Pension Series

Liability-Hedging Handbook: A Guide to Best Practices for US Pension Plans

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For many pension plans, investment strategy is often structured with a liability-hedging portfolio and a growth portfolio, with the weight and composition of each determined by a strategic asset allocation or a de-risking glidepath. Within this overall structure, the construction and calibration of the liability-hedging portfolio is integral to effective pension asset management. This report focuses exclusively on the liability-hedging portfolio, delineating key considerations and best practices for single-employer defined benefit plans including those sponsored by corporations, health care institutions, non-profit organizations, and certain partnerships.

A Balancing Act: Strategies for Financial Executives in Managing Pension Risk

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As pressures on pensions mount, we believe financial executives are best served by re-evaluating major decisions in terms of the true tools at their disposal. In this paper we review four levers that are fundamental drivers of pension costs and outcomes: asset returns, liability hedging, contribution policy, and benefit management. Balancing these levers is critical to enabling greater probability of success in managing pension risk, and we introduce a framework for chief financial officers and other financial executives to use in doing so.

Thought Mortality Was Dead? Considerations for Pensions Given the IRS’s Delay in Implementing RP-2014

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The IRS’s somewhat unexpected decision to delay implementation of the RP-2014 mortality tables has impacted at least three separate aspects of pension plan strategy: calculating minimum contribution requirements; determining variable-rate PBGC premiums; and valuing lump-sum distributions to be paid out to terminated vested participants. This brief discusses what has changed and provides general considerations for all sponsors to weigh in the near term.

A Stronger Union: Addressing the Unique Investment Challenges of Multiemployer Defined Benefit Plans

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Adaptive and sophisticated strategies are necessary to serve the unique features, constraints, and needs of multiemployer plans. In this note, we explore some of the key challenges that many multiemployer plans face, discuss how to invest in light of these challenges, and provide thoughts on governance and the overall role of the investment advisor in the multiemployer context.

Navigating the Diversified Growth Fund Maze

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Diversified growth funds (DGFs) have garnered significant attention and assets—particularly amongst UK defined benefit pension schemes—as a less volatile source of long-term growth. DGFs can be valuable tools for pension portfolio management, but only if trustees understand what they are buying and how it fits into the context of the total portfolio. The simple bifurcation of the available products into traditional and absolute return strategies can be a starting point for trustees to help make sense of the market and set appropriate risk/return expectations across different market environments.