After some tough years relying on investment returns in a down economy, many trustees are reevaluating whether their current investment policy makes sense or whether it’s time to make some changes.
We were recently provided with a 3-part series by Ryan Labs Asset Management that advocates a slightly non-traditional approach to asset allocation. In the first article, "The Big Squeeze", Ryan points to declines in interest rates that have driven up the cost of funding retirement benefits. In the second article, "The 7.5 Percent Solution", Ryan argues that many plans use an unrealistic interest rate assumption to value liabilities and that can mislead plan trustees about the real cost of benefits and lead them to chase returns that, in the current environment, are a stretch. Finally in the last article "The Golden Rule" Ryan advocates for a portfolio of fixed-income securities that match the profile of a fund’s liability.
So what is your take on Ryan Labs Asset Management’s argument?
Has your fund changed its investment policy? Are you looking at the evaluation of your investments and liabilities differently since the economic downturn? Email your thoughts or plan experiences to firstname.lastname@example.org and we’ll include a recap of trustee experiences and ideas in a future blog post.
Please note in sharing Ryan Labs Asset Management’s articles, SMACNA is not advocating the adoption of this firm’s investment strategy, but instead is seeking to provide trustees with new or different viewpoints that allow for the exploration of ideas that may suit the trustees’ funds needs and goals.
The implementation and design of an investment policy requires knowledge that is often beyond the expertise of the average trustee. It is for this reason that we encourage trustees to consult with trusted service providers and legal counsel who are knowledgeable about ERISA funds and multiemployer plans, in particular.