Gregory J. Yess, CPA

Ignore Mortality at Your Own Risk

For the fifth year in a row, the updated Society of Actuaries mortality tables have reduced the size of pension liabilities: While this short...

State of the US Consumer in Four Charts

With no shortage of economic uncertainty in the world, it is natural to ask whether the US consumer can continue as the primary engine...

FAQ: What Happened in the Repo Market Last Month?

A volatile September in the normally placid money markets inspired a number of client inquiries, and a few overzealous headline writers in the financial...

Monetary Policy in the U.S. is Being Determined by European (Japanese) Financial Markets

As we approach the next Fed meeting in September, expect more chatter on 1) whether they should ease and 2) what the inverted Treasury...

Global Bond Yields Plunge to Record Lows

Bond yields have fallen dramatically around the world this month, driven by the latest escalation of the trade war as well as signals that...

The Waiting is the Hardest Part: An Update on the LIBOR Transition

The LIBOR transition continues. As we have outlined in previous notes, we are six years into a global effort to replace LIBOR with more...

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...

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...

Market Bids Farewell to the Fed’s Tightening Cycle

The last seven weeks have seen a dramatic repricing of the expected path of monetary policy. As recently as November 8, the fed funds...

Groundhog Day Meets Mortality Assumptions

Perhaps it would have been more fitting if the Society of Actuaries published their updated pension mortality improvement scale, MP-2018, on February 2. (For...

SOFR, So Good

The LIBOR transition continues. A global effort has been underway since 2013 to reduce dependency on LIBOR, the benchmark interest rate discredited by a...

Implementing Your Beta

When envisioning any new strategy, it is human nature to skim over the details. Previous posts in this series outlined the strategic rationale and...

China, the Goliath of the Treasury Market

After the latest round of the trade war, China has imposed tariffs on nearly all of the $130 billion in annual goods imports from...

Small Balances, Big Bias?

Small balance annuity buyouts have been increasingly popular in the last few years – and for good reason. Given the fixed PBGC premium1 charged per...

Rebuilding Beta

In our previous post, we outlined a framework for evaluating asset allocation decisions and suggested that asset owners could enhance returns by separating investments...

Breaking Down Your Beta

Like visiting the doctor periodically, it is important for an investor to assess the overall health of her portfolio from time to time. At...

Separating Annuity Buyout Fact From Fiction

In recent weeks we have read a handful of commentaries suggesting that pension plans should take advantage of a “window of opportunity” to complete...

Fed’s Technical Adjustment to IOER is a Sign of Things to Come

It was a surprise to no one when the Federal Reserve hiked rates this past Wednesday. The purpose of this note is to describe...

A Small Lump of Coal in the Discount Curve

‘Tis the season for both giving and receiving, and for pension plans it’s been an especially great season for receiving. Since the beginning of...

Sharing an Interesting Analysis

Sometimes you come across a piece of analysis that is interesting enough to feel compelled to pass it on. I had this reaction while...

Anticipating the FIFO Rule

As the effort to reform the U.S. tax code speeds through the legislative process, it is clear that, whatever the specifics of the ultimate...

The Phillips Curve is Dead, Long Live the Phillips Curve!

The Phillips Curve describes the relationship between unemployment and inflation. First proposed in 1958, the theory holds that a low unemployment rate reflects a...

Fed Takes First Step of $2 Trillion Journey

The Federal Reserve took the first step this week of what will be a long journey towards normalizing its balance sheet after buying nearly...

The Beginning of the End for LIBOR

The end is nigh for the London Interbank Offered Rate. The CEO of the British markets regulator, the Financial Conduct Authority, announced yesterday that...

Does the Size of a Company’s Pension Affect its Stock Price?

Summary We examined the statistics behind the claim that large pensions drag down a company’s valuation and accordingly how annuity buyouts allow a sponsor...

Go Long!

The Treasury Department is considering issuing an ultra-long bond with a maturity greater than 30 years. The idea was first raised in post-election interviews...

Taking A Hike

It is a well-known market truism that the Fed tries to avoid surprising markets with its monetary policy decisions, especially when those decisions result...

Trumponomics – Two Scenarios for Fiscal Stimulus

Changes in yields can provide insights into the market’s views on the potential results of anticipated policies of the Trump Administration. One of the...

Equity Spread Duration is Bubbling Up

Summary In recent months we’ve observed that equity’s effective spread duration (ESD) seems especially pronounced—for example, the S&P 500’s ESD is currently about 25...

A Strategy That Pays Dividends – Dividend Tilts in Taxable Insurance Portfolios

Taxable insurance portfolios can enhance returns by employing the tax code’s preference for dividends. By orienting their holdings toward equities that pay higher dividends,...

Make Funded Status Great Again (Again)

The ongoing equity rally and the rise in Treasury yields prompted us to revisit this analysis. Between yesterday’s close (December 1) and November 10,...

Make Funded Status Great Again

It has been an interesting week. Regardless of your political leanings, Tuesday’s election seems to have already produced another unlikely winner: defined benefit plan...

The Topography of Pension Risk

Last week, we participated in the annual P&I Pension Settlements Strategies conference. We will share the full materials in an upcoming post, but I...

Grading Rates on a Curve

Can rates in the U.S. only go up from here? With Treasury yields reaching historical lows recently, it may be tempting to think of...

Have Cash – Will Carry: Another Simple Strategy to Help Enhance Cash Yields

As the (seemingly) never-ending search for yield continues in year eight of the “low for long era,” an oldie but a goodie comes to...

There’s Beta in My Alpha! (Part 2)

I received some feedback asking whether the high correlation of managers both to beta and to each other applies to “Aggregate” managers as well....

There’s Beta in My Alpha!

When I was a kid, being called different never felt like a good thing. Fortunately, with age I have come to realize that sometimes...

Bonds Without Borders

It may pay to be a little more cosmopolitan when it comes to your bond portfolio. Yield differences between comparable maturity instruments in different...

Prix Fixe vs. A la Carte (or, Asset Classes vs. Risk Premia)?

When you go to a restaurant for a nice meal, do you prefer to order from the prix fixe menu or go the à...

Long Corporates and Low Treasuries

We talk with a lot of pension plan sponsors who strategically want to hedge their liabilities by buying long duration corporate bonds but who...

Risk Premia Strategies – Beta Overlay 2.0?

The advent of investable risk premia indices brings beta overlay to a new level. These tools allow investors to adjust the pre-packaged factor weights...

NISA’s Target Date Glidepath – Designed for Retirement Security

The retirement landscape is shifting, as the workforce grows older and increasingly relies on its defined contribution plans for retirement security. NISA’s target date...

Rebalancing? Don’t Forget Derivatives

January’s steep drop in equity prices and rise in bond prices mean that many institutional investors are thinking about the same thing: rebalancing. With...

Spending in Retirement: It’s Complicated

You may have missed that the Employee Benefit Research Institute (EBRI) released a study on retirement spending back in November.* The headline conclusion was...

Here’s an Idea to Potentially Enhance Your Cash Returns

Returns will be hard to come by in 2016. That is perhaps the least controversial prediction we can offer for the New Year. Though...

The Great Migration Toward Fixed Income

Since the New Year is always a time for reflection, and we are pension geeks, we thought it would be interesting to take a...

Brazil Downgraded to Junk—But It’s Not High Yield!

Brazil’s sovereign debt was recently downgraded below investment grade (IG). Before the downgrade, its index-eligible bonds were included in both the Barclays US Credit...

Live (Less) Long and Prosper?

Working in the pension industry, it can be confusing to know which side to root for when new longevity projections come out. And when...

Fed Liftoff: More Questions than Answers

Markets are currently implying nearly an 80% probability that on December 16th the fed funds target range will be raised by 25 basis points....

Our Take on Negative Swap Spreads

While the topic may not have come up at the Thanksgiving table, it’s one of the most discussed issues in the markets right now:...

The Full Picture on Partial Buyouts

We hear annuity buyouts frequently discussed as a silver bullet to reduce pension plan risk. Whether buyouts are the right de-risking option was the...

The Full Picture on Partial Buyouts

Plan sponsors may be disappointed if they expect to eliminate most of their pension risk with a partial buyout. Unless a buyout is paired...

Regulators Pave the Road to Retirement Income

We’ve witnessed a flurry of new guidance and regulations from both the Department of Treasury and Department of Labor related to retirement income. The...

Credit Where It’s Due

When de-risking with liability driven investing, pension plans must decide on the right blend of corporate bonds and Treasuries to hedge their liabilities. We...

Pension Buyout Reality Check

Recent annuity purchases highlight the need to examine what drives their pricing. Plan sponsor announcements that allude to “par” settlements relative to accounting values...

The Beauty of the Bundle

DC participants want the most for their money when choosing a retirement income strategy. While annuities can offer higher income, that value is partially...

Long Live Longevity Annuities

DC plans can now offer deferred “longevity” annuities that provide income in the later years of retirement. This is good news for those participants...

The Long View on Short Rates

Since the 2008 financial crisis, the market has suggested a rapid rise in short-term rates to a higher equilibrium level. And while that future...

Refocusing on Retirement Income Risk

Fixed income allocations in defined contribution plans, while perceived as low risk, may actually expose participants to substantial volatility in retirement income. To reduce...

Spreading Confusion

We have observed (with some bemusement) how the financial media often compares the yields on different countries’ debt without adjustment for the different currencies...

Cash on the Barrelhead

LDI hibernation strategies may present an opportunity to de-risk at a lower expected cost and on a more flexible contribution schedule than annuity buyouts....

At the Crossroads

Many pension plan sponsors and fiduciaries are confronting perhaps the most important decision in the plan’s life – whether to pursue an internal de-risking...

Putting Longevity Risk in its Place

Pension plans run the risk that actual beneficiary lifespans can exceed those assumed in their liability projections. We estimate the risk to be about...

Contribution Relief with a Catch

At first blush, MAP-21 would appear to make pension plan contributions less likely in the near term. However, it also makes pension deficits more...

Defining the Pension De-Risking Spectrum

Pension de-risking need not be an all-or-nothing decision. In fact, plan fiduciaries may be surprised by the degree to which pension risk profiles can...

The Credit Rating Impact of Pension De-Risking

By simply de-risking their pension plan, companies can realize most of the benefits of annuity purchases without incurring the upfront liquidity costs or committing...

Efficient Tax Management in Taxable VEBA Portfolios

Reducing tax consequences in equity portfolios offers tangible benefits in the current tax environment. Three key decisions that directly influence the after-tax performance of...

Funding Relief and Implications for Pension Investing

The recently-passed Moving Ahead for Progress in the 21st Century Act (“MAP-21”) provides temporary funding relief for corporate defined benefit plans. In this piece,...

PSRX Overview

NISA’s proprietary Pension Surplus Risk Index (PSRX®) and supplemental data offer plan fiduciaries a means of monitoring plan funded status volatility and the ability...

PSRX Guide

Corporate Bond Scarcity? The Case for Separating Interest Rate and Spread Risks

U.S. pension plan demand for long duration corporate bonds has been and is expected to remain at a high level. Nonetheless, some sponsors have...

Prospective Funded Status Volatility

Negative performance of risk assets, coupled with lower interest rates, has had the obvious effect of reducing funded status for most corporate defined benefit...

Break-even Yield Curve

Like any market, timing interest rates is challenging. This brief addresses one key, and often overlooked, aspect of interest rate levels – specifically, rate...

Dynamic Liability Driven Investing

Pension plans have used Liability Driven Investment (LDI) strategies for years. In this brief we introduce a more comprehensive platform: Dynamic LDI. The improvement...

Interest Rate Hedges

Interest rate markets have experienced pronounced volatility in recent years. Many pension liability hedge strategies that relied heavily on derivatives and Treasury bonds outperformed...

Considerations Surrounding Corporate Bonds in Pensions

Widening credit spreads increases focus on the suitability and attractiveness of corporate bonds as pension plan investments. This paper examines one aspect of these...