On the Curve Carries On

On the Curve Carries On

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Stephen Mullin Julia Gamburg Brad Gottenberg
JUL 13, 2023

We Recommend

A Favorable Environment for Short Duration Fixed Income

A New Era of Corporate Pension Investing

Explore Strategies

Private Capital

Last year we highlighted the relative attractiveness of the intermediate part of the corporate curve. And a year later, we believe we continue to see value in the intermediate corporate credit space. In this paper, we highlight the potential opportunities for investors amidst the current valuations in high grade fixed income strategies across the curve.

For much of the past decade and a half, the primary strategies used for pension liability hedging were long dated (i.e., Long Duration Government Credit, Long Credit, STRIPS, etc.). These strategies served as an effective tool to match pension liabilities, and enabled plans to achieve their duration targets efficiently while maintaining a significant allocation to return seeking assets. In our view, it worked.

We note that with fixed income maturities ranging from 1-month to more than 40 years, there are a wide range of strategies designed to help meet the specific liability hedging needs of corporate plan sponsors. As of 3/31/2023, MIM’s Pension Tracker estimated the average funded status of the Russell 3000 to be 105.2%, 0.5% above the end of the fourth quarter.