Member-Driven Investing (MDI) Strategy
Our members want pension certainty. To accomplish this, we have created our Member-Driven Investing (MDI) strategy, which seeks to earn a return sufficient to keep the Plan fully funded at current benefit levels and contribution rates. This means we must strike the appropriate balance between risk and return. Taking too little risk would result in returns that are too low to keep paying benefits at the current contribution rate, but too much risk could increase the chances of being underfunded.
We face several challenges as we strive to keep the Plan fully funded:
- Investment Environment – The evolution of COVID-19 and unprecedented monetary and fiscal expansion has extended the ranges of outcomes for interest rates, inflation and asset prices.
- Plan Maturity – A declining ratio of active to inactive members has reduced our risk tolerance
- Longevity Risk – Higher life expectancy increases the Plan’s pension obligations
- Discount Rate for Funding Valuation – Lower interest rates have reduced our discount rates, in turn pushing pension obligations higher
To achieve our objectives in a difficult investment environment, our investment strategy is to harvest a diversified set of market risk premia across liquid and illiquid markets, while adding value through active management.