“When it is obvious that the goals cannot be reached, don’t adjust the goals, adjust the action steps.” Confucius
It should be fairly clear at this time that chasing return has created an environment of great uncertainty for Pension America. As Confucius suggests above, if the primary goal is paying the benefits that have been promised, then don’t change that important goal: adjust the action steps. Our industry has chased performance for decades with little success to show for the effort. Isn’t it finally time to adjust the approach?
Building a cash flow matching portfolio that secures those promised benefits would create far less anxiety for all participants involved in pensions. This approach would have worked beautifully during the first quarter when asset values plummeted and liquidity became scarce. Those “return-focused” assets that took it on the chin would now have time to recover, as the cash flow matching portfolio would have provided the necessary liquidity to meet the promised payouts.