De-risking Pension Funds In A Rising Rate Environment
Defined benefit pension funds have the highest aggregate funding ratio (FR) we’ve seen in years, with some large pension funds being more than 100% funded. In the past, a pension fund with a healthy FR would start thinking about defending its gains by re-allocating some of its assets from stocks to bonds, a de-risking strategy called liability-driven investing, but this assumes that interest rates are equally likely to rise or fall.
With interest rates only slightly above their historic lows and the Fed . . .
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