Tag Archives: cfm

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!

01.26.26
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Another Cockroach!

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

As most folks were focused on the massive snowstorm that crippled a large swath of the U.S., BlackRock was disclosing another significant loss in one of their private debt funds. In this case, BlackRock TCP Capital, a publicly traded middle-market lending fund, expects to mark down the net value of its assets 19 per cent after a string of troubled loans weighed on results, marking the latest sign of pressure in the private credit market.

BlackRock’s vehicle is a business development company (BDC), which pools together private credit loans and trades like a stock. According to multiple reports, the fund has struggled in part because of its exposure to e-commerce aggregators which are companies that buy and manage Amazon sellers. Furthermore, BDC shares have been hit over the past year. There are currently 156 active BDCs, of which 50 are publicly traded. BDC Investors have concerned over private credit returns, underwriting standards and increased regulatory scrutiny. FINALLY!

Of course, this is not an isolated incident for either private credit/debt in general or specifically BlackRock. As you may recall, BlackRock was forced to reprice a private debt holding from par to zero last November, when Renovo Home Partners, a Dallas-based home-remodeling roll‑up that collapsed into Chapter 7 bankruptcy, triggering a roughly $150 million total loss on a private loan largely held by BlackRock.

Funds managed by BlackRock (notably its TCP Capital Corp. BDC) provided the majority of roughly $150 million in private credit to Renovo, while Apollo’s MidCap Financial and Oaktree held smaller slices. As of late September 2025, lenders were still marking this loan at 100 cents on the dollar, implying expectations of full repayment. This shouldn’t have come as a complete surprise because earlier in 2025, lenders had already agreed to a partial write‑off and debt‑to‑equity swap, trying to stabilize Renovo’s capital structure.​

This unfortunate outcome highlights how “mark‑to‑model” valuations in private credit can keep loans at par until very late, then reprice suddenly when a borrower fails. This practice suggest that headline yields in private credit may understate true default and loss severity risk, especially for highly leveraged sponsor‑backed roll‑ups. Yet, it doesn’t seem to have rattled either the market or institutional asset owners who continue to plow significant assets into this opaque and potentially saturated market. It continues to amaze me the number of “searches” being conducted for private credit/debt. Asset classes can get overwhelmed driving down future returns. Do you know what the natural capacity is for this asset class and the manager(s) that you are hiring? Caveat emptor!

01.23.26
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How Does One Secure A Benefit?

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

We hope that you’ll agree that going to Chicago in January demonstrates the lengths that Ryan ALM personnel will go to help plan sponsors and their advisors protect and preserve DB pension plans. We are just thankful that we left yesterday, as today’s temperature is not expected to get to 0. OUCH!

Ron Ryan and I spent the last couple of days speaking with a number of funds and consultants about the many benefits of cash flow matching (CFM), which is gaining incredible traction among pension sponsors of all types. Who doesn’t want an element of certainty and enhanced liquidity within their plans given all the uncertainty we are facing in markets and geopolitically.

The idea of creating an element of certainty within the management of pension plans sounds wonderful, but how is that actually achieved? This is a question that we often receive and this trip was no exception. We had been discussing the fact that the relationship between asset cash flows (bond principal and interest) and liability cash flows (benefits and expenses) is locked in on the day that the bond portfolio is produced. The optimization process that we created blends the principal and interest from multiple bonds to meet the monthly obligations of benefits and expenses with an emphasis on longer maturity and higher yielding bonds to capture greater cost reduction of those future promises.

However, to demonstrate how one defeases a future liability, my example below highlights the matching of one bond versus one future $2 million 10-year liability. In this example from 18-months ago we purchased:

Bond: MetLife 6.375% due 6/15/34, A- quality, price = $107.64

Buy $1,240,000 par value of MetLife at a cost = $1,334,736

Interest is equal to the par value of bonds ($1,240,000) times the bond’s coupon (6.375%)

As a result of this purchase, we Receive: 

  Interest =  $78,412.50 annually ($39,206.25 semi-annual payments)

                            Total interest earned for 10 years is $784,125

  Principal = $1,240,000 at maturity (par value)

Total Cash Flow = $2,024,125  – $2,000,000 10-year Liability  = $24,124.99 excess

                             ($24,124.99 excess Cash Flow)

Benefits:

Able to fund $2 million benefit at a cost of $1.335 million or a -33.25% cost reduction

Excess cash flow can be reinvested or used to partially fund other benefits

In today’s yield environment, our clients benefit to a greater extent asking us to create longer maturity programs given the steepness of the yield curve. If they don’t have the assets to fund 100% of those longer-term liabilities, we can defease a portion of them through what we call a vertical slice. That slice of liabilities can be any percentage that allows us to cover a period from next month to 30-years from now. In a recent analysis produced for a prospect, we constructed a portfolio of bonds that covered 40% of the pension plan’s liabilities out to 30-years. As a result, we reduced the present value cost to defease those liabilities by –42.7%!!

Reach out to us today to learn how much we can reduce the future value cost of your promised benefits. We do this analysis for free. We encourage you to take us up on our generous offer.

01.20.26
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ARPA Update as of January 16, 2026

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

We hope that the continuing success of the ARPA pension legislation warms your heart despite ridiculously cold temperatures in New Jersey and elsewhere.

Regarding last week’s activity, pleased to report that two plans received approval for their SFA applications. Pension Trust Fund Agreement of St. Louis Motion Picture Machine Operators and Teamsters Local 837 Pension Plan, both non-priority group members, will receive a combined $19.9 million in SFA and interest for their 1,431 members. These approvals are the first for the PBGC in just under one month.

In other ARPA news, there were no new applications filed, as the e-Filing portal remains temporarily closed. In addition, as we’ve been reporting, the window for initial applications to be submitted was to close on 12/31/25. From this point forward, only revised applications should be received by the PBGC. Despite that impediment, two more funds, NMU Great Lakes Pension Fund and UFCW Pension Fund of Northeastern Pennsylvania, added their names to the extensive waitlist seeking Special Financial Assistance. These plans and the others currently on the list must believe that the current deadline in place will be amended.

There was one application withdrawn during the prior week, as the Dairy Employees Union Local #17 Pension Plan pulled their initial application seeking $3.5 million in SFA for the 633 plan participants. Under the current rules, they have until 12/31/26 to resubmit a revised application.

Lastly, there were no applications denied nor were any of the previous recipients of SFA asked to rebate a portion due to census errors.

The U.S. interest rate environment is reacting to some of the global uncertainty. As a result, longer dated Treasury yields are marching higher. As of 9:51 am, the yield on the 30-year Treasury bond is 4.93%, while the 10-year Treasury note yield is at 4.29%. These yields are quite attractive for plans receiving SFA and wanting to secure benefits and expenses with the proceeds. Don’t miss this opportunity to significantly reduce the cost of those future benefits.

01.09.26
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Milliman: Corporate Pension Funding UP – Again!

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

Milliman released its monthly Milliman 100 Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. They reported that the funded ratio has now improved for nine straight months – impressive! As of December 31, 2025, the funded ratio for the index constituents is 108.1%, which is up substantially from year end 2024’s 103.6%.

The increase in the funded ratio for December (and the year) was mostly driven by the performance of the assets for the index’s constituents that saw an 11.32% average return for the year, increasing asset values by $53 billion. A rather stable interest rate environment lead to only a $1 billion decline in the PV of those FV liabilities.

According to Zorast Wadia, author of the Milliman 100 Pension Funding Index report, “discount rates fell during the year, and this trend could extend into 2026, potentially reversing some of the recent funded status gains and underscoring the continued need for prudent asset-liability management.” We couldn’t agree more.

It was the significant decline in U.S. interest rates during a nearly four decade bull market for bonds that really crushed funding for private DB pension plans. It would be tragic to witness a deterioration in the funded ratio/status after reclaiming a strong financial footing. Secure those promises and sit back and enjoy managing surplus assets.

Here is the link to the full December report: View this month’s complete Pension Funding Index

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.

12.29.25
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A Time to Look Back

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

Nearly eight years ago (2/28/18), I produced a blog post titled, “Let’s Just Cut Them Off!”, in which I took offense to an article trashing pension legislation then referred to as the “Butch Lewis Act” (BLA). The writer of the article, Rachel Greszler, The Heritage Foundation, stated that the BLA (as well as other potential solutions at that time) were nothing more than tax-payer bailouts.  She estimated that these bailouts could amount to as much as $1 trillion. I stated at that time that “I don’t know where she has gotten this figure, but it is not close to reality.”

Ms. Greszler defined the potential recipients of these loans (now grants) as the entire universe of multi-employer plans totaling roughly 1,375 (at that time) with an unfunded liability of $500 billion.  However, the Butch Lewis Act, and subsequently ARPA) was only designed for those plans that were designated as “Critical and Declining”.  The total amount of underfunding for that cohort was roughly $70 billion.  A far cry from the $1 trillion that she highlighted above.

So, where are we today? I’m happy to report that as of 12/19/25, the PBGC has approved Special Financial Assistance to 151 pension plans totaling $75.2 billion. These grants are ensuring that 1,873,112 American workers will receive the retirement benefits they were promised! Amazing!

In my original post, I wrote “given the author’s concern for the million or so union workers whose benefits may be trashed, she certainly doesn’t propose any solutions other than to say that a “bailout” is a horrible way to go.  If these plans don’t receive assistance, they are likely to fail, placing a greater burden on the Pension Benefit Guaranty Corporation (PBGC), which is already financially troubled.” Fortunately, through the ARPA pension legislation, the PBGC’s multiemployer insurance fund is stronger today than it has been in decades.

I finished my post with the following thoughts: “Retirement benefits stimulate economic activity, and usually on the local level. The loss of retirement benefits will have a direct impact on these economies. Also, these benefits are taxed, which helps pay for a portion of the loans (now grants). Doing nothing is not an answer. I applaud the effort of those individuals who are driving the Butch Lewis Act. I encourage everyone to reach out to your legislatures to educate them on the BLA and to gain their support. There are millions of Americans who need your support.  Thank you!”

I was thrilled to work with Ron Ryan and the BLA team headed by John Murphy and David Blitzstein. It remains one of the highlights of my 44-year career. Who knew when I began working with Ron and that team it would lead me to eventually join Ryan ALM, Inc. We continue to fight to protect and preserve DB pensions for the masses. There is a ton of work remaining to do. Securing those promises through cash flow matching (CFM) is an important first step. Let us help you accomplish that objective.

12.17.25
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FV Benefits Reduced by -56.1% – Really!

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

I truly relish getting feedback related to my blog posts. I wasn’t surprised that there was more activity, and a little skepticism, related to my recent post that discussed the output from a current project. You may recall the post titled, “Bond Math and A Steepening Yield Curve – Perfect Together”, in which I shared that one particular Cash Flow Matching (CFM) implementation resulted in a potential -56.1% reduction in the FV cost of promised pension benefits. A few folks questioned the math, while another made the comment that the “savings” or cost reduction was nothing more than the time value of money. But isn’t that the reason to have pension assets in the first place so you are not funding liabilities at 100 cents on the dollar (pay-as-you-go).

Well, here’s the thing, the use of bonds, the only asset class with a known cash flow (future value at maturity and contractual semi-annual interest payments), brings to the management of pensions an element of certainty not found elsewhere. Yes, it is conceivable that one could cobble together a group of investment strategies that might subsequently achieve a targeted return that would help pay those obligations, but the volatility associated with this return-focused approach may also lead to significant underperformance and higher contribution expenses in the process.

With CFM, the savings (cost reduction) gets locked in on day one of the assignment. Give us a 5-year, 10-year, or longer assignment to secure those promised benefits, and we’ll be able to give you the likely return for that entire period. What other investment strategy can do that? Furthermore, CFM provides the necessary liquidity without forced selling or the sweep of dividends, interest, and capital distributions that should be reinvested in those higher returning strategies. In the process, the investing horizon for the plan’s assets is extended enhancing the probability that they will achieve the desired outcome.

In the example used in the previous Blog post, the -56.1% cost reduction was achieved with only 40% of the plan’s assets. By using a vertical slice approach, in which we secure a portion of the monthly obligations, we were able to extend the coverage period from 11-years to 30-years. That extension allowed us to use longer maturity bonds at substantially higher yields, which took advantage of bond math that proclaims that the longer the maturity and the higher the yield, the lower the cost. It’s true!

In today’s interest rate environment in which the average BBB corporate bond is trading at a yield close to 6%, a pension plan can capture roughly 89% of the target return (6.75% average ROA) with little to no volatility. How wonderful! Given that humans hate uncertainty, why don’t plan sponsors adopt the use of CFM to bring some certainty to their pension systems? Why do they choose to continue to ride the rollercoaster of returns provided by markets leading to increased contributions following down markets?

So, if you are still skeptical regarding our ability to provide significant cost reductions specific to your set of liabilities, allow us to provide you with a FREE analysis highlighting how CFM can support your pension plan and the plan’s participants. There may not be such a thing as a free lunch, but we can provide you with a sleep-well-at-night strategy.

12.15.25
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ARPA Update as of December 12, 2025

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

Unlike the Northeast, access to the PBGC’s e-Filing portal is thawing. According to the PBGC’s website, “the e-Filing Portal is open only to plans at the top of the waiting list that have been notified by PBGC that they may submit their applications. Applications from any other plans will not be accepted at this time.” Despite the dozens of multiemployer plans that remain on the waitlist, the floodgates have certainly not opened.

In fact, only two plans were permitted to submit applications last week. UFCW – Northern California Employers Joint Pension Plan, a Priority Group 6 member, submitted a revised application seeking >$2.3 billion for nearly 140k members, while UFCW, Local 23 and Giant Eagle Pension Plan, a non-priority group member, filed an initial application hoping to garner $40 million in SFA for 7,100 plan participants.

In other news, Dairy Industry-Union Pension Plan for Philadelphia and Vicinity, Warehouse Employees Union Local No. 730 Pension Trust Fund, and Cleveland Bakers and Teamsters Pension Plan received approval for SFA grants. Collectively they will receive $303.4 million (including interest and loan repayments) for 13,533 plan participants. There have now been 150 plans approved for SFA totaling just over $75 billion in grants.

Fortunately, there were no plans asked to repay a portion of the SFA due to census errors, no plans denied a filing, and no withdrawals of previously submitted applications. There were two more funds added to the waitlist and nine that locked in their valuation dates, including the two most recent additions to the waitlist. There remain 85 applications that have yet to be submitted to the PBGC.

Recent Federal Reserve interest rate action has rates on the long-end of the yield curve ratcheting higher. The 30-year Treasury Bond’s yield is at 4.83% (12:-5 pm). Comparable 30-year IG corporates are trading at yields close to 6% at this time. It remains an excellent time to secure the promised benefits through a CFM strategy.