March 2020: U.S. Monthly Pension Monitor

Rising discount rates offset the impact of asset losses

Despite a drop in equities, credit spread widening led to improved funding ratios over the month

  • Average funded status was up by 3.5% over the month – assets declined by 5.3%, offset by a 9.1% decrease in liabilities
  • Equities plunged over the month of March – the S&P 500 fell by 12.4% while the MSCI AW ex-U.S. declined 14.4%.
Market Watch Dec 2018 Dec 2019 Feb 2020 Mar 2020
Funded Status 87% 89% 82% 86%
CITI Discount Rate 4.22% 3.12% 2.76% 3.22%
Long Credit Yield1 4.89% 3.63% 3.22% 3.91%
U.S. 30Y TSY Yield 3.02% 2.38% 1.67% 1.35%
S&P 500 2,507 3,231 2,954 2,585
  • The yield on the Bloomberg Barclays Long Credit Index surged by 69 basis points – driven by a 106 basis points widening of long IG credit spreads which offset declining treasury yields. The U.S. 10-year Treasury yield was down 42 basis points over the month.
  • Within IG credit, spreads reached their widest trading levels since May 2009 – peaking at 341 basis points on March 23. Fed intervention and improved price discovery helped tame the credit markets over the last six trading days with spreads compressing to 255 basis points by the month end.

Significant spread widening offset declining treasury yields

Chart 1

Spotlight: TALF 2020

  • On March 23, 2020, in an effort to re-energize the credit markets, the Fed established the Term Asset-Backed Securities Loan Facility (TALF)
  • The TALF was previously launched in 2009 during the last financial crisis to help support the flow of credit to consumers and businesses. The program was a success in helping capital markets return to normal
  • Investors in the TALF 2009 program experienced strong returns with early participants typically benefiting most as spreads tightened in line with the roll-out of the program
  • SLC Management will be participating in TALF 2020 as we did in 2009. We believe that the TALF 2020 program provides a similar opportunity for investors to achieve attractive risk-adjusted investment returns. However, investors may need to move quickly. The window to access this program is short with an expected launch date in May

Milliman Pension Funding Index

Chart 2

1 Bloomberg Barclays Long Credit Index
2 TALF 2009 was offered by Ryan Labs Asset Management which recently merged into Sun Life Capital Management (U.S.) LLC.

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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.

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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.

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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.