Reporting proposals from the Actuarial Standards Board and Congress, as well as new proposed mortality tables from the Society of Actuaries could result in a higher valuation of pension obligations and lower funded levels for public pensions, according to Mike Moran with GSAM.
BNY Mellon says higher allocations to U.S. equity drove outperformance as U.S. fixed income sustained its streak as the lowest performing asset class.
The New York State Common Retirement Fund and the New York State Teachers Retirement System hold Exxon shares with a combined value of approximately $1.5 billion, and a lawsuit asks for damages, a disgorgement of all monies obtained in connection with the alleged fraud, and restitution.
Looking at the average funded ratio of all public pensions leads to generalizations, but dividing them into groups shows many are doing well, while some will need serious intervention.
OPERS said the move is expected to lower its funding level, but increase the time in which it can pay off liabilities.
Corporate plans have significantly increased their U.S. fixed income allocation, while public plans have used the funds from U.S. equity and placed them into alternatives, Investment Metrics finds.
“The increase in global equity values for the 12-month period ending June 30, 2017 was a primary driver of the improved funding levels,” says Ned McGuire, at Wilshire Consulting.
The SOA said it developed the new tables once it was determined that public pensions have differing levels of mortality than private pensions. It is soliciting comments on its proposal.
Institutional assets tracked by Wilshire Trust Universe Comparison Service (Wilshire TUCS) posted an all-plan median return of 0.88% for second quarter.
Alternative investments charge higher fees than traditional asset classes such as public equities and fixed income, and according to a study, these fees, in particular, may play a meaningful role in public plan underperformance.
“A cap-weighted strategy skews its way toward the largest stocks, but if plan sponsors own equities in a much more balanced way, it will help with stability,” says Bryan Belton, director, multi asset, at PanAgora Asset Management.
However, the Center for Retirement Research (CRR) at Boston College found portfolio allocation did account for about one-quarter of the total 16-year underperformance for bottom quartile plans.
Wilshire TUCS first quarter returns were weighed down by losses across all major asset classes.
“A primary driver of the improvement in the funding ratio was the increase in global equity values for the 12-month period ending June 30, 2017,” notes Ned McGuire, managing director and a member of the Pension Risk Solutions Group of Wilshire Consulting.
Corporate plans are winding down as public plans are strengthening themselves for the long run.
State pensions have a history of “talking with their feet” in a show of activism against undesirable products or actions.
Under the proposed legislation, any employer or public official who willfully fails to make contributions to public pension plans can face a sentence as low as a $100 fine or as high as 10 years in prison.
The NIRS studied the case of Palm Beach, Florida, which it says offers “an important cautionary tale on the detrimental impacts of switching public employees from DB pensions to DC accounts.”
The Wilshire Trust Universe Comparison Service (Wilshire TUCS) saw a median one-year gain for all plan types of 14.72%.