Tag Archives: Investing

07.14.26
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Ryan ALM’s TPA+ Approach

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

Asset allocation discussions have recently compared traditional pension asset allocation with a “new” approach referred to as the Total Portfolio Approach (TPA). We believe the distinction between traditional asset allocation and the total portfolio allocation is subtle but important. The two approaches begin with different questions.

Traditional asset allocation approaches ask: “How should we invest the assets to achieve the required return objective?”

A TPA approach asks: “How does every asset contribute to funding a pension plans liabilities (benefits)?”

In a traditional asset allocation framework the expectation is that long-term returns will eventual fund the promises. However, a pension plan doesn’t exist to outperform an index/benchmark. It exists to pay the promised benefits!

In the TPA approach, a pension fund will have a broadly diversified array of investments, but each investment has a specific purpose relative to the pension plan’s liabilities. There are no investment sleeves, but a single portfolio with the goal to fund the pension’s liabilities.

We, at Ryan ALM, Inc. believe that our approach, implemented over decades, goes one step beyond Total Portfolio Management.

Whereas a TPA asks: “What allocation best maximizes the performance of the entire portfolio?”

Ryan ALM asks: “What investment strategy best minimizes the cost and risk of paying future pension benefits?”

TPA shifts the focus from individual asset classes to the overall portfolio. Ryan ALM shifts the focus again—from the portfolio itself to the pension liabilities. Assets need to know what they are funding… net liabilities (projected benefits – projected contributions). Since the actuary does not calculate net liabilities, this becomes the first step and calculation of the Ryan ALM process. Our philosophy is arguably closer to Total Pension Management than Total Portfolio Management.

Ryan ALM’s liability-based investment philosophy shares important characteristics with TPA while also differing in a fundamental way.

Traditional Asset AllocationTotal Portfolio ApproachRyan ALM Liability-Based Investing
Optimizes asset-class weightsOptimizes the total portfolioOptimizes the funded status and liability outcomes
Benchmark relativeGoal relativeLiability relative
Focus on returnsFocus on total risk-adjusted returnsFocus on securing pension promises
Asset classes drive decisionsPortfolio drives decisionsLiabilities drive decisions

The Pension objective isn’t returns—it’s securing pension promises! Ryan ALM’s pension management is distinguished from both traditional asset allocators and TPA by highlighting and managing to the pension plan’s liabilities, and then paying those liabilities when required through Cash Flow Matching. No games and no uncertainty!

07.08.26
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Complexity Doesn’t Make it Good or Appropriate

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

We have a serious retirement problem in the U.S. Defined benefit plans have mostly been replaced in the private sector, and rising contribution levels are making public pension offerings problematic for the sponsoring entities. These issues are compounded by the fact that many defined benefit plans have migrated significant assets to opaque, complex, and costly alternative investments. In the process, creating liquidity to meet ongoing benefits and expenses has become more challenging.

Managing a DB pension plan isn’t complicated, yet we continue to make it so. I read an Institutional Investor article with interest, and some alarm, that a public pension system operating with negative cash flow (contributions < benefits and expenses) has decided that the best way to address the liquidity shortfall is to move assets into “”a lot more esoteric lending strategies” like asset-based finance and royalty-based lending in sectors such as entertainment, healthcare, and aircraft engine leasing.” The CIO for this fund continued, “we’re going into a lot of illiquid structures, so we structure the portfolio to make sure we have enough liquidity to meet our benefit payments at all times,” Really????

Going into illiquid structures to ensure adequate liquidity seems oxymoronic. We’ve seen what has transpired in both private equity and private debt regarding distributions and the lack thereof. Again, our industry often brings complexity to a problem when there are far simpler ways to tackle an issue. For decades, Cash Flow Matching (CFM) has carefully matched asset cash flows of bond interest and principal with the liability cash flows of benefits and expenses (B&E) chronologically. There is no hoping that the liquidity will be available when needed.

U.S. rates are currently at levels providing plan sponsors with the ability to SECURE future B&E at low cost and with certainty barring any defaults in IG bonds (<0.2%/year for the last 40-years). Why engage in expensive, opaque “solutions” when a CFM strategy can be adopted for pennies on the $. CFM is a-sleep-well-at-night strategy, which will be comforting to not only the plan sponsor but the plan’s participants. Please stop thinking that a solution needs to be complex to be good. Some of the very best approaches are transparent, straight-forward, and inexpensive: like CFM!

07.06.26
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It’s The Wrong Benchmark!

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

Mark Stricherz has penned an article for The Center Square discussing the Pennsylvania Public-School Employees’ pension fund and its $41 billion shortfall. The gist of article centered on the fact that PSERS failed to exceed it’s investment benchmark last years which fund officials blamed on private equity.

A bit of background: As of Dec. 31, PSERS held $85.3 billion in assets, including $10.1 billion in private equity. Long-term return expectations for this asset class were an annual 10.06% return. The precision of the return expectation seems a bit silly and quite modest given the asset class’s poor transparency, lack of liquidity, and excessive fees. As a point of comparison, the S&P 500 returned 11.4% for the 20-years through June 30, 2026. Regrettably, PSERS’ PE funds produced only a 2.59% last year. As ugly as that return is, that is NOT the reason that PSERS is $41 billion in the whole and Pennsylvania taxpayers on the hook.

An investigation by The Center Square found that private equity was the only one of PSERS’ eight asset classes to miss its benchmarks over one-, three-, five-, 10- and 15-year periods. Interesting! I find it hard to believe that the fund had this kind of relative outperformance and yet still must deal with a $41 billion shortfall. Again, I don’t believe that PE is the sole cause.

As I’ve been reporting for years, the primary objective in managing a defined benefit plan is NOT one focused on return (the ROA). It is the SECURING of the promised benefits at a reasonable cost and with prudent risk. It is a LIABILITY objective. It doesn’t matter that a plan’s assets outperform their respective asset class objectives if the plan’s total fund fails to exceed liability growth. Presently, there are roughly 500,000 members and beneficiaries counting on those promised benefits.

A successful DB pension plan understands its commitments. You’ve made a promise: measure it – monitor it – manage it – and SECURE it! Focusing on return only guarantees volatility. Volatility of returns, contributions, and funded status. Get off the performance rollercoaster.


06.30.26
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As a Fiduciary, Would you…

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

Regrettably, the investment industry has trained pension fiduciaries to think in terms of returns:

  • “Can we earn 7.25%?”
  • “Can we outperform the benchmark?”
  • “Should we own more equities?”
  • “How about alternatives?”

But we at Ryan ALM, Inc. believe chasing returns is NOT the economic objective of a defined benefit plan. Pursuing a return objective only guarantees volatility and not success. Volatility of returns, volatility of the Funded Ratio, and volatility of contributions! We believe that the objective is much simpler:

Deliver every promised benefit at the lowest sustainable COST to the sponsor.

Given that objective, we help pension plans reduce the cost of delivering every pension promise through our turnkey pension sustainable solutions. Reducing cost and SECURING the promised benefits is what every stakeholder should desire from trustees, to sponsors, and most importantly, plan participants.

As a pension Fiduciary what would you do if given this choice?

Imagine two pension funds that both owe retirees $100 million over the next 30 years. One fund invests with the goal of earning the highest possible return, while the other invests with the goal of meeting every payment at the lowest expected long-term cost.

Which strategy sounds more prudent? We believe that most trustees will immediately recognize that the second action better aligns with their responsibilities as Fiduciaries.

Here’s another example to consider. Lets think about funding your pension like you would a 30-year mortgage on your home.

Would you rather:

  • Put all your money in the stock market and hope it’s there when each payment comes due?

Or:

  • Structure your cash flows so each payment is already funded when it’s due?

I believe (hope) that most people would choose the second option for a monthly obligation they cannot afford to miss. Funding your monthly benefits is the exact same thing. Why not ensure that those benefits have been secured and the liquidity available as far into the future as possible through a cash flow matching (CFM) portfolio. It is absolutely time to get off the performance rollercoaster. Bring some certainty to a very uncertain process.

In conclusion, the primary pension objective is to pay every promised benefit at the lowest sustainable cost. Everything we do at Ryan ALM follows from that premise.

06.26.26
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Will You Be Wearing A Bathing Suit?

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

I’m not asking about your plans for America’s 250th celebration come this Fourth of July. 

I read a very interesting email yesterday that referenced the tragic events in Venezuela by saying that the “earthquake doesn’t write the verdict. It audits the books.” My initial reaction: that’s harsh given the significant deaths and injuries that resulted, but upon reflection the author is correct. It wasn’t the fact that an earthquake of that magnitude hadn’t occurred in 125-years. It was the fact that poor planning, weak building codes, inferior construction, and poor maintenance well before the event created the tragic outcome.

As I contemplated the authors words, I began to reflect on what Warren Buffet had said in his 2001 annual letter to shareholders. He stated, “only when the tide goes out do you discover who’s been swimming naked.” Bringing this post back to investing and the impact on pension plans;

  • Rising markets make almost every strategy appear successful.
  • Cheap credit, abundant liquidity, and investor optimism hide poor decisions and weak fundamentals.
  • Excessive leverage, weak business models, and speculation can all seem to work (think SPCX).

But when the “tide goes out” (markets decline) we are left with the truth, and it can be pretty ugly.

  • Companies with too much debt struggle.
  • Investors who relied on leverage are forced to sell.
  • Weak business models fail (Dot Com bubble).
  • Investment managers, pension plans, and their advisors that took hidden risks are exposed.

Importantly, bear markets don’t create weakness—they expose weakness that was already there.

We witnessed what happened following the go go 1990s, when it seemed as if every investment made money, pension funded ratios were at or near all-time highs, and contributions were well contained. It was that prolonged bull market that made almost any pension investment strategy look successful. But then the piper came calling! By the time the tide had rolled out, we witnessed the crushing impact on America’s pension system that hadn’t done anything to secure the promised benefits, improve liquidity, and reduce risk in very aggressive asset allocations.

So, I ask once more, will you be wearing a bathing suit when the next market crash/event occurs? Have you done enough to protect the promises made to your plan participants? If you are concerned that you haven’t, let us perform the audit before the event occurs. Our turnkey system will:

  • Properly measure your fund’s liabilities and cash flow needs.
  • Generate and maintain sufficient liquidity chronologically.
  • Avoid excessive risk.
  • Manage interest-rate risk.
  • Buy-time for the growth assets to perform.
  • Stabilize the funded status and contribution expenses.

Those plans that prepare ahead of the “event”, will be the ones that are healthy when the tide begins to rise again. Prudent risk management matters much more than chasing returns. The real test of an investment strategy for a pension system isn’t during bull markets—it’s during highly uncertain ones, when hidden vulnerabilities become impossible to ignore. Will your fund pass an audit?

06.25.26
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The Ryan ALM, Inc. Blog

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

Are you a recent subscriber (thank you) to the Ryan ALM, Inc. blog? Here’s a little history. I began writing this blog in 2013. I’ll never forget my elementary school friend, Tony, who helped me set up the blog, saying that I shouldn’t start one if I wasn’t going to be consistent in producing content. Well, 13-years later and there are now 1,800+ mostly pension-related posts and more than 600k words. When I joined Ryan ALM, Inc. in the summer of 2019, I was extremely grateful to Ron Ryan for supporting this effort and that support continues to this day, while also being a contributor of important content.

As a new subscriber, what should you expect to read among the plethora of posts? I believe the dominant themes are:

  1. DB Pensions exist to secure promised benefits, not maximize returns.
  2. Pension Liabilities should drive investment decisions and not the ROA.
  3. Funded status matters much more than asset returns.
  4. Cash Flow Matching (CFM) is the most prudent way to secure benefits.
  5. Custom Liability Indexes (CLI) are essential for measuring pension success – good governance.
  6. Reducing uncertainty through fully funding benefits is the true definition of pension risk management.
  7. Defined benefit plans should be protected and preserved.

As a reminder, Ryan ALM, Inc. is an independent pension risk management and SEC registered investment firm that helps defined benefit plans improve funded status, reduce liability risk, enhance liquidity, and secure retirement promises through custom liability measurement, cash flow matching, actuarially informed investment strategies, and ongoing monitoring.

Don’t hesitate to reach out to us with your questions and/or comments. They are always welcome on this blog, which can be found here.

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.

06.17.26
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Pension Problem: Gross versus Net Liabilities

By: Ronald J. Ryan, CFA, Chairman, Ryan ALM, Inc.

Most pension plans are focused on gross liabilities as expressed by the funded ratio (total assets / total liabilities) and funded status (total assets – total liabilities). But the truth is plan assets are to fund NET liabilities after contributions. Contributions can be quite large especially for public pension funds. Pension assets need to know what they are funding… answer = NET liabilities. Unfortunately, actuaries do not calculate NET liabilities, nor do they include contributions as an asset to calculate the funded ratio / status. These oversights have an impact on asset allocation, especially if it is focused on the true economic funded status of solvency. The Ryan team created the first Custom Liability Index (CLI) in 1991 that has become a core product of Ryan ALM. Our CLI will calculate NET liabilities as a term structure, so assets and the plan sponsor know the liquidity needed and when to fund NET liabilities. 

GASB accounting requires a test of solvency (asset exhaustion test or AET) for public funds (which should be a requirement for all types of pensions) that includes contributions as a future asset to help fund the future liability cash flow schedule. Assets are grown at the return on asset assumption (ROA) to see if they can fully fund projected benefits – projected contributions (net liabilities). At the point that assets are exhausted, GASB requires a bifurcated discount rate using AA 20-year municipal rates. Ryan ALM modifies the GASB AET to calculate the ROA needed to fully fund net liabilities. We find that our calculated ROA is usually much lower than the ROA assumption currently being used. Our calculated ROA should be the hurdle rate for asset allocation instead of the common practice of choosing an ROA based on an asset only forecast of returns by asset classes. Our modified AET should be the first step in asset allocation after the CLI is built.

Bonds are the only asset class with the certainty of cash flows. That is why bonds have always been used to defease and immunize liabilities. Our Liability Beta Portfolio™ (LBP) is a cost optimization model that will fully fund NET liabilities at the lowest cost to the plan sponsor. We strongly believe that the bond allocation should be used to fully fund NET liabilities chronologically. In the process, an extended investment horizon is created buying time for the Alpha assets to grow unencumbered. We have found that converting the plan’s core fixed income allocation to a cash flow matching portfolio will normally cover the plan’s next 10+-years of benefit payments. Instead, some pension plans use a “Cash Sweep” to fund current liabilities which significantly damages the total return produced by those growth assets. Let bonds fund NET liabilities with certainty through our LBP… and sleep well at night.        

“Where is the knowledge we have lost in information?” T.S. Eliot

06.17.26
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Just Another Meme Stock?

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

Equity markets are partying like it’s 1999! Valuations be damned! Are the improved funded ratios for defined benefit plans going to be secured through de-risking strategies or are they going to once again be subjected to the whims of the capital markets? For plan sponsors benchmarking your equity exposure to the S&P 500, are you prepared for the volatility potentially associated with the great technology concentration (now roughly 50% of the index)? For those invested in the Nasdaq indexes, are you prepared for SpaceX’s impact, which should happen soon?

Come on, folks. Let’s not repeat the mistakes of the past. Higher interest rates, higher inflation, crazy equity valuations, and geopolitical uncertainty have not seemed to tamp enthusiasm for U.S. stocks. What will? Will it take a stock like SpaceX – now valued at $2.75 trillion – to be the reason that stocks fall back to earth? SpaceX has been trading for three days. The action on the stock suggests that it is just another meme stock.

Can you believe that SpaceX has overtaken Amazon as America’s fifth-largest company? A closer examination of the fundamentals shows just how irrational our markets/investors have become. Let’s look at the current fundamentals of Amazon versus SpaceX.

Valuation

MetricSpaceXAmazon
Revenue$19.30B TTM $716.9B in 2025 
Earnings-$9.36B TTM $77.7B net income in 2025 
P/S137.7x about 3.5x 
P/E-284.2x about 34x normalized 

SpaceX’s valuation is being priced as an extraordinarily high-growth story, despite being a money-losing company, which is why its P/S is dramatically higher than Amazon’s. Amazon, by contrast, already has large-scale revenue and meaningful profitability, so its valuation looks much more grounded in current fundamentals, despite it carrying a rich valuation at 34x normalized earnings.

Profitability

Amazon is clearly ahead on earnings quality: it generated $80.0B of operating income and $77.7B of net income in 2025. SpaceX, on the other hand, reported a $9.36B trailing-twelve-month loss and a negative net margin.

Growth profile

Clearly, SpaceX’s case is mostly about future optionality: investors are paying for expected expansion in launch, satellite, and adjacent businesses rather than present-day profits. Amazon’s case is more balanced because it combines growth with profitability, especially from AWS and advertising, which support its margins.

SpaceX will need to increase sales by roughly 37x to match Amazons P/S of 3.5x. Nothing grows to the heavens – even a rocket company. Risks to pension funding seem to be skewed to the downside. It is time to take some profits and secure the promises that have been given to your plan participants. Please don’t waste another golden opportunity to fortify your plan’s funding.

06.10.26
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Ryan ALM, Inc. – We Offer A Turnkey System

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

Ryan ALM helps defined benefit pension plans understand and manage the COMPLETE economics of their pension promise. Using cash flow projections of contributions, benefits, and expenses, the Ryan organization uses its proprietary liability valuation methodologies (ASC 715 discount rates), its trademarked Custom Liability Index (CLI), and our cash flow matching strategy that we call the Liability Beta Portfolio (LBP) to develop investment SOLUTIONS designed to align plan asset cash flows with liability cash flows. It is the SECURING of those future obligations that should be the paramount activity when managing a pension plan.

We refer to this process as a turnkey system, which Ron Ryan, Ryan ALM’s Chairman, recently described in great detail. We believe that our firm is unique in this regard. Unfortunately, pension plans today receive an actuarial update at most once per year, perhaps 4-6 months delayed. They rely on their asset consultants to create an asset allocation that should reflect the funded status but often the allocations are driven by the ROA. Investment managers are then retained to manage strategies based on the asset allocation, but not the plan’s liabilities. That seems pretty disjointed to us.

Ryan ALM’s competitive advantage is its proprietary turnkey system that integrates:

  • Liability valuation through discount-rate modeling
  • Cash-flow forecasting
  • Liability benchmark construction
  • Portfolio implementation
  • Ongoing monitoring

A true repeatable framework focused on the long-term SUSTAINABILITY of pension plans. Most pension plans don’t have such a system. They receive quarterly investment reports and annual actuarial valuations, but nobody integrates the assets and liabilities into a synergistic decision-making framework. Have you ever wondered: “How has the plan’s financial health changed since our last meeting, and what risks should we be paying attention to?” If not, you should be. Do you know where your liquidity is going to come from to meet those ongoing monthly obligations?

Ryan ALM would be happy to provide you with a free cash flow analysis based on our proprietary turnkey system. Given significant uncertainty today, a short 30-minute conversation followed by our analysis could ensure that your fund is set up for long-term success.