe, we believe a development may be on the horizon; led by managed…