Over the past year, the biggest casualty to emerge as a result of global NIRP (or close to it) monetary policy have been pension funds, which have had two choices: either suffer losses as yields on new fixed income investments barely cover (and in some case don't), or scramble for duration (or outright risky investments like junk bonds and high beta stocks).
In August, we created the chart below as a simplistic illustration of the pension "duration dilemma." The chart graphs how a pension liability grows in a declining interest rate environment versus the value of 5-year and 30-year treasury bonds. As you can see, a $1BN pension that is fully funded at prevailing interest rates would be nearly $700mm underfunded if interest rates declined 300bps and all of their assets were invested in 30-year treasury bonds. The result is obviously even worse if the fund's assets are invested in shorter duration 5-year treasuries.