Investment Structure

Implications of a Flat Yield Curve

September 2018
We are now at a point in which investors are receiving only modest compensation for moving further out on the Treasury yield curve. As the Federal Reserve continues to increase short-term interest rates, there is also the potential for the curve to invert. Regardless of the investor, we believe understanding the implications of holding fixed income at different points along the curve is critical given the range of investor objectives, the shape of the yield curve and the potentially disparate diversification benefits. Our Rocaton Insights: Implications of a Flat Yield Curve provides historical perspective on the shape of the yield curve and outlines potential strategies for different investor types.
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Factor Investing

August 2017

Factor investing has gained in popularity in recent years due to the availability of factor products. We believe there are several practical ways in which investors can make use of the expanding set of factor strategies. Specifically, we believe factors can be used in two ways: 1) top-down asset allocation portfolio construction and 2) bottom-up manager/strategy selection. The attached Insights seeks to define factor investing and provide a framework which investors can use to incorporate factor strategies into portfolios.


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Active Management Philosophy & Implementation

May 2017
Investors have long-debated the merits and challenges of active and passive investing. The discussions have increased recently due to several factors including fee scrutiny, evolution of passive vehicles, and the challenging performance of many active managers over the past several years. Rocaton believes these discussions are important and complex. In this Insights, we outline our general philosophy on active management and present our approach to building a portfolio of active managers and setting active management expectations.


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Reviewing the Primary Roles of Core Fixed Income

April 2017
Core fixed income exposures, as proxied by the Bloomberg Barclays Aggregate Index (“Aggregate”), are found in many investors’ portfolios. Aggregate exposures tend to serve four primary roles in portfolios including 1) source of income, 2) source of liquidity, 3) capital preservation and 4) diversification relative to risk assets. Recent changes to the Aggregate’s interest rate duration, or sensitivity to changes in interest rates, have the potential to impact these four primary roles. This paper focuses on core fixed income as defined by the Aggregate, as this asset class tends to be an “anchor” in many investors portfolios.


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Enhancing DC Plan Processes & Outcomes in 2017

January 2017
As we focus on DC plan priorities for 2017, several key themes emerge. With a backdrop of an uncertain regulatory environment and heightened litigation activity with a significant increase in not only the volume, but also the breadth of claims, 2017 provides an opportunity to double down on fundamentals. In short, this is an opportunity to go back to the basics, revisit process, past decisions and documentation.


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An Introduction to Securitized Credit

November 2016
Securitized credit (or “structured product”) consists of bonds backed by mortgages, loans, and leases (the “collateral”). It is a diverse asset class that is not well represented within the Bloomberg Barclays (“BB”) Aggregate Index. As such, the asset class is typically underrepresented in institutional investor portfolios. Backed by a diverse range of collateral types, a dedicated structured product allocation may provide investors with diversification benefits, reduction in interest rate risk and an attractive yield. Investors should be aware that a dedicated structured product portfolio may be less liquid, challenging to access, more expensive and difficult to benchmark. This paper discusses the securitization process, opportunity set, and implementation considerations.


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Examining Completion Management for Pension Plans

June 2016
The term “Completion Manager” has become part of the pension lexicon for plan sponsors and long duration asset managers over the past several years. However, the term is not easily defined given that completion mandates vary widely in terms of their scope and objectives. This Insight piece will seek to define completion management and discuss the potential role(s) a completion manager can play, evaluate the appropriateness/usefulness of a completion mandate relative to the incremental cost and complexity, and identify characteristics necessary to execute completion services effectively.


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Diversified Multi-Asset Strategies in a Defined Contribution Plan

February 2016
Investors of all types are currently faced with an environment that is marked by relatively expensive assets and low return expectations. This is particularly true for Defined Contribution participants where plan lineups are often dominated by traditional fixed income and equity exposures. One potential solution to this issue is to consider adding a diversified multi-asset strategy to a plan’s lineup. In short, these strategies target positive real returns (typically, 3-5% over inflation) with modest levels of expected risk (typically, less than half that of public equities). The balance of this paper will review the characteristics of these strategies, provide a comparison to more traditional real asset strategies and outline some of the considerations plan sponsors should understand.


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Custom Target Date Options: A Higher Hurdle

April 2015
Given the high utilization of target date options in defined contribution plans, target date options are receiving ever greater scrutiny. As such, custom target date options are becoming a more popular discussion topic. While there are many factors that could lead a plan sponsor to seriously consider custom target date options, we believe there are a few key considerations that should receive the most weight when considering custom target date solutions. We suggest that there should be a higher hurdle for custom implementation and we outline a number of considerations for custom target date options in this Rocaton Insights.


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Exchange Traded Funds: Institutional Investors’ Friend or Foe?

November 2014
Exchange traded funds (ETFs) have been around for more than two decades and recent growth in this market has been impressive. However, adoption by institutional investors (defined as pensions, endowments, insurance general accounts, defined contribution plans, etc.) has been modest. This Rocaton Insights provides an overview of the ETF market and seeks to identify ways in which institutional investors might make use of these products.


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