Tag Archives: Investing

02.10.26
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ARPA Update as of February 6, 2026

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

It looks like those of us in the Northeast will finally get some respite from the bitter cold, as temps will moderate this week and actually hit the 30s. However, those multiemployer pension plans currently sitting on the waitlist and classified as a Plan Terminated by Mass Withdrawal before 2020 Plan Year, continue to be frozen in place. According to the PBGC’s latest update, there are 80 plans that fall under the Mass Withdrawal classification. I’ll share more info on this subject later in this post.

Regarding last week’s activity, the PBGC is reporting that one fund, Operative Plasterers & Cement Masons Local No. 109 Pension Plan, a Troy, MI, construction union, will receive $13.7 million for the 1,439 plan members. In addition to the one approval, there was another fund that withdrew its initial application. Norfolk, VA-based International Association of Bridge, Structural, Ornamental and Reinforcing Ironworkers Local No. 79 Pension Fund was seeking $14.6 million in SFA for 462 participants in the plan.

There were no applications submitted for review. It appears that only one non-mass withdrawal plan, Plasterers Local 79 Pension Plan, remains on the waitlist. Fortunately, there were no plans asked to rebate a portion of the SFA grant due to census errors or any funds deemed no eligible.

Regarding the 80 mass withdrawal funds currently sitting on the waitlist, MEPs terminated by mass withdrawal under ERISA §4041A(a)(2) are explicitly ineligible for SFA under ARP/IRA rules, regardless of application timing. Furthermore:

No “initial application” option exists post-termination date.

Mass withdrawal means that all/substantially all employers completely withdraw leading to a plan termination.

PBGC SFA statute excludes §4041A(a)(2) terminated plans.

For the 80 funds sitting on the waitlist, it seems like a long shot that the APRA legislation will be amended to accommodate these funds seeking SFA. I’ll continue to monitor this situation in future posts.

02.04.26
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How Do You Know?

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

I’m on my way home from another terrific FPPTA conference. The only issue I have is with the weather Gods. How is it that Orlando had weather similar to what New Jersey experiences during January? Yes, I was in a conference room from dawn to dusk, but it still wasn’t fair, especially since temps are set to hit 70+ today, while I’m now sitting at the airport. 

Okay, enough of my complaining. As mentioned, I just attended FPPTA’s Winter Trustee meeting in Orlando. They continue to do an excellent job providing critical education for trustees of all experience levels. As I’ve written, they have also developed a higher-level program for a select group of pension trustees that truly want to roll up their sleeves and like Dorothy and her friends, get behind the curtain. I’ve been fortunate to be a part of the first two TLC classes. As the FPPTA continues to develop their use of AI and the self-contained bot currently under construction, Florida public pension trustees will have critical information at their fingertips that few other states, if any, can provide. Great job!

Despite the robust curriculum, there is still much more that needs to be covered and comprehended by the trustees. For instance, there was a lot of discussion surrounding hiring and firing of managers during a particular case study. As I’ve observed over the years, the fortunate investment manager that gets hired usually has the best performance and a reasonable fee that doesn’t offset the performance advantage. Do pension trustees truly understand what they are buying? Often the manager selected is large and likely growing in terms of AUM. But are those advantages?

Worse, when a manager underperforms, which they will eventually do, whether that underperformance is related to a style rotation or something specific to that manager’s process, a decision must be made as to that manager’s fate. Do you keep the manager or let them go? On what basis are you making that decision? Again, you hired a manager because they had good performance. Did you understand their security selection process (insights) and how those insights were working? Did recent strong AUM growth fuel a positive response in the stocks that they owned? As we know, cycles in the investment industry are driven by cash flows, both positive and negative. More money chasing a few ideas drives up returns, while an exodus from those same ideas can tank an investment manager’s performance.

During one exchange of ideas, I asked the TLC participants if any of their funds were using performance fees for their long-only assignments. Only one trustee said that they had – too bad. We’ll discuss that issue in another post. Regarding the one affirmative response, they initiated a performance fee after an extended period of underperformance. Was that action correct? Paying asset-based fees with no promise of delivery on forecasted alpha is wrong, but retaining an underperforming manager may be just as bad whether they are on a performance fee or not. How did this trustee and his fellow board members know whether the manager had skill or if they once did, were their insights still robust?

Investment managers choose their portfolio holdings based on certain insights, and those insights can be measured as to their predictive ability (information coefficient or IC). An information coefficient is the correlation between predicted returns (or rankings of one stock versus another) and the subsequent results (realized returns). If an advisor is a growth manager, they likely swim in a subset of the U.S. equity universe. They then apply their insights to that subset of equity stocks. Each month they can array their portfolio holdings with the balance of the names in the universe that they did not select to see how their ideas stacked up.

You might be surprised to read that a monthly IC above 0.05% is considered fairly strong. An IC from 0.05% to 0.15% would be very strong and likely lead to consistent alpha generation. However, even the best investment ideas can go through challenging times when market dynamics are just out of whack with historic observations and relationships. But there are also times when ideas can get arbitraged away either by that managers growth or the broader investment community latching onto the same insight rendering it less effective or in some cases a negative forecaster/predictor.

So, I ask, when your manager is underperforming, do you know whether it is a market dynamic that is rendering the insight temporarily weak or has that manager’s forecasting ability been diminished? In the case of the manager who maintains strong forecasting ability, but the insight is just out of favor, you would likely want to retain them after a period of underperformance and maybe give them more assets to manage, but I would not recommend putting them on a performance fee (regression to the mean tendencies). However, if after your careful analysis you identify that the manager in question has seen their insights arbitraged away, that should lead you to terminate the manager, whether you like them or not! Let me know if you’d like to discuss his concept in greater detail.

01.30.26
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“Everybody’s looking under every rock.” Jay Kloepfer

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

Institutional Investor’s James Comtois has recently published an article that quoted several industry members on the near-term (10-years) return forecast for both public and private markets, which according to those asked are looking anemic. No one should be surprised by these forecasts given the incredible strength of public markets during the past three years and the fact that regression to the mean tendencies is not just theory.

An equally, if not greater, challenge is liquidity. As the title above highlights, Jay Kloepfer, Director of Capital Markets Research at Callan, told II that “Liquidity has become a bigger issue,” He went on to say that “Everybody’s looking under every rock.” Not surprising! Given the migration of assets from public markets to private during the last few decades. The rapid decline in U.S. interest rates certainly contributed to this asset movement, but expectations for “outsized” gains from alternatives also fueled enthusiasm and action. The Callan chart below highlights just how far pension plans have migrated.

I’ve written a lot on the subject of liquidity. Of course, the only reason that pension plans exist is to fund a promise that was made to the participants of that fund. Those promises are paid in monthly installments. Not having the necessary liquidity can create significant unintended consequences. No one wants to be a forced seller in a liquidity challenged market. It is critical that pension plans have a liquidity policy in place to deal with this critical issue. Equally important is to have an asset allocation that captures liquidity without having to sell investments.

Cash flow matching (CFM) is such a strategy. It ensures that the necessary liquidity is available each and every month through the careful matching of asset cash flows (interest and principal) with the liability cash flows of benefits and expenses. No forced selling! Furthermore, the use of CFM extends the investing horizon for those growth assets not needed in the CFM program. Those investments can just grow unencumbered. The extended investing horizon also allows the growth assets to wade through choppy markets without the possibility of being sold at less than opportune times.

So, if you are concerned about near-term returns for a variety of assets and with creating the necessary liquidity to meet ongoing pension promises, don’t rely on the status quo approach to asset allocation. Adopt a bifurcated asset allocation that separates plan assets into liquidity and growth buckets. Your plan will be in much better shape to deal with the inevitable market correction.

01.26.26
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Another Cockroach!

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

As most folks were focused on the massive snowstorm that crippled a large swath of the U.S., BlackRock was disclosing another significant loss in one of their private debt funds. In this case, BlackRock TCP Capital, a publicly traded middle-market lending fund, expects to mark down the net value of its assets 19 per cent after a string of troubled loans weighed on results, marking the latest sign of pressure in the private credit market.

BlackRock’s vehicle is a business development company (BDC), which pools together private credit loans and trades like a stock. According to multiple reports, the fund has struggled in part because of its exposure to e-commerce aggregators which are companies that buy and manage Amazon sellers. Furthermore, BDC shares have been hit over the past year. There are currently 156 active BDCs, of which 50 are publicly traded. BDC Investors have concerned over private credit returns, underwriting standards and increased regulatory scrutiny. FINALLY!

Of course, this is not an isolated incident for either private credit/debt in general or specifically BlackRock. As you may recall, BlackRock was forced to reprice a private debt holding from par to zero last November, when Renovo Home Partners, a Dallas-based home-remodeling roll‑up that collapsed into Chapter 7 bankruptcy, triggering a roughly $150 million total loss on a private loan largely held by BlackRock.

Funds managed by BlackRock (notably its TCP Capital Corp. BDC) provided the majority of roughly $150 million in private credit to Renovo, while Apollo’s MidCap Financial and Oaktree held smaller slices. As of late September 2025, lenders were still marking this loan at 100 cents on the dollar, implying expectations of full repayment. This shouldn’t have come as a complete surprise because earlier in 2025, lenders had already agreed to a partial write‑off and debt‑to‑equity swap, trying to stabilize Renovo’s capital structure.​

This unfortunate outcome highlights how “mark‑to‑model” valuations in private credit can keep loans at par until very late, then reprice suddenly when a borrower fails. This practice suggest that headline yields in private credit may understate true default and loss severity risk, especially for highly leveraged sponsor‑backed roll‑ups. Yet, it doesn’t seem to have rattled either the market or institutional asset owners who continue to plow significant assets into this opaque and potentially saturated market. It continues to amaze me the number of “searches” being conducted for private credit/debt. Asset classes can get overwhelmed driving down future returns. Do you know what the natural capacity is for this asset class and the manager(s) that you are hiring? Caveat emptor!

01.23.26
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How Does One Secure A Benefit?

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

We hope that you’ll agree that going to Chicago in January demonstrates the lengths that Ryan ALM personnel will go to help plan sponsors and their advisors protect and preserve DB pension plans. We are just thankful that we left yesterday, as today’s temperature is not expected to get to 0. OUCH!

Ron Ryan and I spent the last couple of days speaking with a number of funds and consultants about the many benefits of cash flow matching (CFM), which is gaining incredible traction among pension sponsors of all types. Who doesn’t want an element of certainty and enhanced liquidity within their plans given all the uncertainty we are facing in markets and geopolitically.

The idea of creating an element of certainty within the management of pension plans sounds wonderful, but how is that actually achieved? This is a question that we often receive and this trip was no exception. We had been discussing the fact that the relationship between asset cash flows (bond principal and interest) and liability cash flows (benefits and expenses) is locked in on the day that the bond portfolio is produced. The optimization process that we created blends the principal and interest from multiple bonds to meet the monthly obligations of benefits and expenses with an emphasis on longer maturity and higher yielding bonds to capture greater cost reduction of those future promises.

However, to demonstrate how one defeases a future liability, my example below highlights the matching of one bond versus one future $2 million 10-year liability. In this example from 18-months ago we purchased:

Bond: MetLife 6.375% due 6/15/34, A- quality, price = $107.64

Buy $1,240,000 par value of MetLife at a cost = $1,334,736

Interest is equal to the par value of bonds ($1,240,000) times the bond’s coupon (6.375%)

As a result of this purchase, we Receive: 

  Interest =  $78,412.50 annually ($39,206.25 semi-annual payments)

                            Total interest earned for 10 years is $784,125

  Principal = $1,240,000 at maturity (par value)

Total Cash Flow = $2,024,125  – $2,000,000 10-year Liability  = $24,124.99 excess

                             ($24,124.99 excess Cash Flow)

Benefits:

Able to fund $2 million benefit at a cost of $1.335 million or a -33.25% cost reduction

Excess cash flow can be reinvested or used to partially fund other benefits

In today’s yield environment, our clients benefit to a greater extent asking us to create longer maturity programs given the steepness of the yield curve. If they don’t have the assets to fund 100% of those longer-term liabilities, we can defease a portion of them through what we call a vertical slice. That slice of liabilities can be any percentage that allows us to cover a period from next month to 30-years from now. In a recent analysis produced for a prospect, we constructed a portfolio of bonds that covered 40% of the pension plan’s liabilities out to 30-years. As a result, we reduced the present value cost to defease those liabilities by –42.7%!!

Reach out to us today to learn how much we can reduce the future value cost of your promised benefits. We do this analysis for free. We encourage you to take us up on our generous offer.

01.20.26
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ARPA Update as of January 16, 2026

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

We hope that the continuing success of the ARPA pension legislation warms your heart despite ridiculously cold temperatures in New Jersey and elsewhere.

Regarding last week’s activity, pleased to report that two plans received approval for their SFA applications. Pension Trust Fund Agreement of St. Louis Motion Picture Machine Operators and Teamsters Local 837 Pension Plan, both non-priority group members, will receive a combined $19.9 million in SFA and interest for their 1,431 members. These approvals are the first for the PBGC in just under one month.

In other ARPA news, there were no new applications filed, as the e-Filing portal remains temporarily closed. In addition, as we’ve been reporting, the window for initial applications to be submitted was to close on 12/31/25. From this point forward, only revised applications should be received by the PBGC. Despite that impediment, two more funds, NMU Great Lakes Pension Fund and UFCW Pension Fund of Northeastern Pennsylvania, added their names to the extensive waitlist seeking Special Financial Assistance. These plans and the others currently on the list must believe that the current deadline in place will be amended.

There was one application withdrawn during the prior week, as the Dairy Employees Union Local #17 Pension Plan pulled their initial application seeking $3.5 million in SFA for the 633 plan participants. Under the current rules, they have until 12/31/26 to resubmit a revised application.

Lastly, there were no applications denied nor were any of the previous recipients of SFA asked to rebate a portion due to census errors.

The U.S. interest rate environment is reacting to some of the global uncertainty. As a result, longer dated Treasury yields are marching higher. As of 9:51 am, the yield on the 30-year Treasury bond is 4.93%, while the 10-year Treasury note yield is at 4.29%. These yields are quite attractive for plans receiving SFA and wanting to secure benefits and expenses with the proceeds. Don’t miss this opportunity to significantly reduce the cost of those future benefits.

01.16.26
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Is A “K” Truly Representative?

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

I recently attended the Opal Public Fund Forum in Arizona. I’ve always appreciated the opportunity to attend and speak at Opal’s pension conferences. This latest version was no exception. However, I found it interesting that there were two thoughts being expressed over and over again. First, many presenters talked about uncertainty. The other idea centered on the current economic environment, which was frequently described as being K-shaped.

Regarding uncertainty, we often write about the onerous impact of uncertainty on individuals, both from a psychological as well as a physiological standpoint. Yet the pension community continues to embrace uncertainty through implementation of traditional asset allocation approaches, which are potentially subject to significant market events. Why? I’m not going to dwell on this topic today as I’d rather focus some attention of the current economic environment, and I’ve covered many times how Ryan ALM can bring certainty, and a sleep-well-at-night approach, to pension management.

As the title above questions, is defining the current economic environment as a K appropriate? When I look at the letter K, it says to me that 50% of something is advancing while another 50% is declining. Is that what is happening in today’s economy? Are 50% of American workers showing strong economic gains, while 50% struggle? I would say, “NO”! No matter what metrics one reviews, indications are that a far greater percentage of the American workforce is struggling to meet basic living needs than a K would suggest. I’m not sure what letter truly represents today’s conditions, but when only 10%-20% of our households are seeing improved conditions that doesn’t conjure up a K in my mind.

The idea of American Exceptionalism is being challenged by today’s economic realities. It is so disappointing given the potential that we possess as a nation. However, our collective wealth continues to be concentrated among a small percentage of American households at the same time that expenses for basic needs – housing, medical coverage, education, childcare, food, insurance, utilities, and retirement – continue to challenge most budgets.

In a recent article by Adam Bonica, titled “The Wall Looks Permanent Until it Falls”, Adam highlights (lowlights perhaps) the significant differences in key metrics relative to a U.S. peer democracy group of 31 developed nations (OECD). For instance, he shows multiple stats in four broad categories, including Economy and Inequality, Family and Livelihood, Survival and Safety, and Institutions and Justice. It is not to say that these peers don’t have these issues – they do. They just experience them at much lower rates. The comparisons that Mr. Bonica focused on were just the averages for the peer group relative to the U.S., and they prove quite stark.

For instance, the peer average for the Top 1% of households by income is 12.8%, while in the U.S. it is 21%! If the Top 1% of earners just took 12.8%, every American household would get an additional $19k/year. If the Top 1% of Household wealth in the U.S. only had 23.2% of the country’s wealth instead of the 30.6% it currently has, every American household would have an additional $96k. A big expenditure every year for American households is healthcare. Our peers average 9.2% of one’s household spending while we average 17.1%. Just matching the rate of spending would reduce our annual expenditure for healthcare by -2.1T/year. Oh, and it isn’t like our “investment” in healthcare is reaping longevity rewards – it isn’t, as we average -4.1 years less than our average peer (78.4 years versus 82.5 years).

We can do a lot better as a society and economy. There are currently 15 million Americans working full-time that earn a level of income that is below the poverty line. Not acceptable. Only about 10% of the American workers are in DB pension plans. As I’ve stated many times, asking untrained individuals to fund, manage, and then disburse a “benefit” without disposable income, no investment acumen, and no crystal ball to help with longevity is just poor policy. Again, we can do better. Ron and I and the Ryan ALM team are focused on protecting and preserving DB pension plans. I wish that we could do more!

01.09.26
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Milliman: Corporate Pension Funding UP – Again!

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

Milliman released its monthly Milliman 100 Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. They reported that the funded ratio has now improved for nine straight months – impressive! As of December 31, 2025, the funded ratio for the index constituents is 108.1%, which is up substantially from year end 2024’s 103.6%.

The increase in the funded ratio for December (and the year) was mostly driven by the performance of the assets for the index’s constituents that saw an 11.32% average return for the year, increasing asset values by $53 billion. A rather stable interest rate environment lead to only a $1 billion decline in the PV of those FV liabilities.

According to Zorast Wadia, author of the Milliman 100 Pension Funding Index report, “discount rates fell during the year, and this trend could extend into 2026, potentially reversing some of the recent funded status gains and underscoring the continued need for prudent asset-liability management.” We couldn’t agree more.

It was the significant decline in U.S. interest rates during a nearly four decade bull market for bonds that really crushed funding for private DB pension plans. It would be tragic to witness a deterioration in the funded ratio/status after reclaiming a strong financial footing. Secure those promises and sit back and enjoy managing surplus assets.

Here is the link to the full December report: View this month’s complete Pension Funding Index

12.30.25
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Pension Reform or Just Benefit Cuts?

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

According to NIRS, at least 48 U.S. states undertook significant public pension reforms in the years following the global financial crisis (GFC), with virtually every state making some form of change to its public pension retirement systems. I’ve questioned for some time that those “reforms” were nothing more than benefit cuts. When I think of reform, I think of how pension plans are managed, and not what they pay out in promised benefits. However, this wasn’t the case for those 48 states which mostly asked their participants to contribute more, work for more years, and ultimately get less in benefits.

Equable Institute released the second edition of its Retirement Security Report, a comprehensive assessment of the retirement income security provided to U.S. state and local government workers. The report evaluated 1,953 retirement plans across the country to determine how well public employees are being put on a path to secure and adequate retirement income. Unfortunately, the reports findings support my view that pension reforms were nothing more than benefit cuts. Here are a couple of the points:

“Retirement benefit values have declined significantly: The expected lifetime value of retirement benefits for a typical full-career public employee has dropped by more than $140,000 since 2006, primarily due to policy changes after the Great Recession such as higher retirement ages, longer vesting, and reduced COLAs.“

“Only 46.6% of public workers are being served well by their retirement plans.“

Yes, newer plan designs are allowing for greater portability through hybrid and defined contribution plans, but as I’ve discussed in many blog posts, asking untrained individuals to fund, manage, and then disburse a “benefit” without the necessary disposable income, investment acumen, and a crystal ball to help with longevity issues is poor policy. We have an affordability issue in this country and it is being compounded by this push away from DB pensions to DC offerings.

Pension reform needs to be more than just benefit adjustments. We need a rethink regarding how these plans are managed. As we have said on many occasions, the primary objective in managing a pension plan is not one focused on return, which just guarantees volatility in outcomes. Managing a pension plan, public or private, should be about securing the promises that were given to the plan’s participants. That should be accomplished at a reasonable cost and with prudent risk.

Regrettably, most pensions are taking on more risk as they migrate significant assets to alternatives. In the process they have reduced liquidity to meet benefits and dramatically increased costs with no promise of actually meeting return projections. Furthermore, many of the alternative assets have become overcrowded trades that ultimately drive down future returns. Higher fees and lower returns – not a great formula for success.

It is time to get off the performance rollercoaster. Sure, recent returns have been quite good (for public markets), but as we’ve witnessed many times in the past, markets don’t always cooperate and when they don’t, years of good performance can evaporate very quickly. Changing one’s approach to managing a pension plan doesn’t have to be revolutionary. In fact, it is quite simple. All one needs to do is bifurcate the plan’s assets into two buckets – liquidity and growth – as opposed to having 100% of the assets focused on the ROA. Your plan likely has a healthy exposure to core fixed income that comes with great interest rate risk. Use that exposure to fill your liquidity bucket and convert those assets from an active strategy to a cash flow matching (CFM) portfolio focused on your fund’s unique liabilities.

Once that simple task has been done, you will now have SECURED a portion of your plan’s promises (benefits) chronologically from next month as far into the future as that allocation will take you. In the process the growth assets now have a longer investing horizon that should enhance the probability of achieving the desired outcome. Contribution expenses and the funded status will become more stable. As your plan’s funded status improves, allocate more of the growth assets to the liquidity bucket further stabilizing and securing the benefits.

This modest change will get your fund off that rollercoaster of returns. The primary objective of securing benefits at a reasonable cost and with prudent risk will become a reality and true pension reform will be realized.

12.24.25
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It’s Not Getting Any Easier

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

I wish for you and your family, friends, and acquaintances a joyous holiday season. I hope that 2026 proves to be an incredibly wonderful year in which the average American once again prospers. As regular readers of this blog know, I mostly focus my attention of DB pension plans, but I’ll occasionally write about the struggles that the American worker faces funding a defined contribution (DC) plan, such as a 401(k). A few months back, I wrote about the burden of homeownership on the American worker and the impact paying roughly 50% of the median household income has on one’s ability to then fund a retirement program.

Unfortunately, it isn’t getting any easier. I read today in the WSJ that the average monthly car payment is now >$750 per month. Oh, my! It is leading buyers of these cars to take out 8-, 9-, and 10-year auto loans. Can you imagine the interest that is paid on a 10-year loan? I suspect that most of today’s car buyers aren’t buying Lamborghinis. Folks not living in areas where mass transportation is abundant are forced to have a car available to get them to work. It is an essential expenditure, just as owning or renting a home/apartment.

In addition, I read yesterday that wage growth continues to moderate, with average hourly earnings only increasing by 3.5% for the 12-months ending November 30, 2025. That represents the slowest pace since 2021, and well below the near 6% peak reached in early 2022. As a result, an incomprehensible 57% of Americans rely on financial support from family or friends. Among parents with adult children, 40% provide ongoing support, with 53% drawing on retirement savings to provide the assistance. Given the cost of housing, it shouldn’t be surprising that 49% live with their adult children or more likely, the adult children are living with them.

Given these financial realities, do we really believe that self-funding a retirement program is truly in the cards for the average American worker? The financial burdens placed on them through costs associated with housing, healthcare, education, childcare, transportation, food, utilities, etc. is crushing. We have a bifurcated society at this time with too few halves actively participating. I don’t think that works longer-term for any economy. It certainly is not going to work when roughly 20% of the American population is 65-years old or older by an estimated 2030.