It's not just SWFs
Hmmm… Seems it’s not just sovereign wealth funds looking for a better return than U.S. Treasury paper. So is the U.S. agency that (in theory anyway) backs traditional corporate pension plans.
The government-sponsored body that insures the pensions of 44m
Americans is to dramatically increase its investments in risky assets
such as equities and real estate as it tries to avoid the need for a
The move by the Pension Benefit Guaranty
Corporation, which suffers a $14bn (€9.5bn, £7.2bn) deficit, was
announced on the President’s Day public holiday yesterday when most
Americans enjoy a day off. It will see the corporation roughly double
its investment in equities, to 45 per cent of its total assets.
new strategy represents a big shift for the corporation, which has
previously sought to minimise its risk by putting most of its
investments into safer but lower-yielding bonds, rather than equities.
Real estate? I presume that means commercial real estate… but these days, it hardly matters from the standpoint of return. Or lack thereof.
Charles Millard, director of the PBGC, said the plan offered a much
higher chance that the insurance fund would be able to earn enough cash
to meet all its commitments without having to ask employers for higher
contributions or taxpayers for a bailout.
Yeah, that’s rich. Oh, check out the rest of its proposed allocation:
The PBGC, which also holds assets from schemes taken over from
insolvent employers, held 28 per cent in equities at the end of last
It will also allocate 45 per cent to a diversified set of
fixed-income assets, down from about 72 per cent at the end of 2007,
and 10 per cent to alternative investments including hedge funds.
Hedge funds? That’s just swell. 2 and 20 for a return that in many cases is no better than the S&P.
If you’re among the lucky few who still hope to collect from a defined-benefit pension plan, you’d better hope it’s being well-run. ‘Cause if it’s not, the PBGC won’t be coming to your rescue.