Tag Archives: Asset allocation

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.

03.09.26
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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.

03.06.26
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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!

03.04.26
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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?

02.25.26
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New Jersey’s Pension System’s “High” Investment Return

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

As a taxpaying resident in New Jersey and a huge supporter of defined benefit plans who has a daughter in the system, I was happy to read that NJ’s pension systems generated strong investment returns in fiscal year 2025, reporting a nearly 11% return. Terrific. Yet, despite the above target return (7.0% ROA), the impact on the system’s funded status was negative. Yes, the funded ratio improved (assets/liabilities), but the funded status further deteriorated (funding gap in $s). Since the system is striving for 7% and the combined funded ratio of the various plans is <50%, a system like NJ’s would need to double the annual return on asset target just to keep the $ deficit stable.

It is great to see that NJ is finally bringing some financial discipline to the management of its pensions, with contributions at least matching the Actuarial Determined Contribution (ADC), but after decades of failing to do so (I think since Washington slept here), the systems are in need of significant funding improvement. Trying to generate outsized gains through a riskier asset allocation is not a long-term winning formula, often leading to greater annually required contributions when markets behave badly and assets get whacked.

The management of DB pension plans is not rocket science if the basics of sound pension management are followed. For instance, plans receiving the full ADC have on average an 80% funded ratio, while those not receiving the full ADC sit with funded ratios <70% (NCPERS study). Plans sitting with funded ratios below 50% are not likely to create enough excess return relative to the annual ROA to be able to close the funding gap. This often leads to plans making difficult decisions such as creating plans with multiple tiers, which I really despise.

Plans should focus on meeting the ADC, securing the promised benefits in the near-term, which buys time for the growth or alpha assets to perform, and reduce costs of administration, including management fees. DB plans are critical to the creation of a dignified retirement. Having a significant percentage of our seniors lacking the financial wherewithal to remain active in our economy is a major problem with long-term implications.

01.30.26
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“Everybody’s looking under every rock.” Jay Kloepfer

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

Institutional Investor’s James Comtois has recently published an article that quoted several industry members on the near-term (10-years) return forecast for both public and private markets, which according to those asked are looking anemic. No one should be surprised by these forecasts given the incredible strength of public markets during the past three years and the fact that regression to the mean tendencies is not just theory.

An equally, if not greater, challenge is liquidity. As the title above highlights, Jay Kloepfer, Director of Capital Markets Research at Callan, told II that “Liquidity has become a bigger issue,” He went on to say that “Everybody’s looking under every rock.” Not surprising! Given the migration of assets from public markets to private during the last few decades. The rapid decline in U.S. interest rates certainly contributed to this asset movement, but expectations for “outsized” gains from alternatives also fueled enthusiasm and action. The Callan chart below highlights just how far pension plans have migrated.

I’ve written a lot on the subject of liquidity. Of course, the only reason that pension plans exist is to fund a promise that was made to the participants of that fund. Those promises are paid in monthly installments. Not having the necessary liquidity can create significant unintended consequences. No one wants to be a forced seller in a liquidity challenged market. It is critical that pension plans have a liquidity policy in place to deal with this critical issue. Equally important is to have an asset allocation that captures liquidity without having to sell investments.

Cash flow matching (CFM) is such a strategy. It ensures that the necessary liquidity is available each and every month through the careful matching of asset cash flows (interest and principal) with the liability cash flows of benefits and expenses. No forced selling! Furthermore, the use of CFM extends the investing horizon for those growth assets not needed in the CFM program. Those investments can just grow unencumbered. The extended investing horizon also allows the growth assets to wade through choppy markets without the possibility of being sold at less than opportune times.

So, if you are concerned about near-term returns for a variety of assets and with creating the necessary liquidity to meet ongoing pension promises, don’t rely on the status quo approach to asset allocation. Adopt a bifurcated asset allocation that separates plan assets into liquidity and growth buckets. Your plan will be in much better shape to deal with the inevitable market correction.

01.29.26
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What Topics Would You Pick?

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

I’m hopefully attending the FPPTA conference in Orlando beginning on Sunday, February 1, 2026. My attendance will be very much dependent on the path of the next winter storm takes as it migrates up the East coast. I’ve been asked to speak on a couple of occasions at this event for which I’m always very appreciative to be given the opportunity to share my perspectives on a variety of pension subjects.

The first opportunity is straightforward in that I will be addressing the importance of cash flow in managing defined benefit pension plans. In my opinion, there is nothing more important than generating and managing cash flow to meet ongoing plan liabilities of benefits and expenses. As pension plans have pursued a more aggressive asset allocation utilizing significantly more alternatives – private equity, private credit, real estate infrastructure, etc. – liquidity has become more challenging. As a result, some of the strategies that have been adopted to raise the necessary cash flow are not in the best interest of the plans longer term. I’ll be happy to share my thoughts on those issues if you want to reach out to me.

Regarding my second opportunity to share some perspective, I am one of four individuals who were asked to identify three pension related topics for a session called “Around the Pension World Discussion”. There will be six randomly selected topics from the original list of 12 that will be covered in 15-minute increments. It is a really interesting concept, and hopefully as we lead the conversation will get great input from the attendees.

The three topics that I chose are:

  1. Liquidity – it is being challenged through the migration of assets to alternative strategies.
  2. Uncertainty – Human beings hate uncertainty as it has both a physiological and psychological impact on us. Yet little to none of our current practices managing pensions brings certainty.
  3. The Primary Pension objective – managing a DB pension is about securing the promised benefits at a reasonable cost and with prudent risk. It is not a return objective.

Clearly, there are tons of topics covering investments/asset allocation, risk management, governance, actuarial assumptions, plan design, etc. It shouldn’t be surprising why I chose the topics that I did based on my focus on securing pension promises through cash flow matching (CFM). We provide the necessary liquidity to meet those ongoing expenditures, while securing the promises given to the plan participants. In addition, CFM is a “sleep-well-at-night” strategy that brings certainty to the management of pension plans that engage in very uncertain practices.

What topics would you have chosen? Please reply to this post. I’d like to share your topics and the rationale behind choosing them in a follow-up blog. Have a great day!

12.30.25
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Pension Reform or Just Benefit Cuts?

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

According to NIRS, at least 48 U.S. states undertook significant public pension reforms in the years following the global financial crisis (GFC), with virtually every state making some form of change to its public pension retirement systems. I’ve questioned for some time that those “reforms” were nothing more than benefit cuts. When I think of reform, I think of how pension plans are managed, and not what they pay out in promised benefits. However, this wasn’t the case for those 48 states which mostly asked their participants to contribute more, work for more years, and ultimately get less in benefits.

Equable Institute released the second edition of its Retirement Security Report, a comprehensive assessment of the retirement income security provided to U.S. state and local government workers. The report evaluated 1,953 retirement plans across the country to determine how well public employees are being put on a path to secure and adequate retirement income. Unfortunately, the reports findings support my view that pension reforms were nothing more than benefit cuts. Here are a couple of the points:

“Retirement benefit values have declined significantly: The expected lifetime value of retirement benefits for a typical full-career public employee has dropped by more than $140,000 since 2006, primarily due to policy changes after the Great Recession such as higher retirement ages, longer vesting, and reduced COLAs.“

“Only 46.6% of public workers are being served well by their retirement plans.“

Yes, newer plan designs are allowing for greater portability through hybrid and defined contribution plans, but as I’ve discussed in many blog posts, asking untrained individuals to fund, manage, and then disburse a “benefit” without the necessary disposable income, investment acumen, and a crystal ball to help with longevity issues is poor policy. We have an affordability issue in this country and it is being compounded by this push away from DB pensions to DC offerings.

Pension reform needs to be more than just benefit adjustments. We need a rethink regarding how these plans are managed. As we have said on many occasions, the primary objective in managing a pension plan is not one focused on return, which just guarantees volatility in outcomes. Managing a pension plan, public or private, should be about securing the promises that were given to the plan’s participants. That should be accomplished at a reasonable cost and with prudent risk.

Regrettably, most pensions are taking on more risk as they migrate significant assets to alternatives. In the process they have reduced liquidity to meet benefits and dramatically increased costs with no promise of actually meeting return projections. Furthermore, many of the alternative assets have become overcrowded trades that ultimately drive down future returns. Higher fees and lower returns – not a great formula for success.

It is time to get off the performance rollercoaster. Sure, recent returns have been quite good (for public markets), but as we’ve witnessed many times in the past, markets don’t always cooperate and when they don’t, years of good performance can evaporate very quickly. Changing one’s approach to managing a pension plan doesn’t have to be revolutionary. In fact, it is quite simple. All one needs to do is bifurcate the plan’s assets into two buckets – liquidity and growth – as opposed to having 100% of the assets focused on the ROA. Your plan likely has a healthy exposure to core fixed income that comes with great interest rate risk. Use that exposure to fill your liquidity bucket and convert those assets from an active strategy to a cash flow matching (CFM) portfolio focused on your fund’s unique liabilities.

Once that simple task has been done, you will now have SECURED a portion of your plan’s promises (benefits) chronologically from next month as far into the future as that allocation will take you. In the process the growth assets now have a longer investing horizon that should enhance the probability of achieving the desired outcome. Contribution expenses and the funded status will become more stable. As your plan’s funded status improves, allocate more of the growth assets to the liquidity bucket further stabilizing and securing the benefits.

This modest change will get your fund off that rollercoaster of returns. The primary objective of securing benefits at a reasonable cost and with prudent risk will become a reality and true pension reform will be realized.

12.02.25
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Do the Analysis! Remove the Guess Work.

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

I am truly blessed working for an organization such as Ryan ALM, Inc. I am awed by the folks that I get to work with and the product/strategy that I get to represent. As a reminder, we’ve created a cash flow matching (CFM) strategy that brings an element of certainty to the management of pensions that should be welcomed by pension plan sponsors and their advisors far and wide. What other strategy can inform you on the day that the portfolio is constructed what the performance of that strategy will be for the full-term of the assignment (barring any defaults within investment grade bonds)? Name another strategy that can lay out the liquidity with certainty for each month (chronologically) of that assignment.

Given that liquidity is becoming a challenge as pension plans (mostly public) adopt a more aggressive asset allocation favoring alternative investments, using a CFM strategy that provides ALL the liquidity to meet ongoing benefits and expenses should be a decision that is easily embraced. Yet, our conversations with key decision makers often stall as other parties get involved in the “review”. To this day, I’m not sure what is involved in most of those conversations.

Are they attempting to determine that a traditional core fixed income strategy benchmarked to a generic index such as the BB Aggregate is capable of producing the same outcome? If so, let me tell you that they can’t and it won’t. Any fixed income product that is not managed against your plan’s specific liabilities will not provide the same benefits as CFM. It will be a highly interest rate sensitive product and performance will be driven by changes in interest rates. Do you know where U.S. rates are headed? Furthermore, the liquidity provided by a “core” fixed income strategy is not likely to be sufficient resulting in other investment products needing to be swept of their liquidity (dividends and capital distributions), reducing the potential returns from those strategies.  Such a cash sweep will reduce the ROA of these non-bond investments. Guinness Global’s study of S&P data for the last 85 years has shown that dividends and reinvestment of dividends account for 50% or more of the S&P returns for rolling 10- and 20-year periods dating back to 1940.

Are they trying to determine if the return produced by the CFM mandate will be sufficient to meet the return on asset assumption (ROA)? Could be, but all they need to realize is that the CFM portfolio’s yield will likely be much higher than the YTM of a core fixed income strategy given CFM’s 100% exposure to corporate bonds versus a heavy allocation to lower yielding Treasuries and agencies in an Agg-type portfolio. In this case, the use of a CFM strategy to replace a core fixed income mandate doesn’t impact the overall asset allocation and it certainly doesn’t reduce the fund’s ability to meet the long-term return of the program.

Instead of trying to incorporate all these unknown variables/inputs into the decision, just have Ryan ALM do the analysis. We love to work on projects that help the plan sponsor and their advisors come to sound decisions based on facts. There is no guess work. Importantly, we will construct for FREE multiple CFM portfolios, if necessary, to help frame the decision. Each plan’s liabilities are unique and as such, each CFM portfolio must be built to meet that plan’s unique liability cash flows.

All that is required for us to complete our analysis are the projected liability cash flows of benefits and expenses (contributions, too) as far into the future as possible. The further into the future, the greater the insights that we will create for you. We can use the current allocation to fixed income as the AUM for the analysis or you can choose a different allocation. We will use 100% IG corporates or you can ask us to use either 100% Treasuries/STRIPS or some combination of Treasuries and corporate bonds. We can defease 100% of the plan’s liabilities for a period of time, such as the next 10-years or do a vertical slice of a % of the liabilities, such as 50%, which will allow the CFM program to extend coverage further into the future and benefit from using longer maturity bonds with greater YTMs. Isn’t that exciting!

So, I ask again, why noodle over a bunch of unknowns, when you could have Ryan ALM provide you with a nearly precise evaluation of the benefits of CFM for your pension plan? When you hire other managers in a variety of asset classes, do they provide you with a portfolio up front? One that can give you the return that will be generated over a specific timeframe? No? Not surprised. Oh, and BTW, we provide our investment management services at a significantly lower fee than traditional core fixed income managers and we cap our annual fee once a certain AUM is reached. Stop the guess work. Have us do the work for you. It will make for a much better conversation when considering using CFM. Call me at 201/675-8797 or email me at rkamp@ryanalm.com for your free analysis. I look forward to speaking with you!

11.19.25
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It Couldn’t Be Any Easier!

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

I participated this morning in a portfolio review for one of our Cash Flow Matching (CFM) clients. As usual, it couldn’t be any easier for us and the client. Following the Chair’s announcement that it was Ryan ALM’s turn, I stated that all benefits and expenses remain SECURED on a net of contributions basis through 2048 and gross of contributions through 2056. Any questions? That’s it!

There is no guessing as to the future. There is no hand-wringing or pondering regarding the Fed, and what they might do at their next meeting in December. No worries about equity valuations, the impact of AI, the increase in the use of PIKs in private credit portfolios, etc. We built this portfolio in the third quarter of 2024, and it continues to do exactly what it was designed to do. The combination of maturing principal and interest is providing the necessary asset cash flows to meet monthly distributions (liability cash flows of benefits and expenses) like clock-work. How comforting!

The only potential fly in the ointment is a default of an investment grade bond. But according to S&P, that happens at a 0.18% annual clip or roughly 2 / 1,000 bonds (last 40-years). Fortunately for us and our client this has not happened within their portfolio. So, as long as the monthly cash on hand remains greater than the required distribution, we are meeting the requirements of our mandate.

There is no anxiety associated with our management of pension assets. Only an element of certainty rarely found within pension management. How many of your other managers can provide a summary as concise as ours? How many of your managers have built a strategy where the performance for the length of the mandate (5-, 10-, or more years) is known on the day the portfolio is constructed? When we talk about CFM as a “sleep-well-at-night” strategy, this is precisely what we are talking about. Why wouldn’t you want some of this in your fund?

As a reminder, through CFM the liquidity is enhanced, the benefits (promises) SECURED, the investing horizon extended for the non-CFM assets, and certainty established for that portion of the portfolio. Seems like a no brainer.