PLANSPONSOR - April/May 2020 - 44

DB FOCUS
Same
But
Different
Lessons on past
market breaks, from
seasoned bond
investors
T
his series typically considers the
asset classes in the defined benefit
(DB) plan portfolio from a prospective
stance, and looks for areas of investment
that might be rewarding over the
intermediate to long term. Given today's
uncertainty across the markets and the
economy, we instead look back, through
the eyes of seasoned bond investors, to
past market breaks. We hope some of the
challenges, and opportunities, of the past
will provide guidance for a successful exit
from the COVID-19-induced crisis.
" I started my career in fixed income
in 2008 and remember two distinct
aspects of the financial crisis, " observes
Alex Pekker, senior investment director
in the pension practice at Cambridge
Associates in Boston. " The first was that
every market, except U.S. Treasurys, came
crashing down: slowly and then accelerating.
The concerns were that corporate
defaults would rise and investors would
not be paid, which would translate into
falling funded status for pension plans. "
The impact was not just on the
abstract concept of funded status, he adds.
" The second memory is the illiquidity in
the markets, which no one saw coming.
Our DB clients turned to their investment
managers and asked them to raise cash
to meet benefit payments, in September,
October, November, December and into
2009. And the fixed income managers
had to tell them that selling their securities
would mean realizing a large haircut. "
The graphic (see next page) shows
the progress of the U.S. investment-grade
corporate bond market, as expressed by the
iShares U.S. Investment Grade Corporate
Bond ETF [Exchange-Traded Fund], trading
as LQD. The bond market weakened early
in 2008, but from mid-September, when
Lehman Brothers Holdings was forced
into bankruptcy, through the end of that
month, prices fell nearly 20%-a move
nearly unthinkable in investment-grade
credit. The market was recovering through
mid-January 2009 but had another great
fall before bottoming out on March 9, when
44 PLANSPONSOR.COM April - May 2020 Art by Marc Rosenthal
both the investment-grade and high-yield
bond markets, as well as U.S. stocks, all
reversed course and began a long recovery.
Elaine Stokes, a portfolio manager at
Loomis Sayles & Co., a leading investment
manager in fixed income, also in Boston,
has been trading bonds since 1988 and is a
witness to what she calls a series of rolling
crises. " There was the failure of LongTerm
Capital Management in 1998, which
became an Asian and emerging market
crisis; another at September 11, 2001; the
financial crisis in 2008; and others in 2011
and 2015 through 2016. "
She points out the evolution in bond

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PLANSPONSOR - April/May 2020

Table of Contents for the Digital Edition of PLANSPONSOR - April/May 2020

The Road Ahead
2020 DB Administration Survey
2020 Plan Sponsor of the Year Finalists
2020 PLANSPONSOR Service Stars
Same but Different
It Takes Two
Staying the Course
PLANSPONSOR - April/May 2020 - Cover1
PLANSPONSOR - April/May 2020 - Cover2
PLANSPONSOR - April/May 2020 - 1
PLANSPONSOR - April/May 2020 - 2
PLANSPONSOR - April/May 2020 - 3
PLANSPONSOR - April/May 2020 - 4
PLANSPONSOR - April/May 2020 - 5
PLANSPONSOR - April/May 2020 - 6
PLANSPONSOR - April/May 2020 - 7
PLANSPONSOR - April/May 2020 - 8
PLANSPONSOR - April/May 2020 - 9
PLANSPONSOR - April/May 2020 - 10
PLANSPONSOR - April/May 2020 - 11
PLANSPONSOR - April/May 2020 - 12
PLANSPONSOR - April/May 2020 - 13
PLANSPONSOR - April/May 2020 - 14
PLANSPONSOR - April/May 2020 - 15
PLANSPONSOR - April/May 2020 - 16
PLANSPONSOR - April/May 2020 - 17
PLANSPONSOR - April/May 2020 - The Road Ahead
PLANSPONSOR - April/May 2020 - 19
PLANSPONSOR - April/May 2020 - 20
PLANSPONSOR - April/May 2020 - 21
PLANSPONSOR - April/May 2020 - 2020 DB Administration Survey
PLANSPONSOR - April/May 2020 - 23
PLANSPONSOR - April/May 2020 - 24
PLANSPONSOR - April/May 2020 - 25
PLANSPONSOR - April/May 2020 - 2020 Plan Sponsor of the Year Finalists
PLANSPONSOR - April/May 2020 - 27
PLANSPONSOR - April/May 2020 - 28
PLANSPONSOR - April/May 2020 - 29
PLANSPONSOR - April/May 2020 - 30
PLANSPONSOR - April/May 2020 - 31
PLANSPONSOR - April/May 2020 - 32
PLANSPONSOR - April/May 2020 - 33
PLANSPONSOR - April/May 2020 - 34
PLANSPONSOR - April/May 2020 - 35
PLANSPONSOR - April/May 2020 - 36
PLANSPONSOR - April/May 2020 - 37
PLANSPONSOR - April/May 2020 - 2020 PLANSPONSOR Service Stars
PLANSPONSOR - April/May 2020 - 39
PLANSPONSOR - April/May 2020 - 40
PLANSPONSOR - April/May 2020 - 41
PLANSPONSOR - April/May 2020 - 42
PLANSPONSOR - April/May 2020 - 43
PLANSPONSOR - April/May 2020 - Same but Different
PLANSPONSOR - April/May 2020 - 45
PLANSPONSOR - April/May 2020 - It Takes Two
PLANSPONSOR - April/May 2020 - 47
PLANSPONSOR - April/May 2020 - Staying the Course
PLANSPONSOR - April/May 2020 - 49
PLANSPONSOR - April/May 2020 - 50
PLANSPONSOR - April/May 2020 - 51
PLANSPONSOR - April/May 2020 - 52
PLANSPONSOR - April/May 2020 - Cover3
PLANSPONSOR - April/May 2020 - Cover4
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