New York City’s comptroller is the latest public official trying to change laws aimed at limiting risk in pension investments, as U.S. state and local pension funds try to plug shortfalls in a low-return environment.
Comptroller Brad Lander, who oversees about $260 billion in retirement money for city police, firefighters, teachers and other public workers, is asking New York lawmakers for more flexibility to invest in private markets, high-yield debt and foreign stocks. The state comptroller’s office, which supervises another $280 billion in retirement assets, views the idea favorably, with a representative saying such flexibility “is key in times of market volatility.”
Pension funds, like household investors, are facing a relatively bleak environment for stocks and bonds, the bread and butter of a traditional retirement portfolio. In the face of historic inflation and Federal Reserve efforts to contain it, these funds are finding they can no longer rely on bonds to rise when equities fall and vice versa. In the first quarter, the S&P 500 returned minus 4.6% while the Bloomberg U.S. Aggregate bond index returned minus 5.93%.
“Those two things taken together is what’s scary: the prospect of both going down at the same time,” said Steve Foresti, chief investment officer at Wilshire Associates, which advises large public pension funds. Retirement portfolio managers, he said, are asking “in that environment, do I have anything that actually goes up?”
Author(s): Heather Gillers
Publication Date: 26 April 2022
Publication Site: WSJ