By: Russ Kamp, Managing Director, Ryan ALM, Inc.

We are happy to share with you a research piece titled “Bond Index Recommendation: Bag the Agg!“, written by Ronald J. Ryan, CEO, Ryan ALM, Inc. It includes a wonderful history lesson regarding the first bond indexes produced by Kuhn Loeb in the mid ’70s, and how Ron got involved to eventually create the “Lehman” indexes that are still so prominent today. There is also a nearly 50-year look back at a Kuhn Loeb index document. There aren’t many in our industry today who will remember the Kuhn Loeb letterhead.

Of equal importance is Ron’s opinion that the Aggregate Index has served its useful purpose and it is time for a rethink. Replacing the Agg won’t be easy, but with a renewed focus on the primary pension objective which is to secure the promised benefits at a reasonable cost and with prudent risk, it becomes easier to understand. The Ryan organization is focused on securing the pension promise through cash flow matching. In order to successfully implement such a strategy, a “Custom Liability Index” (CLI) must be created given each pension plan’s unique liabilities. The CLI is now the benchmark of choice for investment professionals to manage against.

I’m sure that you will appreciate Ron’s history lesson and his rationale for wanting to “retire” the Aggregate Index as the primary fixed income benchmark. Enjoy!