Tag: Institutional Investor

The Pandemic Hit Public Pension Funds Hard — But Now They’re Better Funded Than They’ve Been in Years

Mary Pat Campbell

Link: https://www.institutionalinvestor.com/article/b1rmn95n2tb93d/The-Pandemic-Hit-Public-Pension-Funds-Hard-But-Now-They-re-Better-Funded-Than-They-ve-Been-in-Years

Excerpt:

Plans that experienced larger declines in funded status may have “erased” losses and experienced “incrementally higher asset returns and funded status gains” as risk assets rallied through the latter half of the year, the report said.

“The same thing that caused volatility in their portfolios on the way down actually helped on the way back up,” said William Chang, pension strategist at GSAM.  “When the pandemic hit last year, it was one of the quickest drawdowns, one of the quickest declines in equity markets. And the subsequent recovery and exit out of that bear market was equally as quick.” 

At the end of March 2020, the top quartile of plan funded status was around 81 to 90 percent. By March 2021, that figure increased to 91 to 100 percent funded status, according to the report. GSAM attributed the improvement to the subsiding effects of the pandemic: rising vaccination numbers, declining initial jobless claims, and rising consumer confidence.

Author(s): Jessica Hamlin

Publication Date: 3 May 2021

Publication Site: Institutional Investor

Confessions of a Lapsed Allocator

Mary Pat Campbell

Link: https://www.institutionalinvestor.com/article/b1lhkrw4kqnn5m/Confessions-of-a-Lapsed-Allocator

Excerpt:

Public pension investment professionals spend too much time and effort fighting to do their jobs. Internal bureaucracy probably took up 25 percent of the total work hours of my small team. 

And it’s not about being lazy or unwilling to work hard. Consider, for example, an in-demand fund that had been in process for some time and finally created capacity — but required one month for work to be finished up before closing. Every week needed for internal paperwork, presentations, and hoop-jumping, well, that meant one less week of actual due diligence and investment debate. Or maybe we would have just passed on the manager, which is also suboptimal as it’s often the best-performing managers that require the most flexible processes.

This is counterproductive. And that’s not just an opinion. Research shows that the impact of due diligence in alternatives is meaningful for returns. Spending more hours doing actual research before making a decision results in higher returns, and the effect is more pronounced the greater the dispersion of returns. The act of getting that decision approved shouldn’t consume so much of a limited staff’s time. 

Author(s): Christopher Schelling

Publication Date: 5 May 2020

Publication Site: Institutional Investor