Pension plan hedge portfolios can benefit from long-standing investment practices in many life insurers’ portfolios:

  • Diversifying the portfolio outside of investment grade corporates can lift overall yield and tap new sources of return.

  • Hedge portfolio diversification can sidestep excessive issuer concentration, as the same large cap-weight names often dominate both U.S. equity and investment grade corporate benchmarks.

  • Active management can mitigate funded status deterioration. It enables pension funds to hold downgraded issues until they recover rather than selling them on the downgrade and incurring a loss.

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