Defined benefit pension funds have the highest aggregate funding ratio (FR) we’ve seen in years, with some large pension funds being more than 100% funded. In the past, a pension fund with a healthy FR would start thinking about defending its gains by re-allocating some of its assets from stocks to bonds, a de-risking strategy called liability-driven investing, but this assumes that interest rates are equally likely to rise or fall.
With interest rates only slightly above their historic lows and the Fed planning to hike policy rates sometime in 2015, it makes sense to plan on