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Perspectives Contributor:

Richard R. Ratkowski, CFA

December 1, 2022

Exceeding Solvency Expectations for Multiemployer Pension Plans

A new analysis of the Final SFA Rule shows that plans receiving ARPA relief could surpass goals. When the Special Financial Assistance (SFA) provisions were originally published in 2021 by the PBGC as Interim Final Rules, it seemed unlikely eligible multiemployer plans would achieve the intended goal of maintaining solvency...

October 20, 2022

LDI Markets in the US & UK – Four Structural Differences to Know

In just eight days, the U.K.’s bond market became so disrupted that the Bank of England (BoE) stepped in to backstop the gilt market on September 28th. Between September 19th and September 27th, 2022, U.K. 30-year inflation-linked bond yields rose from -5 bps to 189 bps, a net change of...

June 3, 2022

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...

January 25, 2022

Standing Out From the Junk

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”...

November 22, 2021

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...

August 5, 2021

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...

May 17, 2021

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...

July 2, 2020

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...

May 14, 2020

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...

April 7, 2020

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...

April 15, 2019

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...

January 22, 2019

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...

October 24, 2018

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 practical applications of a different way to think about and approach asset allocation. As sometimes happens, it is easy for the “what” and “why” of a...

September 25, 2018

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 into headline exposure (“overlay”) and committed capital (“underlay”) components. To better understand this approach, it may be helpful to provide some rationale of market drivers and...

September 7, 2018

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 times, some of the most seemingly mundane parts of the checkup, for example a routine blood test, can be the most important and impactful. With that...