Equity Losses Hurt Multiemployer Plans, Bonds Stronger

June 17, 2002 (PLANSPONSOR.com) - Multiemployer pension funds took it on their collective chin during 2001, with a median loss on their equity investment of 11.3%, according to a survey.

According to a Segal Advisors’ survey, there was a spread of about 13 points between the funds with the strongest returns and those with the weakest.

Researchers attributed this, in part, to the fact that growth stocks plummeted 20.4% in 2001 while value stocks had a less severe 5.6% drop during the year. Overall, despite a fourth quarter 2001 surge, equities had their second down year in a row. 

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In a year of volatile equity markets, fixed-income investments provided stability, the survey said. The median rate of return for fixed-income investments in the survey was 8.5 % for 2001.

Performance Warning

The survey pointed out that the multiemployer plans’ substandard absolute return performance came despite the positive market environment during the previous five years of 1995 to 1999.

Over the five-year period ended December 31, 1999, many multiemployer plans’ investments produced double-digit annualized returns that surpassed their actuarial assumptions, the survey said.

In 2001, for the second consecutive year, the average multiemployer fund’s investment performance fell below the actuarially assumed rate of return.


The 11.3% median equity loss for 2001 for funds in the survey was comparable to the 11.9% decline in the Standard & Poor’s Index of 500 stocks, the survey said. Approximately 56% of the funds in the survey performed better than the S&P 500 Index and experienced less of a decline.

Meanwhile, the multiemployer pension funds fixed-income gain was almost identical to the 2001 return of 8.4 % for the Lehman Aggregate Bond Index, the survey said. Of the surveyed pension funds, 55% beat the Lehman Aggregate Bond Index’s return, the survey said.

A comparative benchmark comprising 55% S&P 500 Index and 45% Lehman Aggregate Bond Index would have produced a 2.7% 2001 loss, the survey said.

In 2001, the fixed-income spread between the lowest and highest performing funds was only 1.9%, the survey said. This represents a narrowing of the spread compared to previous years and marks a reversal of a trend in which the spread from the median had been widening, the survey said.

The full text of the survey is available at Segal Advisors’ site .