Overlay strategies use a variety of derivative investment vehicles – such as swaps, swaptions, and futures – to gain, offset or substitute specific portfolio exposures beyond those provided by the underlying portfolio assets. These strategies continue to grow in use and importance as pension plans and other institutional investors seek ways to manage risks and enhance returns to meet their obligations.
We offer a fully turnkey approach to analysis, overlay design, execution and monitoring on behalf of our clients.
Ryan Labs Asset Management, as the overlay investment manager, undertakes the liability and key rate duration analysis for the pension plan. Overlay research, strategy development and execution are carried out by our Derivatives and Quantitative Strategies group. Ryan Labs Asset Management also generates custodian reports and tracks third party manager positions.
Ryan Labs Asset Management is a wholly-owned subsidiary of Sun Life Investment Management.
The mission of this group is to satisfy the investment and hedging objectives of clients, through disciplined and insightful risk management.
Sun Life Institutional Investments (U.S.) LLC is responsible for back-office operations, trade settlements, trade notifications, collateral management, as well as the tracking and reporting of real time positions.
Types of overlay strategies
Our overlay strategies are customized to specific client portfolios, with strategies designed to accomplish a range of goals.
Overlay completion for LDI accounts is designed to allow a plan to increase its interest rate hedging to reduce funding volatility, with little impact to the plan’s underlying asset allocation.
Swaption strategies can be designed to provide a zero or reduced premium cost method for plans to neutralize the impact of substantial interest rate changes on a liability portfolio – and help stabilize its funded status while maintaining its current asset allocation.
Synthetic equity helps a plan maintain a desired level of interest rate risk hedging with fixed income while providing additional return-seeking exposure through synthetic equity beta.
Customized overlay solutions can be applied to mitigate risk and/or enhance returns providing a more efficient use of capital – strategies can be tailored to capture uncorrelated risk premium that perform well when in risk off environments.
About overlay strategies
Overlay strategies may use derivative instruments (such as interest rate swaps) to obtain exposure greater than the actual funded amount of the mandate. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives involves leverage and could lose more than the amount invested.
The overlay strategies are only available to Qualified Eligible Persons as defined in CFTC Regulation 4.7(a).
This page only contains summary information regarding the overlay investment management approaches and is not a complete description of the investment objectives, portfolio management and research that supports these approaches. There is no guarantee that these investment strategies will work under all market conditions. Each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market.
This material contains opinions and such opinions are subject to change without notice.