10.13.26
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Why Wait To Buy That Security?

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

As I’ve mentioned before, I like getting responses to the many blog posts that I publish. A recent response to the possible use of Cash Flow Matching (CFM) was “My plan has a 10+-year duration. We are not close to using CFM”. Thanks for the observation. Here’s what I’d say to that:

I wouldn’t view a 10+-year duration for a pension plan as either unique or one that is “not close” to using cash flow matching. Duration strategies and CFM address two very different purposes. A plan’s duration tells us something about the interest-rate sensitivity and timing of the pension plan’s liabilities. It doesn’t tell us whether those promised benefits should begin to be secured today, especially given the higher interest rate environment.

For Ryan ALM, the more important question is “What is the plan’s funded status/funded ratio”? If a plan has sufficient assets to secure a meaningful portion of its future benefit payments, why would a pension plan wait simply because the liability duration is 10+-years? Importantly, CFM DOESN’T require matching the entire liability stream or waiting until a plan is closed, frozen, or very mature. A plan can establish a CFM portfolio today that secures, for example, the next 5-, 10-, 15-, or more years of projected benefits and expenses, while the remaining assets continue to pursue growth to meet future liabilities. As an FYI, we have multiple 30+-year assignments.

Furthermore, many pension plans have negatively impacted the liquidity available to meet the monthly obligations through asset migration to non-public investments. CFM dramatically improves a plan’s liquidity profile. A duration strategy doesn’t provide liquidity!

We’d suggest that the better funded a plan becomes, the stronger the argument may be for taking some risk off the table, especially during these highly uncertain times. Funding improvement/security represents progress toward fulfilling the pension promise. CFM allows the sponsor to secure and monetize some of that progress by converting assets into contractual bond cash flows designed to meet those future benefit payments.

Finally, if the desire of the pension plan sponsor is to mitigate interest rate risk, CFM provides a superior duration match since every month of the assignment is duration matched. So, a 10-year CFM mandate would have 120 bespoke duration matches as opposed to an “average” duration or a few key rates matched along the Treasury yield curve.

Rather than observing that a pension plan with a 10+-year duration means that plan isn’t ready for CFM, I would counter with; “Why wouldn’t a plan sponsor want to secure a portion of the promises where a plan could improve liquidity, secure benefits, reduce the cost of those future benefits, and extend the investing horizon for the residual assets to grow unencumbered?”

Keep the questions and observations coming. Thank you.

10.12.26
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ARPA Update as of October 9, 2026

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

Good morning. One of the perks of being involved in bonds is the fact that October 12, 2026 is a federal holiday and the bond market is closed, as today you are celebrating either Columbus Day or Indigenous Peoples’ Day. Enjoy. Stock markets on the other hand remain open and they are operating on a normal schedule.

Regarding ARPA and the PBGC’s implementation of this critical pension legislation, two plans received approval for Special Financial Assistance (SFA), while another two were given permission to submit an application seeking an SFA grant.

Local 1814 Riggers Pension Plan and Pension Plan of International Union of Bricklayers and Allied Craftworkers Local #15 Pennsylvania received approval for their revised applications. Local 1814 will receive $2.9 million for its 65 members, while the Bricklayers and Craftworkers will get $6.5 million for the 165 participants in that fund.

There are now 42 applications before the PBGC, including UFCW Local 174 Commercial Pension Fund Plan and Local 87-Distributors Pension Plan, that are hoping to secure a combined $28.3 million plus interest and FA loan repayments for just over 1,300 participants.

IN the PBGC’s weekly update they did not identify any funds withdrawing or denying applications and there weren’t any funds seeking to be added to the current waitlist. The last fund being added was in August 2026.

Fortunately, U.S. interest rates remain elevated. The pension plans that have recently received or those that will soon get SFA are going to benefit from these higher levels, as the future value of benefits to be paid will be reduced significantly. We recently produced a 30-year defeasement that had a 6.5% YTM. When ARPA was first approved (March 2021), U.S. rates were at historic lows. The cost to secure those promised benefits was far greater than it is today.

10.09.26
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Ryan ALM, Inc. Q3’26 Newsletter

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

We are pleased to share with you our insights and perspectives on the relationship of pension assets to pension liabilities (benefits and expenses) through the Q3’26 Newsletter. As you will read, the third quarter produced robust growth for pension funding, as liabilities collapsed due to a significant rise in U.S. interest rates (discount rate). As a result, funded ratios are at a high point since we began our analysis back in 2000. We believe that now is the time to take risk out of your asset allocation by securing a portion of the plan’s liabilities through cash flow matching (CFM).

As always, we encourage you to reach out to us with any questions or observations. Thank you for taking the time to read our insights, which we hope will prove useful.

10.08.26
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As If The Price of Oil Wasn’t Bad Enough – Shipping Costs!

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

The cost of transporting crude oil has exploded, adding another significant inflationary pressure to the global energy supply chain. Hiring a Very Large Crude Carrier (VLCC) to move U.S. oil to Asia now costs roughly $77 million, compared with an average of just $9.2 million in 2025. That is an increase of nearly 740%. As a FYI, VLCCs are among the largest oil tankers in commercial service, typically carrying around 2 million barrels of crude oil.

The important point isn’t simply the cost of the tanker. Transportation is part of the delivered cost of crude oil, so this extraordinary increase will ultimately be absorbed somewhere along the supply chain by producers, refiners, distributors, and/or consumers.

As I’ve mentioned in many blog posts when discussing inflation, this is particularly important because the Fed’s action to raise interest rates does little to solve this problem. The Fed can restrain demand, but it cannot manufacture tankers, increase shipping capacity, reopen constrained/blocked shipping routes, or reduce geopolitical risk. This is another example of supply-driven inflation, rather than excessive consumer demand.

Furthermore, there is potentially an important lag in its effect on the U.S. economy. Even if crude oil prices stabilize or fall, dramatically higher transportation costs can continue working their way through producer prices and ultimately consumer prices. That makes tanker rates another factor worth watching alongside the prices of oil, diesel, and gasoline on inflation expectations and potentially higher U.S. interest rates. Is the current energy shock becoming embedded in broader U.S. inflation? If so, a Fed Funds rate increase of >25 bps will be absolutely necessary.

10.08.26
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Corporate Pension Funding Rockets Higher

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

The Milliman 100 Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans, was recently released. It isn’t surprising that the average funded ratio advanced nicely during September given the dramatic rise in U.S. interest rates.

As a result, the funded status of the Milliman 100 PFI plans rose by $19 billion during September on the back of a 47 basis points (bps) rise in the discount rate, which now stands at 6.47%. This dramatic rise reduced pension liabilities by $54 billion. This reduction in the total liabilities offset investment returns that fell -2.2% for the month. According to Milliman, this challenging performance was the second-worst month of 2026, following the -3.19% return posted in March. The funded ratio for the index members is now at 114.5%, up more than 5% from 109.4% established at June 30, 2026.

“Despite losing $59 billion in market value during the third quarter, driven by quarterly returns of -2.92%, this performance was more than offset by a $105 billion reduction in plan liabilities, as discount rates rose 86 bps during the period,” said Zorast Wadia, PFI author. “Discount rates have not approached current levels since the 6.53% seen in May 2009, and the PFI funded ratio has not reached similar highs in more than 25 years.”

Given this dramatic improvement in funding, corporate defined benefit funds would be remiss to not seek to defease pension liabilities and secure that funding. As reported in the Ryan ALM, Inc. blog yesterday, we constructed a cash flow matching portfolio using high-quality investment-grade bonds (BBB+ or better) that produced a 6.5% YTM for the 30-year assignment. We are always willing to provide a free analysis of what CFM can do for your fund.

View this month’s complete Pension Funding Index.

10.07.26
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More Evidence?

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

As a follow-up to the September 30th post below, here is a note that I found from Bloomberg this morning.

“AI’s enormous funding needs keep growing. SpaceX is said to be in talks to raise $40 billion to buy Nvidia chips in what would be one of the biggest debt financings yet for the technology’s buildout, just days after Broadcom beganlining up $60 billion in AI chip financing for Anthropic and others. Ray Dalio warned AI is a “classic bubble” nearing the point of bursting as rates rise and investors seek cash.”

I’ve been saying for a while that rising rates would put significant pressure on equities in general and the hyperscalers more specifically. It is only becoming more magnified. If you are managing a pension plan, I encourage you to take risk off the table and secure those improved funded ratios.

Is AI Investment Reaching A Natural Limit?
10.06.26
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And There You Go: 6.5% YTM on a 30-year CFM assignment – Incredible!

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

For those of you responsible for the management of public DB pension systems, the news that we can build a 30-year cash flow matching (CFM) portfolio with a YTM of 6.5% through an investment-grade corporate bond portfolio while restricting quality to BBB+ or better should be incredibly exciting and enticing!

According to NASRA’s April 2026 survey of 132 major public pension plans, the long-term assumed rate of investment return is:

  • Average assumed return: 6.91%
  • Median assumed return: 7.00%
  • This has fallen substantially from an average of 7.94% in 2009.

As a result of today’s rapidly rising rate environment, our CFM optimization process can capture 94.1% of the annual target return, with little uncertainty. This YTM was achieved for a Florida-based public pension plan that was interested to see how CFM could work for them. Here’s what we can do:

  • Secure all the net benefits and expenses (B&E) through 9/30/56
  • The future value of those net B&E is $80.1 million
  • It takes only $31.7 million in assets to secure those FV B&E for a cost reduction on day-one of -60.4%
  • The YTM is 6.5%
  • The average quality is A-, with no exposure to BBB or BBB- bonds

Since we are building the portfolio net of forecasted contributions, those contributions are now known for the next 30-years. What a gift to the sponsor funding this program who no longer needs to be concerned about what annual surprises await. I have no idea where rates will go from here. They are currently not high, as I entered this industry when the 10-year Treasury note’s yield was >15%, and certainly not as low as we witnessed just 6-years ago, when that same note’s yield hit 0.52%. All I know is that the current environment is providing plan sponsors with the opportunity to secure the promised benefits at significant cost reduction with certainty (barring any defaults).

Why would you want to continue riding the performance rollercoaster when you can jump off knowing that you’ve won the funding game? CFM truly is a sleep-well-at-night strategy for both the sponsor and participant. We provide the pillow!

10.05.26
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ARPA Update as of October 2, 2026

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

October is definitely my favorite month for weather in New Jersey, and this past Saturday epitomized why: it was a spectacular Autumn day. It is also a very exciting time if you are a professional sports fan given the intersection of all four major sports seasons.

But the excitement isn’t reserved for only the weather or sports, as the PBGC is still working through a considerable list of multiemployer plans still seeking Special Financial Assistance (SFA). Presently, there are 42 funds (3 Priority Group 1 members) with applications before the PBGC and roughly 70 other pension plans that remain in the wings and hoping to one day submit their applications.

There were four plans that submitted applications during the previous week, including Schiffli Embroidery Workers Pension Fund that submitted a revised application seeking $7.7 million in SFA for its 638 plan participants. They had only submitted the initial application earlier in the week. In addition, three funds provided initial applications, including United Food and Commercial Workers’ Union Local 919 and Contributing Employers’ Non-Food Pension Plan, Pension Plan of the Leather Goods, Plastics, Handbags and Novelty Workers’ Union Local 1, Joint Retirement Fund, and Local One Photoengravers Pension Fund. In total, they are requesting $74.7 million in SFA for just over 4,000 members.

In other ARPA news, there were no applications approved or denied. In addition, there were no funds seeking to be added to the waitlist. The one application that was withdrawn (Schiffli) was quickly resubmitted and it is currently in the queue before the PBGC.

The 42 applications before the PBGC are requesting $1.68 billion in SFA for more than 78k pensioners. To date, $78.1 billion in SFA has been awarded to the 168 successful applicants, which goes a long way to protecting and preserving the pensions for 2,022,141 American workers. What an incredibly successful program!

10.02.26
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Ryan ALM, Inc.’s Concern: Stagflation

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

The U.S. capital markets are sending some interesting, and perhaps conflicting, signals. Treasury yields have risen dramatically, energy prices remain elevated, diesel supplies continue to be constrained, and corporate credit spreads are beginning to widen. Yet inflation expectations remain relatively well anchored and economic activity has held up surprisingly well. What are we to make of all this? I believe we may be witnessing the early stages of an environment tilting toward stagflation.

The problem, as I’ve written before, is that much of today’s inflation isn’t being created by excessive demand. It is being driven by supply issues, particularly within energy. The Fed can raise the Fed Funds rate by 25 basis points, 50 basis points, or perhaps much more, but none of those actions will produce another barrel of oil, gallon of diesel, or unit of refining capacity. Clearly, we aren’t going to plow fewer acres, ship less food, or stop moving goods around the country simply because interest rates have increased. Energy sources are embedded in virtually everything we produce and consume. Higher interest rates don’t fix that problem.

What higher rates can do is reduce demand elsewhere. Unfortunately, that means households get hit from both directions. They pay more for gasoline, food, utilities, and transportation because of the current energy supply issues, while simultaneously paying more for mortgages, auto loans, credit cards, and other financing because of the Fed. Businesses face the same squeeze through higher operating costs combined with a higher cost of capital. Is that really the prescription we want when the original inflationary driver is primarily a supply problem?

The markets are beginning to reflect this tension. The 10-year Treasury yield has moved well above 5% (currently 5.27% at 12:07 pm), producing an extraordinarily high real yield given that longer-term inflation expectations remain near the mid-2% range. At the same time, credit spreads have begun widening, while oil remains expensive and diesel markets remain stressed. Credit spreads aren’t signaling a crisis today, but the combination of these many factors bears careful watching. If credit conditions continue deteriorating while energy costs remain elevated, we’ll have an increasingly powerful stagflation cocktail based on stubborn inflation accompanied by weakening economic activity.

The Fed should obviously be concerned about inflation. However, I still question whether monetary policy can effectively address the inflationary environment that we’re experiencing without creating other problems in the process. The Fed can diminish demand. It cannot create supply. If energy prices remain elevated while real interest rates stay near more restrictive levels and credit conditions continue to deteriorate, we shouldn’t be surprised to see economic growth suffer. We’ll continue watching Treasury yields, inflation expectations, oil and diesel prices, and credit spreads closely as we monitor conditions for stagflation. Current economic conditions are beginning to get very interesting.

10.01.26
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Kudos to Florida and Its Liquidity Statute

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

You are not likely to know about Florida Statute §112.661(6) unless you reside in Florida and sit on a pension board, and even then, you still might not have heard or read about this statute. It became effective October 1, 2000, as part of Chapter 2000-264, Laws of Florida, enacted through CS/SB 372, “Investment of Public Funds”, which Governor Jeb Bush approved on June 14, 2000,

This provision is the only one of its type among the 50 U.S. states. Florida should be commended for its inclusion in the management of public pension plans. The subsection for this statute is titled “Maturity and Liquidity Requirements.” 

It provides: “The investment policy shall require that the investment portfolio be structured in such manner as to provide sufficient liquidity to pay obligations as they come due.”

It then goes a meaningful step further: “To that end, the investment policy should direct that, to the extent possible, an attempt will be made to MATCH (the statute’s word, not mine) investment maturities (that says bonds to me) with known cash needs and anticipated cash-flow requirements.” As Phil Rizzuto would say, “Holy Cow”! If given the opportunity, I couldn’t have written this requirement any more clearly.

Again, the Investment Policy Statement (IPS) should direct that an attempt will be made to match investment maturities through bonds with known cash needs and anticipated cash-flow requirements. That sounds a lot like Cash Flow Matching (CFM) to me.

So, I ask, within your (IPS) do you have an explicit Liquidity Policy? If so, does it consider Florida Statute 112.661? At the most recent FPPTA conference in Orlando, I was asked to speak to liquidity management practices currently used in Florida. What I discovered is the there are two fundamentally different philosophies:

Asset-driven liquidity

“When we need cash, where can we get it?”

Liability-driven liquidity

“We know when benefits must be paid, so why don’t we arrange the assets today to produce the cash when those payments occur?”

Here are the seven strategies that I was able to identify that are currently being utilized. I’d be interested to hear from those of you that might have adopted some other means to secure liquidity.

Only #7 falls under the category of liability-driven liquidity, which comes closest to adhering to statute 112:661. Given the rapid rise in U.S. interest rates, creating a cash flow matching portfolio for some period of time (10-years) not only SECURES the necessary liquidity, it extends the investing horizon for the plan’s residual assets, while dramatically reducing the cost to fund those future benefits. We are always happy to provide a free analysis on what CFM could accomplish for you and your fund. Don’t let this wonderful rate environment pass you by.