Tag Archives: Investing

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.

06.09.26
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Milliman: Corporate Pension Funding at 25-Year High

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

Ryan ALM, Inc. prides itself on providing pension sustainability solutions. Working with DB pension plans of all funding levels is what motivates and drives us. As a result, we pay close attention to the current funded status of Pension America. We greatly appreciate the work that Milliman does in providing monthly updates on the health of both private and public pensions.

We are pleased to share the output from the Milliman 100 Pension Funding Index (PFI), which, as a reminder, analyzes the 100 largest U.S. corporate pension plans. Given the strong rally in U.S. equities, it is not surprising to see that the collective funded status of the Milliman 100 PFI plans improved by $18 billion during May. As a result, the funded ratio rose from 108.2% as of April 30, to 109.6% as of May 31st. This represents the high water mark in pension funding since July 2001, when it stood at 109.9%.

Milliman also reported that plan liabilities also rose during the month, to $1.208 trillion, as the discount rate used to value those future promises fell 4 bps, to 5.62%. Fortunately, the growth in pension liabilities was not enough to offset investment gains of 2.22% for the cohort. The combined assets grew $22 billion during the month to $1.324 trillion, while the funded status surplus reached $116 billion. 

“May’s robust returns pushed corporate pensions further into surplus territory, to a level not seen in nearly 25 years,” said Zorast Wadia, Milliman PFI author. “Plan sponsors that haven’t yet pursued de-risking opportunities may want to review their options, as conditions remain highly favorable.” We couldn’t agree more with Zorast. Rising interest rates reduce the present value of those future promises. Defeasing pension liabilities at these rates will lock in the relationship of assets to liabilities.

Markets will do what markets do. Interest rates will rise and fall. Economic uncertainty will come and go. The question is whether your pension plan is structured to withstand those events without jeopardizing the promises made to participants. Don’t subject your pension plan to unnecessary market risk. You’ve worked too hard to get funding to this level.

View this month’s complete Pension Funding Index.

06.05.26
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It is Our Mission!

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

The individual professionals on the Ryan ALM, Inc. team have both a personal and professional mission which drives us every day! What is that mission? We are driven with the goal of protecting and preserving defined benefit pension plans, which we believe are the only true retirement plans. Any other “retirement” vehicle pales in comparison. Yet, our industry has adopted practices which we believe are detrimental to the long-term stability of these critically important plans.

Pursuing an objective focused on return has created an environment that has these DB plans on a perpetual rollercoaster of performance, ultimately creating unnecessary instability and uncertainty as it relates to both contributions and funded status. As a reminder, we believe that the primary objective in managing a DB pension plan is to SECURE the promised benefits at a reasonable cost and with prudent risk. It is not a performance objective.

Recently, I reviewed a pension plan that believed its biggest challenge was improving returns. After examining its cash flow needs, we discovered the larger issue was liquidity. By addressing liquidity first, the trustees reduced risk, a key action in these uncertain times, while improving confidence in their ability to meet future benefit payments. Furthermore, most trustees I speak with are wrestling with the same issues—liquidity, uncertainty, and how much risk is appropriate at this stage of the investing cycle.

Through Cash Flow Matching (CFM), a dedicated investment-grade bond portfolio in which we carefully match asset cash flows of principal and interest against the liability cash flows of benefits and expenses, we are able to bring certainty to your cash flow needs through enhanced liquidity. I’d be happy to walk through your plan’s cash flow profile and show you how a cash flow matching approach would support your current asset allocation.

Every pension plan is different, but every trustee shares the same responsibility: ensuring promised benefits are paid. Markets will do what markets do. Interest rates will rise and fall. Economic uncertainty will come and go. The question is whether your pension plan is structured to withstand those events without jeopardizing the promises made to participants.

If you’re not completely certain that your fund is structured appropriately, let us at Ryan ALM work with you to protect and preserve your DB plan, as it is our collective mission. Your fund’s participants will appreciate knowing that their promised benefits have been secured for some period of time. If you’d like a second opinion on your plan’s liquidity profile, cash flow needs, or overall asset allocation strategy, let’s talk. A 30-minute conversation may help you see risks—and opportunities—that aren’t visible through a funded ratio or return assumption lens.