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February 01, 2013 at 09:59 AM
Pension investment allocations of Department of Defense contractors are more conservative than those of a peer group of companies, according to new research.
The U.S. Government Accountability Office, Washington, D.C., publishes this finding in a study, “Pension Costs on DOD Contracts: Additional Guidance Needed to Ensure Costs are Consistent and Reasonable.” The GAO report finds that the tax-qualified define benefit plans of the largest DOD contractors invest in similar types of pension plan assets as their peer group, but do so more conservatively.
Aggregating the year-end 2011 pension investment allocations of the DOD contractors and their peer group shows that contractors have allocated about 7 percentage points more of their investments to generally conservative assets, namely cash and fixed-income assets, than is the case with their peer group. The DOD contractors therefore have a lower percentage of pension investments allocated to equities and “other” assets compared to their peer group, the report states.
Equities and “other” assets, such as private equity, hedge funds, real estate and commodities, are generally considered to be riskier than cash and fixed-income assets.
