US Pension Funds

U.S. DB and DC Pensions - The top 10 papers

US Pensions Research - The top 10 papers

At Savvy Investor, we curate the best pensions and investment white papers and make them available to our members for free. Here, we list the ten top US Pensions papers from the last six months.

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A question for DB plan sponsors: To LDI or not to LDI (Vanguard, 2016)
This paper briefly compares the experiences of two different defined (DB) clients. One client chose LDI and the other, having initially considered LDI, decided not to adopt it. Philip C. Daubney compares these two experiences in both rising and falling rates environments, and both strong and weak equity markets. He considers the effects of the actual market environment not just on assets, but on the funded status of the plans.

Why target-date funds are widely misused by retirement investors (2016)
Why do retirement investors hold only a part of their retirement plan assets in target-date funds (TDFs)? This paper by Financial Engines Advisors seeks to explain as well as the reasons these investors decrease their allocation to TDFs over time. The paper also explains the implications of these findings for retirement plan designs.

The world's 300 largest pension funds (Willis Towers Watson)
This 47-page paper by Willis Towers Watson provides important insights into the world's largest pension funds. It shows data by DB/DC, asset type, region and asset allocation. The research shows that the 300 largest pension fund hold 43% of global assets. Total assets grew by over 3% last year (compared to 6% the year before).

Corporate Pension Risk Management and Corporate Finance: Theory and Practice
This report addresses some key questions: How does a company's pension plan affect the stock price? How does the pension plan impact the company's credit rating / credit spread? How does a US company manage its pension liabilities in the light of pension insurance (i.e. the Pension Benefit Guaranty Corporation)?

Constructing a DC investment lineup: Four best practices (Vanguard, Apr 2016)
This April 2016 Vanguard paper details four key fundamentals for constructing a defined contribution investment menu. These include clarifying the objectives, and creating a tiered menu based on those objectives. Although target-date funds are dominating the thought process for many participants, there should be a focus on providing investment options for DC plan members who wish to look beyond TDFs.

Strategic asset allocation reviews for US DB plan sponsors (Russell, 2016)
In this paper, Justin Owens, Senior Asset Allocation Strategist, discusses the process for long-term investing in different asset classes. This process - the Strategic Asset Allocation Review - often requires an asset allocator with expertise in asset and liabilities, who after completing the analysis, shares the results with sponsors. Owens details three main areas sponsors ought to be mindful of.

Building a Better Process for Target-Date Fund Selection (Mar 2016)
In this paper, Stewart D. Lawrence and Timothy R. Barron explore the process for Target-Date Fund selection. They evaluate which target-date funds in a DC plan investment line-up can be equated to building a house with a firm foundation (stable asset manager), roof (glidepath), frame (asset allocation) and walls (underlying funds). 

For LDI Investors, the Credit Cycle Brings Risk and Opportunity (Janus, Apr 2016)
In these late innings of the credit cycle, as fundamentals begin to deteriorate, corporations re-lever their balance sheets, and management teams focus on driving shareholder value, often at the expense of bondholders, the pace of credit downgrades is accelerating and the potential headwind to a plan’s liability-hedging portfolio is increasing. The authors believe that in this period of increasing credit risk, fundamental credit research is paramount to help corporate plan sponsors navigate shifting credit markets by managing the risks within long-duration credit while capitalizing on opportunities, all with an ultimate goal of reducing surplus volatility and improving the funded status of the plan.

Determining reasonableness of retirement plan fees (Vanguard, Apr 2016)
This brief paper by Vanguard explains the fiduciary duties of plan sponsors. It discusses different tools and steps they can use to determine the sensibleness of their plans' fees.

DC Pensions: Going passive is still an active decision (Russell, Mar 2016)
Passive investing is growing in popularity Defined Contribution plan sponsors. Two experts from Russell Investments met with a top ERISA lawyer to chat about some of the legal and investment issues facing those sponsors considering such a move. This document details the key points of their conversation.

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