Tag Archives: Economy

04.01.26
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March Proves Challenging for Core Fixed Income

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

March was a difficult month for active core fixed income managers, as the Bloomberg U.S. Aggregate Index fell -1.8%. Uncertainty related to the impact of the Iran War on oil prices and subsequently inflation, pushed rates higher across the Treasury yield curve. The U.S. 10-year Treasury note saw yields rise 38 bps to 4.31%.

Agencies fell -1.7% in line with Treasuries, while the Corporate sector declined -2.0%. Corporate spreads ended March with an option adjusted spread (OAS) of 88.6 bps. The best performing Corporate sector was Financials (-1.7%), while Utilities performed worst at -2.2%.

The greatest risk managing bonds is interest rate risk. Given both geopolitical (Iran, Taiwan, Ukraine) and economic risks (oil, inflation, interest rates), now is the time to significantly reduce risk within your fund, whether that be a DB pension or E&F. Why continue to ride active fixed income through these uncertain markets? One can use a cash flow matching (CFM) strategy to SECURE and fund net liabilities chronologically well into the future. In the process, interest rate risk is eliminated as future benefits and expenses are not interest rate sensitive.

Furthermore, by securing near-term liabilities, the non-bond assets can now grow unencumbered providing more time to wade through these challenging times. I have no idea how long this conflict will last. I also don’t know how much damage has occurred and that which might still happen to oil production in the Middle East. Implementing a strategy that doesn’t rely on forecasting U.S. interest rates should be a high priority today.

Making the switch is easy. Rotate your current core fixed income assets from an active investment strategy to a CFM portfolio. There isn’t a need to revisit the fund’s asset allocation. We’ll even look for opportunities to take-in-kind some of your existing holdings. You’ll appreciate not having to search each month for the liquidity to meet the monthly promises that have been made to your participants, as the CFM strategy will provide all the liquidity that you need. Moreover, the Ryan ALM CFM model is skewed to A/BBB+ corporate bonds which should outyield most generic bond indexes that are skewed to Treasuries (e.g. the AGG).


03.16.26
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Unfortunately, the Joke Was On Us!

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

I started raising alarm bells related to DB pension exposure to alternatives – mainly private equity and private credit several years ago, and have produced roughly a dozen blog posts that touch on this issue. You may recall some of the posts from 2024:

The Joke’s On Us!

Good Ideas are Often Overwhelmed!

Kinda Silly Question

Well, unfortunately it appears that it is time to pay the piper! As mentioned in the posts listed above, we as an industry don’t truly appreciate the idea that there is a natural capacity to EVERY investment. As an industry, we DO overwhelm good ideas and those funds that are late to the party are often left with just the crumbs in the chaffing dish.

I stumbled over a good, but scary, list of recent events within private credit. The list was compiled by Ignacio Ramirez Moreno, Host of The Blunt Dollar Podcast:

Cliffwater saw 14% redemption requests.

Morgan Stanley’s fund got 10.9%.

Blackstone hit a record 7.9%.

All three capped withdrawals below what investors requested.

Glendon Capital flagged concerns about Blue Owl’s valuations.

Pimco called it “a crisis of really bad underwriting.”

JPMorgan’s marking down loans and tightening lending to private credit funds.

Partners Group thinks defaults could double.

Pimco’s predicting a “full-blown default cycle.”

Apollo’s saying the pain could last 12-18 months.

Well, that is some list! In addition, I was always quite skeptical of the credit quality that was assigned to these companies, and I guess that I wasn’t too far off given that 43% of private credit borrowers have negative free cash flow. Furthermore, the U.S./Israel vs. Iran war won’t help either, as inflation expectations have ratcheted higher reducing significantly the prospects for Fed action leading to lower rates. In fact, it would not be surprising to see the Fed have to raise rates. If such an action occurs, the higher interest rates could exacerbate the current challenging environment for private debt borrowers and their income statements.

Let’s see how the pension plan sponsor community and their advisors deal with private credit’s first real crisis. It should be both interesting and likely painful.

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!

03.06.26
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Milliman: Corporate Pension Funding now at 109.4%

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

Milliman has released the latest monthly report on the Milliman 100 Pension Funding Index (PFI). As a reminder, this index analyzes the 100 largest U.S. corporate pension plans.

For February, the PFI funded ratio rose from 109.1% as of January 31, to 109.4% as of February 28, marking the highest collective funded ratio since the 109.9% mark observed in July 2001. However, the funding improvement was solely a result of asset performance, as declining discount rates of 14 basis points reduced the discount rate to 5.33% and raised the PFI projected benefit obligation (liabilities) to $1.235 trillion. Fortunately, monthly returns of 2.15% offset the impact of falling U.S. interest rates leading to growth in the market value of plan assets by $22 billion, to $1.351 trillion.

“February’s investment performance drove the month’s $5 billion gain in funding levels,” said Zorast Wadia, author of the Milliman PFI. He went on to say that “while this marks 11 straight months of funding improvements, further declines in interest rates may occur, and ongoing market volatility makes it vital for plan sponsors to undertake surplus-management strategies focused on both sides of the balance sheet.” We continue to support Zorast in recommending that managing assets to liabilities is critical for DB pension plans in all market environments, but especially given the significant uncertainty under which markets are currently operating. As a reminder, the primary objective in managing a DB pension is to SECURE the promised benefits at a reasonable cost and with prudent risk. It is NOT a return objective.

We, at Ryan ALM, do not forecast interest rates, but the impact of rising oil prices (WTI currently up 30.7% as of 9:13 am EST since Friday) will likely have an impact on inflation and interest rates. It will be interesting to see if a potential fall in the value of liabilities proves greater than the potential impact that rising rates might have on equity markets and other assets. Will we see the 12th consecutive month of improved funding levels?

Please click on the link below for a look at the complete Milliman corporate pension funding report.

View this month’s complete Pension Funding Index.

02.27.26
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Oh, Canada!

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

There were significant trade developments announced yesterday between the U.S. and Canada, which don’t seem to be getting the attention that they deserve. I wish that these developments were driven by Canada in retaliation for both the women’s and men’s gold medal performances in Italy, but it seems as if the U.S. is being a sore winner in this situation.

So, what happened yesterday? U.S. under President Trump has reclassified Canada from a Tier 1 allied trading partner to a Tier 3 restricted commerce nation through an executive order.​ Oh, boy, that sounds onerous. It seems as if this escalation follows tensions brought about by new U.S. tariffs on Canadian goods such as steel, lumber, and energy products prompting Canada to diversify partnerships with China, Mexico, and others. Previously, Canada ranked as the U.S.’s top export market and second-largest trading partner overall, with highly integrated supply chains in autos and energy. The move to tier 3 immediately increases tariffs to 35% on ALL Canadian goods – ouch! Furthermore, this classification places Canada in the same trading bucket as countries such as Belarus and Venezuela.

Not surprisingly, Canada, led by Prime Minister Mark Carney, is countering by pursuing deeper relations with China, Ecuador, Indonesia, and India to reduce U.S. reliance, which still accounts for nearly 70% of its exports. According to various press reports, the White House announced the order approximately two hours before it became public, automatically imposing a 35% tariff on all Canadian goods, financial restrictions, and a freeze on joint military contracts. Canadian Prime Minister Mark Carney responded within 90 minutes by announcing countermeasures in Parliament, including export controls on critical minerals, such as potash, and withdrawal from NORAD data sharing.​

This move is highly disruptive to integrated North American supply chains. The decision followed escalating U.S. tariffs and was defended in Trump’s recent State of the Union address.​​ Canada now faces sharp export declines to its largest market, potentially worsening its trade balance and likely depreciating the Canadian $. Business investment drops due to higher costs for US machinery, leading to layoffs, reduced GDP growth, and sustained inflation from tariff pass-throughs. The potential for retaliatory measures like export controls on minerals will further strain relations between these two long-term allies.

Please don’t think that this development only strikes at Canada’s economy. US consumers and industries will see higher input costs such as steel, which estimates suggest could be as high as $7.5B+, leading to inflation and eroding competitiveness in batteries, clean energy, and defense. Canadian retaliation reduces US exports, impacts GDP, and exacerbates supply chain vulnerabilities with no quick domestic substitutes.

Higher inflation will impact interest rates, leading to higher costs of borrowing, and depending on the significance of these developments could lead to a bear market environment and an economic slowdown concurrent with existing labor force concerns. So, why isn’t this getting more attention?

02.20.26
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The Median Account May Not Be <$1k, But It Is Still A Crisis!

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

There has been some debate within the investment industry related to National Institute on Retirement Security’s (NIRS) recent release of their report titled, “Retirement in America: An Analysis of Retirement Preparedness Among Working-Age Americans”. A report that claimed that “across all workers (21-64), including those with no savings, the median amount saved was only $955.”

Those complaining about the findings cited as issues the inclusion of young workers, while also citing that the information used in the analysis was self-reported. Furthermore, there was mention of the fact that there is an impending massive wealth transfer from both the Silent and Baby Boomer generations to Millennials that will act to mitigate retirement savings shortfalls. Really? Let’s explore.

Including young workers will skew the results, as most haven’t had the chance to establish households and begin to save. Let’s focus on more mature workers, such as those age 55-64. How are they doing? According to Vanguard, the median (I hate averages) 401(k) balance for participants in that age cohort is only $95,642, as reported in Vanguard’s How America Saves 2025 report. That certainly doesn’t seem like a significant sum to carry one through a 20+ year retirement.

Furthermore, >30% of eligible DC participants are not contributing at all, while only 2% (according to Fidelity) have account balances exceeding $1 million. If one applies the 4% rule to an account balance with only $95,642, that participant can “safely” withdraw $3,826 per year to fund their retirement. That coupled with an average Social Security payout ($24.8k annually) is not going to get you too far. Heck, my property taxes in Midland Park are >$32k per year.

How about the impact of the great wealth transfer? Millennials must be set to receive a significant windfall – right? Not so fast, as the typical millennial can expect little or nothing from the “great wealth transfer”. For those who do receive something, amounts in the low five figures are a reasonable estimation: that certainly is not a life‑changing windfall. But aren’t the estimates regarding the transfer ranging from $84-$90 trillion with some estimates as significant as $100 trillion? Where is all that wealth going?

  • Fewer than one‑third of U.S. households receive any inheritance at all; 70–80% inherit nothing.​
  • Inheritances are disproportionately a feature of affluent families: in one analysis, inheritances are passed in about half of top‑5% households versus only 12% in the bottom 50%.​
  • Wealthier boomers are more than twice as likely to leave inheritances as poorer Americans, implying the transfer will largely reinforce existing inequalities.​
  • Across all households that receive something, the average inheritance is about $46,000, but this is heavily skewed by very large bequests at the top.
  • For the bottom 50% of households that receive an inheritance, the average is around $9,700.
  • For those in the broad “middle” (roughly the next 40% by wealth), the average inheritance is around $45,900.

So, in terms of expectation for the typical millennial, a large share will receive nothing, as their parents lack assets, too. Unfortunately, the “headline” trillions mostly reflect very large transfers to a relatively small share of already‑wealthy households. In short, the great wealth transfer is real in aggregate, but for the median millennial it looks less like a solution to a retirement shortfall!

The demise of defined benefit plans and the nearly exclusive use of defined contribution plans is creating a crisis. The current situation may not be as scary as the headline that the median amount saved is only $955, but $95,642 (or <$4k/year) is not going to help one navigate through a long retirement, especially as inflation associated with healthcare costs continues to rise rapidly.

Again, asking individuals to fund, manage, and then disburse a retirement benefit without the necessary disposable income, investment acumen, and NO crystal ball to help with longevity issues, is poor policy, at best. Everyday expenses are overwhelming family finances. The prospect of a dignified retirement is evaporating. Debating whether to include private/alternative investments and cryptos in 401(k) offerings is certainly not the answer. We need real solutions to this crisis. Where are the adults in the room?

02.10.26
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Milliman: Corporate Pension Funding Soars

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

Milliman has once again released its monthly Milliman 100 Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans, and the news continues to be quite good.

Market appreciation of 1.05% during January lifted the market value of PFI plan assets by $8 billion increasing total AUM to $1.327 trillion. A slight 1 bp rise in the discount rate to 5.47% lowered plan liabilities marginally to $1.217 trillion at the end of January. As a result, the PFI funded ratio climbed from 108.2% at the beginning of the year to 109.0% as of January 31, 2026. 

“January’s strong returns contributed $8 billion to the PFI plans’ funding surplus, while declining liabilities contributed another $2 billion,” said Zorast Wadia, author of the Milliman 100 PFI. “Although funded ratios have now improved for 10 straight months, managing this surplus will continue to be a central theme for many plan sponsors as they employ asset-liability matching strategies going forward.” We couldn’t agree more, Zorast! Given significant uncertainty regarding the economy, inflation, interest rates, and geopolitical events, now is the time to modify plan asset allocations by reducing risk through a cash flow matching strategy (CFM).

CFM will secure the promised benefits, provide the necessary monthly liquidity, extend the investing horizon for the non-CFM assets, while stabilizing the funded status and contribution expenses. Corporate plan sponsors have worked diligently tom improve funding and markets have cooperated in this effort. Now is not the time to “let it ride”. Ryan ALM will provide a free analysis to any plan sponsor that would like to see how CFM can help them accomplish all that I mentioned above. Don’t be shy!

Click on the link below for a look at Milliman’s January funding report.

View this month’s complete Pension Funding Index.

For more on Ryan ALM, Inc.

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!