Tag Archives: Finance

08.27.26
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Deja Vu All Over Again? Just Saying!

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

Yogi Berra, the great Yankee catcher, but also a NY Mets player/coach in 1965, is credited with the saying it’s “Deja Vu all over again”, which he supposedly uttered back in 1961. Are we potentially witnessing in 2026, with AI investments soaring and equity valuations that may be stretched, a replay to what transpired in March 2000? Now, I’ve heard many arguments that today’s technology companies aren’t your fathers’ or even your grandfathers’ but anytime I hear the phrase “this time is different”, I want to run and hide.

Let’s explore. At the peak of the dot-com bubble in March 2000, Information Technology represented approximately 35% of the capitalization-weighted S&P 500. That level of concentration within the S&P 500 was deemed extraordinary at that time. Remember when Cisco Systems was the largest stock in the S&P 500 index? What transpired from March 2000 to October 2002, proved incredibly painful to those investors that believed that “this time was different”. Unfortunately, it wasn’t! The result was a significant reduction in the weight of the technology sector within the S&P 500 from 2000-2002 by an incredible 21.7%. The technology bubble burst took down Tech’s exposure from roughly one-third of the index to about 13% by the 2002 bear-market bottom.

PeriodTechnology weight in S&P 500
1995~10%
March 2000~34.5%
Oct. 2002~12.8%

That leads to today’s discussion comparing March 2000’s Technology exposure versus August 2026’s broader “technology-related” weight when you include Meta, both classes of Alphabet, Amazon, and Tesla. As you can see by the information displayed below, roughly 50% of the S&P 500’s weight is now in technology-related entities.

ComponentS&P 500 weight
Official Information Technology37.15%
Amazon3.84%
Alphabet Class A3.06%
Alphabet Class C2.45%
Meta Platforms1.83%
Tesla1.55%
Broader technology exposure49.88%

In other words, today’s exposure is about 15.4 percentage points higher in technology than at the peak of the dot-com bubble.

However, the exposure to Technology and AI is not limited to the S&P 500 (equities), as massive investment in data centers (real estate) done through significant debt financing (fixed income) might be subjecting a pension plan’s entire asset allocation to significant risks.

Is your portfolio prepared for the next significant market correction?

08.21.26
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When is $2T Really Not $2T?

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

In 2021, the U.S. ran a deficit of $2.772 trillion. We know that much of the stimulus created by that deficit spending was in reaction to the economic disruption created by Covid-19. Fast forward 5-years, and the 2026 fiscal year (10/1/25-9/30/26) federal deficit is projected to be around $1.9 trillion. That is potentially a lot of stimulus provided to the private sector through the U.S.’s deficit spending. But is this nearly $2 trillion in “stimulus” really creating $2 trillion in demand for goods and services and will it create similar consequences to what we witnessed in 2022 when inflation spiked? I don’t think so.

First, 2021’s stimulus was also accompanied by supply factors, as the economy was effectively “shut down” compounding inflationary pressures. In addition, the 2021 deficit included “only” $352 billion in interest expense associated with financing our national debt (now >$40 trillion).

The primary differences between 2021’s deficit and 2026’s are the facts that supply factors are not present as the economy is able to meet current demand with far fewer impediments and >50% of the deficit now pays for the interest expense on that $40 trillion national debt. Instead of going to individuals in the private sector that might use that $1 trillion in interest expense to demand goods and services, most of that interest expense is going to pension funds, insurance companies, banks, the Fed, foreigners, wealthy people. etc. According to my former INVESCO colleague, Charles DuBois, “only about 10-20% of the interest received is spent into the current domestic economy.”   

Consequently, today’s roughly $2 trillion deficit is much less stimulative than the $2 trillion deficits from 5-years ago. Chuck estimates that it is “perhaps about $0.6 trillion less stimulative”.  Inflation remains an issue, and may worsen should oil shocks materialize during the next several months, but it is not as bad as it could be if we were truly running a $2 trillion annual deficit with most of those $s flowing into the bank accounts of individuals, who like to spend!

08.13.26
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A Possible Dallas P&F POB – What to do, what to do?

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

Dallas, TX voters may be asked to approve nearly $1 billion in debt this fall to help the city deliver a long-promised new police academy, while also providing financial flexibility ($500 million) for ongoing contributions into the city’s police and fire pension fund. Jack Ireland, the city’s chief financial officer, told the council that voter approval of pension obligation bonds (POB) wouldn’t trigger the issuance of new debt, but would “give the City Council the financial flexibility to approve its usage if interest rates improved in the future.”

However, not everyone is in agreement regarding the potential POB issuance. Councilman Adam Bazaldua said “asking voters to support another bond package, including the conditional approval of pension obligation bonds, sends the wrong message”. “It’s hard enough for us to decipher and educate our voters with the language that is required by state law, that will tell them their tax rates will go up with these bonds, but now we have to explain to them we’re asking you to approve half a billion dollars that we may not ever even touch or use,” Bazaldua said. “I’m adamantly opposed to this.”

A City Council vote is set for Aug. 12. If approved, any bond proposals would appear on the general election ballot on Nov. 3.

What would you do? Unfortunately, conventional thinking would have the City issue the bonds and contribute the proceeds into the P&F fund, where trustees and their advisors would apply those funds to the current asset allocation. The conventional POB strategy essentially says:

Borrow at X% → put the proceeds into the pension → invest in the existing portfolio expecting Y% → hope Y > X%.

That process is exactly the arbitrage framework that makes POBs controversial. The Government Finance Officers Association (GFOA) explicitly identifies the possibility that invested proceeds fail to earn more than the bond interest rate as a principal POB risk—and recommends against POB issuance largely because of risks such as this. I ran around the country in 2020-2021 arguing that historically low interest rates made the issuance of POBs sound but only if the proceeds were used to defease the plan’s liabilities – not invest them in traditional markets. What followed was 2023’s -18% return for the S&P 500 and a -12% return for the Aggregate index. Just what I and the GFOA warned against.

We believe that using cash flow matching (CFM) for the proceeds makes ultimate sense. At only 36% funded, this fund is facing insolvency due to significant negative annual cash flow and annual contributions that fall short of the ADC. This fund needs an economic boost and putting $500 million to work immediately and securing the next couple of years of benefits will buy some time for the growth assets to perform. Actually, they need significantly more than $500 million to get back on the right footing, but anything is better than nothing. As a reminder, a pension plan that is roughly only 1/3 funded and striving for a 6.5% return, actually needs to generate a nearly 20% annual return just to maintain the funding deficit.

I would describe our process as creating two portfolios: A liquidity bucket consisting of the CFM strategy and a growth buck that contains all non-core bonds. Furthermore, I would add any existing core bonds from the legacy assets into the liquidity bucket to be used to further build out the CFM portfolio. Here are the roles for the two portfolios/buckets:

Cash Flow MatchingLegacy / Growth Portfolio
Secure pension benefitsGenerate long-term growth
Provides needed liquidityMarket-dependent relative returns
Uses bond principal + interestContains equities/alternatives/etc.
This portfolio is Liability-focusedTotal return-focused
Creates cash flow roadmapCreates uncertain cash flows
Eliminates a cash sweepCan withstand market risk
Buys timeUses that time

With a pension as poorly funded, it is impossible for traditional pension management to perform two conflicting jobs simultaneously: generate high returns and provide liquidity to pay benefits.

I know that our recommendation goes against the traditional approach, but CFM brings an element of certainty to the management of pension assets that is desperately in need of some certainty. Dallas needs a dramatic improvement in the plan’s funding. Why should they continue to ride the rollercoaster of returns, which only guarantees volatility and may lead to further funding erosion? Use the POB proceeds, but only if near-term liabilities can be secured.

07.22.26
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A “Joe Friday” Moment

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

Jack Webb, who portrayed Joe Friday in the 1950s crime drama “Dragnet”, was famous for saying in season two “all we want are the facts, ma’am.” The catchphrase eventually morphed into a shorter phrase with the help of comedian, Stan Freberg, who released his parody “St. George and the Dragonet” in which he stated, “just the facts, Ma’am”. That phrase has been carried forward in Dragnet remakes. But, I digress.

Today, I present to you a Joe Friday moment. Here are the facts: Oil prices have risen by 27% since July 6th. U.S. Treasury yields are rising across the yield curve, and the 30-year Treasury yield is within 6 bps of this cycle’s high of 5.2%. The 10-year Treasury yield is currently 4.66% as of 10:24 am on 7/22/26. Investment grade corporate bond spreads have finally started to widen although slowly. According to Morgan Stanley, the “average” yield on a BBB+ corporate is 6.23% or roughly 1.1% higher than the yield on the comparable 30-year Treasury bond. Inflation, which moderated in June, is likely to spike higher given the current direction of activity in the Middle East and its impact on shipping lanes.

These are the facts. They suggest to me, and hopefully you, that the current U.S. interest rate environment is ripe for de-risking activities through cash flow matching (CFM). Why continue to live with the uncertainty surrounding oil, inflation, rates, etc., when you can SECURE your fund’s promises in the near-term?

I wish that I had a crystal ball to help me forecast the future but alas I don’t, and I suspect that you don’t either. Given the lack of clarity related to future events, I suggest that we live in the moment. We have an environment in which the cost of those future promises (benefit payments) can be cut dramatically. An environment that brings an element of certainty to a very uncertain process. An environment in which U.S. interest rates are providing plan sponsors with a significant portion of the annual return on investment target.

We’ve seen this scenario before. At the start of the 2000s, we had pension plans extremely well-funded and contribution expenses well-controlled. That opportunity went unheeded. The result of that inaction proved to be disastrous as we saw DB pension funding get pounded by two major equity market corrections. Are you confident that another major correction isn’t around the corner?

Like Joe Friday, I rely on the facts, which I’ve now presented to you. Ignore them at your peril.

06.23.26
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Source Ryan ALM, Inc.

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

At Ryan ALM, Inc., we pride ourselves on being a resource for our clients beyond providing our three products – Cash Flow Matching (CFM), Custom Liability Index (CLI), and our ASC 715 Discount Rates. As regular readers of this blog will recall, we are always highlighting our willingness to provide a free analysis on how any of our products can be used to support your pension fund or E&F, especially if the goal is to secure the promised monthly benefits or grant payments.

These insights have been put to practical use three times in the last week by our clients. In the first case, we were asked to price a possible extension of an existing CFM portfolio by 6-months and 12-months using only investment grade bonds in one case while including high yield in the second scenario.

In the second example, we manage a CFM portfolio for a plan where we have defeased 100% of the net liabilities out to 2056. This plan is scheduled to make contributions until 2048. We were asked to evaluate the impact on the CFM portfolio (and the pension fund) using two new contribution rates equal to 75% and 50% of the current annual payment.

In the third example, we currently manage a significant portion of an E&F’s total fund. They inquired as to what the impact would be on the current CFM portfolio if they expedited grant payments during the next four years. We currently cover future grant payments out to 2036.

In each of these cases, we produced an analysis that will help them come to a decision that is in the best interest of the fund. We encourage our clients, and those that would like to be, to use our services to think through critical issues, such as ongoing liquidity needs, which has become a challenge for many plans/funds as alternative assets have become a bigger share of the asset allocation. Please don’t hesitate to SOURCE Ryan. We suspect that you’ll be quite pleased by what our services can do for you, your fund, and most importantly, your beneficiaries. Try us. I’m certain that you’ll like us!

The Ryan ALM mission is to solve liability driven problems through low-cost, low-risk solutions.

06.01.26
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What Do You Need?

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

We are now nearly through the first half of 2026. That doesn’t seem possible. Despite the very uncertain economic and geopolitical environment, U.S. equities continue to march higher, especially for stocks associated in any way with AI. As a result, I suspect that a number of plan sponsors/trustees will say that they only need for those good times to keep rolling. But is that possible given current valuations? On the other hand, perhaps you are a sponsor/trustee that believes that nothing grows to the heavens, and as a result you might be looking to take a little risk out of your current asset allocation. If so, I have a suggestion. But first, here are a few questions that I’d like you to consider:

  • How is your fund’s current liquidity profile?
  • If raising the necessary monthly liquidity is challenging, how would you like a strategy that provides the liquidity you need, net of contributions, each month chronologically as far out as the strategy’s allocation will take you?
  • Given current equity valuations, how would you like an extended investing horizon that buys time for your fund’s alpha assets to wade through potentially choppy near-term markets without fear of forced selling to meet benefits and expenses?
  • How does reducing investment management fees sound?
  • How would you like to stabilize contribution costs and the funded ratio?
  • The investment strategy that I am referring to brings an element of certainty to the management of pensions that sorely lack that today. How does that sound?
  • How do you think your participants would appreciate knowing that their promised benefits are SECURED for the period that your new strategy covers?
  • Interest rates are the greatest threat to a fixed income (bond) investment program. How would you like a strategy that is not impacted by changes in U.S. interest rates?

Come on Kamp, is there really an investment strategy that can secure the benefits, buy time for the residual assets to just grow unencumbered, lower investment fees, eliminate interest rate risk, and provide the liquidity that I’ll need to pay my monthly bills? There sure is! For regular readers of this blog, you likely know that I’m referring to Cash Flow Matching (CFM) as the investment strategy.

This bond product carefully matches the asset cash flows of principal and interest with the liability cash flows of benefits and expenses. By doing so, the benefits are secured for the length of the program. We have assignments from 3-years to 30-years. We’ve just bought time for the assets not engaged in CFM to wade through any ugliness in markets without fear of liquidation to meet monthly payouts. Furthermore, we are matching future values which are not interest rate sensitive. A $1,000 benefit payment next month is $1,000 whether rates are at 2% or 10%. Finally, we provide our investment management services at attractively low rates.

We also provide a free analysis to any sponsor who’d like to know how CFM could benefit their fund. We’ll produce a CFM portfolio that will help you understand the potential cost reduction in the value of those future benefit promises. In today’s rate environment, we can produce portfolios that reduce the future cost of providing benefits by roughly 2% per year. Ask us to cover the next 10-years and the savings becomes very attractive and meaningful. We are ready when you are!

05.29.26
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Important NIRS Statement related to Alaska

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

I recently published a post highlighting how powerful public pension funds are as an economic force. Despite DB pension fund demise in the private sector, they remain widely used to support hiring and retention of critical public servants. However, there are gaps in their usage and significant attempts have been made to shift the burden for a dignified retirement from the employer to the employee through DC offerings.

Recently, there was a bipartisan attempt by the Alaska legislation to reintroduce defined benefit plans to public sector workers, which were shuttered to new employees back in the early 2000s. Unfortunately, the bill was vetoed by Governor Dunleavy. The following text is a statement from Dan Doonan, Executive Director, National Institute on Retirement Security related to the Alaska situation. It is excellent!

Statement on Efforts in Alaska to Restore Pension Benefits to Address Grave Workforce Shortage

WASHINGTON, D.C., May 19, 2026 – In response to the veto of bipartisan legislation passed by the Alaska legislature to provide defined benefit pensions to Alaska’s public employees, the National Institute on Retirement Security (NIRS) issued the following statement today from Dan Doonan, NIRS executive director:

“Alaska’s effort to restore a pension plan for public workers represents meaningful progress in addressing one of the state’s most pressing challenges: attracting and retaining a stable, experienced public workforce. While Governor Dunleavy has vetoed the legislation, the fact that the measure passed both the House and Senate demonstrates a growing recognition that retirement benefits are not just about retirement security — they also are an essential workforce management tool.

For years, Alaska has faced deep and growing staffing shortages and retention problems across the public sector after closing its pension plans, especially in education and public safety. Pensions are a proven tool for helping employers recruit qualified workers, reduce costly turnover, and retain experienced employees who provide continuity and institutional knowledge. Too often, Alaska has served as a training ground where workers gain experience and then leave for other states that provide pension benefits and offer public employees financial security after careers serving their communities.

Research delivered by NIRS to the Alaska Department of Education found that Alaska’s shift away from pensions contributed to higher turnover among public education employees. Alaska is a rare example in which data was available to compare the behavior of workers in the same jobs and communities, with the same employers, but with different benefit offerings. That increased worker turnover in Alaska carries real costs for employers, taxpayers, and communities alike.

Importantly, the new pension tier approved by the legislature offered an innovative middle-ground design approach to protect taxpayer interests, with both risk- and cost-sharing features.

Despite the veto, the legislation is an important step forward because policymakers from both parties acknowledge that retirement plan design directly affects workforce stability and the quality of public services. Supporters rightly argued that offering a redesigned, innovative pension plan with taxpayers’ protections would help address chronic vacancies and improve retention in critical public-sector jobs.

We hope Alaska lawmakers continue this conversation and make another run at restoring a pension option in the future. States across the country increasingly recognize that pensions remain one of the most cost-effective tools available to build and sustain a strong workforce capable of delivering essential public services.”

The National Institute on Retirement Security is a non-profit, non-partisan organization established to contribute to informed policymaking by fostering a deep understanding of the value of retirement security to employees, employers, and the economy as a whole. Located in Washington, D.C., NIRS membership includes financial services firms, employee benefit plans, trade associations, and other retirement service providers. More information is available at www.nirsonline.org.

Thanks, Dan and NIRS, for your continuing advocacy for DB pension plans.

05.11.26
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Milliman: Corporate Pension Funding Highest Since 2007

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. It would be fascinating to see how these 100 plans differ from a list just 20-years ago.

As for today’s members, the Milliman 100 PFI plans showed improved funding by $23 billion during April. These stellar results were driven by strong equity returns as the constituents averaged a 2.13% gain. As a result, the funded ratio dramatically improved from 105.9% at the end of March to 107.8% at the end of April representing the highest level of funding since October 2007, when it stood at 108.1%. Strong investment gains increased assets by $20 billion and now stand at $1.297 trillion, while the projected benefit obligation fell slightly to $1.204 trillion, as the monthly discount rate edged up one basis point, to 5.66% from 5.65%. 

“After a flat first quarter, the funding surplus grew to $94 billion at the end of April, primarily due to strong market returns,” said Zorast Wadia, author of the Milliman 100 PFI. “This means plan sponsors continue to have more pension risk management options as plans move further into surplus territory.”

Plan sponsors would be wise to seek risk reducing strategies. The previous high watermark was achieved in October 2007, just prior to the start of the Great Financial Crisis, which pummeled markets through March of 2009. As the graph below highlights, the Milliman 100 went from a small surplus in the Q3’07 to a major deficit within 6 months. It would be another 13-years before a surplus was once again created.

Plan sponsors should secure the pension promises through a cash flow matching (CFM) strategy and then actively manage surplus assets since they’ve now created a much longer investing horizon for those assets. Ryan ALM, Inc. is always willing to provide a free analysis of what is possible through CFM.

For the full Milliman report, click on the link below.

View this month’s complete Pension Funding Index.

05.07.26
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Unique Liabilities Require A Unique Solution

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

Most pension plans have exposure to fixed income. Perhaps not as much as they did prior to 2000, but today’s common thinking is that the current exposure is enough to act as a buffer should equity markets not continue along this momentum fueled path, and finally, to support the monthly liquidity needs of the fund. But are those the right reasons to use bonds and what type of fixed income should be used to accomplish those objectives?

We observe that most funds use a variety of investment grade bonds (Treasuries, Agencies, Corporates, etc.) and they have that collection benchmarked to a generic index such as the Bloomberg U.S. Aggregate Index (a.k.a. the Agg). As a reminder, the Agg was created by Ron Ryan when he was Head of Research at Lehman Brothers a few years ago. But, again, is this the right approach? We at Ryan ALM, Inc. believe that bonds should only be used for their cash flows (principal and interest) and not as a performance driver. Bonds are perhaps the only asset class with a known cash flow equal to the value at maturity (PAR) and contractual interest payments. Those known cash flows can be modeled to meet the plan’s ongoing liability cash flows (benefits + expenses). 

Which brings me to the point that every pension plan’s liabilities are unique, and as such, no generic index such as the Agg could possibly match a plan’s liabilities. If the asset cash flows don’t match and fund the liability cash flows (benefits and expenses), the plan is subject to unnecessary interest rate risk. Again, given that every pension plan has a unique set of liabilities this would suggest that each pension plan needs to have an investment strategy created specifically for their cash flow needs. Cash Flow Matching (CFM) is an investment strategy with a very long and successful history. An appropriately crafted CFM portfolio will meet and fully fund chronologically the liability cash flows as far into the future as the allocation to the CFM strategy lasts.

We take great pride in our proprietary CFM optimization modeling, which we began using at Ryan ALM’s founding in 2004. Having the ability to tailor unique solutions to client specific issues/requests is a hallmark of our firm, and this capability is being recognized throughout the industry. In fact, we recently received this feedback from an ALM expert at a large asset/liability consulting firm, who stated that I’m “impressed with the team’s ability to build portfolios for such non-standard cashflow streams.” Thank you!

We’d be happy to demonstrate our capability and we’re always willing to provide a free analysis highlighting how your fund could benefit through CFM and Ryan ALM’s expertise. Just call us.

05.04.26
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Why Wouldn’t You Prefer a SD of +/-0%?

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

I continue to be surprised that more pension plans don’t embrace greater certainty in the management of their funds. The Iran War is leading to great uncertainty related to inflation, interest rates, and economic growth. Yes, U.S. equities have enjoyed a healthy recovery following the initial outbreak in the Middle East, but is that sustainable?

Callan does a good job of providing a regular review of what asset allocation would be necessary to achieve a 7% return and the risk (measured as standard deviation) to achieve that return objective. Callan indicated that it was very easy to achieve a 7% return all the way back in 1994 when U.S. interest rates were higher than they are today. In fact, an allocation of 85% to fixed income and small allocations to L.C. equity, SC equity, and int’l stocks would have produced a 7% return with only a 5.6% annual standard deviation.

However, in the most recent update from 2024, Callan suggests the following asset allocation is necessary to achieve a 7% return:

This means that 68% of the time, a plan sponsor should expect an annual return of 7% +/- 8.6%. At two standard deviations (95% of the observations or 19/20 years), the annual return will fall between +/- 17.2% of the 7% target. Would you be comfortable knowing that your fund could generate an annual return of -10.2%? Think about the impact a return like that would have on contributions?

What if I said that cash flow matching (CFM) a portion of your pension fund would result in those assets having an annual SD of 0% barring a default which occurs at a rate of 0.18% annually among investment grade corporate bonds for the last 40-years. How’s that possible? When CFM is implemented, the plan’s asset cash flows and matched agains the plan’s liability cash flows (benefits and expenses). They mover in lockstep with each other no matter where rates go. Today’s U.S. interest environment is attractive and getting more attractive as I write this post, as the 30-year Treasury bond yield has topped 5% (5.02% at 11:47 am DST). Higher rates are great for CFM, as they lower the present value of those future promises.

Furthermore, the use of a CFM portfolio secures the pension promises, dramatically improves plan liquidity, eliminates interest rate risk for the portion of the plan, extends the investing horizon for the residual plan assets, and reduces the cost of those future pension promises. Again, why wouldn’t you embrace an element of certainty?

I’m not sure what the Callan team would identify as the proper allocation to achieve a 7% return today, but I suspect that the annual standard deviation is greater than the 8.6% from 2024. Every time a pension plan falls short of the annual ROA, contributions must increase to make up for the shortfall. Greater investment certainty, like that associated with using CFM, reduces the likelihood that the pension plan sponsor with suffer from a negative surprise associate from increased contributions.