The most–read Fiduciary Matters blog posts of 2017
On behalf of the Fiduciary Matters team, we’d like to wish you all the best for the holiday season and the year ahead.
2017 was a busy year for the blog, with a wide variety of topics ranging from pension contributions to interest rate hedging to abnormally low stock market volatility—and that’s reflected in our list below of the year’s top five most–read blog posts. Happy reading!
In November, General Electric announced one of the largest pension contributions on record—a $6 billion, voluntary debt–funded contribution to be paid in 2018. GE’s peers from the $20 billion club (our name for the 19 U.S. listed corporations with the largest pension liabilities) have been following a similar game plan in 2017. In this update, we review their activity this year.
In early October, the IRS issued a notice finalizing the prescribed mortality assumptions to be used in calculating liabilities for minimum funding purposes, effective from the start of 2018. The IRS decision to update the mortality assumptions has been choreographed for some time: the Pension Protection Act of 2006 requires the IRS revise mortality tables every 10 years, with said 10–year period set to expire in 2017 or 2018, and the IRS preliminarily released this update in December, 2016.
Some periods of history might point to the conclusion that the correlation between the returns on stocks and bonds is positive, others that it is negative. These variations can be a signal of fundamental change in the broader market environment.
People who really understand investment risk understand that numbers are only part of the story. And when market conditions are atypical—as they are today—it’s important to be extra careful in interpreting risk reports.
One of the biggest strategic decisions faced by defined benefit pension plans is that of choosing an interest rate hedge ratio. This is never a totally straightforward decision, since it involves a tradeoff between competing objectives. The decision is, however, much trickier for some plans than it is for others.