June 2020: U.S. Monthly Pension Monitor

Discount rates fall, funded status remains unchanged

Positive asset returns offset by further decline in discount rates

  • Average funded status was down by 0.1% over the month — Assets returned 1.66%, offset by a 1.73% increase in liabilities.
  • Equities continued to rebound from March lows — The S&P 500 rose another 1.8% while the MSCI ACWI ex-U.S. increased 4.3%.
Market Watch Dec 2018 Dec 2019 May 2020 June 2020
Funded Status1 87% 90% 84% 84%
CITI Discount Rate2 4.05% 3.01% 2.46% 2.38%
Long Credit Yield2 4.89% 3.63% 3.31% 3.16%
U.S. 30Y TSY Yield 3.02% 2.38% 1.41% 1.41%
S&P 500 2,507 3,231 3,044 3,100
  • The yield on the Bloomberg Barclays Long Credit Index declined by 15 basis points (bps) – a 16 bps tightening of long credit spreads drove the yield down while the 30Y Treasury yield remained unchanged at 1.41%.
  • Within IG credit, spreads continued to narrow — IG credit markets continue to tighten from the March wides, finishing June at 142 bps, a 22 bps decline month-over-month.
  • Continued demand for U.S. corporate debt – U.S. high yield corporate bond issuance set a new monthly record of $52BN in June, greatly exceeding the previous record of $41BN.

Long credit spreads vs. long Treasury yields

Spotlight: Corporate bond purchase by the Federal Reserve

  • In March, the Fed announced support for the corporate bond market via a variety of programs, including lending directly to investment grade companies, purchasing investment grade corporate bonds in the secondary market, and purchasing investment grade ETFs.
    • The market reacted positively to the announcement, despite the Fed’s minimal participation in the corporate bond markets at that stage.
  • In May, the Fed began broad market based purchases via investment grade bond ETFs, which provided more flexibility by bypassing the certification process in the CARES Act. This was followed in June with the purchase of individual bonds on the secondary market, though this accounted for less than 1% of the daily trading volume.
  • The purchase program has been largely focused on shorter duration bonds and is based on a custom index with a maximum maturity of 5 years. While direct purchases of long dated corporate bonds have been limited, the Fed’s support for corporate credit has been positive for long credit overall as it boosted both investor confidence and market liquidity.
  • For LDI investors in particular, the program has provided a boost. Improved investor sentiment provided support for BBB-rated issues that outperformed higher quality long AA-rated benchmarks over the month by 1.5%2.

Milliman Pension Funding Index

¹The CITI discount rate corresponds to the FTSE short pension liability index. The Long Credit yield corresponds to the Bloomberg Barclays Long Credit Index.
²Source: Barclays Live. Long AA U.S. Corporate Index vs. Long BBB Corporate Index.

About SLC Management

SLC Management is the brand name for the institutional asset management business of Sun Life Financial Inc. (“Sun Life”) under which Sun Life Capital Management (U.S.) LLC in the United States, and Sun Life Capital Management (Canada) Inc. in Canada operate.

Sun Life Capital Management (Canada) Inc. is a Canadian registered portfolio manager, investment fund manager, exempt market dealer and in Ontario, a commodity trading manager. Sun Life Capital Management (U.S.) LLC is registered with the U.S. Securities and Exchange Commission as an investment adviser and is also a Commodity Trading Advisor and Commodity Pool Operator registered with the Commodity Futures Trading Commission under the Commodity Exchange Act and Members of the National Futures Association.

BentallGreenOak, InfraRed Capital Partners (InfraRed), Crescent Capital Group (Crescent), and Advisors Asset Management are also part of SLC Management.

BentallGreenOak is a global real estate investment management advisor and a provider of real estate services. In the U.S., real estate mandates are offered by BentallGreenOak (U.S.) Limited Partnership, who is registered with the SEC as an investment adviser, or Sun Life Institutional Distributors (U.S.) LLC, an SEC registered broker-dealer and a member of the Financial Industry Regulatory Authority (“FINRA”) . In Canada, real estate mandates are offered by BentallGreenOak (Canada) Limited Partnership, BGO Capital (Canada) Inc. or Sun Life Capital Management (Canada) Inc. BGO Capital (Canada) Inc. is a Canadian registered portfolio manager and exempt market dealer and is registered as an investment fund manager in British Columbia, Ontario and Quebec.

InfraRed Capital Partners is an international investment manager focused on infrastructure. Operating worldwide, InfraRed manages equity capital in multiple private and listed funds, primarily for institutional investors across the globe. InfraRed Capital Partners Ltd. is authorized and regulated in the UK by the Financial Conduct Authority.

Crescent Capital Group is a global alternative credit investment asset manager registered with the U.S. Securities and Exchange Commission as an investment adviser. Crescent provides private credit financing (including senior, unitranche and junior debt) to middle-market companies in the U.S. and Europe, and invests in high-yield bonds and broadly syndicated loans.

Securities will only be offered and sold in compliance with applicable securities laws.

AAM is an independent U.S. retail distribution firm that provides a range of solutions and products to financial advisors at wirehouses, registered investment advisors and independent broker-dealers.

Website content

The content of this website is intended for institutional investors only. It is not for retail use or distribution to individual investors. All investments involve risk including the possible loss of capital. All asset classes have associated risks. Certain asset classes are speculative, can include a high degree of risk and are suitable only for long-term investment. Further information available upon request. This website is for informational and educational purposes only. Past performance is not a guarantee of future results.

The information contained in this website is not intended to provide specific financial, tax, investment, insurance, legal or accounting advice and should not be relied upon and does not constitute a specific offer to buy and/or sell securities, insurance or investment services. Investors should consult with their professional advisors before acting upon any information contained on this website. The assets under management (AUM) represent the combined AUM of Sun Life Capital Management (Canada) Inc., Sun Life Capital Management (U.S) LLC, BentallGreenOak, Crescent Capital Group, InfraRed Capital Partners, and Advisors Asset Management.

AUM as of March 31, 2025. Total firm AUM includes approximately $8B in cash, other, unfunded commitments, and Advisors Asset Management equity. Total firm AUM excludes $11 billion in assets under administration by AAM.

Currency conversion rate: USD $1.00 CAD $1.4387 as of March 31, 2025.

SLC Management Newsroom: SLC-20221101-2566004

UK Tax Strategy - InfraRed (UK) Holdco 2020 Limited

InfraRed (UK) Holdco 2020 Ltd is the UK holding company of InfraRed Partners LLP and a subsidiary of Sun Life (U.S.) Holdco 2020 Inc, which has its headquarters in the U.S. The company was incorporated to purchase InfraRed Partners LLP and acts solely as a passive holding company. The Tax Strategy for the InfraRed Holdco Group sets out our approach to the management of InfraRed Holdco Group UK tax affairs in supporting business activities in the UK. 

This UK tax strategy is published in accordance with the requirements set out in Schedule 19 of Finance Act 2016. The strategy, which has been approved by the Board of Directors of InfraRed (UK) Holdco 2020 Ltd, is effective for the period ending 31 December 2024. It applies to InfraRed (UK) Holdco 2020 Ltd and its dormant subsidiary Sun Life (UK) Designated Member Ltd, referred to as the “InfraRed Holdco Group”. InfraRed Holdco Group.