By: Russ Kamp, CEO, Ryan ALM, Inc.
Election day is finally upon us. I really couldn’t take one more political ad, especially given how nasty most of them have become. I’m not sure that I watched many in which the candidate talked about what they’d previously accomplished and what they hoped to do once elected. Most of the commercials were just about bashing their opponent. Something has got to change.
If I were running for office to secure Pension America – I’ve actually run in six prior elections (won 5) for two different boards of education and town council – this would be my platform. I would propose that every defined benefit pension plan have as its core holding a cash flow matching (CFM) portfolio in lieu of active core fixed income. The balance of the plan’s assets could then be managed as they are today, or perhaps more aggressively since CFM will expand the investing horizon increasing the probability of those assets achieving their desired outcome. My promise to you (no fingers crossed behind my back): Ryan ALM, Inc. would,
- Secure the promised benefits at low cost and with prudent risk,
- Dramatically improve the monthly liquidity to meet those promised benefits (and expenses) chronologically,
- Extend the investing horizon for the alpha assets,
- Eliminate interest rate risk for the CFM assets, as they are defeasing benefits that are future values,
- Keep the plan from forcing liquidity when selling assets to meet benefits is not advantageous,
- Significantly reduce the cost of those future promises effective on the day the portfolio is constructed, and
- Provide all of this at modest cost
Like many politicians promising the moon, these “benefits” may sound too good to be true, but this is what CFM does all of the time! To show you that we mean what we say, we are always willing to provide plan sponsors with a free analysis to highlight what CFM could do for your plan.
What do you say? Do we have your vote? I believe that your plan participants would say, “YES!”
