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September 2019 | Pension Solutions

Historic Lows in Interest Rates Raise Questions for Corporate DB Sponsors

The recent dramatic fall in interest rates has been detrimental for long dated obligations such as defined benefit (DB) pension plans. In the current environment, corporate DB plan sponsors and their investment committees may be asking themselves many questions, such as:

  • Given the fall in interest rates, is now the right time to be hedging interest rate risk?
  • Should we monetize some of the liability driven investment (LDI) positions we put on years ago?
  • Are there other actions we should consider to de-risk our plans?

We make some observations around the implications of the fall in interest rates for DB plans and their sponsors, and provide some thoughts around strategies they may wish to consider in the current environment.

MORE INSIGHTS

May 2019
US Corporate Pension De-Risking: More Than Just Bonds

The trend of US corporate defined benefit (DB) pension plans engaging in de-risking programs is firmly in place and a variety of factors have coalesced over the past ten-plus years which have guided plans to consider de-risking actions.

October 03, 2016
Pension Plan Management: Should Sponsors Borrow to Fund and De-risk Their Plans?

We discuss how a borrow-to-fund strategy can be an effective tool to enable a corporate defined benefit (“DB”) plan to accelerate a de-risking program. 

February 2016 | Pension Solutions
Pension Rebalancing in a Time of Market Volatility

Year-to-date capital market moves have shifted some plans away from their strategic asset allocation targets. This has led some plans to once again re-visit their policies around when and how to rebalance their portfolios.

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