Done right, investing defined benefit plan assets is complex. We believe that every defined benefit plan has a unique and different set of circumstances, risks, objectives, and constraints that need to be accounted for in the design of any investment strategy. If the purpose of the assets in a defined benefit plan is to offset a specific set of liabilities – and it always is – then we believe the only solution to the challenge of investing defined benefit plan assets is a highly customized portfolio designed by an experienced professional.
Sellwood’s senior investment professionals have extensive experience advising defined benefit (DB) plans of all types. We have expertise in all aspects of plan design and monitoring, including liability driven investing (LDI) strategies, asset allocation modeling, investment policy development, manager selection & monitoring, and performance reporting. For plan sponsors that have chosen to freeze their defined benefit plans, our experience advising hybrid and defined contribution plans allows for a more seamless transition process. Our advice is comprehensive and informed by ongoing evaluation of new regulations and industry trends.
Uncompromising. And Uncompromised.
Sellwood’s ethics are second to none.
Sellwood acts as a fiduciary with respect to all of the services that we provide, to all clients, meaning that we consider client interests first and foremost. Our firm always has been, and always will be, absolutely free from any conflicts of interest. We have no financial relationships with investment managers or service providers that we may recommend to clients. We do not accept revenue sharing, 12-b1 fees, or any other payments that would compromise our objectivity. 100% of our revenues are in the form of cash payments from our clients, meaning 100% of our advice is worth taking. We do not employ placement agents or other outside marketers.
Our firm adheres to a strict internal Code of Ethics and all employees are bound by the CFA Institute Code of Ethics & Standards of Professional Conduct.
Customized Investment Solutions
While we operate under a defined Investment Philosophy for all clients, we approach each client individually, and we understand that no portfolio will be appropriate for all clients. We do not maintain model portfolios or employ cookie-cutter solutions. Before recommending an investment strategy to a client, we first seek to understand the client’s circumstances in all their complexity. It is only with this understanding that we can recommend portfolios that appropriately balance returns and risks for the specific client.
Investing defined benefit portfolios always involves a trade-off of risks. While one plan sponsor may need to prioritize the ability of the plan’s assets to outperform liabilities, another sponsor may need to minimize the volatility of funded status and likelihood of surprise required contributions. These two aims are often in conflict. We seek to fully understand each plan sponsor’s specific objectives and constraints — which are always unique to the client — before designing a customized portfolio for each client that best meets those objectives.
Liability Driven Investing (LDI) and Frozen Plan Expertise
For corporate DB plans, the Pension Protection Act of 2006 has forced plan sponsors to focus more on the business risks associated with funded status volatility. Phased implementation of an LDI strategy, which seeks to better match changes in the market value of plan assets with changes in liabilities, can help moderate funded status volatility and make required contributions more predictable.
Sellwood’s consulting team members have worked with numerous DB plan sponsors to design and implement customized LDI strategies that better match the plan’s assets to its liabilities. We have experience working with plans that have closed, frozen, are on a path toward annuitization, and that are evaluating settlement strategies. Throughout, our focus remains on tailoring a portfolio so that the plan’s assets reflect the actual risks to the plan sponsor, which are rarely the risks most typically considered by investment advisors who lack sophisticated understanding of DB plans and asset-liability matching.
For clients that delegate investment discretion to Sellwood, we manage the client’s portfolio movement along an LDI glidepath, using agreed-upon funded status triggers, in an ERISA 3(38) capacity.
Performance Reporting Designed Specifically for DB Plans
For a defined benefit plan sponsor, the portfolio elements that need to be monitored go far beyond return. Our reporting is designed specifically with defined benefit plan sponsors in mind. In addition to net-of-fees reporting of all investments and the entire portfolio versus appropriate benchmarks and institutional peer groups, our reporting depicts portfolio returns against estimated plan liability growth, because the primary purpose of the assets in a defined benefit plan, after all, are to offset specific liabilities. Additionally, our reporting incorporates essential information from the plan’s actuary and includes regular estimates of funded status and, when applicable, progress along, and triggers for movement along, an LDI glidepath.
Taft-Hartley Benefit Trusts
Our senior team has worked with multi-employer and Taft-Hartley plan clients for the better part of the last decade and has a full understanding of the unique complexities of this plan type. For Taft-Hartley plans, we seek a full understanding of your plan to inform our service offering to you. We work closely with your actuary to understand the Plan’s funded “zone” status and the asset returns that would be necessary to maintain or change the zone status. We are aware of the implications of each zone status and what a change in status means not just for the portfolio, but for the security of promised benefits and contribution levels in the future. We are aware that no plan portfolio exists in a vacuum, and that our investment advice is not an end in itself. Instead, our advice serves the meaningful goal of assuring promised retirement benefits that participants have earned, while keeping the cost of maintaining the plan as low as reasonably possible.
Customized Implementation Services
Some clients want only our advice, and others want us to both provide and implement our advice. We are comfortable under either approach, or anywhere in between. For ERISA clients, we offer fiduciary advice under ERISA §3(21) or §3(38). Either way, we are a fiduciary for 100% of the services that we provide. We believe that like investment advice, implementation discretion works best when it is customized to the client’s unique needs. We believe that discretion to implement investment decisions is not a binary “on or off” condition but instead exists along a spectrum, and we encourage our clients to consider which level of implementation services fits them best.
Experienced & Stable
We believe that stability of an investment advisory team is the most often overlooked factor in long-term investment success. There are rewards to long-term investment thinking, but those rewards can only be realized with a stable advisory firm and team. The best investment advice is provided by an experienced consultant, in the context of a long-term relationship. For these reasons, we have designed our firm and consulting team to be among the most stable in the industry.
Each of our client-facing consultants has at least 17 years of direct institutional investment advisory experience. We are 100% owned by our current employees, and our firm’s ownership is distributed broadly within the firm. Our ownership culture and governance mechanisms ensure that Sellwood will remain a viable partner to the clients we serve for years to come.
The Sellwood Difference
Good advice arises from thoughtful structure. Our absolute freedom from conflicts of interest means that we sit on the same side of the table as our clients, and that our recommendations or decisions are always designed to benefit the portfolio. We bring large-firm experience and expertise, while retaining the client service focus of a boutique. Each of our consultants has at least 17 years of experience advising institutional clients, and continuity of our consulting team is a critical core value at Sellwood, meaning we offer clients unmatched stability in their consultant relationships. And our advice to clients is advice worth taking: we hold ourselves to the fiduciary standard of care for 100% of the services we provide to 100% of our clients.
We would be delighted to discuss Sellwood Consulting’s defined benefit plan capabilities with you directly. Please contact us to arrange an introductory meeting or call.