Archive

Assessing the Choices for the ‘Distribution Phase’ of DC Plans

08/14/18

It may be hard to believe, but the 401(k)—the most popular type of defined contribution (DC) plan—turned 40 this year. Up to now, the retirement industry has focused on improving the “accumulation phase” of DC plans. But as DC plans...

Yield Curve Shenanigans?

08/08/18

The U.S. Treasury yield curve has been on a \"flattening\" trend since the end of 2013. At the end of 2013, the difference between the 2-year and 10-year U.S. Treasury note yield was 260 basis points; today it is roughly...

Is This It for the Current Economic Expansion?

08/07/18

Real GDP growth in the U.S. hit 4.1% in the second quarter of 2018, the strongest quarterly gain since 2014. Many indicators corroborate the story of a thriving American economy: low unemployment, robust consumer spending, elevated business and consumer confidence, ...

Trade Spat Rains on Risk Parade

08/01/18

After celebrating U.S. tax cuts and deficit spending in the prior quarter, risk seekers tempered their buying enthusiasm in the second quarter when a global trade war threatened to crash the party. Casting shade on the growing but increasingly fragile...

Making Cents of the Irrational With Options

07/30/18

Derivatives such as options enable investors to exchange specific market risks in their portfolios in much the same way homeowners who need fire insurance can purchase it from companies that pool risks to provide that coverage.(Estimate reading time: 4 min...

Follow the Money: Asset Flow Data Support Industry Trends

07/25/18

Twice a year, Callan takes a deep dive into asset flow data to extrapolate trends and identify the most successful investment managers in each asset class. What we found in our most recent analysis, for year-end 2017, is consistent with...

How Stocks, Bonds, and Real Assets Did in the 2nd Quarter

07/17/18

Equity Markets: Strong Returns, With U.S. in the LeadThe U.S. equity market posted solid returns in the second quarter on the back of strong first quarter earnings as well as record share buybacks fueled by the Trump Administration's $1.5 trillion...

Summer Doldrums for the Economy?

07/16/18

Summer months are typically a quiet time for the markets. Recent events, however, may disrupt this tradition. Threats of escalating trade wars have cast a pall over equities, and numerous geopolitical uncertainties continue to push investors toward a more cautious...

Hyperactive Private Equity Markets Merit Steady Pacing

07/12/18

With volatility returning to the public markets in the first quarter, private equity activity slowed somewhat but remained brisk in absolute terms. Fundraising declined from prior periods. Company investments and exits trended slightly lower, although venture capital funding rose.(Estimated reading...

Untangling the Gordian Knot of ‘Cash Drag’

07/10/18

Modern portfolios are increasingly complicated as they have expanded beyond stocks and bonds. The management of those portfolios—and the attendant illiquidity that can come with alternative investments—has many asset owners staring at a Gordian knot very much in need...

Under the Hood of the MSCI EM Index

06/29/18

Remember the BRIC countries? The acronym was coined in 2001 by Goldman Sachs economist Jim O’Neill for the economies of Brazil, Russia, India, and China to convey that their relative economic growth would continue to exceed that of the so-called...

China A-Shares: Issues for Investors to Address

06/28/18

It is no secret that China is becoming an important market for global investors. Major index providers are increasing the proportion and types of Chinese shares in their indices, and investment managers are launching strategies to take advantage of this...

DC Plans Can Help with a Demographic Crisis

06/14/18

“Dear future generations, please accept our apologies.”—Kurt VonnegutAs pundits decry the declining labor force participation rate, they miss a simple point. More people are retiring than are entering the labor force—a simple result of our demographics. The United...

Dragnets of Due Diligence

06/05/18

The often mundane jobs of compliance officers and forensic auditors have gotten more exciting. Investment advisers registered with the Securities and Exchange Commission (SEC), with few exceptions, must use a newly expanded Form ADV to report on their businesses.(Estimated reading...

Our Take on Cryptocurrencies

05/31/18

Like you, we've been following the development of cryptocurrencies with great interest, as investors are understandably excited by bright, shiny objects with excess return potential.(Estimated reading time: 2 min 55 sec)Spoiler alert! Callan does not recommend our clients allocate to...

ESG’s ‘Good Vibrations’? Not Yet for DC Plans

05/29/18

“I'm pickin' up good vibrations…”— Brian Wilson, The Beach BoysThere is no shortage of “good vibrations” around the environmental, social, and governance (ESG) space. While ESG was once the purview of niche managers, it has gained broader acceptance—many investment managers...

NCREIF Property Index Chugs Along; REITs Hit Hard

05/22/18

The NCREIF Property Index gained 1.7% during the first quarter (1.1% from income and 0.6% from appreciation). This marked the 33rd consecutive quarter of positive returns for the Index.(Estimated reading time: 2 min 50 sec)Industrial (+3.3%) was the best-performing sector...

Boy – That Escalated Quickly!

05/16/18

The market narrative of strong corporate earnings, falling unemployment, and tax reform had pumped up expectations for risk assets heading into 2018. However, hints that an overheated U.S. economy may be unable to absorb significant fiscal stimulus ahead spooked markets...

Examining MiFID II After Implementation

05/14/18

Last August Callan outlined some of the issues raised by MiFID II, the second iteration of the Markets in Financial Instruments Directive. We wanted to provide an update on the directive, which took effect at the start of this...

Slow Burn

05/11/18

After a weak first quarter, the U.S. economy closed out 2017 with decent momentum, as GDP grew at a robust 3% annualized rate for the remaining three quarters. The first quarter of 2018 will likely be remembered for its sudden, ...

Mixed Results for Global Fixed Income Markets

05/08/18

By David Welsch and David ZeeU.S. Bonds: Fear, Uncertainty Roil MarketsThe 10-year U.S. Treasury yield marched steadily higher through most of January and February in response to positive economic data, then equity market weakness and concerns over a looming trade...

Global Equities: Volatility Returns and Markets Sag

05/04/18

Volatility returned in the first quarter, with the Dow Jones Industrial Average and S&P 500 Index both finishing lower—a first since the third quarter of 2015.U.S. Stocks: Dow, S&P 500 Fall, First Time Since ‘15After starting strong on the back...

Year in Review: Private Market Activity Maintains Strong Pace

05/01/18

In 2017, U.S. equity assets appreciated for the ninth straight year: The tax reform legislation passed by Congress fueled positive sentiment about future economic fundamentals, while the markets shrugged off Fed rate hikes.(Estimated reading time: 3 min 15 sec)In the...

Enhance Your DC Plan with a “Mega Roth”

04/26/18

Plan sponsors who want to allow participants to contribute more Roth monies to a defined contribution (DC) plan than the standard limits have an option: The \"Mega Roth, \" in-plan Roth conversion of after-tax contributions in the same year they...

Rebalance Your Portfolio, or Let It Ride?

04/24/18

With the return of market volatility, investors are asking whether it is an appropriate time to rebalance their portfolios. Our view: Yes! This sometimes-overlooked procedural discipline is extremely important.(Estimated reading time: 3 min 50 sec)Asset allocation may be the most...

ESG and Investment Theory and Design

04/19/18

At Callan’s recent National Conference, our guest speakers tackled the major issues and themes facing institutional investors in the coming years. We’ll cover the highlights of their comments in a series of posts. This is the fourth; the first appeared...

Aging and Financial Decisions

04/16/18

At Callan’s recent National Conference, our guest speakers tackled the major issues and themes facing institutional investors in the coming years. We’ll cover the highlights of their comments in a series of posts. This is the third; the first appeared...

A Tool to Stay on Top of Private Equity Fundraising

04/13/18

Because general partners only raise funds every three to four years, it is essential for institutional investors to stay ahead of private equity fundraising activity. Especially with the accelerated pace of fundraising in today’s market environment, it is easy to...

Active Share Is Not a Litmus Test

04/12/18

A recent deal between the New York state attorney general’s office and major investment firms highlighted the role of “active share” in evaluating mutual funds or other pooled investment vehicles. While the New York deal, in which 13 firms representing...

Risk Parity: Silver Bullet or a Bridge Too Far?

04/10/18

I was asked to contribute a chapter to a recent book published by the CFA Institute, Multi-Asset Strategies: The Future of Investment Management. I was honored by the invitation and happy to do so. Callan has a strong commitment to...

Managing an NQDC Plan Investment Menu

04/03/18

In an article for the latest edition of our DC Observer, I discussed non-qualified deferred compensation (NQDC) plans, the investment menu structure, and hedging strategies. Unlike a qualified defined contribution plan, in which plan assets are segregated from the employer’s...

Vexing Volatility

03/29/18

Market volatility spiked in February, coinciding with declines for the S&P 500 Index and the Bloomberg Barclays U.S. Aggregate Bond Index. Callan surveyed leading multi-asset class (MAC) strategy providers to understand how the products reacted in this newly volatile environment...

The New Faces of Cybersecurity

03/26/18

At Callan’s recent National Conference, our guest speakers tackled the major issues and themes facing institutional investors in the coming years. We’ll cover the highlights of their comments in a series of posts. This is the second; the first appeared...

Callan Poll: How Many Funds Are Considering Gun Divestiture

03/23/18

At the request of one of Callan’s large public fund clients, we conducted a timely “micro-poll” last week to understand where these investors stand on the issue of divestiture from gun manufacturing companies (note this poll did not inquire about...

Our Manager Search Process

03/20/18

I’m always struck by the number of media articles with titles such as, “How to get into consultant XYZ’s search process.” While it is certainly necessary to know how each consultant operates, a consultant's search process should ultimately be able...

Evaluating Average DC Plan Fees

03/16/18

A new feature of Callan’s DC IndexTM, the DC Fee Analysis chart examines the effects of plan size, participant allocations, and vehicle utilization on investment management fees. The data can help plan sponsors compare their fees to peers...

Divest or Engage? Our Advice

03/14/18

The recent spate of deadly shootings in the U.S.—especially those involving schoolchildren—has prompted some institutional investors to ask about ways to use their portfolio assets to signal they would like to see meaningful change related to firearms and their role...

Trade Wars and Other Risks to the Global Economy

03/12/18

At Callan’s recent National Conference, speakers tackled the major issues and themes facing institutional investors in the coming years. We’ll cover the highlights of their comments in a series of posts like this one on our blog.In her talk “What’s...

MLPs Keep Tax-Favored Status Under New Law

03/02/18

Despite some concerns about preliminary versions of the tax overhaul bill last year, investors in master limited partnerships (MLPs) fared well at the end. Under the old and new tax code, the pass-through nature of MLPs protects investors from double...

Technology Challenges in Volatile Markets

03/01/18

During the recent market volatility, some larger defined contribution (DC) plan vendors experienced difficulty managing peak participant online access or transactional capabilities with their participant websites and/or trading platforms. And for all vendors, lean call center staffing models have led...

Managed Accounts: ‘You Can’t Always Get What You Want’

02/20/18

Back in 1969 the Rolling Stones (inadvertently) summarized the state of decision-making facing plan sponsors regarding managed accounts. Due to limited product availability on recordkeeping platforms, plan sponsors may not be able to \"get what they want.\" But in looking...

Risk Takers See Less as More

02/16/18

The final quarter of 2017 demonstrated that less is more, especially when related to unemployment, taxes, and market volatility. Global unemployment continued to fall, bolstering consumer spending power. President Trump delivered on his promise of cutting corporate taxes, instantly helping...

4th Quarter Update on Commercial Real Estate

02/15/18

The NCREIF Property Index advanced 1.8% during the fourth quarter (1.2% from income and 0.6% from appreciation). This marked the 36th consecutive quarter of positive returns for the Index.(Estimated reading time: 2 min 32 sec)Industrial (+3.3%) was the best-performing sector...

Non-U.S. Bias Rewarded Plans in 2017

02/14/18

Endowments/foundations (+3.8%) performed best last quarter, followed by public plans (+3.7%), Taft-Hartley plans (+3.6%), and corporate plans (+3.5%). For all funds, the return was +3.7%, according to Callan’s database. Plans with assets below $100 million performed best by fund size, ...

Hedge Fund Outlook for 2018–No Grit, No Pearl

02/13/18

With equity prices still near historic highs, now is an appropriate time to take stock of the world’s capital markets and consider the outlook for hedge funds. Should investors buy, sell—or hedge?(Estimated reading time: 3 min 56 sec)In this post...

Last Year, Not Last Week, Was Unusual

02/12/18

By Mark Andersen and Jay KloepferThe S&P 500 entered correction territory last week, plunging more than 10 percent in five trading days after volatility exploded on Feb. 2. Investors betting on continuing low volatility saw big losses, and markets around...

Sentiment Restored. Is It Time to Worry?

02/12/18

The U.S. economy closed out 2017 with decent momentum, recording a solid 2.6% gain in GDP in the fourth quarter after growth above 3% in each of the prior two quarters. Investor sentiment felt disconnected as the year unfolded; the...

Global Fixed Income Results in the 4th Quarter

02/07/18

In the U.S., longer-term bonds topped short-term and intermediate-maturity bonds. Investment-grade corporate debt was the best-performing fixed income sector. Returns were mostly flat in developed markets; emerging market debt delivered more muted returns than in earlier quarters.(Estimated reading time: 3...

Equity Markets in Sync Around the World

02/07/18

A strong quarter closed out a strong year for markets around the world, powered by synchronized global economic growth, a new tax law in the U.S., and low interest rates and inflation. Emerging markets outpaced developed markets for the fourth...

How Callan Categorizes MAC Strategies

01/31/18

By Mark Andersen and Jason EllementMulti-asset class (MAC) strategies have existed for decades; the first product with an allocation to balanced stock and bond strategies was launched more than 80 years ago. In the 1980s, MAC strategies evolved, moving beyond...

A Q&A on Our Capital Market Projections

01/25/18

Callan recently published our 2018 Capital Market Projections, detailing our expectations for return, volatility, and correlation for broad asset classes. These projections represent our best thinking regarding a longer-term outlook and are critical for strategic planning as our investor clients...

Private Markets Stay Robust in 2017

01/22/18

As 2017 progressed, the private markets stayed on track to set records for fundraising. New private equity partnership commitments totaled $249.4 billion through the third quarter, up 29% from the same period in 2016, according to Private Equity Analyst, and...

DC Trends Survey (2018)

01/18/18

Callan’s 11th annual Defined Contribution (DC) Trends Survey found that plan sponsors continue to focus intensely on fees. Sponsors, by a wide margin, cited reviewing plan fees as the most important step they took in improving their fiduciary position in...

Restructuring a Multi-Manager Plan: A Case Study

01/17/18

By Ben Taylor and Michael JoeckenIn the most recent edition of the DC Observer, we described the restructuring of a city-sponsored 457(b) plan with nearly $1 billion in assets that uses multi-manager funds. The revamping process examined the...

What Limited Partners Are Saying About Infrastructure

01/12/18

Jan Mende of our Real Assets Consulting group recently discussed the sentiments of U.S. limited partners (LPs) about infrastructure in a video interview. Interest in the asset class is growing, she said. Investors who have made allocations to infrastructure...

Tax Bill’s Impact on Foundations and Higher Ed

01/10/18

By Steve Center and Karen HeifferonThe tax overhaul bill signed into law by President Trump at the end of last year could have significant long-term effects on endowments and foundations—particularly nonprofit organizations dependent on charitable donations and certain private colleges...

Treasuries for the Long Run

01/05/18

In the current low-return environment, institutional investors have pursued high-return objectives by increasing their exposure to equity and equity-like investments. However, with uncertain profit growth, high equity valuations, and fresh memories of the Global Financial Crisis (GFC), they are also...

Analyzing the Impact of the New Tax Law

01/02/18

The federal tax law overhaul signed by President Trump at the end of last year, totaling more than 800 pages, marked the first comprehensive change to the U.S. corporate and personal tax systems since 1986.(Estimated reading time: 2 min 2...

Securities Lending 101

12/06/17

By Kyle Fekete and Mark KinoshitaAs passive investing becomes a larger part of fund sponsors’ portfolios, investors are encouraged to look underneath the hood of their indexing strategies to evaluate securities lending. This has played an integral role in maintaining...

ESG Survey (2017)

12/05/17

In Callan’s 2017 ESG Survey, we found that adoption rates of environmental, social, and governance (ESG) factors into the investment decision-making process among institutional investors has leveled off. In 2017, 37% of fund sponsors incorporated ESG factors into their...

Active or Passive? Our Data Can Help

11/30/17

The debate over active vs. passive management is endless, and it spans many different asset classes and investment styles. And for an issue that seems to involve cold, hard math, the discussion can get subjective and even passionate.(Estimated reading time:...

Tax Reform and the Muni Bond Market

11/29/17

The House passed its tax reform bill and the Senate is slated to vote on its version as early as this week. Importantly, both versions preserve the tax exemption of municipal bonds. There are common features as well as differences...

Diversification: Where’s My Free Lunch?

11/21/17

Much of asset allocation work rests on the back of modern portfolio theory, which asserts that diversification stands as the lone “free lunch” offered up by the market gods. But in reality, the ascent of target date funds (largely built...

The Rise of Infrastructure Debt Investments

11/20/17

Infrastructure can be broadly described as facilitating the movement of people, goods, and ideas, and it is essential for the economic productivity of a society. Infrastructure assets include regulated utilities, transportation assets, energy assets, communication assets, and social infrastructure.(Estimated reading...

On Charitable Giving

11/16/17

It’s been said that 80% of life is just showing up. While real life is certainly more complicated than that, showing up is actually what most charitable organizations value most. Showing up demonstrates that you care about what the institution...

Investment Management Fee Survey (2017)

11/15/17

Callan conducted a survey of institutional investors to offer insights regarding the fees paid for investment management services. This is the seventh installment of our Investment Management Fee Survey, and 2016 marks the 30-year anniversary of the original publication.The...

PE Market Sees ‘Golden Era’

11/14/17

Low volatility and gently rising markets fostered ongoing “Golden Era” conditions in the private equity market. Fundraising is on pace to best last year’s post-GFC high; buyout and venture investments slowed slightly but dollar volume remained healthy.(Estimated reading time: 1...

Best Location for Real Estate? Europe

11/13/17

The NCREIF Property Index advanced 1.7% during the third quarter (1.1% from income and 0.6% from appreciation). This marked the 35th consecutive quarter of positive returns for the Index. In the second quarter, appreciation return increased from the first quarter, ...

Kickin’ It with Risk

11/09/17

As MAD magazine’s Alfred E. Neuman proclaims, “What, Me Worry?” In the third quarter, global markets fully embraced that fearless mantra. And why not? Discarding past worries of stubbornly slow economic growth and other trifling distractions, markets focused on positive...

Managing Risk While Hunting for Returns

11/08/17

Low interest rates and low return expectations continued to drive strategic allocation discussions for fund sponsors. Many felt compelled to take on market risk to reach return targets. Sponsors are now examining if there is anything they can do to...

Why So Sad?

11/06/17

The disconnect sharpened in the third quarter of 2017 between the state of the underlying economy, which is pretty good, and sentiment, which is not so good, teetering on downright gloomy.(Estimated reading time: 3 min 34 sec)Geopolitical upheaval across the...

Healthy Risk Appetite Drove Global Fixed Income Yields

10/30/17

Global fixed income markets generally performed well in the third quarter. Moderate growth and inflation kept long-term rates low and range bound in the U.S. Rates were also low outside the U.S., but dollar weakness boosted returns.(Estimated reading time: 1...

Up, Up, Up, and Away for Global Equities

10/26/17

With volatility extremely low and the global economy humming along, equity markets around the world continued their steady march upward in the third quarter, part of what has been dubbed the “everything rally” as bonds and commodities have also done...

The Power of Savings

10/24/17

While the institutional investing industry spends enormous time and effort on the details of glide path design for target date funds in defined contribution plans to improve retirement for participants, it might be as important to revisit the role savings...

Perspectives on the Global Economy

10/23/17

The recent Annual Meetings of the International Monetary Fund and World Bank Group, which I attended along with thousands of global fixed income investors, policymakers from governments issuing debt, economists, and other market participants, offered a wealth of...

Happy Anniversary, Black Monday

10/19/17

The U.S. stock market reached a new high today, with the Dow cresting 23, 163 while the S&P 500 hit 2, 562. Thirty years ago today, on October 19, 1987, the U.S. stock market shook the global financial system to...

Callan Survey Unearths DC Governance Committee Productivity Hacks

10/10/17

The governance committees that oversee defined contribution (DC) plans have a lot on their plate, and knowing how to make the most efficient use of the resources at their disposal is not always apparent. Effective governance of the DC plan...

Uncertainty Beyond the Next Eclipse

10/10/17

On August 21, 2017, a total solar eclipse swept across America. This rare celestial event involved no uncertainty, so everyone was prepared for it. In ancient times, though, civilizations that could not understand the true nature of eclipses reacted in...

Thoughts on Relevance

10/09/17

Staying competitive in our industry is critical for all of us, but it is becoming more challenging. We are all well aware of the many issues our industry faces. However, from my perspective as a 40+ year industry veteran, it...

The Private Debt Pie

10/04/17

As institutional investors consider adding private debt to their portfolios, Callan’s Jay Kloepfer, executive vice president and the director of Capital Markets Research; and Jay Nayak, senior vice president in our Private Equity Research group, prepared answers to some high-level...

Latest on the Private Markets

09/29/17

The private equity markets kept up their robust pace of fundraising in the second quarter. Buyouts continue to be the top strategy for limited partners, receiving more than 70% of commitments.(Estimated reading time: 1 min 15 sec)Among the quarter’s other...

Our Nuclear Decommissioning Funding Study

09/21/17

Callan’s annual Nuclear Decommissioning Funding Study offers key insights into the status of nuclear decommissioning funding in the U.S. to make peer comparisons more accurate and rel­evant. The 2017 study covers 27 investor-owned and 27 public power utilities with an...

Callan DC Index Off to a Strong Start

09/19/17

We recently published the latest data for the Callan DC Index™ , which tracks performance, asset allocation, and cash flows of over 90 large defined contribution plans representing approximately $150 billion in assets.(Estimated reading time: 1 min 33 sec)Highlights for the...

What We’re Seeing From Manager Searches

09/15/17

Callan recently examined the trends we have seen in manager searches since 2012. Here are the highlights of our findings:(Estimated reading time: 3 min 15 sec) Non-U.S. and global equity searches are increasing while U.S. equity searches are declining Low...

Celebrating 30 Years of the Global Investment Performance Standards (GIPS)

09/14/17

A look back at the history of the CFA Institute Performance Presentation Standards: an industry game changer.Estimated reading time: 3 min, 26 secManager performance composites weren’t always a useful tool to assess historical manager performance. Prior to the mid-1980s, reporting...

Private Equity Survey (2017)

09/13/17

Callan conducted a survey of institutional private equity investors to offer insights relevant to the limited partner community. We focused on deployment models, patterns of investment and commitment activities over time, governance and oversight, staffing and resources, and responsibilities for...

Jan Mende in Pensions and Investments: Infrastructure

08/28/17

Callan's Jan Mende recently appeared in the Pensions and Investments roundtable feature, \"What Does the Future Hold for Infrastructure Investing?\" The article covers a wide-ranging set of topics of interest to infrastructure investors—one of Jan's Q&As is...

Conference Highlights: NASRA

08/21/17

JJ Milder and Brady OConnell recently attended the National Association of State Retirement Administrators (NASRA) conference in Baltimore. NASRA seeks to gather senior leaders and trustees from large public pension plans to improve education and information sharing.Estimated reading time:...

The Evolution of Target Date Funds

08/17/17

The defined contribution (DC) industry has devoted tremendous amounts of time and effort to improve the likelihood of successful retirement outcomes. But much like the ancient Roman goddess Fortuna capriciously interfering in the lives of mortals, random economic and market...

Why Is Inflation So Low?

08/16/17

We are now eight years into the economic recovery in the U.S., arguably the latter stages of a mature expansion and at a point where inflationary pressures typically begin to build. Yet price and wage inflation remain stubbornly subdued.(Estimated reading...

A Small Bounceback for Real Estate

08/15/17

The NCREIF Property Index advanced 1.8% during the second quarter (1.2% from income and 0.6% from appreciation). This marked the 34th consecutive quarter of positive returns for the Index. Appreciation return increased from the previous quarter, the first such gain...

Expectations and Diversification

08/14/17

The Capital Markets Research Group conducts strategic planning projects, education sessions and general research for our clients. The Group’s discussions are often very big picture--in what should we invest, and why? These discussions are on the front end of potential...

Many Funds Risk Up for Returns

08/09/17

Fund sponsors are beginning to come to grips with lower capital market return expectations. Pension funds are reducing actuarial return assumptions, and endowments and foundations are discussing and making adjustments to spending rules. Some funds are addressing this issue by...

As the World Churns, Despacito

08/08/17

Stock lovers embraced the slowly shifting narrative of global growth in the second quarter. Although hopes of a Trump bump faded further in the U.S. amid distracting Beltway theatrics, U.S. corporate profits remained resilient and credit spreads tightened modestly. Exhibiting...

Are We Ready to Fund Retirement from DC Plans?

08/07/17

DC plans have been focused on the accumulation of assets for retirement, and the DC industry has spent considerable effort to improve investment offerings, control costs, encourage participation, and streamline the technology of the participant’s interaction with the plan. But...

Conference Highlights: ConsortiumEAST 2017

08/04/17

I recently attended ConsortiumEAST 2017: Connecting Institutional Investors, Emerging and Diverse Managers in New York, organized by RG and Associates.(Estimated reading time: 2 min)This well-organized event featured sessions including the following:Fireside Chat – Doing Away with GroupthinkKey takeaways included:The philosophy...

In Context: Markets in Financial Instruments Directive (MiFID) II

08/03/17

Over the last year, Callan has been fielding questions from both asset owners and asset managers regarding MiFID II. There is certainly some confusion among US-based asset owners utilizing Europe-based money managers (and/or US-based money managers with operations and portfolio...

Conference Highlights: National Association of Securities Professionals (NASP)

08/01/17

Callan recently presented at the 28th Annual Pension and Financial Services Conference hosted by the National Association of Securities Professionals (NASP) in Los Angeles. In attendance were about 560 people, of which approximately 160 were plan sponsors.On day one of...

How Index Changes May Affect Investors

08/01/17

UPDATED: After consulting with index users and other parties, FTSE Russell recently announced that it would exclude some securities issued by companies with unequal voting rights from its indices, following its decision to exclude shares of Snap, the popular social...

Hunt for Yield Drove Bonds in 2nd Quarter

07/28/17

In the United States, fixed income investors continued to hunt for yield in this low-interest rate environment, while non-U.S. bonds benefited from a weaker U.S. dollar. Emerging market bonds also benefited from both the hunt for yield and the dollar's...

Equities Up Around the World in 2nd Quarter

07/27/17

Spurred in part by recovery in Europe, non-U.S. equity markets outperformed U.S. stocks, and emerging markets topped developed markets. The Russell 3000 rose 3.0%, while the MSCI ACWI ex USA Index climbed 5.8%.U.S. Stocks: Shocks, but No SlowingDespite an increase...

8 Tips for DC Plan Sponsors to Avoid Fiduciary Traps

07/20/17

Defined contribution (DC) plan sponsors often worry about landing in hot water for doing the wrong thing. However, many fiduciary issues crop up because plan sponsors have failed to take action. Here, we list eight potential fiduciary traps and suggest...

So What the Heck Is SUBICO?

07/17/17

Callan is committed to original, path-breaking research to help educate the financial industry and serve our clients. That commitment began with the firm’s founding and continues today with a research operation that spans every major asset class and investing strategy.(Estimated...

Strong Start for Private Equity

07/13/17

The private equity market got off to a roaring start in the first quarter of 2017, with new commitments up sharply compared to last year.(Estimated reading time: 2 min 42 sec)Here are some highlights from Callan’s Spring Private Markets...

The Rewards of Private Equity’s ‘Unrewarded’ Risks

07/12/17

For many portfolios and asset allocation studies, private equity plays a starring role because it boasts high projected returns and low enough expected correlations that mathematical models such as mean variance optimization love it. But private equity is not magic.(Estimated...

New Feature: A Monthly Periodic Table

07/11/17

Callan has long used our Periodic Table of Investment Returns to highlight for clients and other institutional investors the advantages of diversification over the long haul. The table ranks asset classes by performance over various time periods, and over...

Over-Inflated? PCE vs. CPI

07/06/17

Because of its extraordinary response to the Global Financial Crisis, investors scrutinize the actions of the Federal Open Market Committee (FOMC) more than ever. Since 2000, the Fed’s preferred measure to set its 2% target rate for inflation has been...

Thoughts on ESG Investing

06/27/17

I recently participated in a panel discussion at an ESG Investing Breakfast Briefing in San Francisco presented by Pensions and Investments. The panel was preceded by two interesting presentations on environmental, social, and governance (ESG) issues.(Estimated reading time: 3...

How DTS Helps Us Evaluate Bonds

06/26/17

Evaluating bonds and fixed income portfolios can be complex and challenging, and to help make that process easier I developed a way for Callan to use a metric developed by practitioners called DTS, or duration times spread, which measures systematic...

Managing DC Plan Vendors

06/19/17

For defined contribution (DC) plans, managing recordkeepers can be daunting. In the latest edition of the DC Observer,  Callan's Jamie McAllister and Jana Steele outline ways to make this vital oversight process easier.(Estimated reading time: 3 min 0 sec)One...

DC Index, 1st Quarter 2017

06/14/17

We recently published our latest data for the Callan DC Index™ , which tracks performance, asset allocation, and cash flows of over 90 large defined contribution plans representing approximately $150 billion in assets.(Estimated reading time: 1 min, 17 sec)Highlights...

The Politics of Investing

06/12/17

While it can be risky to directly correlate political developments with market movements, a look at some aspects of the current political landscape merits investor consideration. In this blog post I will discuss the various policies under consideration by the...

Open Protocol: Comparing Apples to Apples

06/06/17

Evaluating the risks of a large cap value portfolio against those of another has long been a relatively easy exercise for investors. However, evaluating the risks of an absolute return-oriented risk premia fund versus those of a relative value multi-strategy...

About Our Revamped Target Date Index

06/05/17

With target date funds (TDFs) now accounting for nearly 30% of the average defined contribution plan’s assets, understanding their performance, fees, and asset allocations is more important than ever.(Estimated reading time: 2 min 37 sec)That’s why Callan has improved our quarterly...

Bear Market Ahead? Beware of the ‘False Charge’

06/02/17

When I was a Boy Scout backpacking in the Sierras, my troop assigned shifts of scouts at night to watch for marauding bears on the perimeter. To scare them off, the sentry clanged a pot or made some raucous noise....

Completion Managers: An Overview

06/01/17

The pension plan environment is fraught with complexities as increasing regulation and rising costs force plan sponsors to evaluate an array of risks to meet their pension obligations.Estimated reading time: 2 min, 30 secMany plan sponsors have taken the first...

First Quarter GDP: Hitch in Our Git-Along?

05/22/17

For the fourth year in a row, reported GDP growth disappointed in the first quarter, coming in at just 0.7%, down from a 2.1% rate in the fourth quarter and the weakest rate in three years.(Estimated reading time: 3 min...

More than Words: The Asset Manager Code of Professional Conduct

05/21/17

The perception and validation of ethical standards in investment professionals builds client trust in an advisor and strengthens the resolve to stay the course when the advisor’s strategy is out of favor.(Estimated reading time: 2 min, 15 sec)If you think...

Dollops of Alpha with Beta

05/18/17

Behold the power of positive thinking. The U.S. economy moved steadily forward with revived animal spirits in the first quarter. That provided the Fed the ammunition to raise short-term rates by 25 basis points, with more increases expected in the...

No Homefield Advantage for Fund Sponsors

05/17/17

A post-election rally, higher interest rates, and political uncertainty in Europe and Asia left global markets unfazed as stocks and bonds rallied. Both U.S. and non-U.S. stocks delivered stellar returns in the first three months of 2017. That put some...

New Year, New Lows for Real Estate

05/17/17

The NCREIF Property Index advanced 1.55% during the first quarter (1.15% from income and 0.40% from appreciation). This was the lowest return since 2010, eclipsing the fourth quarter’s mark of 1.73%. Appreciation fell for the eighth consecutive quarter and made...

Private Equity on a Roll

05/16/17

New private equity partnership commitments totaled $80.0 billion in the first quarter, with 310 new partnerships formed, according to preliminary data from Private Equity Analyst. The number of partnerships jumped 75% from 177 in the first quarter of 2016, and...

The Hedge Fund Edge: Still Sharp or Too Dull?

05/12/17

Why should investors bother with hedge funds? The original proposition behind them was their promise of differentiated performance: better risk-adjusted returns with a lower correlation to traditional capital markets. However, recent history suggests that the current generation of hedge funds lacks...

U.S. Fixed Income: Up, Up, and Away

05/09/17

During the first quarter, the U.S. bond market generated positive returns across the board due in part to strong economic data and upbeat investors. U.S. fourth quarter GDP grew at an annualized rate of 2.1%, consumer spending rose 3.5%, and...

Correlation: At the Heart of Smart Beta

05/08/17

Like all great relationships, my interest in 'smart beta' started with correlation. This often-ignored member of Markowitz’s troika is usually overshadowed by return and risk estimates. Cocktail party banter is full of references to attractive returns or the pitfalls of...

Non-U.S. Fixed Income: Separation Anxiety

05/05/17

Sovereign debt performed well in the first quarter amid political uncertainty about the future of the European Union (EU). Emerging market debt outperformed developed market debt for the third straight quarter as the JPM GBI-EM Global Diversified Index advanced 6.50%...

2017 National Conference: On Challenges for Institutional Investors

05/03/17

Callan’s 37th annual National Conference drew a range of high-profile speakers. This final post recaps their views on the array of challenges institutional investors face; previous ones appear here, here, and here.(Estimated reading time: 2 min 30 sec)Ben...

No-Nonsense Guide to White Label Funds

04/28/17

“White label” funds are investment structures built using a mix of underlying funds to provide a simple but rich multi-manager exposure to an asset class. Their intuitive labeling (i.e., “Company XYZ Small Cap Fund”) is designed to help participants easily...

DCIIA Public Policy Forum Highlights

04/27/17

Lori Lucas, CFA, and James Veneruso, CFA, CAIA, recently attended the annual Defined Contribution Institutional Investment Association (DCIIA) Public Policy Forum in Washington, DC. Here are some notes and observations from the event. (Lori is the DCIIA Chair.) The DCIIA...

What We Are Seeing: Insights From Capital Markets Research

04/25/17

The Capital Markets Research Group conducts strategic planning projects, education sessions, and general research for our clients. Recent discussions have been prompted by the low interest rate environment, low return expectations, and investor frustration with the seemingly high cost of...

Non-U.S. Equity: Profits Trump Populism

04/24/17

A flurry of political skirmishes and uneven growth in Asia failed to deter non-U.S. equity investors, and the “risk-on” theme of last year continued into 2017. The weak U.S. dollar also bolstered overseas returns for U.S. investors.(Estimated reading time: 2...

In Context: Credit Lines and Private Equity

04/23/17

I recently read a Bloomberg article titled, “Buyout Firms Are Magically -- and Legally -- Pumping Up Returns.” It is about vehicle-level leverage creeping into the private equity business. Here, I share some related thoughts for consideration.Early on, limited...

U.S. Equity: Steady as She Goes

04/20/17

Despite concerns over the Trump administration’s ability to follow through on promises of lower taxes and decreased regulation, the market accelerated higher in the first quarter.(Estimated reading time: 2 min 27 sec)The S&P 500 Index hit a peak (2, 396) in March...

Book Review: Black Edge

04/17/17

Book Review of Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street, by Sheelah KolhatkarIn the spirit of Den of Thieves, James B. Stewart’s classic book about the insider trading...

Sanguine Sentiment Fuels Risk-on Rally in Q1 2017

04/14/17

The risk-on theme persisted through the first quarter as improving economic data trumped elevated geopolitical uncertainty, both in the U.S. and abroad. Economies in the U.S. and Europe continued to gain traction and the U.S. entered its 93rd month of...

Top 10 Tips for Investment Committees

04/13/17

Investment committees face complex challenges overseeing institutional investment funds. They must navigate myriad laws and regulations, select the right managers and strategies, monitor their portfolios, and ensure their funds can deliver the returns needed for their beneficiaries.(Estimated reading time: 2...

2017 National Conference: On the Future and Perfect Capitalism

04/12/17

Callan’s 37th annual National Conference drew a range of high-profile speakers. This post and others (previous ones here and here) will recap their views on key economic and geopolitical issues.(Estimated reading time: 2 min 39 sec)Dr. Michio Kaku, a...

Risk Parity: A Primer

04/05/17

I recently wrote an article on risk parity for a CFA Institute publication on multi-asset-class strategies.  This excerpt from that article covers all the basics and should put you well on the path to risk parity expertise.(Estimated reading time 3...

In Context: Global Small Cap Equity

04/04/17

In small cap investing (U.S., international, emerging market, and global small cap) there are exploitable inefficiencies that are less available in large cap. Read on to learn more about some of the opportunities and challenges in this space.(Estimated reading time:...

2017 National Conference: On Long-Term Financial and Economic Trends

04/03/17

Callan’s 37th annual National Conference in January drew a range of high-profile speakers who touched on a diverse slate of topics in their talks for the more than 500 attendees, which included plan fiduciaries, chief investment officers, and investment managers.This...

Creating Our Real Estate Indicators

03/30/17

Our Real Estate Indicators,  which attempt to provide insight about the commercial real estate market cycle, play a vital role in our conversations with clients and our approach to investing in this asset class.(Estimated reading time: 1 min 12 sec)In...

Private Real Estate Debt and Middle Market Direct Lending

03/27/17

Private debt offers an attractive opportunity for some institutional investors in this challenging financial environment, as they confront low yields today yet need to bolster their portfolios against the impact of rising rates.(Estimated reading time: 1 min 19 sec).At Callan's 2017...

2017 National Conference: On the Rising Opposition to Globalization

03/27/17

Callan’s 37th annual National Conference drew a range of high-profile speakers who touched on a diverse slate of topics in their talks for the more than 500 people who attended this year’s event. This post and ones later will recap...

In Context: Market Volatility

03/22/17

Yesterday, equity market volatility touched off a host of headlines and commentary. Here, we present a longer-term context around market volatility.Estimated reading time: 2 min, 19 secMarket volatility can be measured in a number of ways. We address three in...

Private Equity Activity Trended Downward in 2016

03/22/17

In the Winter edition of Private Markets Trends, I discuss the major themes of 2016 and the outlook for this year and beyond.Last year company investments and exits trended downward for both buyouts and venture capital, compared to 2015....

DC Index, 4th Quarter 2016

03/16/17

The Callan DC Index™ ended 2016 with a return of 7.99%, its best year since 2013. The Index reflects the performance, asset allocation, and cash flows of more than 90 large defined contribution (DC) plans representing approximately $150 billion in...

(No) News at 11:00 – Fed Raises Interest Rates

03/16/17

Yesterday, the Federal Reserve raised short-term interest rates in the U.S. by 25 basis points, or one-quarter of a percent. Fed Chair Janet Yellen said, “the simple message is that the economy is doing well.”Estimated reading time: 3 min 18...

Style Factors: A Primer

03/15/17

The popularity of investing using risk factors has increased since first studied by academics in the 1970s. Today, asset owners, fund managers, and academics are exploring how to use factor concepts within their portfolios and products.(Estimated reading time: 4 minutes, ...

Alternative Facts and the Evolving Role of Hedge Funds

03/14/17

Hedge funds have faced a difficult stretch, underperforming less-expensive alternatives for years. However, as lightly regulated managers with few investment constraints, hedge funds have a distinct advantage over traditional investments such as mutual funds.For this quarter’s Fiduciary Perspectives essay, ...

Fixed Income Observations

03/07/17

How are investors responding to the prospect of rising rates? Here's a look at plan sponsors' reactions and some potential enhancements to the fixed income structure.Estimated time to read: One minutePublic funds, endowments, foundations, and Taft-Hartley plans have all steadily...

DC Plans and Investment Policy Statements

03/02/17

Yogi Berra’s wisdom is particularly apt for investment policy statements (IPS): On the one hand, an investment committee that tries to manage its DC plan without an IPS is apt to lose...

Capital Market Projections 2017

03/02/17

Each year, Callan develops long-term capital market projections, detailing expected return, standard deviation, and correlations for major asset classes. These projections are the cornerstone for strategic planning.(Estimated reading time for this post: 1 min 45 sec)From co-authors James Van Heuit and John...

ESG Continues to Climb

02/24/17

For the fourth straight year, Callan’s survey to assess the status of environ­mental, social, and governance (ESG) factor integration reveals increasing traction among U.S. investors.(Estimated reading time: 1 min, 40 sec)ESG investing—including responsible and sustainable investment strategies and socially...

Periodic Table of Investment Returns

02/23/17

One glance at the crazy quilt of colors in the Periodic Table of Investment Returns suggests the challenge investors face in picking an investment class “winner” year-by-year and illustrates the benefit to diversification.

2017 DC Trends Survey

02/07/17

Our 10th annual Defined Contribution Trends Survey reveals that fees are playing a heightened role in driving plan sponsor decision-making. Reviewing plan fees was cited as a key area of fiduciary focus, both now and for the foreseeable future.(Estimated reading...

Saving Public Defined Benefit Plans: Talking Points

01/31/17

The funded status of public employee defined benefit (DB) retirement plans continues to garner great debate in the industry and press. DB plans are the primary vehicle for ensuring retirement income security for public workers, and Callan believes these plans...

Built to Last: Strategic guidance for effective investment committees

01/24/17

In this paper, authors Elizabeth Hood, CFA, and Cody Chapman, CFA, CAIA, offer advice in areas including committee membership, investment policy statements, review processes, and fiduciary training and ongoing education.Key points include: Investment committees are increasingly essential to the success...

Risky Business

01/17/17

Interest rates are historically low in the U.S. and abroad. Couple this with modest growth, and fund sponsors reluctant to lower return expectations face one of the most difficult investing environments in history.To find out how difficult, our experts wondered, ...

Ethical Mindfulness

01/10/17

Studies show that the key to ethical behavior is to keep promoting, discussing, and practicing ethical principles. Here, we present eight important points on ethics:Implementing high ethical standards in the investment industry is not only the right thing to do, ...

2016 Cost of Doing Business Survey: U.S. Funds and Trusts

01/03/17

Managing the costs associated with running a fund or trust is paramount to the success of the fund, and it is also a primary fiduciary responsibility of those who oversee pensions, endowments, foundations, and other asset pools. (Estimated reading time for...