Pension portfolio manager for Ryan ALM Advisers. I implement the Ryan ALM Liability Beta Portfolio (LBP) strategy that matches bond cash flows to pension liabilities. Our approach to managing the bond allocation for pensions starts with Asset-Liability Management and focusing on the pension’s ...more

Pension portfolio manager for Ryan ALM Advisers. I implement the Ryan ALM Liability Beta Portfolio (LBP) strategy that matches bond cash flows to pension liabilities. Our approach to managing the bond allocation for pensions starts with Asset-Liability Management and focusing on the pension’s primary objective of securing benefits. The objective for a Defined Benefit Pension is to fund benefits when due in a prudent, low-risk, and cost-efficient manner. This is an Assets vs. Liabilities objective. A pension investment portfolio vs. market index objective is an assets vs. assets objective which is the wrong objective. No two Pensions are alike because no two pensions have the same liabilities schedule and funded ratio. Therefore, no two pensions should have the same asset allocation. Yet many plan sponsors measure the performance of their investment portfolio vs. market indexes, rather than versus liabilities and this approach leads them to the same wrong asset allocations. Ryan ALM creates a Custom Liability Index (CLI) for every client. We use the pension liabilities to create the CLI. We do not use some blend of market indexes because again that would be assets vs. assets. We measure, monitor, and manage the performance of assets versus liabilities. We do not believe that bonds are performance assets. The real value in bonds is in their cash flows because the Future Value of bond cash flows is known in advance and does not change with interest rates. Once benefit payments are matched, they stay matched regardless of market volatility. We take the client's existing bond allocation and repurpose it so that it will chronologically and continuously cash flow matches the first 7 to 15 years of pension benefit payments giving risk assets time to perform. Our cash flow matching bond portfolio creates a cash flow bridge across bear markets in stocks and secures pension benefits. Historically 48% to 60% of the S&P 500 returns come from dividends being reinvested. On average since 1940, over a 10-year period, the contribution of dividends to the total return for the S&P 500 was 48% and with a 20-year holding period, dividends accounted for roughly 60% of total returns. Why would an investor want to interrupt the power of dividend compounding by not having an LBP liabilities cash flow matching portfolio and be forced to sell alpha-producing assets to make benefit payments? Contact: Steven DeVito SDeVito@RyanALM.com 254-242-3572less