The Million Dollar Round Table (MDRT) looks at what consumers want, and need, in a new batch of results from a survey of 2,034 U.S. adults, ages 18 and older, that was conducted in November 2020, as the third U.S. wave of the COVID-19 pandemic was beginning.
About 68% of the MDRT survey participants had investments of some kind, according to the public results summary and the survey executive summary.
The pandemic hit the finances of many of the survey participants hard: 19% said their income rose in 2020, but 35% said their income fell.
About 82% of all of the participants said they were saving money, and many of them reported aiming more for liquidity than for a secure retirement.
Author(s): Allison Bell
Publication Date: 23 March 2021
Publication Site: Think Advisor
Chicago’s municipal pension plan recently redeemed $50 million from a large-cap equity fund. Seems like a non-event. Happens all the time. But the reason the pension plan did so is chilling: It was done specifically in order to make pension benefit payments. This should be a cautionary flag to underfunded pensions and to the state and municipal governments that sponsor them.
First, when pensions are underfunded they have a tendency (or need) to take on more risk in order to try to generate higher returns.
For example, underfunded pension plans are increasing their allocations to private equity. Nothing wrong with that. But that means more of the portfolio is illiquid. It would be very unlikely that private equity positions would be sold to “make payroll,” specifically because they are so illiquid. But this leaves fewer assets that are liquid enough to be sold, and that increases the pressure on those liquid assets to be sold at a decent price. Moreover, if the plan has significant assets in liquid securities, such as large-cap equities or Treasurys, those assets can easily be sold, but then the portfolio will be out of balance and will require additional trading and rebalancing anyway.
Secondly, the pension plan must keep more cash on hand than it otherwise would. If your policy portfolio calls for a 3% allocation to cash, that is designed for diversification and dry powder. But a pension plan sponsor should be providing significant amounts of cash into the pension each year. If the sponsor is not making its contributions, then the pension plan has to carry more cash than it otherwise would.
Author(s): Charles Millard
Publication Date: 7 April 2021
Publication Site: Plansponsor