The Pension Benefit Guaranty Corporation (PBGC) announced February 18 that it has adopted a new diversified investment policy, which includes investing heavier in equities and alternative investments, to help ensure the federal insurance program can meet its long-term obligations to America’s retirees.
There is currently approximately $55 billion available to the PBGC to invest in the new investment policy. Under the new policy, the PBGC says it will allocate 45% of its assets to a diversified set of fixed-income investments, 45% to diversified equity investments, and 10% to alternative investment classes. The agency’s previous policy set an equity investment target of 15% to 25%, although the actual level of equity investments was 28% at the end of FY 2007, the PBGC says.
“The PBGC is responsible for the pensions of 1.3 million Americans, but we don’t currently have the resources to keep all of our future commitments,” said PBGC Director Charles Millard in a release. “The new investment policy adopted by the PBGC Board of Directors will better manage our invested assets. Although it should generate higher returns, it also offers lower risk through broader diversification. This strategy gives the Corporation a 57% likelihood of full funding within ten years, compared to 19% under the previous policy.”