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

WTW has published the results for their Swiss Pension Index. Swiss funds are performing exceptionally well with the average funded ratio hitting 128.5% at year-end. The improved funding reflects strong asset performance and the impact of rising interest rates which lowered the present value of future liabilities (benefit payments). Despite the good news, WTW warns investors to be cautious “given the currently elevated valuations in global equity markets a market correction could potentially be around the corner, so continued discipline and prudent risk management is required.”

Given the uncertainty that is always present in the management of defined benefit pension plans whether in the United States or abroad, we always recommend a disciplined and prudent risk management approach. Our sentiment isn’t restricted to U.S. markets. “Pension funds should continuously monitor their portfolios as market, interest rate, and geopolitical conditions evolve,” recommends Alexandra Tischendorf, Head of Investment at WTW Switzerland.

Importantly, Ms. Tischendorf shared that “we (WTW) are also seeing increased adoption of cash flow–driven investment (CDI) approaches, particularly for liabilities with fixed payment profiles. These strategies align investment returns more closely with expected cash flows and can enhance portfolio resilience compared to traditional duration-based approaches.” YES!

We’ve often shared through our blogs and research that cash flow matching (CFM) strategies are superior to duration-only implementations, as you get a more precise duration match through CFM, while also getting the liquidity to meet ongoing benefits and expenses. As always, we are happy to provide a free analysis to any pension plan sponsor that wants to understand what is possible through CFM. Don’t be shy!