March 2021: U.S. Monthly Pension Monitor

Rise in discount rates increased funded status by 3%

March Market Summary

  • Average funded status was up by 3% in March: Assets returned 0.4% while an increase in discount rates reduced liabilities by 3%.
  • The yield on the Bloomberg Barclays Long Credit Index increased 22 basis points (bps): Despite credit spreads rallying 7 bps in March, a 29 bps rise in long end Treasury yields pushed the index yield up to 3.45%, its highest trading level in roughly a year¹. 
Market Watch Dec 2019 Dec 2020 Feb 2021 Mar 2021
Funded status 90% 90% 95% 98%
CITI discount rate2 3.01% 2.23% 2.70% 2.94%
Long Credit yield2 3.63% 2.78% 3.23% 3.45%
U.S. 30Y TSY yield 2.39% 1.64% 2.15% 2.41%
S&P 500 3,231 3,756 3,811 3,973
  • The yield curve continues to steepen: The 2 year Treasury yield ticked up a modest 3 bps, while 10 and 30 year yields rose by 34 and 26 bps, respectively. The 2s10s spread now sits at 158 bps, its widest level since July of 2015. 
  • Investment grade corporate supply posted its strongest month since June of 2020, totaling $158B: Robust corporate issuance may be an indication corporations are rushing to lock in low debt financing as rising rates and higher borrowing costs could be on the horizon. 

Long credit spreads vs. long Treasury yields

Spotlight: The great re-opening 

  • March Non-Farm Payrolls came in at 916K, far exceeding the expected figure of 647K and a significant increase over the 468K figure from February.
    • This can be attributed to the continued reopening of the economy, as the vaccine rollout has been faster than expected. Single day dosage administration now exceeds 4MM/day and 7-day average deaths from Covid-19 now sits at fewer than 1K/day, far below the ~3.3K/day figures we saw in January.
  • The rebound has resulted in strong equity market performance and supply chain constraints that have pushed commodity prices to multi-year highs.
    • Prices of copper, iron and lumber are all at 7-year highs. As travel resumes and the TSA passenger count climbs to its highest in 12 months, WTI rebounded to ~$60.
    • Inflation concerns have also been reflected in real yields, as the 10-yearTreasury has increased 83 bps since the start of the year and now sits at 1.6% as of March 31st. Real rates now sit at -0.6% versus -1.1% at the end of 2020.
  • As pension funded status is pushed higher by strong equity performance and higher yields driven by inflation, plan sponsors should ensure they have plans in place to rebalance when yield or funded status targets are met, as market conditions could change quickly.
    • For sponsors concerned with the continuation of tight long end spreads, alternatives such as private credit could provide additional yield.
    • Sponsors should consider working with managers that have derivative capabilities to develop implementation plans to shift exposures/allocations efficiently.

Milliman Pension Funding Index

¹Data from reference Bloomberg Barclays Indices. Issuance data sourced from SIFMA.

²The CITI discount rate corresponds to the FTSE short pension liability index. The Long Credit yield corresponds to the Bloomberg Barclays Long Credit 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.