Topical Research

The recent market environment has led Endowment and Foundation Trustees to re-evaluate the key aspects of their investment oversight.  For most Trustees, the challenge is to balance the two competing financial objectives of an institution: meeting current spending needs while maintaining the long term “real” value of the assets.  This paper focuses on ways to create an ideal spending policy. 

NEPC's annual asset allocation letter.

With the widespread acceptance of modern portfolio theory by investors, asset-allocation decisions are often driven by the quest to select a portfolio that maximizes long-term risk-adjusted returns. The recent financial crisis, however, has intensified investors’ focus on  understanding the risks embedded in their portfolios.

Recent changes in the rules governing U.S. corporate pension plans (the Pension Protection Act of 2006 for contribution funding, and FASB 158 for balance-sheet accounting) move plans closer to “mark-to-market” measurement of assets and liabilities. These rule changes have prompted much discussion on the role of LDI in pension plans.

This paper outlines the main types of Liability Driven Investment (LDI) products and discuss issues to consider in implementing LDI.

When the Pension Protection Act (PPA) was released in 2006, the general thrust for defined benefit retirement plans was to require more stringent funding requirements with less flexibility in setting the assumptions used to calculate plan contributions.  The new regulations also created many questions on various implementation approaches and calculations.  Yet, when PPA became effective for pension plan years beginning in 2008, many of these questions were left unanswered. 

An allocation to Real Assets can play an important role in a long-term investment portfolio.  Real Assets encompass an array of investment strategies whose values are sensitive to inflation and include TIPS, commodities, commodities-linked stocks, commodities-oriented hedge funds and hedge funds of funds, and direct investments in real estate, energy, farmland, timber, and infrastructure.

Higher prospective tax rates are renewing interest in Roth 401(k)s and 403(b)s. This paper summarizes the technical aspects of the Roth feature, illustrates the tax diversification value, and sets out things to think about before adding the option to your plan.

2008 reminded us that human beings have limited ability to peer into the future.  As investment professionals we have attempted to enhance this limited ability by using various models and theories as lenses through which to form views of future risks and returns, and to select investment strategies in light of those views.  Yet many of us were caught off guard by 2008.  Does this mean that our lenses were cloudy, that our models were flawed? 

NEPC's annual asset allocation Letter.

A significant aspect of the current global financial crisis is a lack of liquidity across most markets. As a result, redemption restrictions have been imposed on a broad array of pooled investment vehicles ranging from short-term fixed income products to hedge funds.

Many clients participate either directly in Securities Lending programs administered by their custodian bank or third party lender, or indirectly through investments in various commingled and mutual fund vehicles. In recent weeks the investments in the Cash Collateral pools used to secure assets on loan have experienced significant pricing pressures, and, in some cases, impairment. While we cannot predict the future impairment of additional issuers, NEPC believes the practice of Securities Lending has a long-term place within a functioning securities market and is a viable activity for institutional investors when viewed within the same risk and return framework which governs all investment decisions.

Ross Bremen and Rob Fishman talk with PIMCO about the evolving investment structure of defined contribution plans.

In this memo, we seek to provide some insights into the issues surrounding fair value accounting and touch on some of the more relevant components of the regulations. Importantly, we also suggest steps that investors can proactively take to minimize the impact of the regulations on their programs and reduce the administrative stress points.

An overview of the turbulent markets in 2008.

We believe severe dislocations in the credit markets have created the potential for compelling risk adjusted returns. As a result, we recommend that clients consider increasing their credit market exposure in the near future.

This article provides background to the LaRue v. DeWolff, Boberg & Associates, Inc. case and summarizes the Court’s finding.

NEPC's annual asset allocation letter.