Heather Gillers
speaker
548 appearances
11 recordings
1 series
first heard Nov 2018
last heard Oct 2021
Heather Gillers’s voice in public audio — every appearance, attributed to the second.
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Appearances
In the public pension world, funds expect to return around 7%.
every year, which is a pretty aggressive return and may have been a little bit more realistic when bond yields were much higher 20 or 30 years ago.
But assuming such a high return allows these pension funds to contribute less money from the government's annual budgets, you know, the state of...
nevada or maine or the city of new york doesn't have to put as much in its annual but in its pension fund every year because it's expecting to earn this extra income from investments now once upon a time they could get that money from bonds and they really didn't have to worry it was kind of a set it and forget it type of situation but as bond yields
have fallen, they've had to turn to other riskier investments to try and hit that 7% target.
And for the past decade, that's really been stocks.
So over the past 10 years, public pensions have ramped up their stock allocations.
They're now at a 13-year high.
And the issue with that, as we saw over the past couple weeks, is that stocks can be volatile and stocks can fall.
On the private pension side, there's an additional consideration.
Corporate pension funds, pension funds run by public companies, don't get to assume they're going to earn 7%.
They have to be more conservative about what they assume they're going to earn.
the rules about how they estimate their liabilities require them to use a corporate bond rate when they forecast what they'll owe in the future.
So as corporate bond rates drop, the number representing their liability grows.
So corporate pension funds have an additional headache caused by falling bond yields.
It's not just that they...
earn as much, but also that their liabilities now look bigger at a time when they're also likely experiencing equity losses.
Well, it's hard to draw a direct line between anything that happens in the markets and the
how pensioners might be affected.
Pensioners have pretty strong legal protections in most states.
Showing 221–240 of 548 · page 12 of 28
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