The past few years have been great for corporate pension funds. Strong portfolio performance has improved the funded status of corporate defined benefit pensions across the board, returning most plans to funding levels not seen in more than a decade.
. . .
Most of these plans are well hedged through liability-driven-investing models. Even plans that use other investment frameworks, such as total return, saw similar increases in funded status and strong performance, according to data from Milliman and NEPC.
. . .
Matt Maleri, partner in and head of insurance at NEPC, says, “We’re seeing much more attention paid to duration exposures and trying to match liabilities across the yield curve, not just in totality—also understanding the split between credit and Treasury bonds that is needed to match their liabilities.”
. . .
NEPC’s Maleri agrees with the focus on long-term thinking.
“The purpose of an evergreen vehicle, in our view, is that you don’t need to constantly make new commitments to a fund that calls capital, draws it down and returns it,” Maleri says. “But we would caution plan sponsors that these aren’t really tools for liquidity.”
. . .
Click here to continue reading the full Chief Investment Officer article.