Insights

Pension Solutions' Monitor - Jan 2020

This monthly thought leadership piece focuses on the market developments and indicators that are most relevant for pension plans.

Multi-asset Market Update - Jan 2020

Get insight on market movements and opportunities associated with key risk factors driving investment returns.

Market Commentary - 2019 Recap

Review our latest market commentary centered on the macroeconomic outlook, fixed income markets and strategic client solutions.

Pension Fiscal Fitness Monitor - Q4 2019

Understand the impact of changes in quarterly estimates on the health of a typical US corporate defined benefit pension plan.

Pension Debt is Junk

Deferring pension contributions has been common practice among corporate pension plan sponsors since the 1980s. Many sponsors have adopted the approach of funding the minimum required contribution under ERISA and IRS rules. This made perfect sense for many years as it allowed companies to preserve cash, minimize the risk of trapped surplus and free capital to focus on investing in the growth of the enterprise. The practice of deferring funding historically provided a cheap source of financing. Today, it is the financial equivalent of issuing junk bonds.

The SECURE Act

The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) was enacted into law by the President on Friday, December 20, 2019. The SECURE Act is a key piece of legislation that supports our DC strategy, which is focused on delivering a comprehensive income solution framework pairing investment-only solutions with guaranteed income solutions.  Working closely with our other internal business units, we are developing a modular income framework that will allow for individuals and plan sponsors to combine flexible income with annuities.

Securities Lending: Is the game worth the candle?

Securities lending is, on the surface, a fairly straightforward process. The owner of a security earns a fee by lending it to another party in exchange for collateral, and when the collateral is cash, subsequently reinvesting it. The key is evaluating whether this reward is worth the risk. How much can be earned by lending the security to another party and reinvesting any cash collateral?  How much risk is being taken through the collateral and counterparty exposure? These answers can depend on evolving market conditions.

Becoming a bank?

At the simplest level, banks make profit by lending money to borrowers at a higher rate than they pay out to the savers. Over the past few weeks, the repo market, a central piece of the U.S. financial system, has experienced unexpected volatility. The primary purpose of the repo market is to function as a source of liquidity—allowing investors with cash to earn interest by making short term loans to entities with securities that can be used as collateral for the loan.