The Wall Street Journal: Treasury Yields Rise Ahead Of Expected Fed Pause
Ahead of the conclusion of June’s Fed meeting and the release of the latest CPI report, NEPC’s Head of Asset Allocation, Phillip Nelson, spoke with The Wall Street Journal about the long-term outlook around consumer price increases and the impact that could have on treasury yields. View the article on The Wall Street Journal’s site here.
Treasury yields bounce back from early declines as the Fed is expected to keep rates unchanged tomorrow after ten consecutive increases. May consumer price data this morning supported the markets’ predominant view that the hiking cycle could take a break this month with a possible final uptick in July. BNP Paribas’ economists say in a note that “persistent stickiness in the core will keep more hawkish Fed officials committed to additional policy tightening in July.” The 10-year yield rises 0.074 percentage point to 3.838% and the two-year gains 0.104 pp to 4.694%, in both cases the highest level since early March.
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The 10-year Treasury yield could move above 4%, NEPC’s Phillip Nelson says. He thinks it is going to take some time for consumer price increases to slow down to a pace the Fed finds satisfactory. Until then, policy rates will remain high, pushing Treasury yields higher as markets adjust. Nelson sees the 10-year “somewhere close to the 4% range.” For most of this year, the benchmark has traded between 3.3% and 4.1% and is at 3.8% today. “Eventually, the long end of the Treasury market has to adjust to higher inflation expectations and so we can see 10-year, 30-year start moving north of 4% and that would be appropriate.”
Click here to continue reading the full Wall Street Journal article.
Pensions & Investments: Social Security's Woes Highlight Need for Holistic Plan
NEPC’s Bill Ryan was featured in a recent Pensions & Investments article which focuses on the uncertain future of Social Security and what plan sponsors can do to prepare participants. View the article on Pensions & Investments’ site here.
Given Social Security’s uncertain future, defined contribution executives say that it’s important for plan sponsors to offer participants holistic retirement planning and encourage additional savings.
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A reduction in Social Security benefits would lead to an increased strain on the defined contribution system, according to Bill Ryan, Chicago-based Partner and Head of Defined Contribution Solutions at NEPC LLC.
In the case of lower benefits, many individuals would need to rely more on their 401(k) plan for retirement income, he said. To do so means that “it’s going to put more pressure on the 401(k) balance, draw down faster, and you could see it depleting sooner,” Mr. Ryan said.
Mr. Ryan called it a “compound effect: Social Security reduces; more money comes out of the 401(k) plan (and) runs out quicker. And so, assuming returns are constant for everyone, the only way to start planning for this is to incrementally save more to backstop that.”
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NEPC’s Mr. Ryan said Social Security needs to be discussed more within the retirement industry, as well, since it “tends not to be (at) the forefront of the participant communications.”
“I think Social Security should get more attention (from) consultants and plan sponsors, especially in light of the attention towards annuities,” Mr. Ryan said. “Social Security is an annuity, and it’s a lower-cost annuity. So it’d be unfortunate if that wealth management strategy was compromised.”
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If Social Security benefits are reduced, “it’s not going to change a person’s need to pay their mortgage, pay their car loan, (or) pay whatever they were planning,” Mr. Ryan said. “That (loss) is going to have to come from other forms of savings like DC, and if we’re not planning for that,” it could cause people budgetary issues.
That’s why Mr. Ryan said “there should be more guidance to encourage faster escalation of savings rates or maybe tax credits for higher matches.”
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Mr. Ryan said delaying the age at which someone takes Social Security is still valuable, but it’s a hard sell.
“If someone were to take it later, it puts less of a strain on the trust,” he said. “And there’s an absolutely incremental value that the participant will actually be able to get more from it, but it’s hard to make that human trade,” and give up immediate money for possible money in the future, especially given the system’s uncertain future.
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Dakota Live! Podcast: Thinking Boldly with Chenae Edwards of NEPC
NEPC’s Chenae Edwards was interviewed by Dakota Live! in their recent podcast to discuss the NEPC manager research process, how clients are maneuvering through the current market environment, and her experience in working with non-profit institutions. Listen to the podcast on Spotify or Apple Podcast.
“Chenae Edwards, Partner with NEPC, LLC shares her investment consulting experience as she discusses the NEPC manager research process, how clients are maneuvering through the current market environment, and her experience in working with non-profit institutions. NEPC is one of the industry’s largest independent, full-service investment consulting firms, serving more than 400 clients with over $1.4 trillion in assets under advisement. With over 350 employees and over 400 clients across channel, NEPC’s five distinct practices and eight regional offices make it one of the more important consultants in the industry. Learn more about what has made NEPC so successful over the years, and how Chenae and her colleagues research and select their investment management partners.”
PlanSponsor: Robust Retirement Tiers Can Help Keep Participants In-Plan
NEPC’s Bill Ryan was quoted in a recent PlanSponsor article to discuss retirement plans and what can be done to support the goals of retirees and plan sponsors alike. View the article on PlanSponsor’s site here.
Workplace retirement plans may need to change their name—these days, more plan sponsors are looking for ways to serve their former employees even after they’ve quit working.
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“Bill Ryan, partner and head of defined contribution solutions at NEPC, says most plans already have the basic tools—the ability to make systematic withdrawals and investment options that can support near-term goals—necessary to serve their retirees.
“The retirement tier is an overwhelming topic that doesn’t have to be overwhelming,” Ryan explains. “We are closer to the answer than further away. Most plans have the building blocks for a retirement income tier; they just have to build on them.””
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“[Scott] Mayland says plan sponsors considering adding annuities must evaluate them with a fiduciary’s eye, making sure they understand all the features and the costs. Ryan says a simple way for plans to get started with annuities might be through a window that allows participants to select from a range of providers. For plan sponsors looking to add an annuity to the investment menu, a straightforward, plain-vanilla fixed annuity is likely the best approach for the widest demographic, he adds.”
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“The expansion of in-plan Roth accounts that will occur as additional SECURE 2.0 provisions go into place may further strengthen the case for a retirement tier.
“There is going to be an unintentional benefit from that long-term, because this group won’t need to take RMDs, and they may leave their money in longer,” Ryan says.”
Read the full article on Plan Sponsor’s website here.
Pensions & Investments: Institutional Investors Flush with Infrastructure Opportunities
NEPC’s Matthew Ritter was quoted in a recent Pensions & Investments article to discuss the growing interest institutional investors have had in infrastructure and renewable energy over the past decade. View the article on Pensions & Investments’ site here.
Institutional investor interest in infrastructure has grown steadily in recent years, but with more opportunities in renewable energy coupled with economic incentives borne out of the Inflation Reduction Act, more institutions are steering dollars to the asset class in a trend experts and managers expect to continue.
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Infrastructure interest among institutional investors has grown steadily over the last five or 10 years, said Matthew Ritter, Boston-based partner and head of real assets investments at investment consultant NEPC LLC.
Now, more institutional investors are replacing their energy private equity exposure, or at least new commitment dollars, with private infrastructure because of the new and appealing offerings in the asset class, Mr. Ritter said.
“As the infrastructure market has continued to grow and evolve, not just in terms of the number of managers and strategies, but really the breadth of strategies out there, there have been more attractive opportunities regardless of what your objectives are,” Mr. Ritter said.
There are plenty of reasons for institutional investors to consider investing in infrastructure today, such as yields, diversification or inflation hedging, he added.
With inflation elevated, Mr. Ritter said the focus on infrastructure and real assets broadly has increased, but NEPC and its clients take a long-term investing approach, “So investors are not typically adjusting their target allocations or dramatically increasing or decreasing investment volumes based on these sort of shorter-term market trends.”
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Pensions & Investments: Retirement Tiers Emerge from Hiding in DC Plans
NEPC’s Bill Ryan was quoted in a recent Pensions & Investments article which focuses on the ABA Retirement Fund’s investment tier for those approaching or in retirement. View the article on Pensions & Investments’ site here.
In December 2020, as the world grappled with the pandemic, the ABA Retirement Funds program — a retirement plan used by some 4,100 law firms and organizations connected with the practice of law — rolled out an investment tier designed specifically for retirees and those nearing retirement.
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The majority of plan sponsors already offer retiree-focused investments but haven’t spent the time to package and market them as a retirement tier, said Bill Ryan, a partner and head of defined contribution solutions at NEPC LLC in Chicago.
Plan sponsors haven’t gone the extra step of saying, “Of the 10 options we provide, these three are the best to use for short-term needs in retirement to draw down,” he said. “The majority are not marketing it, even though they have the parts.”
Mr. Ryan cited NEPC client data showing that 76% of plan sponsors offer stable value funds, 43% offer money market funds, and almost a third offer inflation-protection funds, three of the essential building blocks in a retirement tier.
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For some consultants, the traditional target-date fund, which is pervasive in plans, is the ultimate retirement tier, even though it isn’t marketed as such.
“We believe that the No. 1 retirement income solution is a target-date fund plus systematic distribution as the first line of defense,” Mr. Ryan said.
While the target-date fund feels like a “vanilla concept,” it is “probably the best option in retirement because some professional has built a portfolio that’s targeting a 4%, 5% or 6% rate of return in retirement,” he said. “If an individual is taking out 4% or 5%, it matches the dividend that they need to draw for an income without depleting the balance in retirement.”
For Mr. Ryan, the target-date fund is akin to Batman. “It’s the hero we need; maybe not the hero we want,” he said.
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FIN News: NEPC Enhances DEI Rating System as Diverse Manager Usage Grows
NEPC was featured in a recent FIN News article which covered the launch of our new DEI Rating System which was announced in our 2022 DEI Progress – Part 1. View the article on FIN News’ site here.
401k Specialist Magazine: NEPC Finds Over Half of Clients Use Diverse Managers
NEPC was recently featured in a 401k Specialist Magazine article that dug into our 2022 DEI Progress – Part 1 which found that more clients are implementing DEI strategies and working with diverse managers. View the article on 401k Specialist Magazine’s site here.
Client exposure to diverse strategies is climbing, finds a new report by investment consultant and outsourced chief investment officer (OCIO) provider NEPC.
Its latest report, the NEPC found that 59% of its clients use diverse managers, with diverse firms currently investing $40.4 billion in client assets and managing 182 client strategies. Currently, NEPC serves over 400 retailer clients and $1.4 trillion in total assets.
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Click here to continue reading the full 401k Specialist Magazine article.
Pensions & Investments: NEPC to offer DEI Ratings System for Money Managers
NEPC was featured in a recent Pensions & Investments article delving into our 2022 DEI Progress – Part 1 and highlighted our new DEI Rating System. View the article on Pensions & Investments’ site here.
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Mr. Forde said NEPC’s new ratings system could contribute to further progress on that score. “One of the benefits of the DEI ratings, moving forward … is that it puts the power of information back into the hands of clients,” he said.
“We have a myriad of different clients, we have a myriad of different opinions on how to incorporate DEI and other things into their investment process. DEI ratings give them the opportunity to look at their entire portfolio of managers, for us to provide our insights directly to … empower them to say, ‘this is important to us in this way’ and craft it how they see fit, or how they don’t, and so I think the DEI ratings … is really additive in this type of environment,” he said.
Click here to continue reading the full Pensions & Investments article.
NEPC 2022 DEI Progress Report: Raising the Bar for the Investment Industry
BOSTON–(BUSINESS WIRE)– NEPC, a leading research-driven investment consultant and OCIO provider with $1.4 trillion in assets under advisement, today published its third annual Diversity, Equity, and Inclusion (DEI) Progress Report, a report that aims to uncover the investment-oriented benefits of diversity, supporting NEPC’s goal of being the investment industry’s most intentional and data-driven DEI leader.
This year’s report highlights the firm’s steady progress toward NEPC’s Diverse Manager Policy goals, which were initially set in 2019. This latest report is a direct reflection of NEPC’s view that diversity, equity, and inclusion drive sustainable success for clients, employees, and communities. Diversity helps unlock a wider range of talent and ideas, ultimately ensuring that investment teams are able to meet and achieve their investment goals.
“From the outset, our goal has been to help lead change in the investment industry by emphasizing the value of transparency and metric-driven policy when it comes to DEI. To do that, we’ve remained committed to learning, growing, and thinking about diversity as an identifier of opportunity and risk, not only within our walls but externally as well, and as a differentiator to better serve our clients, ” said Will Forde, Partner, Co-Chair, Diverse Manager Committee. “With well over half of our clients using Diverse Managers, we recognize the progress that we’ve made when thinking about engagement with diverse-owned and -led firms, but recognize the work that needs to be done in order to maintain and improve upon those efforts.”
NEPC’s 2022 DEI Progress Report provides insight into the firm’s DEI initiatives from a marketplace perspective. Listed below are highlights from this year’s report:
Client Exposure to Diverse Strategies
- 59% of NEPC clients use Diverse Manager(s)
- $40.4B of client’s assets with Diverse Firms
- 182 client strategies managed by Diverse Firms
Increasing Diversity in NEPC’s Recommended Strategies
- Driven by the Explorer Program, a platform to identify and engage with diverse-owned and -led investment management firms that are not currently 1- or 2-rated by NEPC, the centerpiece of NEPC’s DEI program is the goal of achieving 15% Diverse Manager representation by 2024.
- NEPC achieved its initial goal of 10% Diverse Manager exposure by 2022 for OCIO accounts and is on track to achieve 15% Diverse Manager exposure by 2024.
- NEPC conducted 206 interactions with Diverse Management firms in 2022, more than 3X the interactions in 2019.
“As the conversation around increasing diversity in the investment space continues to evolve, so must our goals and how we’re thinking about DEI standards, said Mike Manning, Managing Partner. “We are proud of what we’ve accomplished thus far, but NEPC is aware of the work that remains, and is committed to identifying meaningful ways to continue engaging with diverse-owned and -led firms.”
For more information about NEPC’s sustainable solutions like its Impact Investing Committee and Diverse Manager Committee, click here. To download the full results of NEPC’s 2022 DEI Progress Report, click here.
ABOUT NEPC, LLC
NEPC is an independent investment consultant, private wealth advisor, and OCIO provider serving over 400 retainer clients and $1.4 trillion in total assets. Combining a proprietary research team dedicated to the long-term challenges facing investors with our unique client-centric model, NEPC builds forward-looking investment portfolios for institutional investors and ultra-high-net worth individuals. To learn more about NEPC, visit nepc.com.
Contact:
Laura Nascimento
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