Tag Archives: Finance

10.08.25
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An Alternative Pension Funding Formula

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

I’ve spent the last few days attending and speaking at the FPPTA conference in Sawgrass, Florida. As I’ve reported on multiple occasions, I believe that the FPPTA does as good a job as any public fund organization of providing critical education to public fund trustees. A recent change to the educational content for the FPPTA centers on the introduction of the “pension formula” as one of their four educational pillars. In the pension formula of C+I = B+E, C is contributions, I is investment income (plus principal appreciation or depreciation), B is benefits, and E represents expenses.

To fund B+E, the pension fund needs to contribute an annual sum of money (C) not covered by investment returns (I) to fully fund liability cash flows (B+E). That seems fairly straightforward. If C+I = B+E, we have a pension system in harmony. But is a pension fund truly ever in harmony? With market prices changing every second of every trading day, it is not surprising that the forecasted C may not be enough to cover any shortfall in I, since the C is determined at the start of the year. As a result, pension plans are often dealing with both the annual normal cost (accruing benefits each year) and any shortfall that must be made up through an additional contribution amortized over a period of years.

As a reminder, the I carries a lot of volatility (uncertainty) and unfortunately, that volatility can lead to positive and negative outcomes. As a reminder, if a pension fund is seeking a 7% annual return, many pension funds are managing the plan assets with 12%-15% volatility annually. If we use 12% as the volatility, 1 standard deviation or roughly 68% of the annual observations will fall between 7% plus or minus 12% or 19% to -5%. If one wants to frame the potential range of results at 2 standard deviations or 19 out of every 20-years (95% of the observations), the expected range of results becomes 31% to -17%. Wow, one could drive a couple of Freightliner trucks through that gap.

Are you still comfortable with your current asset allocation? Remember, when the I fails to achieve the 7% ARC the C must make up the shortfall. This is what transpired in spades during the ’00s decade when we suffered through two major market corrections. Yes, markets have recovered, but the significant increase in contributions needed to make up for the investment shortfalls haven’t been rebated!

I mentioned the word uncertainty above. As I’ve discussed on several occasions within this blog, human beings loathe uncertainty, as it has both a physiological and mental impact on us. Yet, the U.S. public fund pension community continues to embrace uncertainty through the asset allocation decisions. As you think about your plan’s asset allocation, is there any element of certainty? I had the chance to touch on this subject at the recent FPPTA by asking those in the room if they could identify any certainty within their plans. Not a single attendee raised their hand. Not surprising!

As I result, I’d like to posit a slight change to the pension formula. I’d like to amend the formula to read C+I+IC = B+E. Doesn’t seem that dramatic – right? So what is IC? IC=(A=L), where A are the plan’s assets, while L= plan liabilities. As you all know, the only reason that a pension plan exists is to fund a promise (benefits) made to the plan participant. Yet, the management of pension funds has morphed from securing the benefits to driving investment performance aka return, return, and return. As a result, we’ve introduced significant funding volatility. My subtle adjustment to the pension formula is an attempt to bring in some certainty.

By carefully matching assets to liabilities (A=L) we’ve created an element of certainty (IC) not currently found in pension asset allocation. By adding some IC to the C+I = B+E, we now have brought in some certainty and reduced the uncertainty and impact of I. The allocation to IC should be driven by the pension plan’s funded status. The better the funding, the greater the exposure to IC. Wouldn’t it be wonderful to create a sleep-well-at-night structure in which I plays an insignificant role and C is more easily controlled?

To begin the quest to reduce uncertainty, bifurcate your plan’s assets into two buckets, as opposed to having the assets focused on the ROA objective. The two buckets will now be liquidity and growth. The liquidity bucket is the IC where assets and liabilities are carefully matched (creating certainty) and providing all of the necessary liquidity to meet the ongoing B+E. The growth portfolio (I) are the remaining plan assets not needed to fund your monthly outflows.

The benefits of this change are numerous. The adoption of IC as part of the pension formula creates certainty, enhances liquidity, buys-time for the growth assets to achieve their expected outcomes, and reduces the uncertainty around having 100% of the assets impacted by events outside of one’s control. It is time to get off the asset allocation and performance rollercoaster. Yes, recent performance has been terrific, but as we’ve seen many times before, there is no guarantee that continues. Adopt this framework before markets take no prisoners and your funded status is once again challenged.

09.23.25
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Buy on the Rumor…

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

After 44-years in the investment industry I’ve pretty much heard most of the sayings, including the phrase “buy on the rumor and sell on the news”. I suspect that most of you have probably heard those words uttered, too. However, it isn’t always easy to point out an example. Here is graph that might just do the trick.

There had been significant anticipation that the U.S Federal Reserve would cut the Fed Funds Rate and last week that expectation was finally realized with a 0.25% trimming. However, it appears that for some of the investment community that reduction wasn’t what they were expecting. As the graph above highlights, the green line representing Treasury yields as of this morning, have risen nicely in just the last 6 days for most maturities 3 months and out, with the exception of the 1-year note. In fact, the 10- and 30-year bonds have seen yields rise roughly 10 bps. Now, we’ve seen more significant moves on a daily basis in the last couple of years, but the timing is what has me thinking.

There are still many who believe that this cut is the first of several between now and the end of 2025. However, there is also some trepidation on the part of some in the bond world given the recent rise in inflation after a prolonged period of decline. As a reminder, the Fed does have a dual mandate focused on both employment and inflation, and although the U.S. labor force has shown signs of weakening, is that weakness creating concerns that dwarf the potential negative impact from rising prices? As stated above, there may also have been some that anticipated the Fed surprising the markets by slicing rates by 0.50% instead of the 0.25% announced.

In any case, the interest rate path is not straight and with curves one’s vision can become obstructed. What we might just see is a steepening of the Treasury yield curve with longer dated maturities maintaining current levels, if not rising, while the Fed does their thing with short-term rates. That steepening in the curve is beneficial for cash flow matching assignments that can span 10- or more years, as the longer the maturity and the higher the yield, the greater the cost reduction to defease future liabilities. Please don’t let this attractive yield environment come and go before securing some of the pension promises.

09.19.25
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Houston, We Have A Problem!

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

That famous phrase from the movie Apollo 13, is actually modified from the original comment spoken by Jack Swigert, the command module pilot, who said, “Okay, Houston…we’ve had a problem here”. In any case, I am not referencing our space program, the City of Houston or for that matter, any other municipality. However, I am acknowledging that we continue to have an issue with how the debt of companies, municipalities, and other government entities get rated and how those rating agencies get compensated.

There was a comment in New Jersey Spotlight News (a daily email newsletter) that stated “New Jersey is facing uncertain economic times, to say the least, but its state government got a vote of confidence from Wall Street this week.” Of course, I was intrigued to understand what this vote of confidence might be especially given my knowledge of the current economic reality facing my lifelong state of residence. It turns out that Moody’s has elevated NJ’s debt rating. Huh?

Moody’s action in raising the rating to Aa3 follows a similar path that S&P took several months ago. Yes, NJ was able to recently close its budget gap by $600 million through tax increases but given that the state has one of the greatest tax burdens of any U.S. state, the ability to further raise taxes is likely significantly curtailed unless they want to witness a mass exodus of residents, including the author of this post!

According to Steve Church, Piscataqua Research, a highly experienced and thoughtful actuary, “New Jersey’s public employees, teachers, police and fire systems are $96B underfunded by reference to their actuaries’ contribution liability calculations and $154B underfunded using their actuaries’ LDROM calculations!” Ouch! Furthermore, they offer an OPEB that is funded at <10%. In addition, New Jersey, like many states, will be negatively impacted by the cuts in Medicaid and other social safety net programs. These cuts are likely to put significant pressure on the state’s budget, which has already risen significantly in just the last 5 years from $38.3 billion in fiscal year 2020 to nearly $60 billion today.

So, how is it possible that NJ could see a ratings increase given the significant burden that it continues to face in meeting future pension and OPEB funding, while also protecting the social safety net that so many Jersey residents are depending on. Well, here’s the rub. Rating agencies are paid under the practice called “issuer-pays”. This process has often been criticized, especially during the GFC when a host of credit ratings were called into question. Unfortunately, few alternatives have been put into practice today. How likely will a municipality or corporate entity pay an agency for a rating that puts the sponsor in a poor light? We’ve been extremely fortunate to have mostly weathered recent economic storms, but as history has shown, there is likely another just around the corner. How will these bonds hold up during the next crisis?

09.15.25
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ARPA Update as of September 12, 2025

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

Welcome to FOMC week. I wouldn’t ordinarily mention the Federal Reserve in the ARPA update, but we could see an interest rate cut, and perhaps one that is larger than currently anticipated. The implications from falling interest rates are potential large, as it raises the costs to defease pension liabilities (benefits and expenses) that would be secured through the SFA grant by reducing the coverage period. This impact could be potentially diminished if the yield curve were to steepen given recent inflationary news.

Enough about rates and the Fed. The PBGC is still plugging away on the plethora of applications before them and those yet to be accepted. Currently, there are 20 applications under review. Teamsters Industrial Employees Pension Plan is the latest fund to submit an application seeking SFA. They are hoping to secure $27.4 million for the 1,888 participants. The PBGC has 6-7 applications that must be finalized in each of the next 3 months.

Happy to report that both Alaska Teamster – Employer Pension Plan and Hollow Metal Pension Plan received approval for their applications. The two non-priority pension funds will receive a combined $240.1 million for >13k members.

In other ARPA news, Bakery Drivers Local 550 and Industry Pension Fund, a Priority Group 2 member, whose initial application was originally denied because they were deemed ineligible, has had their revised application denied because of “completeness”. Will three times be the charm? In their latest application they were seeking $125.8 million to support 1,122 plan participants.

Lastly, Greater Cleveland Moving Picture Projector Operators Pension Fund, became the most recent fund added to the waitlist. They are the 167th fund on the waitlist of non-priority members, with 74 still to submit an application. According to the PBGC’s website, their e-Filing portal is limited at this time.

We’ll keep you updated on the activity of the U.S. Federal Reserve and the potential implications from their interest rate decision. Hopefully, concerns related to inflation will offset the current trends related to employment providing future SFA recipients with an environment conducive to defeasing the promised benefits at higher yields and thus, lower costs.

09.05.25
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I’m Concerned! Are You?

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

I’ve been concerned about the U.S. retirement industry for many years, with a particular focus on traditional pensions. The demise of DB pensions is a major social and economic issue for a significant majority of American workers, who fear that their golden years will be greatly tarnished without the support of a traditional DB pension plan coupled with their inability to fund a supplemental retirement vehicle, such as a defined contribution plan.

I recently had hope that the rising U.S. interest rate environment would bring about a sea change in the use of DB pensions, but I haven’t seen the tidal wave yet. That said, the higher rate environment did (could still) provide plan sponsors with the ability to take some risk off the table, but outside of private pensions, I’ve witnessed little movement away from a traditional asset allocation framework. You see, the higher rate environment reduces the present value cost of those future benefit payments improving both the funded ratio and funded status of DB pensions, while possibly reducing ongoing contributions. Securing those benefits, even for just 10-years dramatically reduces risk.

But, again, I’ve witnessed too few plans engaging in alternative asset allocation strategies. That’s not the same as engaging in alternative strategies, which unfortunately continues to be all the rage despite the significant flows into these products, which will likely diminish future returns, and the lack of distributions from them, too. An alternative asset allocation strategy that Ryan ALM supports and recommends is the bifurcation of assets into two buckets – liquidity and growth – as opposed to having all of the plan’s assets focused on the return on asset (ROA) assumption.

By dividing the assets into two buckets, one can achieve multiple goals simultaneously. The liquidity bucket, constituting investment grade bonds, will be used to defease the liability cash flows of benefits and expenses, while the growth or alpha assets can grow unencumbered with the goal of being used to defease future liabilities (current active lives). One of the most important investment tenets is time. As mentioned above, defeasing pension liabilities for even 10-years dramatically enhances the probability of the alpha assets achieving the desired outcome.

So why am I concerned? The lack of risk mitigation is of great concern. I’m tired of watching pensions ride the rollercoaster of returns up and down until something breaks, which usually means contributions go up and benefits go down! Given the great uncertainty related to both the economy and the labor force, why would anyone embrace the status quo resulting in many sleepless nights? Do something, and not just for the sake of doing something. Really do something! Embrace the asset allocation framework that we espouse. Migrate your current core bond allocation to a defeased bond allocation known as cash flow matching (CFM) to bring an element of certainty to the management of your plan.

Listen, if rates fall as a result of a deteriorating labor force and economy, the present value of pension liabilities will rise. Given that scenario, it is highly likely that asset prices will fall, too. That is a lethal combination, and not unique given how many times I’ve seen that play out during my 44-year career. Reach out to us if you aren’t sure how to start the process. We’d be pleased to take you through a series of scenarios so that you can determine what is possible. Perhaps you’ll sleep like a baby after we talk.

09.03.25
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Ryan ALM discount rates: ASC 715 and ASC 842

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

As we enter the final third of 2025 (how is that possible?), actuaries, accounting firms, and pension plan sponsors may begin reviewing their current discount rate relationship(s). If you are one of those, you may want to speak with us about the Ryan ALM discount rates. Since FAS 158 became effective December 15, 2006, Ryan ALM has created a series of discount rates in conformity to then FAS 158 (now ASC 715). Our initial and continuous client is a BIG 4 accounting firm, which hopefully testifies to the integrity of our data.

The benefits of the Ryan ALM ASC 715 Discount Rates are:

  1. Selection – we provide four yield curves: High End Select (top 10% yields), Top 1/3, Above Median (top 50%), Full Universe
  2. Transparency – we provide very detailed info for auditors to assess accuracy and acceptability of our rates
  3. Precision – precise and consistent reflection of current/changing market environment (more maturity range buckets, uses actual bond yields rather than spreads added to Treasury yield curve, no preconceived curve shape/slope bias relative to maturity/duration) than most other discount rate alternatives  
  4. Competitive Cost – our discount rates are quite competitive versus other vendors and can be purchased with a monthly, quarterly, or annual subscription
  5. Flexibility – we react monthly to market environment (downgrades, gaps at certain maturities) with flexibility in model parameters to better reflect changing environment through variable outlier exclusion rules, number of maturity range buckets, and minimum numbers of bonds in each maturity range bucket to better capture observed nuances in the shape of the curve, especially at/near the 30 year maturity point where the market is sparse or nonexistent at times.
  6. Clients – our rates are used by individual plan sponsors, several actuarial and accounting firms including, as stated above, a Big 4 accounting firm
  7. Integration into Ryan ALM products – we use ASC 715 discount rates for our Custom Liability Index and Liability Beta Portfolio™ (cash flow matching) products

Development of our discount rates is the first step in our turnkey system to defease pension liabilities through a cash flow matching (CFM) implementation. Our Custom Liability Index (CLI) and Liability Beta Portfolio (LBP) are the other two critical products in our de-risking process/capability.

In addition to ASC 715, Ryan ALM provides ASC 842 rates, which is the lease accounting standard issued by the Financial Accounting Standards Board (FASB). This standard supersedes ASC 840 and became effective December 15, 2018, for public companies and December 15, 2021, for private companies and nonprofit organizations. Given the widespread prevalence of off-balance sheet leasing activities, the revised lease accounting rules are intended to improve financial reporting and increase transparency and comparability across organizations. ASC 842 will provide management better insight into the true extent of their lease obligations and lead to improvements in capital allocation, budgeting and lease versus buy decisions.

The discount rate to be used is the rate implicit in each lease. This could be difficult and not readily determined. In that case ASC 842 requires the lessee to use the rate that the company borrows at based on their credit rating. Ryan ALM can provide the ASC 842 discount rates based on each lessee borrowing rate or credit rating (i.e. A or BBB). We can provide these discount rates monthly, quarterly or whatever frequency is needed.

We’d be pleased to discuss with you our discount rates or any element of this state-of-the-art capability.

08.14.25
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Are Investors About to Get Their Comeuppance?

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

As we’ve discussed in this blog on many occasions, the U.S. interest rate decline from 1982 to 2022 fueled risk assets well beyond their fundamentals. During the rate decline, investors became accustomed to the US Federal Reserve stepping in when markets and the economy looked dicey. There seems to be a massive expectation that the “Fed” will once again support those same risk assets by initiating another rally through a rate decline perhaps as soon as September. Is that action justified? I think not!

Recent inflation data, including today’s PPI that came in at 0.9% vs. 0.2% expected, should give pause to the crowd screaming for lower rates. Yes, employment #s published last week were very weak, and they got weaker when Erika McEntarfer, the commissioner of the Bureau of Labor Statistics, was fired after releasing a jobs report that angered President Donald Trump. In addition, we have Secretary of the Treasury, Scott Bessent, demanding rates be cut by as much as 150-175 bps, claiming that all forecasting “models” suggest the same direction for rates. Is that true? Again, I think not.

You may recall that I published a blog post on July 10, 2025 titled “Taylor-Made”, in which I wrote that the Taylor Rule is an economic formula that provides guidance on how central banks, such as the Federal Reserve, should set interest rates in response to changes in inflation and economic output. The rule is designed to help stabilize an economy by systematically adjusting the central bank’s key policy rate based on current economic conditions. It is designed to take the “guess work” out of establishing interest rate policy.

In John Authers (Bloomberg) blog post today, he shared the following chart:

Calling for a roughly 2.6% Fed Funds rate in an environment of 3% or more core and sticky inflation is not prudent, and it is not supported by history. Furthermore, the potential impact from tariffs will only begin to be felt as most went into effect as of August 1, 2025.

Getting back to the Taylor Rule, Authers also provided an updated graph suggesting that the Fed Funds rate should be higher today. In fact, it should be at a level about 100 bps above the current 4.3% and more than 270 bps above the level that Bessent desires.

Investors would be wise to exit the lower interest rate train before it fuels a significant increase in U.S. rates as inflation once again rises. The impact of higher rates will negatively impact all risk assets. Given that a Cash Flow Matching (CFM) strategy eliminates interest rate risk through the defeasement of benefits and expenses that are future values and thus not interest rate sensitive, one could bring an element of certainty to this very uncertain economic environment before investors get their comeuppance! Don’t wait for the greater inflation to appear, as it might just be too late at that point to get off the lower interest rate train before it plummets into a ravine.

07.24.25
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A few Observations from Newport

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

As I mentioned in my ARPA update on Monday, I had the pleasure of attending the Opal Public Fund Forum East in beautiful Newport, RI, and neither the conference nor Newport disappointed. I don’t attend every session during the conference, but I do try to attend most. In all honesty, I can’t listen to another private equity discussion.

As always, there were terrific insights shared by the speakers/moderators, but there were also some points being made that are just wrong. With this being my first day back in the office this week, I don’t have the time to get into great detail regarding some of my concerns about what was shared, but I’ll give you the headline and perhaps link a previous blog post that addressed the issue.

First, DB pension plans are not Ponzi Schemes that need more new participants than retirees to keep those systems well-funded and functioning. Actuaries determine benefits and contributions based on each individual’s unique characteristics. If managed appropriately, systems with fewer new members can function just fine. Yes, plans that find themselves in a negative cash flow situation need to rethink the plan’s asset allocation, but they can continue to serve their participants just fine. Remember: a DB pension plan’s goal is to pay the last benefit payment with the last $. It is not designed to provide an inheritance.

Another topic that was mentioned several times was the U.S. deficit and the impending economic doom as a result. The impact of the U.S. deficit is widely misunderstood. I was fortunate to work with a brilliant individual at Invesco – Charles DuBois – who took the time to educate me on the subject. As a result of his teaching, I now understand that the U.S. has a potential demand problem. Not a debt issue. I wrote a blog post on this subject back in 2017. Please take the time to read anything from Bill Mitchell, Warren Mosler, Stephanie Kelton, and other disciples of MMT.

Lastly, the issue of flows into strategies/asset classes seems not to be understood. The only reason we have cycles in our markets is through the movement of assets into and out of various products/strategies. Too much money chasing too few good ideas creates an environment in which those flows can overwhelm future returns. It is the same for individual asset management firms. Many of the larger asset management firms have become sales organizations in lieu of investment management organizations as they long ago eclipsed the natural capacity of their strategies. In the process, they have arbitraged away their insights which may have provided the basis for some value-added in the past. I believe that too much money is chasing many of the alternative/private strategies. In the process, future returns and liquidity will be negatively impacted. We’ve already seen that within private equity. Is private debt next?

Again, always enjoy seeing friends and industry colleagues at this conference. I continue to learn from so many of the presenters even after 44-years in the industry. However, not everything that you hear will be correct. It is up to you to challenge a lot of the “common wisdom” being shared.

07.01.25
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U.S. $ Decline and the Impact on Inflation

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

As I was contemplating my next blog post, I took a look at how many of my previous >1,625+ posts mentioned currencies, and specifically the U.S. $. NEVER had I written about the U.S. $ other than referencing the fact that we enjoy the benefit of a fiat currency. I did mention Bitcoin and other cryptos, but stated that I didn’t believe that they were currencies and still don’t. Why mention them now? Well, the U.S. $ has been falling relative to nearly all currencies for most of 2025. According to the WSJ’s Dollar Index (BUXX), the $ has fallen by 8.5% for the first half of 2025.

Relative to the Euro, the $ has fallen nearly 14% and the trend isn’t much better against the Pound (-9.6%) and the Yen (-8.7%). So, what are the implications for the U.S. given the weakening currency? First, the cost of imports rises. When the $ loses value, it costs more to buy goods and services from abroad. The likely outcome is that the increased costs get passed onto the consumer, who is already dealing with the implications from uncertain tariff policies.

Yes, exports become cheaper, which would hopefully increase demand for our goods, but the heightened demand could also lead to greater demand for U.S. workers in order to meet that demand leading to rising wages (great), but that is also potentially inflationary.

What have we seen so far? Well, first quarter’s GDP (-0.5%) reflected an increase in imports spurred on by fear of price increases due to the potential for tariffs. Q2’25 is currently forecasted to be 2.5% according to the Atlanta Fed’s GDPNow model, as U.S. imports have fallen. According to the BLS, import prices have risen in 4 of 5 months in 2025, with March’s sharp decline the only outlier.

The potential inflationary impact from rising costs could lead to higher U.S. interest rates, which have been swinging back and forth depending on the day of the week and the news cycle. Furthermore, there is fear that the proposed “Big Beautiful Bill” could also drive rates higher due to the potential increase in the federal deficit by nearly $5 trillion due to the stimulative nature of deficits. Obviously, higher U.S rates are great for individual savers, but they don’t help bonds as principal values fall.

We recommend that plan sponsors and their advisors use bonds for the cash flows (interest and principal) and not as a performance driver. Use the fixed income exposure as a liquidity bucket designed to meet monthly benefits and expenses through the use of Cash Flow Matching (CFM), which will orchestrate a careful match of asset cash flows funding the projected liabilities cash flows. The remaining assets (alpha bucket) now benefit from time, as the investment horizon is extended.

Price increases on imports due to a weakening $ can impact U.S. inflation, but there are other factors, too. I’ve already mentioned tariffs and wage growth, but there other factors, including productivity and global supply chains. Some of these drivers may take more time to hash out. There are many uncertainties that could potentially impact markets, why not bring an element of certainty to your pension fund through CFM.

06.09.25
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Capital Distributions From Private Equity Collapse

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

I recently published a blog titled, Problem – Solution: Liquidity, in which I discussed the impact of pension plan sponsors cobbling together interest, dividends, and capital distributions from their roster of managers, and how that practice was not beneficial, especially during periods of stress in the markets. Well, one of those three legs of the “gotta, but how am I gonna, meet my monthly payment of benefits and expenses”, is really falling short at this time.

Dividends are far lower these days than they once were when equities were perceived to be quite risky. In fact, it wasn’t until 1958 that dividend income fell below interest income from bonds. Couple that phenomenon with the fact that capital distributions have plummeted, and plan sponsors are placing far greater emphasis on capturing interest from bonds than ever before. Yes, thankfully interest rates have risen, but the YTM on the BB Aggregate index is still only in the 4.7% range. That is not likely sufficient to meet monthly payouts, which means that bonds will have to be sold, too. The last thing one should want to do in a rising rate environment is to sell securities at a loss.

However, if the plan sponsor engaged a Cash Flow Matching (CFM) manager in lieu of an active core fixed income manager, the necessary liquidity would be made available each and every month of the assignment, as asset cash flows would be carefully matched against liability cash flows. Both interest and maturing principal would be used to meet those benefits and expenses. No forced selling. No scurrying around to “find” liquidity. A far more secure and certain process.

What if my plan isn’t fully funded. Does it make sense to use CFM? Of course, given that benefits and expenses are paid each month whether your plan is fully invested or not, wouldn’t it make more sense to have those flows covered with certainty? Sure, a poorly funded plan may only be able to use CFM for the next 3-5-years, but that’s the beauty of CFM. It is a dynamic process providing a unique solution for each pension plan. No off the shelf products.