Money managers at the Pension Benefit Guaranty Corp. (PBGC) poured money into stock in 2008, yanked money out as prices were plunging, and ran up high transition costs.
The U.S. Government Accountability Office (GAO) looked at PBGC investment transaction costs for a review of PBGC asset management practices conducted at the request of Democrats on the House Ways and Means Committee.
The PBGC insures the defined benefit pensions of about 44 million U.S. residents and now manages $80 billion in assets obtained from failed plans.
The PBGC has changed its investment objectives and stated asset allocation targets frequently over the last 8 years, alternating between more conservative and more aggressive approaches to investing, Barbara Bovbjerg, a GAO managing director, writes a report summarizing the GAO’s findings.
In February 2008, for example – shortly before the current economic slump began – the PBGC decided to increase equity holdings, high-yield debt and emerging market debt to 45% of assets, up from targets of 15% to 25% set in 2006.
The PBGC transitioned $13 billion in assets as a result of that decision, and the net transaction costs that