Funding Optimization
CapAcuity has proprietary financial models to evaluate any funding or hedging strategy. This allows us to develop alternatives customized to each plan sponsor.
FUNDING STRATEGIES
Corporate-Owned Life Insurance (COLI). We optimize COLI funding by evaluating:
- product loads
- mortality/cost of insurance – pooled or experience rated
- investment expenses and performance
- asset/liability correlation and tracking error
Mutual Funds or Other Non-COLI Assets. We conduct a comprehensive analysis—evaluating investment expense, manager performance, asset/liability correlation, and tax efficiency. We evaluate and recommend the potential enhancements available through proprietary tax and expense mitigation strategies, which may include:
- identifying tax-efficient fund managers and investments
- designing and implementing tax-efficient asset/liability management (ALM) through our proprietary system
- tax optimization to reduce corporate tax
HEDGING STRATEGIES
Total Return Swaps. Benefit liabilities that are unfunded or poorly correlated to plan assets create P&L volatility, which may have a material and unplanned impact on corporate earnings. We conduct a thorough analysis to assess the feasibility and cost/benefit of hedging market exposures and mitigating P&L volatility utilizing a total return swap (TRS).
We assist the plan sponsor in negotiating pricing and terms with the swap counterparties and executing appropriate tax elections. Working with our strategic partner Atlas Financial Partners, we provide comprehensive financial and tax reporting—while managing the plan liability and TRS correlations through our proprietary ALM system.