As defined benefit plans continue to grapple with funding issues, defined contribution
plans have emerged as the primary vehicle for retirement savings. In recent years we
have seen increased adoption of features that encourage participation in such plans,
such as automatic enrollment, as well as the emergence of options that better prepare
participants for retirement, such as target date funds. Consideration of ESG issues—
that’s environmental, social, and governance—within the participant-directed, defined
contribution plan structure has also gained momentum as a way for plan sponsors to
engage with their participants and mitigate risks for the investor. Plan sponsors are now
tasked with the challenge of determining whether and how to best incorporate ESG
considerations into the stewardship of defined contribution plans.
In this paper, we will highlight some key themes, namely that along with the growth of DC plans, the Pension Protection Act of 2006 (“PPA”) has been a catalyst for changes to plan design and investment structure. Additionally, the mainstream acceptance of behavioral finance has placed greater emphasis on simplifying the investment lineup and helping DC participants make more effective choices.
In describing some of the strategies and portfolio frameworks that investors could consider for
the management of their duration, liquidity, and credit exposures in anticipation of rising rates, we will
address the potential benefits and also highlight some likely risks that should not be overlooked.
The following paper analyzes current
valuation levels as well as future return prospects over the next few years for High Yield, Bank Loans and Non-Agency RMBS.
This paper explores EMD as an asset class, focusing on the benefits and risks. Further, EMD characteristics and their impact on portfolio dynamics are discussed. Recommendations as well as guidance toward making an allocation to the asset class are included.
This paper seeks to determine if there are areas of public equity markets that are “less efficient” and thus potentially conducive to active investing. Without taking a stance on the active versus passive debate, this paper asks, “if you plan to hire an active manager, what is the best place to start looking?”
The following paper examines global equity as an asset class, focusing on justifications and concerns for investing globally rather than via a traditional partitioned U.S. and non-U.S. approach. Furthermore, relative performance, risks, and meaningful outperformance from active management are also considered. Ultimately, this paper strives to investigate the theoretical reasons for global investing and whether these same arguments hold true in reality.
Over the last several years institutional investors have adjusted their fixed income portfolios to include significant allocations to global bonds. This trend represents a regime shift from prior years when bond portfolios were mostly concentrated on U.S. issuers. However, as the trend has gained momentum, so has the need to truly understand global bonds and how they can impact a portfolio. In this paper, we outline our position on investing in global bonds from the perspective of a U.S.-based investor.
Failure to rebalance a portfolio can lead to a much different risk and return profile than suggested by the original asset allocation. Although straightforward in concept, the topic of rebalancing is not always understood, most especially its importance in times of market stress. In this paper, we address the most common rebalancing programs utilized by investors, and investigate the advantages of each.
LDI Position Paper Part 2 (of 2). Intended as a resource for plan sponsors who have decided to implement an LDI strategy, and covers the practical issues surrounding implementation and maintenance, along with risks.