The Relationship Between Public Pension Investments and Declining Bond Yields



The visualizations display how private equity investments have grown in popularity. Private equity allocations are now the third-largest asset class for public pension plans, growing from 3.62 of nationwide plan portfolios in 2001 to 9.15 percent in 2019.

Portfolio managers should be free to pursue whatever investment philosophies they believe are in the best long-run interests of their plan members. However, policymakers, pension plan members, and taxpayers should be aware of these trends and the risks that come with them. Pension systems and lawmakers need to address the growing risk of volatility in ways that maintain a plan’s resiliency to unpredictable market factors. Also, plan stakeholders should be wary of a situation where the tail wags the dog—with pension systems swapping safety for risk and volatility as they chase outdated and overly optimistic investment return assumptions.

Author(s): Jordan Campbell

Publication Date: 25 February 2021

Publication Site: Reason