Pension Managers Cautious But Steady Despite Attacks, Weak Markets

October 19, 2001 ( - Even though total US pension fund assets fell by just over 7%, the largest institutional funds aren't making major changes to their long-term strategies because of the weak economy and the effects of the terror attacks.

Those were some of the findings of a Greenwich Associates report on US corporate and public pension funds, endowments, and foundations released Thursday.

Among 95 funds and endowments, 78% reported a reduction in assets in 2001, while 21% reported gains. Only one fund said its asset level was constant from 2000 to 2001.

The preliminary report found that most large fund officials are seeking evidence of a clearer long-term economic picture before making any significant buying or selling moves.

“In such uncertain times, it makes sense for funds to stay the course, ride out the rougher weather, and position themselves advantageously for better days to come,” said Greenwich consultant Rodger Smith, calling the caution, sound market intelligence.

“None of us can know the future, but in past instances of major market dislocations of the kind we saw when the stock markets reopened on September 17, hindsight shows that the worst thing to have done was to have taken precipitous action.”

Cautious Allocations 

That cautionary approach manifested itself in asset allocation decisions, the report said. Most fund officials told researchers they were holding off rebalancing even though weak markets have helped drive down overall domestic equity levels from 51% to 49%.

Bond investments are up from 23% to 25%, international equities are down a bit from 12% to 11% and stable value allocations upticked 1% to just over 5%.

The preliminary study was based on interviews with 61 corporate pension funds, 23 public pension funds and 11 endowments or foundations. The interviews took place before September 11 and most of the asset levels reported were second-quarter figures.

Greenwich Associates will conclude interviews for its 2001 US investment management study later this month. More than 1,400 institutions are expected to be interviewed for the final report due in December.