November 2021: U.S. Monthly Pension Monitor

Funded status fell 0.8% in November due to a drop in discount rates and selloff in equities

November Market Summary

  • Average funded status decreased by 0.8% to 97.3%: Assets returned -0.2% while a drop in discount rates increased liabilities by 0.6%. ¹
  • U.S. equity markets fell in November: After a nearly 7% S&P 500 return in October, U.S. equities fell -0.8% in November. Year-to-date, the index is up 21.6%.
  • The yield on the Bloomberg Barclays Long Credit Index decreased 1 basis points (bps): Long credit spreads widened 12 bps while the underlying Treasury basis decreased 13 bps. This was the largest month-over-month credit spread widening since March 2020. ¹
Market Watch Dec 2019 Dec 2020 Oct 2021 Nov 2021

Funded status

90%

90%

98%

97%

CITI discount rate²

3.01%

2.23%

2.58%

2.52%

Long Credit yield²

3.63%

2.78%

3.06%

3.05%

U.S. 30Y TSY yield

2.39%

1.64%

1.93%

1.97%

S&P 500

3,231

3,756

4,605

4,567

Spotlight: Positioning for uncertainty

  • In November, uncertainty over inflation and how the Fed might react caused the curve to flatten significantly. The 5s-30s Treasury curve flattened by 12 bps, ending the month at a spread of just +63 bps. For context, the spread between 5s and 30s reached +163 bps in February of this year.
    • On November 30th, Chairman Powell finally acknowledged that inflation might not be transitory and strongly hinted that tapering might be on the menu sooner than people initially expected.
  • However, this outlook has been muddled by two factors: a slowing Chinese economy & the Covid-19 Omicron variant.
    • Following the fall of China Evergrande, Chinese high yield spreads ballooned from 1250 bps to 1980 bps. As the largest commodities consumer in the world – with approximately 50% of world copper consumption – this led to a drop of over 10% in the S&P GSCI Commodities Index.
    • Uncertainty regarding the potential impact of the Covid-19 Omicron variant caused risk assets to sell off, with the S&P falling from a high of 4,704 in November to 4,567 at the end of the month.
    • Similarly, we saw a 21% fall in oil prices in November. WTI fell from a high of $84/barrel to $66/barrel by month end, easing inflation concerns.
  • This high degree of uncertainty combined with tight spread levels means SLC Management has positioned our portfolios defensively. We are moving up the quality spectrum and maintaining some dry powder to allow for opportunistic purchasing of mispriced assets if we begin to see weakness in the market.

Milliman Pension Funding Index (November Estimate)

¹ Funded Status for the month of November is estimated and subject to change as final numbers are released. Data from reference Bloomberg Indices.

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

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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.