How the New IRR Rule May Impact Investment Portfolios

As investment managers tackle the challenging low-rate environment, viable options for future investment needs should not be overlooked.


The NCUA’s Interest Rate Risk (IRR) management rule will take effect Sept. 30.  In the recently released FAQs, it is noted that management of credit unions subject to the rule should:

  • Develop and maintain adequate IRR measurement systems.
  • Evaluate and understand IRR exposures.
  • Establish an appropriate system of internal controls (this means separating the risk takers from those measuring the risk).
  • Allocate sufficient resources for an effective IRR program.
  • Identify procedures and assumptions involved in the IRR measurement system.
  • Establish clear lines of authority for managing IRR.
  • Provide a sufficient set of reports to comply with board-approved policies.

When it comes to a credit union’s investment portfolio, longer-term investments (with maturities greater than five years) will be included in the Supervisory Interest Rate Risk Ratio (SIRRT) calculation. As many credit unions look more closely at the duration of specific investments as part of their overall asset liability and interest rate risk management processes, the ability to select options with targeted durations could be beneficial. Gaining exposure to certain types of asset classes without making a long-term investment may also help boost yields during a prolonged low-rate environment.

How Target Duration Portfolios Work

With a professionally managed portfolio, a specified duration can be targeted to help institutional investors structure their balance sheets.  For example, an ultra-short duration portfolio targets a period of nine months and a short-duration portfolio targets a period of two years. Both options invest in different asset classes such as agency notes/debentures and mortgage backed bonds that are permissible investments for federal credit unions.

Credit unions that are looking to fill a specific slot in their asset/liability management planning can use these types of portfolios to minimize extension or call risk.  Institutions can also gain exposure to mortgage-backed securities without investing for the long-term and can purchase shares at any time.  Shares may be redeemed at any time as well, based on the credit union’s needs.  

The chart below from Goldman Sachs Asset Management’s recent white paper, Investing in a Low Rate Environment, underscores the type of challenges investment managers are currently facing, with extraordinarily low interest rates not seen since World War II.

Falling Rates: A 30-Year Tailwind

Options like target duration portfolios exist to help credit unions manage their investment portfolios and overall balance sheets through a wide variety of interest rate environments and investment landscapes. They can be used as part of an overall investment strategy or as a complement to other types of investments.

Want To Learn More?

The Trust for Credit Unions provides several investment options with target durations to meet credit union’s balance sheet needs. From overnight to two-years, our professionally managed portfolios were created exclusively for credit unions and have managed billions of investment dollars for hundreds of institutions throughout their 25-year history.

TCU also provides education about the economy and institutional credit union investment options through online resources, live webinars and more. A recorded version of TCU’s Fixed Income University series is available for On-Demand viewing here.

Contact us today at info@trustcu.comor 800-237-5678 to request a copy of the Trust for Credit Unions’ Prospectus.  You can also learn more about each of the portfolios online at


The Trust for Credit Unions (TCU) is a family of institutional mutual funds offered exclusively to credit unions.  Callahan Financial Services is a wholly-owned subsidiary of Callahan & Associate and is the distributor of the TCU mutual funds.  Goldman Sachs Asset Management is the advisor of the TCU mutual funds. To obtain a prospectus which contains detailed fund information including investment policies, risk considerations, charges and expenses, call Callahan Financial Services, Inc. at 800-CFS-5678.  Please read the prospectus carefully before investing or sending money.  Units of the Trust portfolios are not endorsed by, insured by, obligations of, or otherwise supported by the U.S. Government, the NCUSIF, the NCUA or any other governmental agency.  An investment in the portfolios involves risk including possible loss of principal.



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