03.16.26
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Unfortunately, the Joke Was On Us!

By: Russ Kamp, CEO, Ryan ALM, Inc.

I started raising alarm bells related to DB pension exposure to alternatives – mainly private equity and private credit several years ago, and have produced roughly a dozen blog posts that touch on this issue. You may recall some of the posts from 2024:

The Joke’s On Us!

Good Ideas are Often Overwhelmed!

Kinda Silly Question

Well, unfortunately it appears that it is time to pay the piper! As mentioned in the posts listed above, we as an industry don’t truly appreciate the idea that there is a natural capacity to EVERY investment. As an industry, we DO overwhelm good ideas and those funds that are late to the party are often left with just the crumbs in the chaffing dish.

I stumbled over a good, but scary, list of recent events within private credit. The list was compiled by Ignacio Ramirez Moreno, Host of The Blunt Dollar Podcast:

Cliffwater saw 14% redemption requests.

Morgan Stanley’s fund got 10.9%.

Blackstone hit a record 7.9%.

All three capped withdrawals below what investors requested.

Glendon Capital flagged concerns about Blue Owl’s valuations.

Pimco called it “a crisis of really bad underwriting.”

JPMorgan’s marking down loans and tightening lending to private credit funds.

Partners Group thinks defaults could double.

Pimco’s predicting a “full-blown default cycle.”

Apollo’s saying the pain could last 12-18 months.

Well, that is some list! In addition, I was always quite skeptical of the credit quality that was assigned to these companies, and I guess that I wasn’t too far off given that 43% of private credit borrowers have negative free cash flow. Furthermore, the U.S./Israel vs. Iran war won’t help either, as inflation expectations have ratcheted higher reducing significantly the prospects for Fed action leading to lower rates. In fact, it would not be surprising to see the Fed have to raise rates. If such an action occurs, the higher interest rates could exacerbate the current challenging environment for private debt borrowers and their income statements.

Let’s see how the pension plan sponsor community and their advisors deal with private credit’s first real crisis. It should be both interesting and likely painful.

03.16.26
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ARPA Updated as of March 13, 2026

By: Russ Kamp, CEO, Ryan ALM, Inc.

I’ll be wearing my green tomorrow. How about you? Perhaps the luck of the Irish will carry some weight with the PBGC during the upcoming week, but it didn’t have much sway last week.

The PBGC accepted two revised applications for Special Financial Assistance (SFA) for the week ending March 13th. Iron Workers Local No. 12 Pension Fund and the Iron Workers-Laborers Pension Plan of Cumberland, Maryland submitted revised applications. Together they are seeking a modest $24.2 million for their 1,413 plan participants. The PBGC will have 120-days to act on the applications.

According to the PBGC’s website, their e-Filing Portal remains temporarily closed. As discussed previously, there is one fund currently on the waitlist that hasn’t submitted an initial application that is not classified as a Plan Terminated by Mass Withdrawal before 2020 Plan Year.

In other ARPA news, there were no applications approved or denied in the past week, and none withdrawn. The PBGC currently has 15 applications under review, including nine that are an initial application. Fortunately, it seems as if any SFA recipient that might have had to repay a portion of the grant due to census issues has done so at this point. There have been no payments of excess funds since last September.

There has not yet been a public, plan‑by‑plan PBGC resolution of the mass‑withdrawal‑terminated plans on the SFA waitlist. As previously mentioned, the legal landscape has changed (2025) which puts pressure on the PBGC oversight. What changed from the original interpretation of “eligible plans” was the Second Circuit’s decision held that the SFA statute does not exclude multiemployer plans that had previously terminated by mass withdrawal, reversing PBGC’s denial of SFA to a fund that terminated in 2016. Furthermore, the court read ARPA’s “critical and declining” language to focus on status in the 2020–2022 window, and rejected PBGC’s position that lack of ongoing “zone status” or prior termination automatically barred eligibility.

As a result, the PBGC’s Office of Inspector General (OIG) issued a 2025 risk advisory flagging that the appellate decision opens the door for 123 terminated plans to seek SFA (80 currently on the waitlist), 91 of which are terminated and insolvent and 32 that are terminated but not yet insolvent and have not received traditional financial assistance.​ The OIG estimates that if SFA is ultimately provided to that group, gross SFA exposure could be on the order of billions of dollars. But, just think about the American Workers that might eventually recoup their promised benefits.

03.13.26
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What is the PCE Price Index Telling Us?

By: Russ Kamp, CEO, Ryan ALM, Inc.

As most investors know, the Federal Reserve’s primary inflation measure is the Core Personal Consumption Expenditures (PCE) price index. The Federal Open Market Committee (FOMC) targets 2% annual PCE inflation while trying to balance long-term price stability and maximum employment. The PCE is produced by the Department of Commerce. Why the PCE? The PCE inflation index covers broad household spending and importantly it adjusts for shifts in consumer behavior, unlike fixed-basket indexes, such as the Consumer Price Index (CPI). Furthermore, the PCE reflects actual expenditures economy-wide and updates the index weights more dynamically. The goal of the PCE inflation measure is to help gauge underlying trends in the broader economy.

The most recent PCE inflation data was published as of today, March 13, 2026, covering a period through January 2026. Core PCE (excluding food and energy) ticked up to 3.06% in January 2026, after having touched 3% at year-end. Cleary, this reading remains well above the Fed’s 2% target, reflecting persistent underlying pressures that may become even more dramatic with the 41% increase per barrel of WTI registered since the close on Friday, February 27th.

The PCE inflation measure has recently accelerated while CPI cooled primarily due to differences in housing weights (lower in PCE) and consumer behavior adjustments.

MonthHeadline PCE (%)Core PCE (%)Headline CPI (%)Core CPI (%)
Dec 20252.93.02.72.9
Jan 20262.93.12.42.5
Feb 2026 (est)??2.4?

The fact that core PCE has now exceeded 3% must be worrying for the FOMC/FED that are also dealing with broader economic pressures, such as employment and US interest rates. Speaking of rates, historically the U.S. 10-year Treasury note has traded at a premium yield to inflation of roughly 2%, with periods as high as 3% or greater. The 10-year Treasury note is currently trading at a yield of 4.25% (as of 10:29 am) suggesting that a “normal” spread should have the YTM at 5.1%.

Given the great uncertainty related to current economic and geopolitical issues, it would not be surprising to see the Treasury yield curve continue to shift upwards. Such a move would create a wonderful environment for pension plan sponsors to de-risk through a cash flow matching (CFM) strategy. It is time to bring an element of certainty to the management of DB pensions to reside in a state of great uncertainty! Don’t wait to explore the amazing benefits provided by CFM.

03.10.26
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Is A Pension Plan’s Negative Cash Flow a Crisis?

By: Russ Kamp, CEO, Ryan ALM, Inc.

Ryan ALM’s Chairman, Ron Ryan, shares his thoughts regarding negative cash flows for DB pension plans and what a potential solution could be to mitigate the impact.

As a reminder, pension plans are designed to have the last $ in the plan meet the last promised benefit payment. They aren’t designed to be an inheritance for the last few participants in the plan. As a result, plans that fall into negative cash flow need to be careful to reduce significant drawdowns that can be harmful to the long-term viability of the plan.

Importantly, Ron discusses the use of Cash Flow Matching (CFM) to bring an element of certainty to the management of pension plans, which are better funded today than at any time since 1999. He states that to avoid another repeat of the spiking contributions dilemma pensions should install a CFM strategy as the core portfolio.

As a reminder, CFM was the dominant investment strategy, previously known as Dedication, for pension plans in the 1970s and 1980s when pensions were fully funded. CFM is a best fit for the true pension objective since it is designed to fully fund net liability cash flows in a cost-efficient manner. Bonds are the only asset class with certainty of its future cash flows (interest income and principal payments at maturity). No forced selling to meet ongoing liability cash flows when markets might not provide the necessary liquidity in a cost effective way.

03.09.26
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It’s Not Just the Price of Gasoline!

By: Russ Kamp, CEO, Ryan ALM, Inc.

Folks (the investment community) seem to be focused on the rising price of oil for its effect on gasoline prices, but the impact of rising oil prices has far greater implications for the broader U.S. economy. Evidence indicates that a vast majority of manufactured goods and industrial processes use petroleum products that are feedstocks to make plastics, synthetic fibers, solvents, and many chemicals, which then become inputs into consumer goods, packaging, vehicles, electronics, building materials, and more.

Because plastics, synthetic fibers, and petrochemical-derived materials pervade sectors from automotive to consumer goods to packaging, a large majority of U.S. manufactured products (“most”) depend on oil products somewhere in their supply chain, either as material or as critical process input.

An extended increase in the price oil could have a dramatic impact on inflation, U.S. interest rates, the labor force, and overall economic activity. Have pension plans done enough to secure the necessary liquidity to meet the promised benefits and the expenses incurred to meet those monthly payments? Has the significant migration of pension assets to alternatives significantly reduced the available liquidity? Do plans understand that in crisis most asset classes tend to find correlations closer to 1 than 0, making the forced sale of assets to meet benefits challenging and more expensive.

Dividing a pension plans asset allocation into two buckets – liquidity and growth – as opposed to having the plan’s assets focused on the return on asset (ROA) assumption can mitigate liquidity risk. Use a cash flow matching (CFM) strategy to ensure that the necessary liquidity (asset cash flows of interest and maturing principal from bonds) is available to meet the liability cash flows of benefits and expenses monthly. While the CFM strategy is SECURING the promised benefits, the remainder of the assets can just grow unencumbered – no forced selling.

Who knows how long this conflict in the Middle East will last. Pension plans may be “long-term” investors, but they have short-term cash needs that must be met. There is no kicking the can down the road. Adopt this bi-furcated asset allocation and enjoy the benefits that come from the knowledge that your promises have been secured.

03.09.26
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ARPA Updated as of March 6, 2026

By: Russ Kamp, CEO, Ryan ALM, Inc.

The uncertainty surrounding the Iran invasion and the impact that it is already having on the U.S. consumer is disconcerting. However, it is comforting to know that the PBGC continues to fulfill its responsibilities regarding the implementation of the ARPA pension legislation. All revised applications are supposed to be resubmitted by December 31, 2026. All initial applications were to be submitted by the end of last year.

Currently, one non-Plan Terminated by Mass Withdrawal before 2020 Plan Year remains on the waitlist. Plasterers Local 79 Pension Plan is still waiting to submit their initial application despite the deadline cited above, but the PBGC’s e-Filing portal remains temporarily closed. Of the 13 applications residing with the PBGC, only one, Cumberland, Maryland Teamsters Construction and Miscellaneous Pension Plan, must be addressed in some way during March, as their 120-day window closes. There are seven pension funds that will have action taken by April 30th, while the remaining five under review will be resolved by June 30th.

Regarding last week’s activity, there were no new applications submitted for review and none were approved. Fortunately, no applications were denied nor were any asked to repay a portion of the Special Financial Assistance (SFA) received. However, there was one application withdrawn, as Colorado Cement Masons Pension Trust Fund pulled its revised application seeking $2.2 million in SFA for 163 plan members.

Despite the incredible work already completed by the PBGC, there remain 124 multiemployer pension plans hoping to receive SFA to support the promises that were given to their workers/retirees. Eighty of those funds fall under the special category of plans impacted by mass withdrawal. Will they get the chance to submit an application? Obviously, much more to come regarding their unique status.

03.06.26
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DB Pension Plan “Absolute Truths” Revisited

By: Russ Kamp, CEO, Ryan ALM, Inc.

This post may be familiar to some of you, as I originally published it in October 2024. Given today’s great uncertainty related to geopolitics, markets, and the economy, I thought it relevant to share once again. Please don’t hesitate to reach out to me if you want to challenge any part of this list. We always welcome your feedback.

The four senior members at Ryan ALM, Inc. have collectively more than 160 years of pension/investment experience. We’ve lived through an incredible array of markets during our tenures. We have also witnessed many attempts on the part of Pension America to try various strategies to meet the promises that have been made to the pension plan participants.

Regrettably, defined benefit (DB) pension plans continue to be tossed aside by corporate America in favor of defined contribution (DC) plans. Both public and multiemployer plan sponsors would be wise to adopt a strategy that seeks more certainty to protect and preserve these critically important retirement vehicles before they are subject to a similar fate.

We’ve compiled a list of DB pension “Absolute Truths” that we believe return the management of pension plans back to its roots when SECURING the promised benefits at a reasonable cost and with prudent risk was the primary objective. The dramatic move away from the securing of benefits to the arms race focused on the return on asset assumption (ROA) has eliminated any notion of certainty in favor of far greater variability in likely outcomes.

Here are the Ryan ALM DB Truths:

  • Defined Benefit (DB) pension plans are the best retirement vehicle!
  • They exist to fulfill a financial promise that has been made to the plan participant upon retirement.
  • The primary objective in managing a DB plan is to SECURE the promised benefits at a reasonable cost and with prudent risk.
  • The promised benefit payments are liabilities of the pension plan sponsor.
  • Liabilities need to be measured, monitored, and managed more than just once per year.
  • Liabilities are future value (FV) obligations – a $1,000 monthly benefit is $1,000 no matter what interest rates do. As a result, they are not interest rate sensitive.
  • Pension inflation is not equal to the CPI but a rate unique to each plan sponsor.
  • Best way to hedge pension inflation is through Cash Flow Matching (CFM) since inflation is in the actuarial projections
  • Plan assets (stocks, bonds, real estate, etc.) are present value (PV) or market value (MV) calculations. We do not know the FV of assets except for bonds cash flows (interest and principal at maturity).
  • To measure and monitor the funded status, liabilities need to be converted from FV to PV – a Custom Liability Index (CLI) is absolutely needed.
  • A discount rate is used to create a PV for liabilities – ROA (publics), ASC 715 (corps), STRIPS, etc.
  • Liabilities are bond-like in nature. The PV of future liabilities rises and falls with changes in the discount rate (interest rates).
  • The nearly 40-year decline in US interest rates beginning in 1982 crushed pension funding, as the growth rate for future liabilities far exceeded the growth rate of assets.
  • The allocation of plan assets should be separated into two buckets – Liquidity (beta) and Growth (alpha).
  • The liquidity assets should consist of a bond portfolio that matches (defeases) asset cash flows with the plan’s liability cash flows (benefits and expenses (B&E)).
  • This task is best accomplished through a CFM investment process.
  • The liquidity assets should be used to fund B&E chronologically buying time for the alpha assets to grow unencumbered in their quest to meet those faraway future liabilities not yet defeased by the liquidity assets.
  • The Growth assets will consist of all non-bonds, which can now grow unencumbered, as they are no longer a source of liquidity. Growth assets will fund those remaining future liabilities not yet defeased by the liquidity assets.
  • The Return on asset (ROA) assumption should be a calculated # derived through an Asset Exhaustion Test (AET)
  • The pension plan’s asset allocation should be responsive to the plan’s funded status and not the ROA.
  • As the funded status improves, port alpha (profits) from the Growth portfolio into the Liquidity bucket (de-risk) extending the cash flow matching assignment and securing more promises.
  • This de-risking ensures that plans don’t continue to ride the asset allocation rollercoaster leading to volatile contribution costs.
  • DB plans are a great recruiting and retention tool for managing a sponsor’s labor force.
  • DB plans need to be protected and preserved, as asking untrained individuals to fund, manage, and then disburse a “benefit” through a Defined Contribution plan is poor policy.
  • Unfortunately, doing the same thing over and over and over is not working. A return to pension basics is critical.

You’ve made a promise: measure it – monitor it – manage it – and SECURE it…   

Get off the pension funding rollercoaster – sleep well!

03.06.26
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Milliman: Corporate Pension Funding now at 109.4%

By: Russ Kamp, CEO, Ryan ALM, Inc.

Milliman has released the latest monthly report on the Milliman 100 Pension Funding Index (PFI). As a reminder, this index analyzes the 100 largest U.S. corporate pension plans.

For February, the PFI funded ratio rose from 109.1% as of January 31, to 109.4% as of February 28, marking the highest collective funded ratio since the 109.9% mark observed in July 2001. However, the funding improvement was solely a result of asset performance, as declining discount rates of 14 basis points reduced the discount rate to 5.33% and raised the PFI projected benefit obligation (liabilities) to $1.235 trillion. Fortunately, monthly returns of 2.15% offset the impact of falling U.S. interest rates leading to growth in the market value of plan assets by $22 billion, to $1.351 trillion.

“February’s investment performance drove the month’s $5 billion gain in funding levels,” said Zorast Wadia, author of the Milliman PFI. He went on to say that “while this marks 11 straight months of funding improvements, further declines in interest rates may occur, and ongoing market volatility makes it vital for plan sponsors to undertake surplus-management strategies focused on both sides of the balance sheet.” We continue to support Zorast in recommending that managing assets to liabilities is critical for DB pension plans in all market environments, but especially given the significant uncertainty under which markets are currently operating. As a reminder, the primary objective in managing a DB pension is to SECURE the promised benefits at a reasonable cost and with prudent risk. It is NOT a return objective.

We, at Ryan ALM, do not forecast interest rates, but the impact of rising oil prices (WTI currently up 30.7% as of 9:13 am EST since Friday) will likely have an impact on inflation and interest rates. It will be interesting to see if a potential fall in the value of liabilities proves greater than the potential impact that rising rates might have on equity markets and other assets. Will we see the 12th consecutive month of improved funding levels?

Please click on the link below for a look at the complete Milliman corporate pension funding report.

View this month’s complete Pension Funding Index.

03.04.26
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Here’s Another Example – Why, Oh Why?

By: Russ Kamp, CEO, Ryan ALM, Inc.

In October 2022, I wrote the following: “I believe that we have overcomplicated the management of DB pension plans. If the primary objective is to fund the promised benefits in a cost-efficient manner and with prudent risk, why do we continue to waste so much energy buying complicated products and strategies that often come with ridiculously high fees and little alpha?”

I still believe that our industry continues to build complicated asset allocation structures unnecessarily. In a recent P&I article, the following was reported: that a public pension system will adjust their asset allocation to reflect new targets including a 4% allocation to hedge funds and 3% to opportunistic credit, alongside increases in private equity to 13.5% from 8% and private debt to 8% from 6.5% — funded by reductions in domestic equities, international equities, and infrastructure.

This action is occurring after the investment consultant ABC recommended the changes following an asset-liability study, with the goal of enhancing protection against volatility and drawdowns while maintaining sufficient liquidity. Can you get more complicated? Are they really claiming that this structure will maintain sufficient liquidity? Sure, there may be a reduction in “volatility” because these strategies are not marked-to-market, as opposed to the public markets, but claiming that sufficient liquidity will be maintained is a joke!

I’ve been arguing for quite some time that the private markets are overbought. As assets continue to flow into these strategies, liquidity has dried up with little capital flowing back to the investor, which is why the secondary markets have flourished. Too many assets in any strategy deflate future returns, which we have witnessed. Regarding hedge funds, which are not aligned with the primary objective in managing a DB pension plan which is a relative objective (assets versus pension liabilities and NOT the ROA) they continue to be extremely expensive offerings that have produced subpar returns for the better part of the last two decades.

If the objective is to maintain sufficient liquidity look no further than cash flow matching (CFM) which will ensure that the necessary liquidity to meet benefits and expenses is available each month of the assignment as far out as the allocation goes without a need for a cash sweep of growth assets. Furthermore, one doesn’t have to pay hedge fund fees to get that “liquidity”. You can get a CFM strategy for 15 bps or less. While your liquidity needs are being met, the CFM portfolio will also extend the investing horizon for the remainder of the fund’s assets enhancing the probability that those less liquid, highly opaque offerings have time to produce the forecasted returns.

Afraid that you are going to give up “return” by using a CFM strategy? We recently completed an analysis for a large public pension system that believed they were <50% funded. We proved that we could fully fund and SECURE the NET liabilities (after contributions) of benefits and expenses (B&E) through 2059! Yes, a CFM portfolio with a YTM of 5.4% was able to fully fund the net B&E for 33-years. In addition, we were able to produce a surplus in excess of $4 billion, which can now just grow and grow and grow. In fact, investing that surplus in an S&P 500 index fund would grow those assets at a 6.5% annual return (the fund’s target ROA) to $35.3 billion by 2059. If the index produced an 8% nominal return for that period those surplus assets grow to >$75 billion that can be used to reduce future contributions, meet future liabilities, and perhaps enhance benefits.

Oh, wait, it gets even better. By investing in just the CFM strategy and the S&P 500 index fund, this plan can reduce annual investment fees from nearly $50 million per year to <$4 million, a reduction of 93%. Those fee savings add another $1.5 billion to the surplus before any return is generated on those savings. As Ripley would say, “BELIEVE IT OR NOT”!

Again, the management of a DB plan is not rocket science. Fund the annual required contributions, focus on the primary objective to SECURE the promised benefits at low cost and prudent risk, and you have a program that is neither complicated nor expensive to administer. When will we learn?

03.02.26
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Eliminate the Uncertainty

By: Russ Kamp, CEO, Ryan ALM, Inc.

There are many benefits to using Cash Flow Matching (CFM) for your pension plan, endowment or foundation. The obvious benefit is the liquidity that is created to meet ongoing expenditures, whether benefit payments or grants. That liquidity comes at a premium today for many entities that have migrated significant financial resources to alternative investments, which are having a difficult time providing their investors with capital distributions.

The other significant benefit is the certainty that comes from using CFM. I’ve appreciated the opportunity to speak at NCPERS, IFEBP, LATEC, and OPAL in the last few months and in each case, I asked the audience if there was any investment strategy within their fund that brought certainty? Not a single hand was raised. They could have mentioned cash reserves as an example, but that is an expensive long-term strategy because of the low short-term yields available today.

The cloud of uncertainty under which we live is not comfortable! Yes, both pension funds and E&Fs are long-term investors, but the riding of markets up and down often leads to a significant increase in the contributions necessary to maintain their funding. That activity is not helpful to anyone. Who knows what will transpire as our country navigates through several potential geopolitical landmines. Combine that reality with uncertain economic growth, weaker labor markets, sticky inflation, and equity valuations that seem stretched, and markets could be in for a rocky period.

Wouldn’t it be a blessing to have CFM in place that not only provides the necessary liquidity so that assets aren’t forced to be sold at less than opportune times, but a strategy (service) that provides certainty since your obligations (liability cash flows) are matched with asset cash flows of bond principal and interest income for as far out as the bond and cash allocation will provide. It isn’t often that we are presented with an investment strategy that is truly a sleep-well-at-night offering for the long term. 

As a reminder, humans hate uncertainty, as it impacts us in both psychological and physiological ways. Yet, in the management of pensions and E&Fs, sponsors have wholeheartedly embraced uncertainty. The disconnect is quite surprising. Again, I don’t know what will transpire in markets today, tomorrow, or next year. I don’t know how the Iran situation will impact shipping lanes and the price of oil and inflation or worse, destabilize the entire region by bringing into the conflict Iran’s friends, such as Russia and China. I’m not a gambler and I don’t believe that managers of pension assets should be either.

I think it is critically important to SECURE the promises given to your plan’s participants and to achieve that objective with low cost and prudent risk. Riding the asset allocation rollercoaster accomplishes neither objective. Now’s the time to act. Not after markets have been rocked.