The goal of these pooled vehicles is that pension plans can match their future liabilities within different inflation environments, according to a press release from the company. Pension funds, often holding varying liability requirements, can purchase different allocations of the nine funds, which are divided into five-year increments out to 40 years.
“PALMs represents a generational change in investment management strategy for pension plans,” said Alan Brown, group chief investment officer for State Street Global Advisors, in the news release. “By recognizing that liabilities, not market benchmarks, are the correct measure of a pension plan’s ability to meet its obligations to pensioners, we can more closely match the client’s liabilities over time, reducing the risk of over- or under-funding. We expect this concept to grow in popularity because it places more investment control back in the hands of trustees.”
State Street also suggested that the tools of transparent pricing, flexibility in adjusting allocations, fixed entry and exit spreads, and monthly valuations are also a bonus not found with other asset classes.
The nine pooled funds will be managed by State Street Global Advisors’ London-based Global Fixed Income management team, according to the announcement. State Street will provide market data on each of the funds to a pension fund consultant so that changes can be made to allocation.
State Street Global Advisors ( www.ssga.com ) is the investment management arm of State Street Corporation, and has $1.2 trillion in investment programs and portfolios.