On the Curve

On the Curve:
Investing in Intermediate
Corporate Fixed Income  

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Stephen Mullin Julia Gamburg Starr Deuschle
JUN 10, 2022

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Public Fixed Income

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. For much of the past decade and a half, the primary strategies used 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. It worked.

As of 3/31/2022, MIM’s Pension Tracker estimated the average funded status of the Russell 3000 to be 102.5%. This improvement in funded status has served as an opportunity for plans to continue de-risking, which usually means to sell equities and buy fixed income… but the question now is where on the curve?