Tag Archives: Pensions

AFM grants licence for investment services to Milliman Financial Strategies

The Netherlands Authority for the Financial Markets (AFM) granted Milliman Financial Strategies B.V. (MFS) a licence for investment services at the end of 2020 (Article 2:96 of the Financial Supervision Act). MFS, with an execution platform in Chicago, London, Amsterdam and Sydney, manages financial balance sheet risks of pension funds and insurers worldwide. In 2018, due to the approaching Brexit, it was decided to serve the European clients of MFS from Amsterdam in addition to London. With the licence granted, MFS can continue to manage financial balance sheet risks for Dutch financial institutions, including pension funds.

“The asset management market is changing rapidly and is under pressure from increasing competition and regulation, resulting in lower management fees and higher costs. Since its inception in 1998, Milliman Financial Strategies has invested in state-of-the-art technology to provide its clients with effective, efficient and transparent hedging solutions. As a result, we are well positioned for these changes in the asset management market,” said Marcel Kruse, Director at Milliman.

“For many years, Milliman Financial Strategies has been helping financial institutions in the United States, Canada, Europe, Australia and Japan to manage market risks on their balance sheets. We are delighted to add our Amsterdam office to our global trading platform and offer our tailored hedging solutions to Dutch pension funds,” said Sam Nandi, Principal and Managing Director at Milliman.

“Milliman’s hedging and overlay solutions stand out from existing providers because we combine the innovative and solution-oriented approach of our consultancy practice with a robust in-house developed system architecture and enrich it with our actuarial knowledge and expertise, including that of Dutch pension funds and pension schemes,” said Rajish Sagoenie, Principal and Managing Director at Milliman.

Milliman strengthens hedging and overlay solutions with MatchingLink software

Milliman is pleased to announce that it has chosen MatchingLink software to enhance its hedging and overlay solutions. With technology playing an increasingly critical role in every part of the investment cycle, Milliman recognizes the need to accelerate the development of digital solutions to ensure competitive hedging solutions offerings to its clients.

The Milliman-MatchingLink collaboration brings together deep skills in both business and technology to support Milliman’s clients and create more value. ‘With MatchingLink’s next-gen tech solutions we can add significant value to our hedging and overlay solutions and drive better results for our (pension fund) clients,’ says Rajish Sagoenie, Principal and Managing Director for Milliman, The Netherlands.

‘The seamless integration of MatchingLink software within the Milliman MG-Hedge® platform, combined with a robust and flexible system architecture, has convinced us that by using MatchingLink we can optimally serve our customers in the Netherlands and Europe. The Milliman-MatchingLink collaboration offers our (pension fund) clients state-of-the-art solutions to manage financial risks now and, in the future,’ says Marcel Kruse, Director Pension and Investment Risk for Milliman in the Netherlands.

MatchingLink’s technology platform operates as a flexible layer, communicating with existing systems. The platform combines a unique data-gathering solution with a calculation engine, analysis and reporting, a flexible workflow solution and artificial intelligence. The platform is both compliant and auditable by design. ‘With our software Milliman can unlock the full potential of the most advanced technology and increase the quality of their business on a daily basis,’ says Eric Pieper, MatchingLink’s CEO.

COVID-19 may exacerbate troubles for multiemployer plans

In March, Milliman published a Multiemployer Alert about the funding impact that market declines related to COVID-19 have had on multiemployer defined benefit pension plans. But COVID-19’s impact goes beyond the market decline.

Many industries are being hit hard by a sudden drop-off in industry activity, with concern that the recovery of normal operation could take several years, reducing the contributions coming into plans. These impacts are a particular concern for mature plans (those with more benefit payments and expenses than contributions), and may have a long-lasting impact on plan funding. Without Congressional action or a speedy market recovery, there may be another wave of plan failures. Lawmakers need to think carefully before providing solutions that further strain an already stressed system.

In this Multiemployer Review, Milliman’s Kelly Coffing, Tim Connor, and Nina Lantz explain in more detail how COVID-19 could leave the multiemployer pension system even more distressed.

Exploring funded status volatility of defined benefit plans

The funded status of corporate defined benefit (DB) pension plans has experienced unprecedented volatility in the 21st century.  Numerous pension de-risking techniques are available for plan sponsors to use depending on their risk exposure and risk tolerance. Risk management, by definition, can be a risky business.

When Milliman established the Pension Funding Index in 1999, DB plans were generally in surplus positions. This observed surplus continued through the end of 2001. However, the Milliman 100 pension plans recorded a funded status deficit of $16 billion by early 2002 in the wake of the dot-com crash and the terrorist attacks of Sept. 11, 2001 (9/11).

The ensuing period of deficit lasted until 2006 with the funded status deficit reaching $36 billion. An all too brief economic and funded-status recovery followed with the funded status surplus reaching $3 billion in 2008. This period of surplus was short-lived as the Milliman 100 plans began their second distinct period of deficit positions in 2008, during the time of the worldwide global financial crisis, with the funded status deficit starting out at $7 billion. Those deficits have continued through the recession and beyond, exceeding a decade. This leads us to the current funded status deficit of $212 billion as of June 2019.

This article by Milliman consultant Zorast Wadia examines the sources of funded status volatility seen over the past two decades and discusses how plan sponsors of DB pension plans have adapted. It also covers the pros and cons of several popular de-risking mechanisms.

Critical Point explores pensions in the United States

The American pension plan is in flux, but not for the first time in U.S. history. In this episode of Critical Point, Milliman consulting actuaries Kelly Coffing and Becky Sielman discuss why it’s a turbulent time for retirement security in America, and what the next generation of pension plans could—and should—look like given emerging technology and the changing nature of the U.S. workforce.

To listen to the entire podcast, click here. Also, to hear past Critical Point episodes, click here.