NIRS: Public Plans Outperformed Private Plans In 2009

In much of the earlier part of the decade, the analysts point out, plans in both sectors each held about 60% of their assets in stocks. But by year-end 2009, corporate pension plans, as a group, had cut back investing in stocks to just 38% of their portfolio, while public plans trimmed only slightly, to about 57% equity exposure, they say.

The NIRS analysts term that change “striking.”

Their explanation is that public plans “took a long-term, balanced approach to investing even in the face of drastic changes in the market” but that private plan sponsors were facing significant pressure that led to the equities pullback.

This pressure stemmed from changes in federal pension law and threatened changes to private sector accounting standards, the analysts say. Another factor: accounting regulations that would require valuation of pension assets and liabilities as though the plan were terminating immediately.

Both factors made sponsoring a pension a far less attractive proposition for employers. and so the private plans tried to limit the damage in ways that resulted in a “policy shift away from equities,” the analysts conclude.