June 2021

US. Pensions under fire after PE underperforms

For decades, state pension funds have relied on the private equity industry to invest retirement savings for teachers, firefighters and other public-sector employees. But in recent years, critics of alternative assets have argued that pension managers, who oversee some $4.5 trillion across the US, would be better served investing in low-cost index funds that track the S&P 500 and avoiding PE's high fees. This past week, public pension fund managers threw PE detractors more red meat, raising larger questions about...

US. Public pensions lose on hedge funds — again

By Brett Arends One of these days I’m going to write about a bunch of retirees and future retirees who have just made a ton of extra money thanks to the financial brilliance of elite, exclusive, high-fee hedge funds. Today, however, is not that day. Instead, here comes more news about a public pension fund allegedly missing out on billions of dollars because of hedge funds and other high-fee funds. And the news that retirement systems and other institutional investors continue to pour...

How Does Social Security Reform Indecision Affect Younger Cohorts?

By John B. Shoven, Sita Slavov, John G. Watson The Social Security trust fund will be exhausted in the early 2030s. The U.S. government will need to make a choice about how to address the impending trust fund exhaustion, but it is unclear what it will choose to do. This indecision leaves young and middle-aged workers not knowing whether they will face Social Security benefit cuts, payroll tax increases, or an increase in the full retirement age. This uncertainty about...

US. Pensions Are Almost Fully Funded and Coming for Your Bonds

A “massive rotation” into corporate bonds from equities may be on the horizon for U.S. pension funds as they become fully funded, according to strategists at Bank of America Corp. Investment gains boosted the funded ratio of the 100 largest corporate plans to 98.8% in May, according to Milliman. That measure of defined benefit pension assets to liabilities has surged from 82% since July 2020, data from the risk management firm show. If interest rates continue to rise, BofA expects the...

ForUsAll Debuts the ‘Alt 401(k)’ to Provide In-Plan Cryptocurrency Access

Another cryptocurrency foray into 401ks was announced today. ForUsAll, a retirement investment platform for small businesses, introduced the Alt 401(k), its turnkey retirement investment platform that allows employers to provide alternative investment options within 401k plans—what the company is calling a “first of its kind.” Read also US. Pensions Are Almost Fully Funded and Coming for Your Bonds The San Francisco-based fintech company is enabling employers to offer cryptocurrency as the plan’s first alternative investment by selecting Coinbase Institutional, a leading cryptocurrency...

Central Falls’ Bankruptcy and the Principle of Shared Pain

By James Tatum The small city of Central Falls, Rhode Island filed for Chapter 9 bankruptcy in 2011, with five other cities. The case could have easily been overshadowed by the insolvency of other sizable jurisdictions. Instead, Central Falls’ case is particular in both the treatment of bondholders and pensioners – one class of creditors was completely protected, while the other suffered deep cuts. The purpose of this article is to examine the method used to distribute losses in Central...

US. Pension risk transfer premiums hit record low – paper

Pension risk transfer premiums are lower than ever, according to a paper from pension risk consultant BCG Penbridge. The consultant was involved in 53 PRT transactions in 2020, involving the purchase of group annuity contracts by U.S. corporate pension plans to transfer a certain number of retirees and pension liabilities to one or more insurers. Among those transactions, 42 were full plan terminations, and the average premium was 101%. Among the 11 PRT transactions that involved retiree liftouts, the average premium was...

US. 401k Savings, Account Balances Grew During Pandemic

Closed restaurants and movie theaters meant more disposable income for retirement savings during the pandemic. T. Rowe Price is out with its annual Reference Point 401k benchmarking report featuring year-over-year data and analysis on participant behavior and plan design, and the results were positive, all things considered. “While the financial, physical, and emotional strains caused by the pandemic had, and will continue to have, repercussions on plan design and retirement savings outcomes, it was encouraging to see that through it all,...

May 2021

US. Market Rebound Spurs Record 33.55% Return for NY State Pension Fund

The New York State Common Retirement Fund (NYSCRF) reported a 33.55% investment return for the fiscal year ending March 31, the largest one-year investment return in the fund’s history. It easily beat its long-term expected rate of return of 6.8%. Read also US. New York City Pensions to Fund $250 Million Apartment Venture The performance, which reflected the financial markets’ rebound from last year’s market crash after the COVID-19 pandemic first hit, raised the fund’s asset value to an estimated $254.8...

US. One Way To Promote Financial Literacy: Teach How The Scammers Work

In a nation more deeply divided than ever about every conceivable issue, a broad consensus has surprisingly emerged that financial literacy is broadly lacking and the need for a financial education for every American is urgent. President Biden recently issued a proclamation deeming April 2021 as National Financial Capability Month. This communication emphasizes the benefits of financial capability, the value of financial literacy, and the importance of access to financial resources. So why is financial literacy attracting such attention? Americans today...