Pension CIOs Bearish on Meeting Assumed Rates of Return

It’s going to be difficult for pension funds to meet their assumed rates of returns for at least the next few years, according to several CIOs who participated in a panel discussion at Wednesday’s Pension Bridge Annual Conference.

The panel featured CIOs from several of the country’s largest public pension funds.

More on the remarks, from P&I:

The Federal Reserve’s actions in keeping interest rates low is resulting in lower returns and lower funding ratios, explained John D. Skjervem, CIO of the of the Tigard-based Oregon Investment Council.

[…]

Pension fund officials have added as much risk to Oregon’s portfolio as they can without taking irresponsible risks, Mr. Skjervem said.

“We are return takers, not return makers,” Mr. Skjervem said.

Thomas Tull, CIO of the Texas Employees Retirement System, Austin, said on the panel that officials at the $24.1 billion pension fund think the low-return environment will require “more tactical asset allocation … and going outside the box.”

Pension fund boards have to understand that this is an investment environment in which the chances of making a pension fund’s assumed rate of return in the next year or so are not high, said Scott C. Evans, deputy comptroller for asset management and CIO of the $162.1 billion New York City Retirement Systems, who also spoke on the panel.

Investment officials could invest more aggressively, “which might be fun but that is not our job,” Mr. Evans said.

“Our job is to make the board understand the realities of the marketplace,” Mr. Evans said.

Read more about Pension Bridge here.

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