Webinar: Considerations for LDI Plan Sponsors
Tom McCartan, Principal of Liability-Driven Strategies outlines how LDI investors can take advantage of attractive credit spreads following recent volatility.
Fixed income markets contain a high proportion of investors whose goal of identifying the most attractive relative value is subverted by jurisdictional or self-imposed rules, regulations, and constraints, or is superseded by other non-economic objectives, such as accounting conventions. This, in turn, creates opportunities for total return, multi-sector fixed income investors willing to consider broad investment guidelines and greater degrees of portfolio management freedom. In this paper, we lay out: 1) The fixed income market segmentation we observe and the resultant high dispersion in risk-adjusted reward; 2) Principles for identifying relative value and pitfalls to avoid; 3) An outline of our portfolio construction approach for building multi-sector portfolios.
In this paper, Tom McCartan, FIA, CFA, Vice President, Liability-Driven Strategies discusses the key risks to a U.S. corporate pension plan's funded status--declining long-term interest rates, tightening long-dated corporate spreads, credit migration, and falling risk assets--and shares practical steps plan sponsors can take now to protect funding levels ahead of the next recession.
*Includes all completion and overlay portfolios managed by PGIM Fixed Income. AUM is calculated by using the notional exposure of the overlay strategies.
Source: PGIM Fixed Income. Assets under management as of June 30, 2020. Excludes assets managed for proprietary and retail clients.
Bloomberg Barclays U.S. Long Government/Credit Index covers USD-denominated and non-convertible, publicly issued U.S. Government or investment-grade securities that are fixed rate or step ups. Securities must have a maturity of 10 years or greater and be rated investment-grade (Baa3/ BBB-/BBB-) or better using the middle rating of Moody’s, S&P, and Fitch.
Bloomberg Barclays U.S. Long Corporate Bond Index covers USD-denominated and non-convertible, publicly issued securities that are fixed-rate or step ups. Securities must have a maturity of 10 years and be rated investment-grade (Baa3/ BBB-/BBB-) or better using the middle rating of Moody’s, S&P, and Fitch.
Bloomberg Barclays U.S. Long Credit Index is comprised of publicly issued U.S. corporate debt and specified foreign debentures and secured notes denominated in USD that have at least 10 years until final maturity and are rated investment-grade (Baa3/BBB-/BBB- or better) using the middle rating of Moody’s, S&P, and Fitch, respectively.
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