Most of us know that pensions are grossly
underfunded; but how they perform has much to do with it. Researchers at
Boston College's Center for Retirement Research analyzed the current
status of State and Local government defined-benefit (i.e.,
"traditional") pension plans across the nation. What they found was a
bit disturbing. Despite an assuming that the plans would earn an
average return of 7.6% per year, the 170 plans reviewed by analysts
actually had an average return of just 0.6% in 2016. This has dropped
the average plan funding percentage to just 67.9%. Given the
underperformance with regard to investments, there remain only two
viable options—increasing contributions (from governments, their
workers, and/or taxpayers), or reducing pension benefits, or both. Most
observers believe that, in the end, it is taxpayers who will once again
get the bill – and the shaft.
Womack Weekly Commentary September 18, 2017 The Markets “In theory, there is no difference between theory and practice, in practice there is.” Yogi Berra was talking about baseball, but the concept also applies to diversification, according to the GMO White Paper, The S&P 500: Just Say No . From the title, you might think the authors – Matt Kadnar and James Montier – don’t like U.S. stocks. They do: “Being a U.S. equity investor over the past several years has felt glorious. The S&P 500 has trounced the competition provided by other major developed and emerging equity markets. Over the last 7 years, the S&P is up 173 percent (15 percent annualized in nominal terms) versus MSCI EAFE (in USD terms), which is up 71 percent (8 percent annualized), and poor MSCI Emerging, which is up only 30 percent (4 percent annualized). Every dollar invested in the S&P has compounded into $2.72 versus MSCI EAFE’s $1.70 and MSCI Emerging’s $1.30.” The au...
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