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United States Government Accountability Office:
GAO:
Report to Congressional Requesters:
June 2011:
Pension Benefit Guaranty Corporation:
Asset Management Needs Better Stewardship:
GAO-11-271:
GAO Highlights:
Highlights of GAO-11-271, a report to congressional requesters.
Why GAO Did This Study:
The Pension Benefit Guaranty Corporation’s (PBGC) insures the pension
benefits of more than 44 million people. Since its inception in 1974,
PBGC’s assets have grown from about $34 million to almost $80 billion
in 2010, largely through assets received in plan terminations. Despite
significant swings in PBGC’s investment history, there has been little
focus on the extent to which it has met its investment goals, the
nature of its investment policies or how they compare with best
practices in the industry. GAO examined (1) how PBGC’s investment
objectives have changed over time and the outcomes associated with
those changes, (2) the performance of PBGC’s investments, and (3) how
well PBGC’s investment policies and operations comport with best
practices in the industry. To address these questions, GAO reviewed
PBGC’s investment policy statements and operational procedures;
analyzed data on investments; and interviewed PBGC officials,
officials from several state pension plans and foreign pension
insurers, and other experts.
What GAO Found:
PBGC’s investment objectives and stated asset allocation targets have
changed frequently in the last 8 years, alternating between more
conservative and more aggressive approaches to investing. Yet these
changes in stated objectives had only a moderate effect on PBGC’s
actual asset allocation because, for a variety of reasons, PBGC did
not meet its targets. In our review of their investment history, we
found that PBGC did not routinely monitor transaction costs related to
its policy shifts and, at certain times, significant transaction costs
were incurred. For example, we determined based on data obtained from
PBGC’s investment managers that nearly $75 million in transaction
costs were incurred during the economic downturn which coincided with
the period when the 2008 policy was being implemented and subsequently
suspended.
Using seven benchmarks, one of which was a Pension Protection Act
benchmark that GAO constructed, GAO’s analysis shows that PBGC’s
investments performed better than most benchmarks on an asset-only
basis, but tended to underperform all seven of the benchmarks when
returns were assessed together with the growth in liabilities. GAO
notes that both analyses have limitations and can be seen by some
experts as incomplete. However, GAO’s method of analysis is consistent
with how financial economics literature suggests investment
performance analysis should be conducted. Finally, GAO’s analysis
found no apparent adverse effect on PBGC’s investment performance as a
result of changes in policy.
PBGC’s policy statements and operating procedures are incomplete and
do not provide sufficient guidance to ensure sound implementation of
its investment policies. The investment policies issued by PBGC’s
board for strategic guidance in the planning and execution of
investments have generally lacked a number of provisions recommended
by the Chartered Financial Analyst Institute; Independent Fiduciary
Services; and other experts of sound investment management, such as
the Government Finance Officers Association. Moreover, according to
our review and based on interviews with PBGC staff, the policy
statements have been insufficiently detailed to provide adequate
guidance for staff. In addition, PBGC’s Corporate Investments
Department’s staff have largely functioned without the benefit of
fully-developed and documented operating procedures.
Although PBGC has grown from a relatively small agency to one holding
almost $80 billion in assets, its policies and procedures still
reflect in many ways its small agency past. To ensure that PBGC can
effectively and consistently meet its obligation to manage a fund of
this size and its liabilities, PBGC’s board and its management must
enact better stewardship, standards, and procedures to ensure that
PBGC can effectively and consistently meet its obligation to conduct
the many investment related functions it performs.
What GAO Recommends:
GAO recommends that the PBGC and its board of directors (1) develop
and maintain comprehensive investment policy statements and (2)
develop a complete set of operating procedures and guidelines for its
investment activities. GAO received comments from the Department of
Labor and the PBGC. They generally agreed with our recommendations.
View [hyperlink, http://www.gao.gov/products/GAO-11-271] or key
components for more information, contact Barbara Bovbjerg at (202) 512-
7215 or Bovbjergb@gao.gov.
[End of section]
Contents:
Letter:
Background:
Frequent Policy Changes Occurred, but Changes to Actual Asset
Allocation Were Moderate:
PBGC's Investment Performance Results Have Been Mixed:
PBGC's Policies and Procedures for Implementing Its Investment Policy
Are Incomplete:
Conclusions:
Recommendations for Executive Actions:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Process for Transitioning Funds to Align with PBGC's
Investment Policy:
Appendix III: Asset-Only and Net of Liability Analysis of Pension
Benefit Guarantee Corporation's Single-Employer Total Fund:
Appendix IV: Comments from the Department of Labor:
Appendix V: Comments from the Pension Benefit Guaranty Corporation:
Appendix VI: GAO Contact and Staff Acknowledgments:
Bibliography:
Tables:
Table 1: Similarities and Differences between PBGC and Other
Institutions:
Table 2: Transaction Costs Incurred with Investment Policies Adopted
in 2004, 2006, and 2008:
Table 3: Descriptions of the Seven Benchmark Portfolios in GAO's
Analysis:
Table 4: A Comparison of PBGC Investment Policy Statements with Best
Practices:
Table 5: Descriptive Statistics for PBGC Total Fund Portfolio Weights
by Allocation Period, September 1976 to December 2009:
Table 6: Portfolio Performance Comparison Results, October 1976
through December 2009:
Table 7: Portfolio Performance Comparison Results, October 1976
through December 2009 (All Asset Returns Are Net of Liability Return):
Figures:
Figure 1: Revenue Sources and Uses of PBGC's Funds:
Figure 2: Growth of PBGC's Trust and Revolving Funds, 1975 to 2010:
Figure 3: PBGC's Actual Equity Allocations Compared to Targets, 1991
to 2010:
Figure 4: Allocations of Bonds and Equities in PBGC Total Fund,
September 1976 to December 2009:
Figure 5: Allocation to Equities in PBGC Total Fund, September 1976 to
December 2009:
Figure 6: Allocation of Bonds and Equities in PBGC Total Fund,
September 1976 to December 2009, with Business Cycle Shading:
Abbreviations:
CID: Corporate Investment Department:
ERISA: Employee Retirement Income Security Act of 1974:
PBGC: Pension Benefit Guaranty Corporation:
PPA: Pension Protection Act of 2006:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
June 30, 2011:
The Honorable Sander M. Levin:
Ranking Member:
Committee on Ways and Means:
House of Representatives:
The Honorable Charles B. Rangel:
House of Representatives:
The Pension Benefit Guaranty Corporation (PBGC) insures the pensions
of more than 44 million private sector workers and retirees who are
covered by more than 27,500 private defined benefit pension plans.
Created in 1974 as a federal guarantor of these plans, PBGC finances
its operations through insurance premiums paid by plan sponsors, funds
received from terminated pension plans, and money earned from the
investment of these funds.[Footnote 1] Despite PBGC's financial
holdings of almost $80 billion, the agency currently faces a
cumulative deficit of more than $23 billion. Alternating between more
conservative and more aggressive investment strategies, PBGC has
revised its investment policy several times since its inception. You
asked us to study:
* how PBGC's investment objectives have changed over time, whether
policy goals were met, and what impact have those changes had on
transaction costs;
* how changes in investment policy have impacted investment returns;
and:
* what methodology did PBGC use to execute investment policy changes
over the past 10 years and how well did PBGC comport with best
practices in the industry in terms of development, execution, and
oversight of its policies.
To answer these questions, we collected and analyzed information using
several methods. To identify changes to PBGC's investment objectives,
policies, and associated costs, we examined the agency's investment
policy statements, interviewed agency staff responsible for
implementing them, and obtained data on costs from staff and
transition managers. Our analysis did not include PBGC's recently
released investment policy statement in late May 2011, since it was
issued just after the completion of our audit work. To analyze the
performance of PBGC's investments, we also obtained PBGC data on
assets and liabilities and conducted a portfolio performance
evaluation of PBGC's Single Employer Total Fund's monthly returns from
October 1976 to December 2009. This analysis compared the fund's
return performance to that of several benchmark portfolios using a
variety of portfolio performance statistics. To determine how well
PBGC comported with industry best practices regarding the development,
execution, and oversight of their policies, we reviewed investment
policy guidance from the Department of Labor, the Chartered Financial
Analyst Institute, and the Government Finance Officer's Association.
We then compared policy elements from such guidance with PBGC's
investment policies, and interviewed PBGC staff, a former PBGC
director, members of the Investment Advisory Committee, and board
representatives to obtain information about PBGC operations. We also
interviewed and examined documents from domestic private and public
insurers, domestic pension plan sponsors, and foreign public insurers.
For additional discussion of our scope and methodology, see appendix I.
We conducted this performance audit from June 2009 through May 2011 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.
Background:
The Employee Retirement Income Security Act of 1974 (ERISA) created
PBGC as a government agency to help protect the retirement income of
U.S. workers with private-sector defined benefit plans by guaranteeing
their benefits up to certain legal limits.[Footnote 2] PBGC
administers two separate insurance programs for these plans: a single-
employer program and a multiemployer program. The single-employer
program covers about 34 million participants in approximately 26,000
plans. The multiemployer program covers 10 million participants in
another 1,500 collectively bargained plans that are maintained by two
or more unrelated employers. If a multiemployer pension plan is unable
to pay guaranteed benefits when due, PBGC will provide financial
assistance to the plan, in the form of a loan, so that benefits may
continue to be made up to the guaranteed benefit limits.[Footnote 3]
However, if the sponsor of a single-employer plan is in financial
distress and does not have sufficient assets to pay guaranteed
promised benefits, the plan will be terminated and PBGC will likely
become the plan's trustee, assuming responsibility for paying benefits
to participants as they become due, up to the guaranteed benefit
limits. Most of PBGC's $102.5 billion in liabilities are due to future
benefit payments owed to participants of underfunded plans terminated
under the single-employer insurance program.
To finance these liabilities, PBGC currently has approximately $80
billion in assets. PBGC's funds primarily come from three sources:
insurance premiums paid by sponsors of defined benefit plans, assets
acquired from terminated plans, and investment income earned on these
assets.[Footnote 4] For example, in 2010 all plans insured by PBGC
paid a total of approximately $2.3 billion in premiums. In addition,
PBGC took over the assets from 147 defined benefit plans in fiscal
year 2010, which totaled approximately $1.8 billion. Finally, over the
course of the same year, PBGC recorded $7.8 billion in earnings from
its investment portfolio, including interest, dividends, and capital
gains.
PBGC holds its assets in essentially two separate funds: the PBGC
trust fund and the PBGC revolving fund (see figure 1).[Footnote 5] The
PBGC Trust Fund holds assets received from terminated plans and the
return on investing the assets held in the trust fund, while the PBGC
Revolving Fund consists of premium receipts and the return on
investing the premium receipts. Benefit payments and financial
assistance are paid from the revolving fund, and then the trust fund
reimburses the revolving fund through a proportional payment at least
annually.
Figure 1: Revenue Sources and Uses of PBGC's Funds:
[Refer to PDF for image: illustration]
Trust fund:
Various assets based on investment strategy and holdings of terminated
plans:
Sources of funds:
Assets from terminated plans trusteed by PBGC;
Returns on investments.
Uses of funds:
Certain plan termination expenses[A].
From Trust Fund to Revolving Fund:
Proportional funding transfers[B];
Administrative expense reimbursements[C].
Revolving fund:
Fixed-income securities.
Sources of funds:
Premiums paid by plan sponsors;
Returns on investments.
Uses of funds:
Benefits paid to participants in terminated plans;
Financial assistance provided to multi-employer plans;
Administrative expenses[D].
Source: GAO presentation of information in PBGC 6/1/2010 draft policy
manual, “Pension Benefit Guaranty Corporation Corporate Investment
Department Policies and Procedures Manual.
[A] Certain expenses related to plan terminations can be paid directly
by the PBGC Trust Fund.
[B] The PBGC Trust Fund reimburses the PBGC Revolving Fund for its
share of payments made to beneficiaries with a proportional payment
made at least annually. The formula for calculating this payment is:
net trust fund assets divided by the present value of future benefits
excluding probable terminations.
[C] The PBGC Trust Fund reimburses the PBGC Revolving Fund for all
administrative expenses initially paid by the revolving fund.
[D] Administrative expenses include such items as payroll and payment
of invoices.
[End of figure]
PBGC has grown significantly since the end of its first year of
operation. As of June 30, 1975, the agency had $34 million in assets
and $1.2 million in liabilities. At the end of fiscal year 2010,
however, the trust and revolving funds combined contained about $80
billion in assets (see figure 2), to cover total liabilities of $102.5
billion, leaving a deficit of approximately $23 billion.
[Refer to PDF for image]
[End of figure]
Figure 2: Growth of PBGC's Trust and Revolving Funds, 1975 to 2010:
[Refer to PDF for image: stacked vertical bar graph]
Year: 1975;
Revolving fund: $0.35 billion;
Trust fund: $0.
Year: 1976;
Revolving fund: $0.73 billion;
Trust fund: $0.
Year: 1977;
Revolving fund: $0.107 billion;
Trust fund: $0.
Year: 1978;
Revolving fund: $0.170 billion;
Trust fund: $0.
Year: 1979;
Revolving fund: $0.136 billion;
Trust fund: $0.70 billion.
Year: 1980;
Revolving fund: $0.155 billion;
Trust fund: $0.113 billion.
Year: 1981;
Revolving fund: $0.174 billion;
Trust fund: $0.159 billion.
Year: 1982;
Revolving fund: $0.273 billion;
Trust fund: $0.201 billion.
Year: 1983;
Revolving fund: $0.289 billion;
Trust fund: $0.421 billion.
Year: 1984;
Revolving fund: $0.282 billion;
Trust fund: $0.511 billion.
Year: 1985;
Revolving fund: $0.344 billion;
Trust fund: $0.582 billion.
Year: 1986;
Revolving fund: $0.486 billion;
Trust fund: $0.812 billion.
Year: 1987;
Revolving fund: $0.504 billion;
Trust fund: $1.241 billion.
Year: 1988;
Revolving fund: $0.79 billion;
Trust fund: $1.144 billion.
Year: 1989;
Revolving fund: $0.95 billion;
Trust fund: $1.6 billion.
Year: 1990;
Revolving fund: $1.6 billion;
Trust fund: $1.0 billion.
Year: 1991;
Revolving fund: $2.5 billion;
Trust fund: $2.3 billion.
Year: 1992;
Revolving fund: $3.2 billion;
Trust fund: $3.0 billion.
Year: 1993;
Revolving fund: $5.0 billion;
Trust fund: $3.3 billion.
Year: 1994;
Revolving fund: $4.9 billion;
Trust fund: $3.3 billion.
Year: 1995;
Revolving fund: $6.4 billion;
Trust fund: $4.1 billion.
Year: 1996;
Revolving fund: $7.2 billion;
Trust fund: $5.0 billion.
Year: 1997;
Revolving fund: $9.0 billion;
Trust fund: $6.6 billion.
Year: 1998;
Revolving fund: $11.6 billion;
Trust fund: $6.5 billion.
Year: 1999;
Revolving fund: $10.8 billion;
Trust fund: $7.8 billion.
Year: 2000;
Revolving fund: $12.1 billion;
Trust fund: $8.9 billion.
Year: 2001;
Revolving fund: $14.4 billion;
Trust fund: $7.6 billion.
Year: 2002;
Revolving fund: $17.0 billion;
Trust fund: $9.0 billion.
Year: 2003;
Revolving fund: $16.4 billion;
Trust fund: $18.1 billion.
Year: 2004;
Revolving fund: $16.2 billion;
Trust fund: $21.3 billion.
Year: 2005;
Revolving fund: $16.4 billion;
Trust fund: $32.6 billion.
Year: 2006;
Revolving fund: $15.2 billion;
Trust fund: $44.0 billion.
Year: 2007;
Revolving fund: $14.5 billion;
Trust fund: $48.1 billion.
Year: 2008;
Revolving fund: $14.97 billion;
Trust fund: $35.8 billion.
Year: 2009;
Revolving fund: $15.86 billion;
Trust fund: $48.05 billion.
Year: 2010;
Revolving fund: $17.58 billion;
Trust fund: $53.61 billion.
Source: GAO analysis of PBGC data.
[End of figure]
PBGC is governed by a three-member board of directors, which consists
of the Secretary of Labor (Chair), the Secretary of the Treasury, and
the Secretary of Commerce.[Footnote 6] The board is responsible for
policy direction and oversight of PBGC's finances and operations. The
board of directors is responsible for establishing and overseeing the
policies of the corporation, including the approval of the
corporation's investment policy statement.[Footnote 7] Under its
bylaws, the board is required to review the corporation's investment
policy statement at least every two years and approve the investment
policy statement at least every four years.[Footnote 8] Each board
member must designate an official (not below the level of an assistant
secretary) to support the board's oversight. Board representatives are
given the authority to act for all purposes under the bylaws, subject
to some actions--such as approving the corporation's investment policy
statement--being ratified by the board members.[Footnote 9] The board
members often rely on these department representatives to conduct much
of their PBGC related work on their behalf.
PBGC uses institutional investment management firms to invest its
assets, subject to the agency's oversight and in accordance with the
investment policy statement as approved by its board and applicable
legal requirements. For example, ERISA provides different requirements
concerning how the assets held in the revolving fund and the trust
fund can be invested. ERISA requires the PBGC Revolving Fund to be, in
part, invested in U.S. obligations.[Footnote 10] PBGC has more
flexibility to invest trust fund assets in other investments, and,
along with revolving fund investments, the corporation's investment
policy statement provides direction on how these assets are to be
invested. With respect to the trust fund, PBGC does not determine the
specific investments to be made, but instead relies on its investment
managers' discretion to invest a portion of the funds consistent with
the benchmarks and risk criteria provided to each investment manager.
When PBGC receives assets from terminated plans, PBGC determines
whether the assets fit into the agency's current investment policy
objectives. For incoming assets that do not fit with their current
policy, PBGC uses investment managers to liquidate them, as soon as
practicable, and then reinvests the proceeds into assets that do align
with PBGC policy.
In its role as an insurer, PBGC's responsibilities are similar to
those of other institutions that conduct such functions. However, the
corporation also faces structural challenges that are not shared by
other insurers, which gives the corporation less control over the
terms by which it insures pension plans and constrains its ability to
manage its risk of loss (see table 1). For example, in contrast with
information provided by pension insurers in Canada and the
Netherlands, PBGC tends to have less control over the terms by which
it insures pension plans. Only Congress, through legislation, can
change premiums or plan funding requirements for defined benefit plans
in the United States.[Footnote 11]
Table 1: Similarities and Differences between PBGC and Other
Institutions:
Life insurers, and property and casualty insurers:
Similarities:
* Like some life insurers, PBGC often has a long-term investment
horizon;
* Like some property and casualty insurers, PBGC often has
unpredictable liabilities that require a certain amount of liquidity;
Differences:
* Unlike insurance companies, PBGC is unable to set the level of
premiums that it receives from plan sponsors to insure their plans;
* Unlike insurance companies, PBGC must take on new beneficiaries,
irrespective of the financial health of the terminated plans.
Foreign pension insurers:
Similarities:
* Like some foreign pension insurers, PBGC is responsible for paying
benefits to participants of plans that it has taken over;
Differences:
* Unlike one foreign pension insurer, PBGC cannot change the terms
under which it insures a pension plan or impose a higher premium on a
plan that takes on significant investment risk;
* Unlike one foreign pension insurer, PBGC cannot reduce benefit
payments to participants in order to protect its own financial health;
* Unlike another foreign pension insurer, PBGC cannot require the
reduction of benefit accrual rates in order to improve the funded
status of a plan;
* Unlike one foreign pension insurer, PBGC lacks the ability to change
funding rules applicable to the plans that it insures.
Sources: GAO analysis of pension insurance information provided by
Canada (Ontario), the Netherlands, Switzerland, and the United
Kingdom; life and property and casualty insurer information provided
by John Hancock, AIG Property and Casualty, and State Farm Property
and Casualty.
[End of table]
Beginning in 2003, recognizing PBGC's long-term financial challenges,
we included PBGC's single-employer insurance program on our list of
"high-risk" programs needing attention and congressional action;
[Footnote 12] in 2009, we added PBGC's multiemployer program as a
program of concern.[Footnote 13] Both programs remain on our high-
risk list today.[Footnote 14]
Frequent Policy Changes Occurred, but Changes to Actual Asset
Allocation Were Moderate:
PBGC's investment policy has changed frequently since 1990,
alternating between more conservative and more aggressive approaches
to investment.[Footnote 15] The frequent changes in policy have had a
moderate impact on PBGC's actual allocation of assets since 1976
because there were no allocation targets in place prior to 1990 and
the policy targets after that time were rarely ever met. Meanwhile,
the transaction costs for the reinvestment of assets during each
policy period have fluctuated with shifts in the market.
PBGC's Investment Objective Changes Have Had Moderate Effect on Actual
Asset Allocations:
Since 1990, PBGC has shifted its investment policy five times. The
shifts in investment policy that occurred in 1990 and 2004 were aimed
at strategies that immunized against interest rate exposure by
increasing the allocation of fixed-income securities. PBGC's
investment policy was shifted in 2009 to a more conservative strategy
of taking on a higher allocation of fixed-income securities.[Footnote
16] In contrast, shifts in investment policy that occurred in 1994 and
2008 were aimed at strategies that maximized returns by increasing the
allocation of equities. Shifts in policy of this frequency are thought
to reflect an undisciplined approach to investing. Experts we
interviewed stated that a more disciplined approach would require that
PBGC change its investment policy no more than once every 5 to 7
years, except to review the policy during unusual circumstances, such
as the recent market crash or when taking over the assets of a large
terminated plan.[Footnote 17] They noted that it can take up to 5
years for a policy to be fully implemented and to have an impact that
can be evaluated. Moreover, these experts stated that a long-term and
disciplined investment policy is needed in order to minimize the costs
associated with shifts in policy.[Footnote 18] Since 1990, PBGC's
investment policy was in place for more than 5 years only once--during
the period from 1994 to 2004. All other policies were in place for
shorter periods, generally about 2 to 4 years (see figure 3).
Figure 3: PBGC's Actual Equity Allocations Compared to Targets, 1991
to 2010:
[Refer to PDF for image: line graph]
Year: 1990;
Percentage of PBGC assets in equities: 43.2;
Equity allocation ceiling or target: 1990 policy (no more than 35%).
Year: 1991;
Percentage of PBGC assets in equities: 25.4;
Equity allocation ceiling or target: 1990 policy (no more than 35%).
Year: 1992;
Percentage of PBGC assets in equities: 22.9;
Equity allocation ceiling or target: 1990 policy (no more than 35%).
Year: 1993;
Percentage of PBGC assets in equities: 20.2;
Equity allocation ceiling or target: 1990 policy (no more than 35%).
Year: 1994;
Percentage of PBGC assets in equities: 29.1;
Equity allocation ceiling or target: 1990 policy (no more than 35%).
Year: 1995;
Percentage of PBGC assets in equities: 29.8;
Unofficial equity allocation ceiling: 1994 policy (no more than
50%)[A].
Year: 1996;
Percentage of PBGC assets in equities: 35.2;
Unofficial equity allocation ceiling: 1994 policy (no more than
50%)[A].
Year: 1997;
Percentage of PBGC assets in equities: 38.7;
Unofficial equity allocation ceiling: 1994 policy (no more than
50%)[A].
Year: 1998;
Percentage of PBGC assets in equities: 38.2;
Unofficial equity allocation ceiling: 1994 policy (no more than
50%)[A].
Year: 1999;
Percentage of PBGC assets in equities: 39.8;
Unofficial equity allocation ceiling: 1994 policy (no more than
50%)[A].
Year: 2000;
Percentage of PBGC assets in equities: 42.8;
Unofficial equity allocation ceiling: 1994 policy (no more than
50%)[A].
Year: 2001;
Percentage of PBGC assets in equities: 36.1;
Unofficial equity allocation ceiling: 1994 policy (no more than
50%)[A].
Year: 2002;
Percentage of PBGC assets in equities: 29.5;
Unofficial equity allocation ceiling: 1994 policy (no more than
50%)[A].
Year: 2003;
Percentage of PBGC assets in equities: 30.3;
Unofficial equity allocation ceiling: 1994 policy (no more than
50%)[A].
Year: 2004;
Percentage of PBGC assets in equities: 33.2;
Equity allocation ceiling or target: 2004 policy (15% to 25%).
Year: 2005;
Percentage of PBGC assets in equities: 29.3;
Equity allocation ceiling or target: 2004 policy (15% to 25%).
Year: 2006;
Percentage of PBGC assets in equities: 28.2;
Equity allocation ceiling or target: 2006 policy (15% to 25%).
Year: 2007;
Percentage of PBGC assets in equities: 30.9;
Equity allocation ceiling or target: 2006 policy (15% to 25%).
Year: 2008;
Percentage of PBGC assets in equities: 28.8;
Equity allocation ceiling or target: 2008 policy (Target of 45%).
Year: 2009;
Percentage of PBGC assets in equities: 24.9;
Equity allocation ceiling or target: 2009 policy (No more than 26.5%).
Year: 2010;
Percentage of PBGC assets in equities: 33.1;
Equity allocation ceiling or target: 2009 policy (No more than 26.5%).
Source: GAO analysis of PBGC data.
Note: For the entire graphic, the policy years and the axis years do
not line up exactly because of a lag between when a policy statement
is released and when the policy begins to be implemented. Also, the
policy change from 2004 to 2006 was the addition of the international
fund, though the target percentages did not change.
[A] No explicit asset allocation was specified in the corporations
investment policy statement, but the policy did set a ceiling for
PBGC's equity allocation of 50 percent.
[End of figure]
PBGC's actual allocation of its total assets (both revolving fund and
trust fund combined) reflects these changes in policy to some extent,
but the impact has been tempered by a number of factors. First, PBGC
must comply with certain statutory investment restrictions.[Footnote
19] Therefore, because PBGC only invest the assets of its revolving
fund in U.S. obligations which are fixed-income securities,
accomplishing its investment policy goal is, in effect, limited to
reallocating the assets of its trust fund--that is assets acquired
from terminated plans under PBGC trusteeship. Second, during the
period between 2004 and 2008, PBGC adopted the practice of using only
assets of newly terminated plans to move toward new allocation
targets, rather than reinvesting assets already in its trust fund.
When in place, this practice further limited the amount of assets PBGC
could use to meet its target allocations. Third, market conditions, at
times, hindered PBGC in reaching its allocation targets by reducing
the overall value--and as a result, the proportion--of assets invested
in a particular sector. Finally, the frequency with which allocation
targets changed also affected PBGC's ability to make significant
changes in its allocation. During each period a policy was in place,
PBGC made progress toward reaching new allocation targets with varying
success before a new policy was adopted.
1990 to 1994:
In May 1990, PBGC adopted a new investment policy calling for a
decrease in the proportion of equities to no more than 35 percent of
its portfolio. This policy was initiated by PBGC's then newly
appointed executive director in response to both an increase in
unfunded liabilities and to the results of a commissioned study that
examined PBGC's liabilities and investment options. The study of
PBGC's trust and revolving funds together recommended that PBGC reduce
its equity exposure and increase its allocation in long-duration fixed-
income assets. Accordingly, PBGC adopted a new investment policy that
focused on matching its assets with its liabilities and targeted an
asset allocation of no more than 35 percent in equities and no less
than 65 percent in fixed income. In 4 months, PBGC decreased its
equity allocation from 43 percent to 33 percent and was able to
maintain this allocation range throughout the period for which the
1990 policy was in effect.
1994 to 2004:
In October 1994, PBGC adopted a new investment policy that focused on
maximizing the return on its investments by investing more heavily in
equities in order to reduce the agency's deficit by achieving higher
rates of return. Although no explicit asset allocation was specified
in the investment policy statement, PBGC's 1994 annual report stated
that, along with the adoption of the new investment policy, the agency
had raised its ceiling for its equity allocation to 50 percent. The
assets in PBGC's revolving fund is, pursuant partially to statute and
partially to PBGC policy, invested only in U.S obligations which are
fixed-income assets, hindering PBGC's efforts to increase its overall
equity allocation.[Footnote 20] However, in the years that followed,
the agency attempted to raise equity levels by investing all its trust
fund assets into equities. In this way, over the course of fiscal year
1994, PBGC increased its actual equity allocation from 17 percent to
30 percent. During the subsequent 7 years this policy was in place,
PBGC's equity allocation peaked in 1999 at 44 percent, and over the
period, averaged about 35 percent according to data provided by the
agency.
2004 to 2006:
In 2004, PBGC adopted a new investment policy that would, similar to
the 1990 policy, match PBGC's assets to its liabilities by emphasizing
fixed-income investments and limiting exposure to market risk. The
2004 policy reduced the allocation target for equities down to the 15
to 25 percent range and raised the allocation target for fixed-income
securities to 75 to 85 percent. To implement this policy, however,
PBGC's board directed staff to use only assets acquired from newly
terminated plans, rather than to transition core trust fund assets
already under management. As a result, according to PBGC officials,
the volume of assets available to transition toward the target
allocations was limited and the agency was not able to lower its
allocation of equities down to the target range during the time this
policy was in effect.
2006 to 2008:
In 2006, PBGC adopted a new policy as a result of its biennial review
process.[Footnote 21] It allowed PBGC to invest in international
securities, a departure from the past. The agency's overall investment
policy, however, remained the same, with equity allocation targets set
at 15 to 25 percent and fixed-income allocation targets set at 75 to
85 percent. Despite this new policy, once again, PBGC officials said
that the agency did not receive enough in newly trusteed assets to be
able to shift its equity allocation down to this target range. Also,
during most of this period, the returns on PBGC's equity investments
outpaced those of its fixed-income investments, further hindering the
agency's attempt to reach this allocation target. Equities were
achieving returns of 11 to 17 percent in fiscal years 2006 and 2007,
while the returns of its fixed-income investments were around 1 to 3
percent annually. Hence, according to PBGC, the actual allocation
hovered between 27 to 32 percent in equities and 67 to 72 percent in
fixed income throughout this period.
2008 to 2009:
PBGC changed its investment policy again in 2008 with the goal of
seeking to maximize returns on its investment. To this end, PBGC
adopted an investment policy with target asset allocations of 45
percent in equities; 45 percent in fixed income; and 10 percent in
alternative investments, such as real estate and private equity. In
addition, the policy called for expansion into two new subclasses of
fixed-income securities: high yield and emerging market debt. In
February 2008, when the policy was adopted, 28 percent of PBGC's
assets were invested in equities. To move quickly toward its newly
adopted allocation targets, PBGC decided to abandon its practice of
relying only on newly acquired assets from terminated plans to
transitioning a portion of core trust fund assets as well. PBGC
transitioned nearly $5.7 billion from its existing trust fund
investments in fixed-income securities to equities. Despite these
efforts, the financial crisis and a 35 percent decline in the New York
Stock Exchange Composite Index between early February 2008 and May
2009[Footnote 22] caused PBGC's actual equity allocation to drop to as
low as 23 percent during this period.
2009 to Present:
In May and June 2009, PBGC's three board members issued a resolution
instructing staff to cease implementing the 2008 investment policy.
[Footnote 23] This resolution was in response to an investigation,
conducted by PBGC's Inspector General, concerning potential conflicts
of interest involving PBGC's then Director with securing asset
managers for the agency's portfolio. Transactions already initiated
were allowed to proceed, but no new transactions were permitted until
the board representatives issued investment policy guidance in July
2009, since the board had not also issued a new investment policy
statement after it ceased the 2008 policy. Instead, this new interim
policy called for a return to the actual portfolio composition as it
was on March 31, 2009, which was 26.5 percent in equities and 73.5
percent in fixed income. This interim guidance served as the official
policy.[Footnote 24] Since then, PBGC has transitioned its newly
acquired assets to fixed-income investments. Nevertheless, the
performance of the equities market improved enough that as of
September 2010, equities made up 31 percent of PBGC's portfolio.
Transaction Costs Have Fluctuated with Shifts in the Market:
While the actual distribution of PBGC assets has remained within a
fairly narrow range since 1990, the transaction costs incurred for the
reinvestment of assets during each period a policy was in place have
fluctuated with shifts in the market. Some transaction costs are
always incurred with the assumption of assets from newly terminated
plans and with the management of existing investments,[Footnote 25]
but the magnitude of these costs can vary dramatically depending on
the volume and type of assets being transitioned, the investment
policy or goal in place, and the market conditions during the
transition period.[Footnote 26] PBGC does not have a routine process
for tracking the transaction costs associated with different
investment policies, and does not consider these costs when developing
new investment strategies.
Transaction costs for reinvestment of assets generally consist of
commissions, fees and certain taxes (referred to as explicit costs),
and opportunity costs, due to market changes during the transaction
(referred to as implicit costs).[Footnote 27] PBGC typically uses
specialized transition investment managers when transitioning large
pools of assets to keep explicit costs down through economies of scale
and by taking advantage of other services offered by these
managers.[Footnote 28] However, opportunity costs can vary widely
based on market conditions, and can result in either a net loss or a
net gain. Taking both explicit and implicit costs together, when
transactions net an amount lower than the original value of the
assets, a loss occurs; when transactions net an amount greater than
the original value of the assets, a gain occurs. Although PBGC does
not routinely track and conduct analytics on the transaction costs
associated with implementing different investment policies, we were
able to compile the costs incurred during each period a policy was in
place from 2004 forward by obtaining records from PBGC officials as
well as PBGC's external transition managers, as summarized in table 2.
Table 2: Transaction Costs Incurred with Investment Policies Adopted
in 2004, 2006, and 2008:
Investment goal: Date policy established;
2004 policy: Reduce equity investments to 15-25%: January 29, 2004;
2006 policy: Maintain equity investments at 15-25%: February 14, 2006;
2008 policy: Increase equity to 45% and certain subclasses of fixed-
income investments: February 12, 2008.
Investment goal: New York Stock Exchange Composite Index[A];
2004 policy: Reduce equity investments to 15-25%: +25.9%;
2006 policy: Maintain equity investments at 15-25%: +12.5%;
2008 policy: Increase equity to 45% and certain subclasses of fixed-
income investments: -35.3%[B].
Investment goal: Volume of assets transitioned;
2004 policy: Reduce equity investments to 15-25%: $8.8 billion;
2006 policy: Maintain equity investments at 15-25%: $2.6 billion;
2008 policy: Increase equity to 45% and certain subclasses of fixed-
income investments: $13 billion.
Investment goal: Transaction costs[C,E]:
Investment goal: Explicit costs (fees, commissions, and certain taxes);
2004 policy: Reduce equity investments to 15-25%: $2.2 million;
2006 policy: Maintain equity investments at 15-25%: $2.9 million;
2008 policy: Increase equity to 45% and certain subclasses of fixed-
income investments: $5.7 million.
Investment goal: Implicit costs (due to market changes during
transactions)[D];
2004 policy: Reduce equity investments to 15-25%: $42.7 million (gain);
2006 policy: Maintain equity investments at 15-25%: $4.7 million;
2008 policy: Increase equity to 45% and certain subclasses of fixed-
income investments: $68.9 million.
Investment goal: Total net transaction costs;
2004 policy: Reduce equity investments to 15-25%: $40.5 million (gain);
2006 policy: Maintain equity investments at 15-25%: $7.6 million;
2008 policy: Increase equity to 45% and certain subclasses of fixed-
income investments: $74.6 million.
Sources: GAO analysis of data from PBGC, BlackRock, and State Street.
[A] New York Stock Exchange Composite Index serves as an indicator of
how the market was performing.
[B] Return shown is for the period from February 2008 through May 2009.
[C] Transaction costs primarily reflect the costs associated with
trading equities rather than fixed-income securities. Transaction
costs related to fixed-income trades were not tracked during
implementation of the 2004 and 2006 policies, and for the initial
implementation (between November 2008 and January 2009) of the 2008
policy. PBGC provided costs related to fixed-income trades during
implementation of later phases of the 2008 policy, but did not provide
a breakdown of explicit and implicit costs. These costs, totaling
$17.2 million, are included in implicit costs.
[D] Implicit costs include what is referred to as the "implementation
shortfall" and time to reach the new allocation, which is generally
captured in the "spread costs"--that is, the cost between the bid
(sell price) and the ask (buy price).
[E] Transaction costs during implementation of the 2008 policy reflect
the costs associated with asset trades of about $9.3 billion that were
tracked during the last two phases of the transition. Transaction
costs associated with asset trades of about $3.7 billion, made during
the first phase of the transition, were not tracked.
[End of table]
From 2004 to 2008, PBGC's investment policy remained primarily the
same: to transition assets from newly terminated plans to increase the
level of fixed-income investments. When the 2004 policy was being
implemented, assets valued at $8.8 billion were transitioned, and
positive market conditions helped PBGC realize a net gain of $40.5
million (or 46 basis points).[Footnote 29] When the 2006 policy was
being implemented, assets of about $2.6 billion were transitioned, but
declining market conditions towards the end of this period contributed
to a loss of $7.6 million (or 30 basis points).
In 2008, PBGC's investment policy shifted to increasing the level of
equity investments and certain subclasses of fixed-income securities
and the agency opted to use assets already in the trust fund, as well
as newly terminated plan assets, to accelerate implementation of the
policy.[Footnote 30] In total, assets of about $13 billion were
transitioned while this investment policy was in place, with $5.4
billion moving from fixed-income securities to equities and $7.6
billion moving from one type of fixed-income securities to others
(specifically, from long-duration securities to high-yield and
emerging market debt). These transactions were completed in three
phases. According to PBGC's own records, phase one was performed in an
"ad hoc" manner and transaction costs were not tracked. Assets
transitioned during this phase totaled approximately $3.7 billion.
Phase two was more structured (referred to as "coordinated sales"),
with PBGC assigning each fixed-income investment manager an amount of
trust fund assets to sell over a 5-month period, allowing trades to be
made on favorable trading days at the discretion of the investment
manager. About $7.9 billion in assets were transitioned during this
phase. During phase three, termed the "runoff" phase, the 2008 policy
had been suspended, but PBGC officials told us they decided not to
cancel the trades for about $1.4 billion in assets that their
investment managers already had initiated. Due in part to the market
downturn during the period the 2008 policy was in place, the
transaction costs associated with asset trades of about $9.3 billion
that were tracked during the last two phases of the transition totaled
nearly $74.6 million (or 80 basis points). According to one PBGC
investment manager, some trades related to the 2008 transition
incurred opportunity costs of 400 to 500 basis points.
In July 2009, a new interim directive was issued to decrease the level
of equity investments back to the asset distribution held as of March
31, 2009. PBGC staff estimated that implementing this new policy could
incur transaction costs of as much as $52 million. In January 2011,
PBGC provided data indicating that between June 2009 and September
2010, $7.4 million in transaction costs had accrued since
implementation of this 2009 directive.
PBGC's Investment Performance Results Have Been Mixed:
Our analysis of PBGC's investment performance found that PBGC's
investments performed better than most on an asset-only basis compared
with the seven benchmark portfolios (see table 3). However, PBGC's
investment portfolio tended to underperform these benchmarks when
returns were assessed together with the liability return (or growth in
liabilities). Specifically, in the asset-only comparison, PBGC's
portfolio achieved better risk-adjusted performance on its investments
than that achieved by six of the seven benchmark portfolios. When
assessed with liabilities, however, all seven benchmark portfolios
performed better than PBGC's investment portfolio. This occurred for
either one of two reasons: either the benchmark had a mix of assets
that were better correlated (that is, moved more in tandem) with
PBGC's liability return (growth in liability), or, when this was not
the case, the benchmarks had returns sufficient to compensate for the
lower correlations for the period examined. The best performing
benchmark (the Pension Protection Act benchmark) incorporated elements
of both features, with a mix of relatively high returns on assets and
relatively high correlation of their assets with PBGC's liabilities.
Our analysis looks at the single historical period from 1976 to 2009,
since the purpose of the analysis is performance assessment, not asset
allocation recommendations. Typically, analyses for the purpose of
asset allocation would project forward over multiple potential future
economic scenarios in order to more fully assess potential risk and
reward. The various alternative static portfolios used in this report
were analyzed for the purpose of a "what-if" analysis--a historical
comparison of alternative investment strategies versus the fluctuating
asset allocation that PBGC actually employed--they were not for the
purpose of recommending a particular asset allocation going forward.
Further, the fact that a particular portfolio performed well over the
1976 to 2009 period in this particular analysis does not necessarily
mean that such a portfolio would be appropriate for PBGC going forward.
Table 3: Descriptions of the Seven Benchmark Portfolios in GAO's
Analysis:
Equity investment benchmarks[A]:
Benchmark: S&P 500;
Asset class composition:
* 100% equities;
* This is a static composition portfolio representing the equity asset
class.
Benchmark: Wilshire 5000;
Asset class composition:
* 100% equities;
* This is a static composition portfolio representing the equity asset
class with a greater allocation to smaller capitalization stocks than
the S&P 500.
Fixed-income investment benchmark:
Benchmark: Barclays Capital Long-Term Government Credit Index;
Asset class composition:
* 100% fixed income;
* This is a static composition portfolio representing the fixed-income
asset class, including both corporate and U.S. government fixed-income
asset classes.
Mixed equity and fixed-income investment benchmarks:
Benchmark: Pension Protection Act Benchmark[B];
Asset class composition:
* 60% equities, 40% fixed income;
* This is a static composition portfolio.
Benchmark: Life Insurance Benchmark;
Asset class composition:
* 85% fixed income, 15% equities;
* This is a static composition portfolio, and is intended as a
stylized representation of the asset portfolio typically held by life
insurance firms in their general accounts.
Benchmark: Post Fiscal Year 2002 Benchmark;
Asset class composition:
* 30% equities, 60% fixed income, and 10% riskless short maturity
fixed-income securities ("cash");
* This is a static composition portfolio, and is intended as a
stylized representation of the average asset allocation of the PBGC
Total Fund from November 2001 through December 2009.[B].
Benchmark: Dynamic Benchmark;
Asset class composition:
* Equivalent to the asset class composition for the PBGC Total Fund;
* This is a dynamic composition portfolio whose asset allocation
varies over time in concert with the PBGC total fund for several broad
asset classes: domestic equity, international equity, fixed income,
and cash.
Source: GAO.
Note: For more detailed discussion of these benchmark portfolios, see
appendix III.
[A] While equity portfolios are included for analytical purposes, PBGC
can not invest in 100 percent equities because ERISA requires that
certain portion of its assets is restricted to investing some
revolving funds in U.S. obligations which are fixed-income assets.
Other revolving funds may be invested as PBGC considers appropriate,
but current policy is to invest them in U.S. Treasury securities. 29
U.S.C. § 1305(b)(3) and (f)(3).
[B] The Pension Protection Act of 2006 requires PBGC to compare the
performance of its investments to a hypothetical portfolio referred to
in this report as the PPA benchmark. Pub. L. No. 109-280, § 412, 120
Stat. 780, 936.
[End of table]
We assessed performance by calculating risk-adjusted returns for
PBGC's portfolio and for each benchmark, where higher returns improve
performance while higher volatility reduces performance.[Footnote 31]
The comparative benchmarks used for this analysis represent a range of
equity and fixed-income allocations. Six of the benchmarks are largely
static (fixed) allocations among asset classes; however, we also
included one Dynamic Benchmark that had allocations that varied among
asset classes over time.
PBGC's Investments Outperformed Benchmark Portfolios on an Asset-Only
Basis:
Our analysis of PBGC's investment returns for the period 1976 to
December 2009 found that, on an asset-only basis, PBGC's portfolio
achieved better risk-adjusted performance on its investments than that
achieved by six of the seven benchmark portfolios.[Footnote 32]
Specifically, our analysis found that on an asset-only basis, PBGC's
portfolio outperformed five of six fixed-allocation benchmarks,
[Footnote 33] as well as the Dynamic Benchmark. In each instance, the
results were maintained regardless of whether or not PBGC investment
returns were net of investment expenses.[Footnote 34] Within this
framework, the PBGC and benchmark portfolios were evaluated solely on
how well the assets performed relative to the risks taken.[Footnote
35] For details see appendix III.
PBGC Investments Underperformed Relative to Benchmark Portfolios When
Returns Were Assessed with the Liability Return:
When consideration of changes in liabilities was included in our
analysis, we found that PBGC's investments did not perform as well as
the seven benchmark portfolios.[Footnote 36] PBGC must cover the
liabilities from the underfunded plans it trustees in order to pay
benefits to participants and beneficiaries. Other than the premiums
assessed on plan sponsors that are statutorily set,[Footnote 37] the
only revenue that PBGC has to cover its liabilities is the return on
the assets it manages. Given this context, analyzing PBGC's investment
performance in a framework that explicitly incorporates liabilities
provides useful information.
We found that PBGC's investments underperformed all seven of the
benchmark portfolios on a risk-adjusted basis when the returns were
analyzed net of the liability return.[Footnote 38] In simple terms,
this means that all seven of the constructed benchmarks had a mix of
assets with some combination of risk, return, and correlation levels
that made their investment strategies achieve a higher level of risk-
adjusted performance than PBGC's investment policy for the 1976 to
2009 period. This occurred because either the benchmark portfolio had
a mix of assets that had a higher correlation with the liability
return, or, in cases where the correlations were lower, the benchmark
portfolio had sufficient returns to compensate for the lower
correlations for the period we examined. However, the dynamic
portfolio, which maintains the same asset allocation as the PBGC total
fund, performed as well as the S&P 500 benchmark and out performed the
Barclays Capital and Post Fiscal Year 2002 benchmarks as well as the
PBGC portfolio--three portfolios that have significant allocations to
bonds. (For additional information, see appendix III).
According to our analysis, the best performing portfolio for the 1976
to 2009 period was the PPA Benchmark Portfolio, with a mix of 40
percent bonds and 60 percent equities.[Footnote 39] Because, this
analysis is strictly based on past performance, this result does not
guarantee or imply that a PPA-like portfolio will perform better than
the current PBGC allocation going forward. Moreover, the PPA benchmark
and other portfolios with a significant weighting toward equity would
likely not perform as well if incoming cash-flows from new plan
terminations were included in the analysis. Rather than determining a
particular asset allocation, this analysis highlights that an approach
that was not only mindful of returns, but also accounted for the
correlation between asset returns and the liability return, was more
likely to result in an investment policy for PBGC that achieved higher
risk-adjusted performance for the 1976 to 2009 period.[Footnote 40]
No Clear Evidence that Fluctuation in the Allocation of Investments
Had Adverse Effect on Performance:
Our analysis found no link between the frequent changes in PBGC's
investment policy since 1990 and the actual allocation between equity
and fixed-asset investments. This is because while the stated policy
shifts were significant, changes to the actual allocation were
moderate. Hence, changes remained within a narrow range of a portfolio
mix between fixed-income and equity allocations. As a result, although
some shifts in actual allocations did occur, we found no conclusive
evidence that fluctuations in the proportional allocation between
equity and fixed-income investments had a notable adverse impact on
PBGC returns. This was the case for both types of analysis--asset-only
and assets net the liability return.
Finally, in the assets net of liability context, our finding that
PBGC's portfolio underperformed relative to the Dynamic Benchmark
suggests that factors other than asset allocation are causing the
underperformance--such factors could include the inflows of new
assets, timing of shifts to meet allocation goals and their associated
costs, or could reflect that there are no costs or fees in the Dynamic
Benchmark. However, detailed information would be required to
determine the reasons for the underperformance of the PBGC total fund
relative to the Dynamic Benchmark.
PBGC's Policies and Procedures for Implementing Its Investment Policy
Are Incomplete:
In our review of PBGC's internal documents, we found that the agency
has largely functioned without complete investment policy statements
and operating procedures. Compared to industry-recommended standards
for pension funds and insurance companies, PBGC's investment policy
statements are missing important provisions that provide
implementation guidance. Further, PBGC staff have largely functioned
without the benefit of fully developed and documented operating
procedures.
Investment Policy Statements Generally Lack Specifics in Key Areas:
The investment policies issued by PBGC's board for strategic guidance
in the planning and execution of investments have generally lacked a
number of provisions recommended for sound investment management or
have been insufficiently detailed to provide adequate guidance for
staff concerning certain investment objectives.
One expert we interviewed stated that while PBGC is unique and may not
be obligated to articulate the same policy provisions as other
institutions with similar responsibilities--such as foreign pension
insurers, domestic pension funds, and private insurance companies--the
agency faces similar investment problems, opportunities, and solutions
as many investment programs do. Hence, it is equally important for
PBGC to have a well-developed investment policy statement as it is for
these other institutions. According to one expert, "an investment
policy statement (IPS) is a foundational document for a pension fund's
investment program. The essential purposes of the IPS are to
articulate the consensus view of the board regarding the overall
investment program and to document policies and procedures regarding
major issues."[Footnote 41]
However, we found items included in the PBGC's policy statements often
are insufficiently detailed to provide adequate guidance for staff
concerning certain investment objectives. For example, we found that
prior to 1990, PBGC operated without a formal investment policy
statement, and that the six different policy statements the PBGC board
has issued since then have been silent in many areas cited as
important by professional organizations such as the Chartered
Financial Analyst Institute, the Association of Public Pension Fund
Auditors, and the Foundation for Fiduciary Studies. We compiled a list
of 25 items these organizations recommended be included in an
investment policy statement in order to provide sound strategic
guidance across the key areas of governance, investment objectives,
and risk management.[Footnote 42] We then examined PBGC's policy
statements against these items and found certain items were often
missing (see table 4). The agency's 2008 policy statement has been the
most thorough to date (including 15 of the items) while PBGC's most
recent investment guidance, adopted by board representatives in 2009,
included the fewest to date (only 6 of the items).[Footnote 43]
Further, some of the provisions that were covered were, according to
some staff, insufficiently detailed to offer adequate guidance.
Table 4: A Comparison of PBGC Investment Policy Statements with Best
Practices:
Policy: Governance:
1. Defines the organizational structure and mission;
Years: 1990-1994: [Check];
Years: 1994-2004: [Check];
Years: 2004-2006: [Check];
Years: 2006-2008: [Check];
Years: 2008-2009: [Check];
Years: 2009-2010[A]: [Blank].
2. Specifies responsibilities for determining, executing, and
monitoring the investment policy;
Years: 1990-1994: [Check];
Years: 1994-2004: [Check];
Years: 2004-2006: [Check];
Years: 2006-2008: [Check];
Years: 2008-2009: [Check];
Years: 2009-2010[A]: [Blank].
3. Describes investment policy review;
Years: 1990-1994: [Blank];
Years: 1994-2004: [Blank];
Years: 2004-2006: [Check];
Years: 2006-2008: [Check];
Years: 2008-2009: [Check];
Years: 2009-2010[A]: [Blank].
4. Describes responsibility for hiring, firing, and monitoring
managers;
Years: 1990-1994: [Check];
Years: 1994-2004: [Check];
Years: 2004-2006: [Check];
Years: 2006-2008: [Check];
Years: 2008-2009: [Check];
Years: 2009-2010[A]: [Blank].
5. Describes board and staff roles;
Years: 1990-1994: [Check];
Years: 1994-2004: [Check];
Years: 2004-2006: [Check];
Years: 2006-2008: [Check];
Years: 2008-2009: [Check];
Years: 2009-2010[A]: [Blank].
6. Assigns responsibility for asset allocation;
Years: 1990-1994: [Blank];
Years: 1994-2004: [Blank];
Years: 2004-2006: [Blank];
Years: 2006-2008: [Blank];
Years: 2008-2009: [Blank];
Years: 2009-2010[A]: [Blank].
7. Assigns responsibility for risk management, monitoring and
reporting;
Years: 1990-1994: [Blank];
Years: 1994-2004: [Blank];
Years: 2004-2006: [Blank];
Years: 2006-2008: [Blank];
Years: 2008-2009: [Blank];
Years: 2009-2010[A]: [Blank].
8. Describes fiduciary responsibilities;
Years: 1990-1994: [Blank];
Years: 1994-2004: [Blank];
Years: 2004-2006: [Blank];
Years: 2006-2008: [Blank];
Years: 2008-2009: [Blank];
Years: 2009-2010[A]: [Blank].
Policy: Investment objectives:
9. Describes investment objective;
Years: 1990-1994: [Check];
Years: 1994-2004: [Check];
Years: 2004-2006: [Check];
Years: 2006-2008: [Check];
Years: 2008-2009: [Check];
Years: 2009-2010[A]: [Blank].
10. States return/risk requirements:
* States performance objective (rate of return);
Years: 1990-1994: [Blank];
Years: 1994-2004: [Blank];
Years: 2004-2006: [Blank];
Years: 2006-2008: [Blank];
Years: 2008-2009: [Blank];
Years: 2009-2010[A]: [Blank].
* Describes asset class investment guidelines (including allowable and
prohibited investments);
Years: 1990-1994: [Blank];
Years: 1994-2004: [Blank];
Years: 2004-2006: [Blank];
Years: 2006-2008: [Blank];
Years: 2008-2009: [Blank];
Years: 2009-2010[A]: [Blank].
* Describes an asset allocation policy (targets and ranges);
Years: 1990-1994: [Check];
Years: 1994-2004: [Check];
Years: 2004-2006: [Check];
Years: 2006-2008: [Check];
Years: 2008-2009: [Check];
Years: 2009-2010[A]: [Check].
11. Defines risk tolerance;
Years: 1990-1994: [Blank];
Years: 1994-2004: [Blank];
Years: 2004-2006: [Blank];
Years: 2006-2008: [Blank];
Years: 2008-2009: [Blank];
Years: 2009-2010[A]: [Blank].
12. Identifies liabilities;
Years: 1990-1994: [Blank];
Years: 1994-2004: [Blank];
Years: 2004-2006: [Blank];
Years: 2006-2008: [Blank];
Years: 2008-2009: [Blank];
Years: 2009-2010[A]: [Blank].
13. Identifies relevant constraints:
* Defines evaluation horizon;
Years: 1990-1994: [Blank];
Years: 1994-2004: [Blank];
Years: 2004-2006: [Blank];
Years: 2006-2008: [Blank];
Years: 2008-2009: [Blank];
Years: 2009-2010[A]: [Blank].
* Identifies liquidity requirements;
Years: 1990-1994: [Blank];
Years: 1994-2004: [Blank];
Years: 2004-2006: [Blank];
Years: 2006-2008: [Blank];
Years: 2008-2009: [Check];
Years: 2009-2010[A]: [Blank].
* Specifies leverage policy;
Years: 1990-1994: [Check];
Years: 1994-2004: [Check];
Years: 2004-2006: [Check];
Years: 2006-2008: [Check];
Years: 2008-2009: [Check];
Years: 2009-2010[A]: [Blank].
* Identifies other constraints;
Years: 1990-1994: [Check];
Years: 1994-2004: [Check];
Years: 2004-2006: [Check];
Years: 2006-2008: [Check];
Years: 2008-2009: [Check];
Years: 2009-2010[A]: [Check].
14. Describes other considerations:
* Identifies proxy-voting policy;
Years: 1990-1994: [Check];
Years: 1994-2004: [Check];
Years: 2004-2006: [Check];
Years: 2006-2008: [Check];
Years: 2008-2009: [Check];
Years: 2009-2010[A]: [Blank].
* Identifies securities lending policy;
Years: 1990-1994: [Check];
Years: 1994-2004: [Check];
Years: 2004-2006: [Check];
Years: 2006-2008: [Check];
Years: 2008-2009: [Check];
Years: 2009-2010[A]: [Blank].
* Identifies special factors (such as ESG);
Years: 1990-1994: [Blank];
Years: 1994-2004: [Blank];
Years: 2004-2006: [Blank];
Years: 2006-2008: [Blank];
Years: 2008-2009: [Blank];
Years: 2009-2010[A]: [Blank].
Policy: Risk management and monitoring:
Policy: 15. Establishes performance measurement and reporting;
Years: 1990-1994: [Check];
Years: 1994-2004: [Check];
Years: 2004-2006: [Check];
Years: 2006-2008: [Check];
Years: 2008-2009: [Blank];
Years: 2009-2010[A]: [Check].
* Defines rebalancing process;
Years: 1990-1994: [Blank];
Years: 1994-2004: [Blank];
Years: 2004-2006: [Blank];
Years: 2006-2008: [Blank];
Years: 2008-2009: [Check];
Years: 2009-2010[A]: [Check].
* Describes investment cost monitoring;
Years: 1990-1994: [Check];
Years: 1994-2004: [Check];
Years: 2004-2006: [Check];
Years: 2006-2008: [Check];
Years: 2008-2009: [Check];
Years: 2009-2010[A]: [Check].
* Describes transition policy;
Years: 1990-1994: [Check];
Years: 1994-2004: [Check];
Years: 2004-2006: [Check];
Years: 2006-2008: [Check];
Years: 2008-2009: [Empty];
Years: 2009-2010[A]: [Empty].
Sources: PBGC, Chartered Financial Analyst Institute, Association of
Public Pension Fund Auditors, and Foundation for Fiduciary Studies.
Notes:
1. Policy items mentioned in the investment policy statement--but not
detailed--are marked with a [Check].
2. Policy items not mentioned in the investment policy--where no
policy exists--are left blank.
[A] The interim policy under which PBGC operated during the period was
a product of a series of specific staff inquiries about how to go
about transitioning assets until the board adopted a new investment
policy statement consistent with its bylaws. A new investment policy
statement was adopted by the board in May 2011.
[End of table]
Governance:
In the governance area, PBGC's investment policy statements have not
assigned responsibility for managing, monitoring, and reporting on
portfolio risk. According to PBGC officials, those responsibilities
were either informally communicated to staff or staff assumed
responsibility for these activities on their own. Further, while most
of PBGC's statements include a discussion of hiring and monitoring
asset managers, they do not assign responsibility for these tasks to a
specific group. By contrast, the investment policy statement of the
United Kingdom's pension insurer, Pension Protection Fund, and most of
the public pension plans that we reviewed do assign responsibility for
these tasks to specific groups, such as the public plan's investment
advisory committee. Also, while PBGC's investment policy statements
assign responsibility for the execution of the investment program,
they generally do not assign responsibility for developing or
monitoring the implementation of the policy.
According to statute, the PBGC board is responsible for establishing
policy.[Footnote 44] In addition, the board has an oversight
responsibility to ensure that PBGC is executing the board's policy in
appropriate ways. According to PBGC staff, because of the lack of
specific guidance in the policy statements, there have been instances
when staff have had to request further policy guidance from PBGC's
board and the board had not always been responsive. For example, in
2004, the board had instructed staff to limit costs by using only
incoming assets to transition to the new allocation target. When
adherence to this directive, together with a low level of liquid,
incoming assets caused the agency to miss its new allocation targets,
staff told us they asked for guidance but did not receive it. More
recently, in May and June 2009, the board members issued a resolution
directing staff to cease implementation of the 2008 investment policy,
but did not approve a new investment policy statement and did not
provide further investment guidance. In response, PBGC's Corporate
Investments Department's (CID) staff wrote a memo to PBGC's acting
director indicating that they were concerned about the lack of a
defined policy to provide direction to CID staff with respect to asset
allocation. Principal areas of concern outlined were: (1) oversight
and management, (2) investment of newly trusteed assets, and (3) asset
allocation risk. Subsequently, policy guidance was provided by the
board representatives until a new investment policy statement was
approved by the board.[Footnote 45]
In addition, while we have found that the board and board
representatives are meeting more frequently than in the past, we could
find no formal oversight or formal feedback mechanism in place for the
board and board representatives--a mechanism that is a necessary
element for ensuring that PBGC is executing the policy in appropriate
ways. According to one expert we interviewed, the inventory of
critical subjects regarding an investment program is extensive, and
the board is ultimately responsible for assessing and overseeing all
of them.[Footnote 46] Some of the key elements the expert noted that
should require the board's focus include clearly articulated
governance policies; a comprehensive, written investment policy
statement; a well thought out asset allocation process;[Footnote 47]
clearly defined and appropriate measures; monitoring processes; and
monitoring of investment costs.[Footnote 48] Although PBGC staff told
us that these things were accomplished below the level of the board
members, we could find no documentation that indicated that such a
formal oversight mechanism was in place. We reviewed decades of board
meeting notes--up through the most recent meetings--in search of such
evidence, but could find none.
Investment Objectives:
In the area of investment objectives, PBGC's statements have remained
silent with respect to several items, such as return targets and
statements of risk tolerance. By comparison, the United Kingdom's
Pension Protection Fund board, in its policy statement, has
specifically set a long-term target investment return of 1.8 percent
above liabilities and a risk level equivalent to a tracking error of 4
percent against liabilities. The Pension Protection Fund also
identified nine risks that might affect its investments and identified
approaches to mitigate those risks. Six of the eight public pension
plans we reviewed also included a return target and a risk tolerance
in their investment policies. One expert stressed, in particular, the
importance of documenting tolerance for risk in the investment policy
cautioning that without such documentation, a firm risks making
changes at a bad time (selling at a deep discount) or in response to
political pressure. In order to keep the investment policy out of the
political realm, a well-documented, long-term, and disciplined view
with an effective governing board is necessary, while following a well
established allocation model that keeps long term perspective in mind.
Risk Management:
In the area of risk management, although most items were covered in
PBGC's policy statements, almost all lacked sufficient detail to
provide adequate guidance. For example, the cost management provision
of PBGC's statements generally identified the types of investment
expenses involved and offered a low-cost policy for investing, but did
not provide guidance on how to monitor these costs. As noted by some
experts, ultimately, investing is not about seeking returns but about
managing risks, with well-grounded policies to ensure adequate
monitoring of risks over time.
Typically missing from PBGC's investment policy statements has been
the practice of portfolio rebalancing. A provision for rebalancing was
provided for the first time in 2008. All of the public pension plans
that we studied included such tolerance ranges. Most also specified a
time frame for rebalancing or assigned responsibility for determining
a course of action.
PBGC's Staff Has Functioned without Formal Operating Procedures:
The PBGC's CID staff has largely operated without fully developed and
documented operating procedures, although it has recently begun to
create them. According to a PBGC staff member, the mission of the CID
is twofold: (1) to transition newly trusteed assets into PBGC's
investment portfolio and (2) to manage PBGC assets. Further, to
transition newly trusteed assets into PBGC's investment portfolio, CID
staff are responsible for transferring assets so that they are
commingled in compliance with PBGC policies, and are consistent with
PBGC's asset allocation. However, the staff member also said that PBGC
historically has not had formal procedures for executing the
investment policy and transitioning assets. As a result, according to
PBGC's Inspector General, when the former board established the 2008
investment policy, certain tasks were not performed in the proper
order by CID staff. For example, according to PBGC's Inspector
General, PBGC had actually undergone several transition related
activities--such as the selection of three investment management firms
for strategic partnership contracts for managing $2.5 billion in PBGC
assets--before risks and mitigating methods related to the transition
were even documented. In addition, CID staff provided a group of
documents covering a number of transition related activities that had
several notable weaknesses. For example, these documents indicated
timelines for implementation, but provided no risk analysis,
accountability measures to monitor progress, or a delineation of roles
and corresponding responsibilities related to the transition.
According to a PBGC staff member, to manage PBGC's assets, at a high
level, CID staff are responsible for five operational tasks: (1)
select, hire, and terminate investment managers; (2) oversee managers:
(3) oversee the aggregate investment program: (4) implement board
asset allocation and any other board investment policy; and (5)
oversee all aspects of the PBGC investment programs including cash
management and securities lending. In 2010, CID staff began to draft
more complete working procedures for their investment operations,
however, PBGC's CID staff and the Inspector General recently told us
that this effort has been a slow undertaking. PBGC's CID staff stated
that creating procedures takes away from their ability to do their
mission work and, thus far, they have only been able to provide
preliminary and incomplete drafts of some of the needed procedures.
However, while complete operational procedures are lacking for most of
the operational tasks under the purview of the CID, PBGC's CID staff
have recently completed a draft compendium of formal procedures that
detail processes and procedures for managing their securities lending
program--the smallest program operated within the CID.[Footnote 49]
According to one expert, well functioning operational policies and
procedures are an essential mechanism for ensuring linkages between a
fund's governance structure, which includes policy making, and its
management systems. This expert wrote that with regard to operational
policies, directors should (1) identify and address aspects of the
fund's investment operations, organization, and portfolio necessary to
control undue risk and expenses, minimize inefficiency, and achieve
the desired long-term return; (2) evaluate the fund's organization and
procedures relative to those of its peers and industry best practices;
and (3) find ways to enhance public trust and confidence in the
pension insurance system. The board must oversee and approve such
policies and procedures.[Footnote 50]
Conclusions:
PBGC has grown from a relatively small agency with about $34 million
in assets in its first year after its establishment in 1974, to one
with almost $80 billion in assets in fiscal year 2010. As the agency
has grown, so too has the frequency of changes to its investment
policies. The agency's policies and procedures for asset management
still reflect its small agency past. Indeed, there are few formally
documented procedures and the investment policy statements are
insufficiently detailed for the agency to manage its investments and
apply the investment policy consistently during a transition period
and during times of political change. Without a detailed investment
policy and formal investment procedures, the agency operates in an
environment that is ripe for costly transactions and sub-par returns.
When factoring in the frequent changes to the investment policy with
the incomplete policies and procedures, a picture emerges that
suggests PBGC lacks a disciplined approach to investing--an unsettling
picture of an agency with responsibility for a large asset portfolio
and a challenging financial future.
As the guarantor of basic pension benefits for 44 million Americans,
PBGC must take a more disciplined and long-term approach to investment
by developing and adhering to a long-term comprehensive investment
policy and developing a complete compendium of operational policies
and procedures. Well-functioning operational policies and procedures
are an essential mechanism for ensuring linkages between pension
funds' governance structure and management systems. Current work under
way by PBGC's CID staff to develop such policies and procedure is an
important first step, but greater commitment is needed from both the
PBGC board and its management to assure that PBGC can effectively and
consistently meet its obligation to conduct the many investment
related functions it performs.
Recommendations for Executive Action:
We are making the following two recommendations:
1. To ensure a disciplined and long-term approach to investment, we
recommend PBGC and its board of directors develop and maintain a
comprehensive investment policy statement that provides clear
organizational accountability, well-defined goals, and risk management
parameters.
2. To ensure proper stewardship of PBGC's assets and effective
implementation of its investment policy, we recommend that PBGC
develop a complete set of operating procedures and guidelines
consistent with recognized best practices in industry and government.
Agency Comments and Our Evaluation:
We obtained written comments on a draft of this report from PBGC and
from the Department of Labor (Labor), which are reproduced in
appendixes IV and V, respectively. PBGC and Labor also provided
technical comments, which we incorporated into the report as
appropriate.
PBGC and Labor generally concurred with our recommendations and
outlined actions the agency has taken to address many of the concerns
we raised. For example, PBGC and its board recently issued a more
comprehensive investment policy statement that has incorporated many
of the policy items that we identified as missing from previously
issued policy statements. In addition, PBGC is in the process of
developing a complete set of operating procedures and guidelines. We
are pleased to learn of the steps already taken and those underway to
address our recommendations. In our view, these initial actions and
continued efforts to implement our recommendations fully can only
strengthen the stewardship of PBGC's investments to better assure that
PBGC can effectively and consistently meet its obligation to conduct
the many investment-related functions it performs.
Underscoring its concern with the importance of PBGC's mission, Labor
highlighted the increased oversight activity by the current board, its
representatives and their staffs. The Secretary noted that the board
also exercises its oversight responsibilities through monthly
transition and investment reports written documentation and other
activities. We acknowledge this increased oversight and appreciate the
efforts by the current board to play a greater role in monitoring the
PBGC. The increased oversight by the current board members and their
representatives indeed represents an improvement in the way policies
and processes are adopted and overseen at the PBGC, but we believe
such improvements must be documented and institutionalized to assure
that such levels of effort are sustained through subsequent boards.
Our prior recommendations to Congress to improve governance at the
PBGC through an expanded and restructured board continue to be needed
to assure that such appropriate and continuous oversight is carried
out, not only today but in the future.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies of the report
to the Secretary of Labor, the Director of the PBGC, and other
interested parties. We will also make copies available to others on
request. This report is also available at no charge on the GAO Web
site at [hyperlink, http://www.gao.gov].
If you or your staff have any questions regarding this report, please
contact Barbara Bovbjerg at (202) 525-7215 or bovbergb@gao.gov.
Contact points for our Congressional Relations and Office of Public
Affairs can be found on the last page of this report. Key contributors
are listed in appendix VI.
Signed by:
Barbara D. Bovbjerg:
Managing Director, Education, Workforce, and Income Security:
[End of section]
Appendix I: Scope and Methodology:
To determine how Pension Benefit Guaranty Corporation's (PBGC)
investment objectives have changed over time and whether policy goals
have been met, we collected and reviewed investment policies used by
PBGC from 1990 through the policy dated October 2009. We started our
review with PBGC's 1990 investment policy because it was the first
investment policy that specified asset allocation targets, such as the
proportion of assets to be invested in fixed-income assets versus
equities. For each of these policies, we identified the overall
objective, such as whether the policy attempted to maximize earnings
using a higher proportion of equities or reduce risk by increasing the
proportion of fixed-income securities matched to the duration of their
liabilities. We also identified the percentages of each type of asset
required by the policy, such as the percentage allocated to equities
versus fixed-income investments, and compared these target allocations
to actual allocations as stated in PBGC's annual reports, internal
trust and revolving fund data, and other financial information
received from PBGC officials. We then looked at the conditions leading
up to each change in policy, such as changes in investment philosophy,
incoming assets from terminated plans, and changes in leadership at
the executive director level. We obtained this information through
interviews with PBGC officials, and from other information provided by
the agency, including internal memos, e-mails, inspector general audit
reports, summary information prepared for board and advisory committee
members, asset and liability studies, and other reports and memos
prepared by various PBGC investment managers and consultants. We also
performed a detailed review of PBGC board and advisory committee
meeting minutes using NVivo content analysis software. To identify and
summarize discussions related to investment policy development,
review, and implementation, we reviewed investment policy statements,
related investment advisory committee meeting notes and documentation,
and board meeting notes when available. We obtained and reviewed this
information from PBGC's inception in 1974 through the current policy,
but focused our analysis on the period between 1990 and the 2009
policy because the policies in place during that period were the focus
of our review.
We also interviewed past PBGC directors, board representatives,
advisory committee members, and the PBGC Inspector General. We also
reviewed relevant federal laws and regulations. To determine how
PBGC's changes in investment policy compared to other entities, we
interviewed officials from several pension consultants, investment and
transition managers, life and property and casualty insurers, and
large state pension plans. We also interviewed and reviewed investment
policy-related information provided by foreign pension insurers in
Canada, the Netherlands, Switzerland, and the United Kingdom. However,
we did not conduct an independent legal analysis to verify the
information provided by state pension plans or foreign pension
insurers. Finally, we reviewed past our work on PBGC's investment
policies and oversight structure.
To determine how PBGC transitions assets between investment policies
and the resulting costs, we interviewed PBGC officials responsible for
transitioning assets and reviewed transition related documentation
provided by PBGC officials, as available. For transitions where data
was not available from PBGC, we obtained this information directly
from PBGC's transition managers and interviewed officials from those
firms to determine both implicit and explicit transaction costs
associated with changing investment policies. We also looked at the
procedures and costs associated with transitioning assets from
terminated plans taken over by PBGC to determine whether or not it was
possible to separate these costs from costs associated with changing
policies.
We interviewed the PBGC Inspector General and past PBGC directors to
obtain additional information about PBGC's transition related policies
and other adopted practices. In order to understand asset transitions
more generally, we interviewed transition and investment managers,
financial industry consultants, and officials at several large state
pension plans. We also looked at market conditions and returns on
equity and fixed-income investments during the periods in which PBGC
was transitioning assets. We limited our analysis of transaction costs
to the policies in place from 2004 through 2009 because of the lack of
detailed cost data available from PBGC and their transition managers
for transactions made prior to the 2004 policy.[Footnote 51]
To assess the performance of PBGC's investments, we conducted a
portfolio performance evaluation of the agency's Single-Employer Total
Fund monthly returns from the period October 1976 to December 2009.
This analysis focused on the single-employer program, which accounted
for 96 percent--or $21.08 billion--of the $21.95 billion total deficit
from the single-employer and multiemployer programs, as of September
30, 2009.[Footnote 52] For those portions of this analysis involving
PBGC liabilities, we used data on the liabilities associated with
(terminated) trusteed plans within the single-employer program.
[Footnote 53] The Single-Employer Total Fund represents the pool of
trusteed assets that supports the liabilities associated with
terminated defined benefit plans that have been trusteed by PBGC.
As part of the portfolio performance evaluation, we compared PBGC's
Total Fund portfolio return performance to the returns on several well-
diversified benchmark portfolios via a number of portfolio performance
statistics. We selected well-diversified benchmark portfolios for the
portfolio performance evaluation to ensure that the variability of the
benchmark portfolio returns almost exclusively represented systematic
risk and not the idiosyncratic risk associated with individual
securities. Also, the portfolios were selected such that they
represented exposure to the systematic risks that are reflected in the
returns on several specific, broad asset classes. The asset classes
are the domestic equity asset class (United States), the foreign
equity asset class, the short maturity, risk-free asset class, and the
long maturity fixed-income asset class. These particular asset classes
were chosen because they are the ones emphasized in asset allocation
data provided by PBGC.[Footnote 54] The benchmark portfolios used in
this analysis are also distinguished by whether their asset class
composition varies dynamically over time ("dynamic" composition
portfolios) or is constant over time ("static" compositions
portfolios). The benchmark portfolios and their characteristics are as
follows:
* S&P 500. Asset class composition: 100 percent equities. This is a
static composition portfolio that represents the equity asset class.
* Wilshire 5000. Asset class composition: 100 percent equities. This
is a static composition portfolio. It represents the equity asset
class with a greater allocation to smaller capitalization stocks than
the S&P 500.
* Barclays Capital Long-Term Government Credit Index. Asset class
composition: 100 percent fixed income. This is a static composition
portfolio representing the fixed-income asset class, including both
corporate and U.S. government fixed-income asset classes.
* Pension Protection Act Benchmark Portfolio.[Footnote 55] Asset class
composition: 60 percent equities and 40 percent fixed income. This is
a static composition portfolio.[Footnote 56]
* Life Insurance Benchmark. Asset class composition: 85 percent fixed
income and 15 percent equities. This is a static composition
portfolio, and is intended as a stylized representation of the asset
portfolio typically held by life insurance firms in their general
accounts (with grouping mortgage assets into the fixed-income
category).[Footnote 57]
* Post Fiscal Year 2002 Benchmark. Asset class composition: 30 percent
equities, 60 percent fixed income, and 10 percent cash. This is a
static composition portfolio, and is intended as a stylized
representation of the average asset allocation of the PBGC total fund
during what is later termed "asset allocation period 4." This roughly
corresponds to the period from beginning of fiscal year 2002 to the
present.
* Dynamic Benchmark. Asset class composition: equivalent to the asset
class composition for the PBGC Total Fund. This is a dynamic
composition portfolio, where the asset allocation varies over time in
such a fashion so as to match that of the PBGC Total Fund for the
broad asset classes domestic equity, foreign equity, fixed income, and
riskless short maturity fixed-income assets (e.g., cash). The purpose
of the Dynamic Benchmark in the PBGC Total Fund portfolio performance
evaluation is to reflect the systematic risk exposure of the PBGC
Total Fund as closely as possible while at the same time abstracting
from any active tactical asset allocation undertaken by the PBGC Total
Fund management, such as tactical allocations in specific subsectors
within an asset class or investments in specific individual securities.
The comparisons allowed us to analyze various aspects of the PBGC
Total Fund's risk-adjusted performance. Given that the primary
function of PBGC is to support its liabilities--the pension benefits
associated with terminated, trusteed plans--the portfolio performance
evaluation was conducted using asset-only returns and asset returns
net of the liability return.
To determine how well PBGC's investment policies and operations
comport with best practices in the industry, we interviewed PBGC's
Inspector General, current PBGC board member's representatives, and
PBGC staff. We also reviewed relevant federal laws and regulations. To
evaluate PBGC's operational guidelines and procedures, we obtained
procedures manuals and documents that PBGC's staff uses to manage and
oversee their operations. To evaluate PBGC's investment policy
statements against industry best practices, we obtained information
and documentation of actual practices used by industry experts,
foreign pension insurers in Canada, the Netherlands, Switzerland, and
the United Kingdom, investment committee documents from large state
pension plan providers, and a property and casualty insurance
provider. To identify a list of items that could be included in an
investment policy we first conducted a literature search for documents
with guidance on investment policy statements. We found documents from
expert organizations which provide standards that financial industry
professionals follow to ensure they are meeting the fiduciary
requirements under relevant state and federal laws. These
organizations include the Chartered Financial Analyst Institute, the
Foundation for Fiduciary Studies, the Association of Pension Plan Fund
Auditors, the Government Finance Officers Association, and Independent
Fiduciary Services. We started with the Chartered Financial Analyst
Institute's documents and listed elements of an investment policy
identified in a document created by the institute and then compared
that list to elements identified in the documents we reviewed created
by other organizations. We also considered the investment policy
statements of other entities and the elements that were frequently
found in those statements. In our list, we kept items that were
mentioned in more than one of the documents from the five expert
organizations. We also added one item, transition policy, which was
not found in the documents we used but we believe that it is specific
and unique to the mission of PBGC since the agency transitions assets
and liabilities from the defined benefit plans that are terminated.
This list contains elements that multiple industry organizations have
identified as desirable elements of investment policy statements, but,
should not be considered an exhaustive, customized checklist. While we
believe that PBGC should have some of the items contained in these
lists, because every investor is unique, the actual items that PBGC
should include in its investment policy needs to be tailored to their
particular needs and situation.
[End of section]
Appendix II: Process for Transitioning Funds to Align with PBGC's
Investment Policy:
Figure: Process for Transitioning Funds to Align with PBGC's
Investment Policy:
[Refer to PDF for image: process illustration]
1. Asset received from plans that are terminated and trusteed by
PBGC[A].
Asset is liquid and/or marketable: go to #2.
Asset is not liquid and/or marketable: go to #7.
[#2 and #3 are Trust Fund Assets]
2. Asset commingled with PBGC’s portfolio[B].
PBGC can transfer to asset manager: go to #3.
PBGC cannot transfer to asset manager: go to #5.
3. Asset moved to existing PBGC asset managers according to investment
policy in effect[C].
4. Assets rebalanced (reinvested) to expedite implementation of PBGC’s
investment policy.
5. Liquidation strategy developed.
6. Asset moved to a transition manager. Go to #8.
7. Illiquid assets (such as real estate or private equity) assigned to
specialists[D].
*. Asset sold or allowed to mature over time.
Source: GAO analysis of PBGC’s Corporate Investment Department
Policies and Procedures Manual (draft dated 6/1/2010) and discussions
with PBGC personnel.
[A] Receipt of newly-terminated plan assets is a multi-step process.
Assets are evaluated by an analyst with PBGC's Corporate Investment
Department (CID).CID policy calls for various documents to be compiled
into a file (including, for example, a plan asset listing, investment
statements, trusteeship agreement, contact information), records
receipt of the plan in CID's plan tracking worksheet, and assigns the
plan to a CID analyst. The analyst then reviews the file and makes
contact with the party/parties that have custody of the assets
(typically more than one) to initiate the transfer, and a plan asset
transfer methodology is determined. PBGC officials noted that it is
CID priority to transfer all assets in-kind, but that is not always
permitted (per contractual agreements between the former plan sponsor
and the asset custodian and/or proprietary investment products) or
optimal (for example, with small dollar mutual funds). To transfer the
assets, the analyst prepares a direction letter that will include a
copy of the trusteeship agreement and transfer instructions at a
minimum. This letter is signed by authorized PBGC personnel and sent
to the asset custodian. The assets are then transferred to PBGC's
asset custodian and placed in a holding account until liquidity is
determined and a certain dollar threshold is met.
[B] PBGC officials noted that transfers of assets in-kind to existing
investment managers can be done at minimal cost; however, decisions
regarding whether or not assets will be transferred to existing
investment managers are also impacted by PBGC's investment policy and
the current asset allocation. For example, if there is a large equity
position in a holding account and the PBGC investment portfolio is
already at or near the maximum equity exposure permitted by the
investment policy, these assets will typically be liquidated into
cash. An exception may be if the amount of equities in the holding
account is considered de minimus (for example, $50 million in equities
going into a $70 billion portfolio) and there is minimal to no cost to
transfer the assets to a manager.
[C] PBGC officials noted that assets received in the form of cash are
immediately considered part of the PBGC investment portfolio and can
be utilized in various ways, such as contributing to existing
investment managers, paying trust fund expenses, and contributing to
the proportional funding payment to the revolving fund.
[D] Illiquid assets, such as real property, are generally transferred
to PBGC's Special Situation manager, where the manager seeks
liquidation of the asset in a timely manner. Private equity (generally
in the form of limited partnerships) is transferred to one of PBGC's
private market overseers.
[End of section]
Appendix III: Asset-Only and Net of Liability Analysis of Pension
Benefit Guarantee Corporation's Single-Employer Total Fund:
We conducted a portfolio performance evaluation of the PBGC Single-
Employer Total Fund monthly returns from the period October 1976 to
December 2009. This analysis focused on the single-employer program,
which accounted for 96 percent--or $21.08 billion--of the $21.95
billion total deficit from the single-employer and multiemployer
programs, as of September 30, 2009.[Footnote 58] For those portions of
this analysis involving PBGC liabilities, we used data on the
liabilities associated with (terminated) trusteed plans within the
single-employer program.[Footnote 59] The Single-Employer Total Fund
represents the pool of trusteed assets that supports the liabilities
associated with terminated defined benefit plans that have been
trusteed by PBGC.
As part of the portfolio performance evaluation, we compared PBGC's
Total Fund portfolio return performance to the returns on several well-
diversified benchmark portfolios via a number of portfolio performance
statistics. The comparisons allowed us to analyze various aspects of
the PBGC Total Fund's risk-adjusted performance. Given that the
primary function of PBGC is to support its liabilities--the pension
benefits associated with terminated, trusteed plans--the portfolio
performance evaluation was conducted using asset-only returns and
asset returns net of the liability return. The liability return refers
to the rate of growth in the total value of the then-existing
liabilities or terminated benefits, (i.e., exclusive of newly
terminated plans). In computing the asset returns net of the liability
return, we use what we term the "scaled" liability return--the product
of the liability return and the inverse of the funding ratio (PBGC
Total Fund aggregate assets to PBGC total fund aggregate liabilities).
[Footnote 60]
Our analysis also entailed examining patterns in the PBGC Total Fund's
asset allocations (PBGC Total Fund portfolio "weights" across asset
classes) over time in order to assess the effect of fluctuations in
the PBGC Total Fund asset allocations on the performance of the PBGC
Total Fund. This analysis included characterizing the behavior of the
PBGC Total Fund portfolio weights and identifying asset allocation
periods in the PBGC Total Fund. The result of this analysis was used
in selecting some of the benchmark portfolios.
Liability Returns:
Monthly liability returns were provided by PBGC for the October 2003
to January 2010 period. For the period prior to October 2003, we
estimated the liability returns using an algorithm designed to
approximate the liability return generation methodology employed by
PBGC. The overall approach involved estimating the present value of
the liabilities, including the aggregate benefit payment, at the end
of each month (referred to by PBGC as the present value of future
benefits). The two major data components for computing the liability
return are (1) the identification of appropriate interest rates for
use each month in discounting the projected cash flows and (2) the
monthly approximation of the projected PBGC liability cash flow stream
for each month during the October 1976 to September 2003 time period.
To determine the appropriate interest rates for discounting the
projected cash flows we used two interest rate factors obtained from
PBGC that it uses in computing estimates of the present value of its
liabilities--the "select" and "ultimate" rates.[Footnote 61] For the
period prior to September 1993, we used a set of interest rates based
on what PBGC terms the "immediate" interest rate. To produce monthly
approximations of the projected liability cash flow stream, we
transformed quarterly projections supplied by PBGC into a monthly
series starting with the first fiscal year for which the present value
of the trusted liability was available, September 1976, using the
algorithm we developed. For each month the liability return is
calculated as the monthly percentage change in the estimated present
value of the liabilities plus the estimated benefit paid at the end of
the month divided by the estimated present value of the liabilities at
the end of the previous month.
Because our liability return methodology relies upon estimates of what
PBGC would have hypothetically projected the future liability cash
flow to be, it is subject to error. Additionally, our liability return
measure is sensitive to valuation assumptions and other inputs, such
as our choice of discount rates, used to calculate the present value
of the expected of the expected future payments. Moreover we relied on
a static set of cash flows unlike the actual cash flow projection that
PBGC would have produced in the past. Such projections would vary over
time due to alterations in the assumed beneficiary survival
probabilities as a consequence of any changes in the choice of
mortality tables, among other things. Also, the algorithm, in
approximating the way in which PBGC calculates its present value
calculations, implicitly assumes the all beneficiaries were receiving
cash flows. Despite these limitations the correlation of the series
produced by our liability return estimation algorithm and PBGC's
liability returns was 0.9994, suggesting near perfect correlation.
Thus, despite the limitation, we believe that our liability return
generating algorithm produces estimates that are robust.
It should be noted that incoming cash flows from newly terminated
plans are not included in the measure of liability return. This
exclusion is consistent with approaches we have reviewed and the
liability return estimates produced by PBGC.[Footnote 62] However,
some pension experts have advocated that any assessment of PBGC
investment policy take into account the correlation between new plan
terminations and financial market performance. Specifically, given the
possibility of a negative correlation between stock market returns and
new plan terminations, an economic environment in which the stock
market suffers losses could potentially be accompanied by an increase
in new plan terminations of underfunded plans and a deterioration in
the funded status of existing trusteed plans. Incorporating the
correlation between stock market returns and new claims could result
in lower risk adjusted performance for portfolios with a heavier
weighting toward stock. While such an analysis would be
methodologically more complex and is beyond the scope of this report,
consideration could be given to including this phenomenon in an
expanded study. While the risk of new plan terminations could also be
addressed through a more actuarial approach to setting PBGC premiums,
such an approach would not eliminate the existence of correlation risk
between PBGC's investment portfolio and the amount of newly terminated
plans.
Our methodology also requires an estimate of the funding ratio since,
as mentioned previously, following Sharpe (2002) and Sharpe and Tint
(1990), our measure of the liability return is scaled by the inverse
funding ratio (the greater PBGC's deficit the more weight liability
returns are given within the asset net of liability framework). As a
result greater credit was given to portfolios that correlated with
liabilities when the PGCG experienced a greater degree of
underfunding. Using a scaled liability return measures the net effect
of the asset and liability returns on the dollar amount of surplus or
deficit; an alternative approach would have been to use the un-scaled
liability return, which would measure the net effect of the asset and
liability returns on the funding ratio. Moreover, while we have given
full weight to the scaled liability return, others may place less
importance on liabilities. Note, however, that the lower the weight
given to the scaled liabilities the more the approach will resemble
outcomes in the asset-only framework. We define the funding ratio as
the ratio of the PBGC total fund trusteed asset portfolio to the
present value of the PBGC total fund trusteed liabilities. Because the
data on liability values was unavailable for the September 1976 to
September 1978 period, we computed estimates using the present value
of future benefits from PBGC annual and actuarial reports. Where the
data was not directly available from a PBGC data source for a
particular month we imputed these values using the existing data.
[Footnote 63]
Performance Statistics:
The portfolio performance literature usually assumes that most
investors (that is, economic agents who seek to allocate funds across
a variety of assets) are risk averse.[Footnote 64] Therefore, we
assessed the performance of the PBGC total fund asset portfolio and
the benchmark portfolios using statistics that measure and summarize
the magnitude of the portfolio returns, the riskiness of the portfolio
returns, and the optimality of the trade-off between the magnitude and
the riskiness of the portfolio returns (risk-return trade-off).
Statistics which measure the magnitude of the portfolio returns
include the mean, minimum, and maximum; statistics which measure the
riskiness of the returns include the standard deviation, semi-standard
deviation, skewness, kurtosis, Value At Risk, and expected shortfall;
and statistics which quantify the trade-off between the magnitudes of
risk and return include the Sharpe, Sortino, Omega, and Adjusted
Sharpe measures. Higher values of the statistics that measure risk
imply that greater riskiness, volatility, or uncertainty is associated
with the portfolio returns. Higher values of the statistics that
measure the magnitude of portfolios returns imply larger portfolio
return values. Higher values of the statistics that quantify the
optimality of the reward to risk trade-off imply better trade-offs
between the magnitude of portfolio returns and the riskiness
associated with them and thus, better risk-adjusted portfolio
performance. The performance statistics used in this report are well-
established measures but they are not the only statistics that could
have been reviewed.
Another important element of any performance statistic is the unit of
time measurement. Our analysis measures returns on a monthly basis,
and measures risk based on the variation in month-to-month returns.
Using a different unit of time, such as a single year or even a multi-
year period, could give a different picture of the risk or reward
tradeoff.[Footnote 65] Another decision in any performance assessment
is whether to do the analysis on a time-weighted or a dollar-weighted
basis. A time-weighted basis gives equal weight to each unit of time;
thus, a monthly rate of return in 1976 gets just as much weight in the
analysis as a monthly rate of return in 2009. A dollar-weighted basis
gives greater weight to the periods when more money is at stake; since
PBGC's portfolio of assets and liabilities was many times bigger in
2009 than it was in 1976, performance in 2009 was of greater economic
consequence than performance in 1976. We used a time-weighted basis
for our analysis, in order to focus on investment performance itself,
rather than on the particular economic consequences in the time period
under study.
In the list that follows, we provide observations and descriptions of
the performance statistics used, where t is a monthly time index; RP,t
is the return on a portfolio P from time t 1 to time t; Rf,t is the
risk-free rate from time t 1 to time t; T is the number of months for
which there is return data; and E[] is the expectation operator such
that E[RP,t] is the mean of the return on portfolio P ; and P is the
standard deviation of RP,t:
* Semi-standard deviation.[Footnote 66] The semi-standard deviation is
similar to the standard deviation except that it focuses more tightly
on the portion of the return variability that is associated with low
returns. There are multiple definitions of the semi-standard
deviation; the one used in our analysis is:
[formula illustration]
where SD is used to denote the semi-standard deviation and MAR is
defined as the "minimum acceptable return.":
* Value At Risk (VaR).[Footnote 67] VaR of the returns is the negative
of a quantile of the probability distribution of the returns over a
given time horizon, where the quantile is often referred to as "alpha"
(). Once and a time horizon (arbitrarily labeled T* here) are
specified, then VaR is defined as the negative of the value such that
the probability that a rate of return over time horizon T* will fall
at or below that value is . For example, if the probability that the 1-
month portfolio return will fall at or below negative 4 percent is
equal to 1 percent, then the 1 percent alpha VaR of the 1-month
returns is 4 percent (not negative 4 percent).
[End of section]
As an alternative to , VaR is often expressed in connection with a
"confidence level" where the confidence level is defined as 1-.
In[Footnote 68] the previous example, the 99 percent confidence VaR
was 4 percent.
Under the assumption that portfolio returns are normally distributed,
one can estimate VaR as:
[formula illustration]
where z1-is the 1-quantile of the normal distribution and P is the
standard deviation of RP,t.
* Expected shortfall.[Footnote 69] Expected shortfall is the (negative
of the) mean value of the returns, conditional upon the returns being
below (negative of) VaR. In the context of the example in point (b),
if the expected shortfall is 6 percent, then negative 6 percent is the
mean value of the returns that are less than negative 4 percent. Under
the assumption that the returns RP,t are normally distributed, the
expected shortfall can be computed as:
[formula illustration]
where ES denotes expected shortfall, É"(·) is used to denote the
standard normal probability density function, and É"(z1-) is standard
normal probability density function evaluated at z1-.
* The Sharpe ratio.[Footnote 70] The Sharpe ratio is the ratio of the
expected excess return to the standard deviation of the return.
Letting S denote the Sharpe ratio, the Sharpe ratio can be computed as:
[formula illustration]
The greater the value, the better the reward to risk trade-off for the
portfolio. Portfolios that have higher Sharpe ratios have better risk-
adjusted performance. Note that in the asset/liability management
context, RP,t can represent the portfolio return net of the liability
return.
* The Sortino ratio.[Footnote 71] The Sortino ratio is the ratio of
the expected return in excess of the minimum acceptable return (MAR)
to the semi-standard deviation. The general expression is:
[formula illustration]
where SSortino is used to denote the Sortino ratio. The advantage of
this performance measure is that it reflects the trade-off between the
magnitude of return and the risk associated with undesirable return
outcomes (such as returns falling below the MAR) more specifically
than the Sharpe ratio does. In this work, an annualized Sortino ratio
for the excess returns is utilized. The applicable equation in this
case is:
[formula illustration]
Higher Sortino ratio values indicate better risk-adjusted portfolio
performance.
* The Omega ratio.[Footnote 72] The Omega ratio is a risk-reward trade-
off measure that is designed to adjust for the impact of outliers and
deviations of the return distribution from normality. The general
definition of the Omega ratio (denoted by ) is:
[formula illustration]
* The Adjusted Sharpe ratio.[Footnote 73] Israelsen showed that when
the expected excess returns for portfolios are negative, the
traditional Sharpe ratio can yield portfolio performance rankings that
are not consistent with the standard notions that investors are risk
averse and also prefer portfolios with higher returns to portfolios
with lower returns. To address this problem, Israelsen modified the
Sharpe ratio as follows:
[formula illustration]
where Sadj denotes the Adjusted Sharpe ratio and abs(E[RP,t]-Rf,t) is
the absolute value of E[RP,t]-Rf,t. Higher Adjusted Sharpe ratio
scores imply superior risk-adjusted performance. Note that when
expected excess returns are negative, the Adjusted Sharpe ratio is
negative, and higher Adjusted Sharpe ratios are those that are less
negative (in other words, smaller in absolute value).
* Skewness (sample skewness).[Footnote 74] The skewness statistic
indicates the extent of extreme return values above or below the mean
return. Positive skewness implies the incidence of a large number of
extreme returns above the mean return; accordingly, negative skewness
implies the incidence of a large number of extreme returns below the
mean. The normal distribution has a skewness value of zero. To
estimate the skewness of the portfolio returns, the following equation
was used, which incorporates a correction for bias (denoting skewness
by sk):
[formula illustration]
* Kurtosis (sample kurtosis).[Footnote 75] The kurtosis provides a
measure of the incidence of extreme return values above and below the
mean return. The higher the kurtosis, the greater the number of
extreme return values both above and below the mean return within the
sample of returns. Visually, a probability density with a large
kurtosis value will appear to have fat "tails." The normal
distribution has a kurtosis of three. As with the skewness, the
kurtosis was estimated using an equation that incorporates a sample-
size bias correction. Denoting the kurtosis by k, the kurtosis
equation utilized is:
Selected Benchmarks:
We selected well-diversified benchmark portfolios for the portfolio
performance evaluation to ensure that the variability of the benchmark
portfolio returns almost exclusively represented systematic risk and
not the idiosyncratic risk associated with individual securities.
Also, the portfolios were selected such that they represented exposure
to the systematic risks that are reflected in the returns on several
specific, broad asset classes. The asset classes are the domestic
equity asset class (United States), the foreign equity asset class,
the short maturity, risk-free asset class, and the long maturity fixed-
income asset class. These particular asset classes were chosen because
they are the ones emphasized in asset allocation data provided by
PBGC.[Footnote 76] The benchmark portfolios used in this analysis are
also distinguished by whether their asset class composition varies
dynamically over time ("dynamic" composition portfolios) or is
constant over time ("static" compositions portfolios). The static
composition portfolios are assumed to be rebalanced monthly. The
benchmark portfolios and their characteristics are as follows:
* S&P 500. Asset class composition: 100 percent equities. This is a
static composition portfolio that represents the equity asset class.
* Wilshire 5000. Asset class composition: 100 percent equities. This
is a static composition portfolio. It represents the equity asset
class with a greater allocation to smaller capitalization stocks than
the S&P 500.
* Barclays Capital Long-Term Government Credit Index. Asset class
composition: 100 percent fixed income. This is a static composition
portfolio representing the fixed-income asset class (including both
corporate and U.S. government fixed-income asset classes).
* PPA Benchmark Portfolio.[Footnote 77] Asset class composition: 60
percent equities and 40 percent fixed income. This is a static
composition portfolio.[Footnote 78]
* Life Insurance Benchmark. Asset class composition: 85 percent fixed
income and 15 percent equities. This is a static composition
portfolio. This is intended as a stylized representation of the asset
portfolio typically held by life insurance firms in their general
accounts (with grouping mortgage assets into the fixed-income
category).[Footnote 79]
* Post Fiscal Year 2002 Benchmark. Asset class composition: 30 percent
equities, 60 percent fixed income, and 10 percent cash. This is a
static composition portfolio. This is intended as a stylized
representation of the average asset allocation of the PBGC Total Fund
during what is later termed "asset allocation period 4." This roughly
corresponds to the period from beginning of fiscal year 2002 to
December 2009.
* Dynamic Benchmark. Asset class composition: equivalent to the asset
class composition for the PBGC Total Fund. This is a dynamic
composition portfolio, where the asset allocation varies over time in
such a fashion so as to match that of the PBGC Total Fund for the
broad asset classes domestic equity, foreign equity, fixed income, and
riskless short maturity fixed-income assets (e.g., cash). The purpose
of the Dynamic Benchmark in the PBGC Total Fund portfolio performance
evaluation is to reflect the systematic risk exposure of the PBGC
Total Fund as closely as possible while at the same time abstracting
from any active tactical asset allocation undertaken by the PBGC Total
Fund management (such as tactical allocations in specific subsectors
within an asset class or investments in specific individual
securities).
PBGC Asset Allocations Over Time:
Our analysis of PBGC's asset allocations for the Total Fund indicate
several broad behaviors:
1. The PBGC total fund asset allocations have varied over the time
period from September 1976 to December 2009 indicating that the PBGC
Total Fund is a dynamic asset portfolio (see figure 4). However, since
November 2001, the combined allocation to both domestic and
international equities has been more stable than it was in the period
before November 2001, since the standard deviation of the total fund
portfolio allocation to equities has been 2.82 percent since November
2001, which is distinctly less than the standard deviation of the
equity weight prior to that time, which was 10.58 percent per month.
See table 1 below. With the exception of cash, the standard deviation
values of all the asset classes shown in table 1 were lower in the
period from November 2001 to December 2009 than in the period prior to
November 2001, suggesting that PBGC asset allocations have been less
variable for over the last 8 years than they were in the more distant
past with the exception of the relatively small cash category. While
some have characterized PBGC Total Fund's asset allocations as time-
varying, this seems more relevant to the period from September 1976 to
October 2001 than to the last approximately 8 years (the period since
November 2001).
Figure 4: Allocations of Bonds and Equities in PBGC Total Fund,
September 1976 to December 2009:
[Refer to PDF for image: multiple line graph]
Allocation regime 1:
September 1976;
Bonds: 84.48%;
All equities: 14.66%.
September 1977;
Bonds: 76.83%;
All equities: 22.15%.
September 1978;
Bonds: 75.31%;
All equities: 24.01%.
September 1979;
Bonds: 69.51%;
All equities: 30.25%.
September 1980;
Bonds: 59.32%;
All equities: 40.26%.
September 1981;
Bonds: 63.71%;
All equities: 35.79%.
September 1982;
Bonds: 61.95;
All equities: 37.97%.
September 1983;
Bonds: 61.58%;
All equities: 38.34%.
September 1984;
Bonds: 48.18%;
All equities: 46.4%.
September 1985;
Bonds: 42.75%;
All equities: 42.73%.
September 1986;
Bonds: 39.2%;
All equities: 47.1%.
Allocation regime 2:
September 1987;
Bonds: 28.23%;
All equities: 57.32%.
September 1988;
Bonds: 39.74%;
All equities: 46.3%.
September 1989;
Bonds: 42.71%;
All equities: 49.83%.
September 1990;
Bonds: 58.62%;
All equities: 33.01%.
September 1991;
Bonds: 70.76%;
All equities: 22.4%.
September 1992;
Bonds: 75.7%;
All equities: 20.25%.
Allocation regime 3:
September 1993;
Bonds: 78.75%;
All equities: 17.13%.
September 1994;
Bonds: 62.74%;
All equities: 30.34%.
September 1995;
Bonds: 64.84%;
All equities: 31.65%.
September 1996;
Bonds: 58.57%;
All equities: 38.48%.
September 1997;
Bonds: 57.5%;
All equities: 39.47%.
September 1998;
Bonds: 62.98%;
All equities: 33.6%.
September 1999;
Bonds: 58.53%;
All equities: 40.4%.
September 2000;
Bonds: 58.09%;
All equities: 41.05%.
Allocation regime 4:
September 2001;
Bonds: 66.28%;
All equities: 28.22%.
September 2002;
Bonds: 68.49%;
All equities: 27.66%.
September 2003;
Bonds: 56.88%;
All equities: 32.39%.
September 2004;
Bonds: 49.75%;
All equities: 29.61%.
September 2005;
Bonds: 70.23%;
All equities: 27.58%.
September 2006;
Bonds: 69.4%;
All equities: 28.07%.
September 2007;
Bonds: 64.1%;
All equities: 32.2%.
September 2008;
Bonds: 68.77%;
All equities: 26.89%.
September 2009;
Bonds: 55.7%;
All equities: 37.19%.
Sources: PBGC; GAO analysis of PBGC data.
[End of figure]
2. However, one aspect of the PBGC Total Fund asset allocation that
has altered significantly since October 2008 is the international and
domestic allocation within the equity asset allocation. The PBGC Total
Fund's allocation to international equities has grown from 2.26
percent at the end of October 2008 to 16.25 percent at the end of
December 2009 (see figure 5).
Figure 5: Allocation to Equities in PBGC Total Fund, September 1976 to
December 2009:
[Refer to PDF for image: multiple line graph]
Allocation regime 1:
September 1976;
All equities: 14.66%.
September 1977;
All equities: 22.15%.
September 1978;
All equities: 24.01.
September 1979;
All equities: 30.25%.
September 1980;
All equities: 40.26%.
September 1981;
All equities: 35.79%.
September 1982;
All equities: 37.97%.
September 1983;
All equities: 38.34%.
September 1984;
All equities: 46.4%.
September 1985;
All equities: 42.73%.
September 1986;
All equities: 47.1%.
Allocation regime 2:
September 1987;
All equities: 57.32%.
September 1988;
All equities: 46.3%.
September 1989;
All equities: 49.83%.
September 1990;
All equities: 33.01%.
September 1991;
All equities: 22.4%.
September 1992;
All equities: 20.25%.
Allocation regime 3:
September 1993;
All equities: 17.13%.
September 1994;
All equities: 30.34%.
September 1995;
All equities: 31.65%.
September 1996;
All equities: 38.48%.
September 1997;
All equities: 39.47%.
September 1998;
All equities: 33.6%.
September 1999;
All equities: 40.4%.
September 2000;
All equities: 41.05%.
Allocation regime 4:
September 2001;
All equities: 28.22%.
September 2002;
All equities: 27.66%.
September 2003;
All equities: 32.39%.
September 2004;
All equities: 29.61%.
September 2005;
All equities: 27.58%.
September 2006;
All equities: 28.07%.
September 2007;
Domestic equities: 28.69%;
International equities: 3.51%;
All equities: 32.2%.
September 2008;
Domestic equities: 24.27%;
International equities: 2.62%;
All equities: 26.89%.
September 2009;
Domestic equities: 20.57%;
International equities: 16.62%;
All equities: 37.19%.
Sources: PBGC; GAO analysis of PBGC data.
[End of figure]
3. The PBGC Total Fund has exhibited a tendency to reduce equity
portfolio weight and increase bond portfolio weight at the start of
economic recessions. As shown in figure 6, for three out of the last
five recessions (including the most recent economic contraction), the
portfolio allocation to equities has fallen either within 1 month of
the start of the recession (1981-1982 and 1990-1991 recessions) or
within 5 months of the recession (2000-2001 recession).
Figure 6: Allocation of Bonds and Equities in PBGC Total Fund,
September 1976 to December 2009, with Business Cycle Shading:
[Refer to PDF for image: multiple line graph]
The following period of recession are depicted on the graph with
shading:
July-September 1090;
September 1981-September 1982;
September 1990-September 1991;
September 2001-September 2002;
September 2008-September 2009.
September 1976;
Bonds: 84.48%;
All equities: 14.66%.
September 1977;
Bonds: 76.83%;
All equities: 22.15%.
September 1978;
Bonds: 75.31%;
All equities: 24.01%.
September 1979;
Bonds: 69.51%;
All equities: 30.25%.
September 1980;
Bonds: 59.32%;
All equities: 40.26%.
September 1981;
Bonds: 63.71%;
All equities: 35.79%.
September 1982;
Bonds: 61.95%;
All equities: 37.97%.
September 1983;
Bonds: 61.58%;
All equities: 38.34%.
September 1984;
Bonds: 48.18%;
All equities: 46.4%.
September 1985;
Bonds: 42.75%;
All equities: 42.73%.
September 1986;
Bonds: 39.2%;
All equities: 47.1%.
September 1987;
Bonds: 28.23%;
All equities: 57.32%.
September 1988;
Bonds: 39.74%;
All equities: 46.3%.
September 1989;
Bonds: 42.71%;
All equities: 49.83%.
September 1990;
Bonds: 58.62%;
All equities: 33.01%.
September 1991;
Bonds: 70.76%;
All equities: 22.4%.
September 1992;
Bonds: 75.7%;
All equities: 20.25%.
September 1993;
Bonds: 78.75%;
All equities: 17.13%.
September 1994;
Bonds: 62.74%;
All equities: 30.34%.
September 1995;
Bonds: 64.84%;
All equities: 31.65%.
September 1996;
Bonds: 58.57%;
All equities: 38.48%.
September 1997;
Bonds: 57.5%;
All equities: 39.47%.
September 1998;
Bonds: 62.98%;
All equities: 33.6%.
September 1999;
Bonds: 58.53%;
All equities: 40.4%.
September 2000;
Bonds: 58.09%;
All equities: 41.05%.
September 2001;
Bonds: 66.28%;
All equities: 28.22%.
September 2002;
Bonds: 68.49%;
All equities: 27.66%.
September 2003;
Bonds: 56.88%;
All equities: 32.39%.
September 2004;
Bonds: 49.75%;
All equities: 29.61%.
September 2005;
Bonds: 70.23%;
All equities: 27.58%.
September 2006;
Bonds: 69.4%;
All equities: 28.07%.
September 2007;
Bonds: 64.1%;
All equities: 32.2%.
September 2008;
Bonds: 68.77%;
All equities: 26.89%.
September 2009;
Bonds: 55.7%;
All equities: 37.19%.
Sources: PBGC; GAO analysis of PBGC data.
[End of figure]
Figures 4–6 and the statistics in table 5 suggest the following asset
allocation periods for the PBGC Total Fund:
* Asset allocation period 1. This period (September 1976 to August
1987) was characterized by a trend of allocation away from bonds into
equities such that the allocation altered from 15 percent equities, 84
percent bonds in September 1976 to 64 percent equities, 31 percent
bonds by August 1987. By way of comparison, the PBGC Total Fund
allocation in September 1976 (the beginning of the historical sample
period) was similar to that found among life insurance companies.
* Asset allocation period 2. This period (September 1987 to September
1993) was marked by rebalancing away from equities towards fixed
income that accelerated at the beginning of the 1990-1991 recession.
In September of 1987, the allocations were 57 percent equities and 28
percent bonds, but this had shifted to 17 percent equities and 79
percent bonds by September 1993. As in September 1976, 17 years
earlier, the portfolio composition was again qualitatively similar to
the allocations associated with life insurance companies.
* Asset allocation period 3. Within this period (October 1993 to
October 2001), the proportion of the PBGC portfolio allocated to
equities rose from 17 percent in September 1993 to 28 percent by
October 2001.
* Asset allocation period 4. (November 2001 to December 2009) Figure 5
indicates that the average weights on domestic equities and equities
as a whole were smaller in this regime than in asset allocation period
3.
Table 5: Descriptive Statistics for PBGC Total Fund Portfolio Weights
by Allocation Period, September 1976 to December 2009:
Average portfolio weight:
Asset class: Domestic equity;
Period 1: September 1976 through August 1987: Average portfolio
weight: 35.95%;
Period 2: September 1987 through September 1993: 34.88%;
Period 3: October 1993 through October 2001: 35.49%;
Period 4: November 2001 through December 2009: 27.79%;
Periods 1-3: September 1976 through December 2001: 35.54%;
All periods: September 1976 through December 2009: 33.57%.
Asset class: International equity;
Period 1: September 1976 through August 1987: Average portfolio
weight: 0;
Period 2: September 1987 through September 1993: 0;
Period 3: October 1993 through October 2001: 0;
Period 4: November 2001 through December 2009: 2.69%;
Periods 1-3: September 1976 through December 2001: 0;
All periods: September 1976 through December 2009: 0.67%.
Asset class: All equities;
Period 1: September 1976 through August 1987: Average portfolio
weight: 35.95%;
Period 2: September 1987 through September 1993: 34.88%;
Period 3: October 1993 through October 2001: 35.49%;
Period 4: November 2001 through December 2009: 30.29%;
Periods 1-3: September 1976 through December 2001: 35.54%;
All periods: September 1976 through December 2009: 34.24%.
Asset class: Fixed income;
Period 1: September 1976 through August 1987: Average portfolio
weight: 60.42%;
Period 2: September 1987 through September 1993: 58.18%;
Period 3: October 1993 through October 2001: 61.14%;
Period 4: November 2001 through December 2009: 62.9%;
Periods 1-3: September 1976 through December 2001: 60.11%;
All periods: September 1976 through December 2009: 60.8%.
Asset class: Cash;
Period 1: September 1976 through August 1987: Average portfolio
weight: 2.07%;
Period 2: September 1987 through September 1993: 4.08%;
Period 3: October 1993 through October 2001: 2.65%;
Period 4: November 2001 through December 2009: 4.28;%
Periods 1-3: September 1976 through December 2001: 2.74%;
All periods: September 1976 through December 2009: 3.12%.
Standard deviation ff portfolio weight:
Percent: Asset class : Domestic equity;
Period 1: September 1976 through August 1987: Average portfolio
weight: 11.78%;
Period 2: September 1987 through September 1993: 13.3%;
Period 3: October 1993 through October 2001: 5.31%;
Period 4: November 2001 through December 2009: 4.5%;
Periods 1-3: September 1976 through December 2001: 10.58%;
All periods: September 1976 through December 2009: 10.04%.
Asset class: International equity;
Period 1: September 1976 through August 1987: Average portfolio
weight: 0;
Period 2: September 1987 through September 1993: 0;
Period 3: October 1993 through October 2001: 0;
Period 4: November 2001 through December 2009: 4.81%;
Periods 1-3: September 1976 through December 2001: 0;
All periods: September 1976 through December 2009: 2.66%.
Asset class: All equities;
Period 1: September 1976 through August 1987: Average portfolio
weight: 11.78%;
Period 2: September 1987 through September 1993: 13.30%;
Period 3: October 1993 through October 2001: 5.31%;
Period 4: November 2001 through December 2009: 2.82%;
Periods 1-3: September 1976 through December 2001: 10.58%;
All periods: September 1976 through December 2009: 9.55%.
Asset class: Fixed income;
Period 1: September 1976 through August 1987: Average portfolio
weight: 15.4%;
Period 2: September 1987 through September 1993: 16.36%;
Period 3: October 1993 through October 2001: 4.26%;
Period 4: November 2001 through December 2009: 6.03%;
Periods 1-3: September 1976 through December 2001: 13.2%;
All periods: September 1976 through December 2009: 11.89%.
Asset class: Cash;
Period 1: September 1976 through August 1987: Average portfolio
weight: 2.65%;
Period 2: September 1987 through September 1993: 3.86%;
Period 3: October 1993 through October 2001: 1.61%;
Period 4: November 2001 through December 2009: 4.11%;
Periods 1-3: September 1976 through December 2001: 2.85%;
All periods: September 1976 through December 2009: 3.27%.
Source: GAO analysis of PBGC data.
[End of table]
PBGC Single-Employer Total Fund Outperformed Most of Its Benchmarks on
an Asset-Only Basis, and Fluctuations in Asset Allocations Did Not
Adversely Impact Asset-Only Performance:
The results immediately below provide a two-way comparison, on an
asset-only basis, of the PBGC Total Returns to the Dynamic Benchmark--
the two dynamic portfolios among those included in our portfolio
performance evaluation analyses. Due to the design of the Dynamic
Benchmark, these results reflect PBGC Total Fund under-or over-
performance linked to influences other than the asset class
allocation, such as asset allocations to specific subsectors within an
asset class or investments in specific securities. Then, in the
following subsection, we assess the effect of variation in the PBGC
Total Fund's asset allocation in an asset-only context by comparing
the performance of the Dynamic Benchmark and the PBGC Total Fund
against the static benchmark portfolios. Special emphasis was placed
on analyzing the differences in performance between the portfolios
that have particularly strong performance and the two portfolios with
dynamic asset allocations. This special emphasis allows us to then
assess whether the time variation in the asset allocations associated
with the PBGC Total Fund and the Dynamic Benchmark appeared to hurt or
help their risk-adjusted performance. Also, we examine whether the
data suggests other aspects of asset allocation aside from variation
in portfolio weights that might bolster or harm risk-adjusted return
performance.
The performance statistics for this section are shown in table 6
unless otherwise noted. The phrases "decade subperiods" and "decade"
will be used to denote the four subperiods--October 1976 through
December 1979, 1980-1989, 1990-1999, and 2000-2009 for which
statistical estimates are shown in table 6.
Table 6: Portfolio Performance Comparison Results, October 1976
through December 2009:
Total return (percentage):
S&P 500;
October 1976 through December 1979: 21.14%;
1980-1989: 408.49%;
1990-1999: 432.79%;
2000-2009: -6.24%;
September 1976 through August 1987: 429.38%;
September 1987 through September 1993: 70.32%;
October 1993 through October 2001: 176.74%;
November 2001 through December 2009: 23.33%;
All (October 1976 through December 2009): 2,977.25%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 5.80%;
1980-1989: 244.49%;
1990-1999: 129.16%;
2000-2009: 112.00%;
September 1976 through August 1987: 170.77%;
September 1987 through September 1993: 118.60%;
October 1993 through October 2001: 86.64%;
November 2001 through December 2009: 60.27%;
All (October 1976 through December 2009): 1,670.60%.
Wilshire 5000;
October 1976 through December 1979: 39.97%;
1980-1989: 376.63%;
1990-1999: 405.39%;
2000-2009: 2.75%;
September 1976 through August 1987: 481.40%;
September 1987 through September 1993: 72.08%;
October 1993 through October 2001: 157.39%;
November 2001 through December 2009: 34.54%;
All (October 1976 through December 2009): 3,364.44%.
PBGC Total Fund Return;
October 1976 through December 1979: 18.68%;
1980-1989: 238.35%;
1990-1999: 220.90%;
2000-2009: 68.12%;
September 1976 through August 1987: 238.55%;
September 1987 through September 1993: 98.58%;
October 1993 through October 2001: 112.39%;
November 2001 through December 2009: 51.72%;
All (October 1976 through December 2009): 2,066.41%.
PPA;
October 1976 through December 1979: 15.31%;
1980-1989: 351.45%;
1990-1999: 287.49%;
2000-2009: 35.35%;
September 1976 through August 1987: 315.79%;
September 1987 through September 1993: 91.95%;
October 1993 through October 2001: 141.82%;
November 2001 through December 2009: 41.47%;
All (October 1976 through December 2009): 2,630.29%.
Insurance Benchmark;
October 1976 through December 1979: 8.25%;
1980-1989: 272.26%;
1990-1999: 162.71%;
2000-2009: 91.65%;
September 1976 through August 1987: 203.71%;
September 1987 through September 1993: 112.68%;
October 1993 through October 2001: 100.38%;
November 2001 through December 2009: 56.75%;
All (October 1976 through December 2009): 1,928.82.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 12.67%;
1980-1989: 284.67%;
1990-1999: 190.11%;
2000-2009: 64.02%;
September 1976 through August 1987: 236.84%;
September 1987 through September 1993: 97.50%;
October 1993 through October 2001: 109.18%;
November 2001 through December 2009: 48.20%;
All (October 1976 through December 2009): 1,962.32%.
Dynamic Benchmark;
October 1976 through December 1979: 11.55%;
1980-1989: 305.14%;
1990-1999: 208.87%;
2000-2009: 61.19%;
September 1976 through August 1987: 273.03%;
September 1987 through September 1993: 87.42%;
October 1993 through October 2001: 114.97%;
November 2001 through December 2009: 49.72%;
All (October 1976 through December 2009): 2,150.16%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: 67.18%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: 51.00%;
All (October 1976 through December 2009): [Empty].
Monthly mean (percentage):
S&P 500;
October 1976 through December 1979: 0.56%;
1980-1989: 1.51%;
1990-1999: 1.48%;
2000-2009: 0.06%;
September 1976 through August 1987: 1.40%;
September 1987 through September 1993: 0.84%;
October 1993 through October 2001: 1.16%;
November 2001 through December 2009: 0.32%;
All (October 1976 through December 2009): 0.97%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 0.17%;
1980-1989: 1.13%;
1990-1999: 0.72%;
2000-2009: 0.67%;
September 1976 through August 1987: 0.84%;
September 1987 through September 1993: 1.10%;
October 1993 through October 2001: 0.67%;
November 2001 through December 2009: 0.52%;
All (October 1976 through December 2009): 0.77%.
Wilshire 5000;
October 1976 through December 1979: 0.95%;
1980-1989: 1.46%;
1990-1999: 1.44%;
2000-2009: 0.14%;
September 1976 through August 1987: 1.48%;
September 1987 through September 1993: 0.86%;
October 1993 through October 2001: 1.09%;
November 2001 through December 2009: 0.41%;
All (October 1976 through December 2009): 1.01%.
PBGC Total Fund Return;
October 1976 through December 1979: 0.46%;
1980-1989: 1.10%;
1990-1999: 1.01%;
2000-2009: 0.46%;
September 1976 through August 1987: 1.00%;
September 1987 through September 1993: 0.99%;
October 1993 through October 2001: 0.81%;
November 2001 through December 2009: 0.45%;
All (October 1976 through December 2009): 0.82%.
PPA;
October 1976 through December 1979: 0.41%;
1980-1989: 1.36%;
1990-1999: 1.17%;
2000-2009: 0.30%;
September 1976 through August 1987: 1.18%;
September 1987 through September 1993: 0.95%;
October 1993 through October 2001: 0.97%;
November 2001 through December 2009: 0.40%;
All (October 1976 through December 2009): 0.89%.
Insurance Benchmark;
October 1976 through December 1979: 0.23%;
1980-1989: 1.19%;
1990-1999: 0.83%;
2000-2009: 0.58%;
September 1976 through August 1987: 0.93%;
September 1987 through September 1993: 1.06%;
October 1993 through October 2001: 0.75%;
November 2001 through December 2009: 0.49%;
All (October 1976 through December 2009): 0.80%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 0.33%;
1980-1989: 1.20%;
1990-1999: 0.91%;
2000-2009: 0.44%;
September 1976 through August 1987: 0.99%;
September 1987 through September 1993: 0.96%;
October 1993 through October 2001: 0.79%;
November 2001 through December 2009: 0.43%;
All (October 1976 through December 2009): 0.80%.
Dynamic Benchmark;
October 1976 through December 1979: 0.30%;
1980-1989: 1.26%;
1990-1999: 0.9%7;
2000-2009: 0.43%;
September 1976 through August 1987: 1.08%;
September 1987 through September 1993: 0.91%;
October 1993 through October 2001: 0.83%;
November 2001 through December 2009: 0.44%;
All (October 1976 through December 2009): 0.83%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: 0.46%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: 0.45%;
All (October 1976 through December 2009): [Empty].
Monthly mean excess return (percentage):
S&P 500;
October 1976 through December 1979: -0.02%;
1980-1989: 0.82%;
1990-1999: 1.09%;
2000-2009: -0.16%;
September 1976 through August 1987: 0.70%;
September 1987 through September 1993: 0.38%;
October 1993 through October 2001: 0.77%;
November 2001 through December 2009: 0.14%;
All (October 1976 through December 2009): 0.52%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: -0.42%;
1980-1989: 0.4%3;
1990-1999: 0.32%;
2000-2009: 0.45%;
September 1976 through August 1987: 0.15%;
September 1987 through September 1993: 0.64%;
October 1993 through October 2001: 0.29%;
November 2001 through December 2009: 0.34%;
All (October 1976 through December 2009): 0.32%.
Wilshire 5000;
October 1976 through December 1979: 0.36%;
1980-1989: 0.77%;
1990-1999: 1.05%;
2000-2009: -0.08%;
September 1976 through August 1987: 0.78%;
September 1987 through September 1993: 0.40%;
October 1993 through October 2001: 0.70%;
November 2001 through December 2009: 0.23%;
All (October 1976 through December 2009): 0.56%.
PBGC Total Fund Return;
October 1976 through December 1979: -0.13%;
1980-1989: 0.40%;
1990-1999: 0.61%;
2000-2009: 0.24%;
September 1976 through August 1987: 0.30%;
September 1987 through September 1993: 0.53%;
October 1993 through October 2001: 0.42%;
November 2001 through December 2009: 0.27%;
All (October 1976 through December 2009): 0.36%.
PPA;
October 1976 through December 1979: -0.18%;
1980-1989: 0.66%;
1990-1999: 0.78%;
2000-2009: 0.08%;
September 1976 through August 1987: 0.48%;
September 1987 through September 1993: 0.48%;
October 1993 through October 2001: 0.58%;
November 2001 through December 2009: 0.22%;
All (October 1976 through December 2009): 0.44%.
Insurance Benchmark;
October 1976 through December 1979: -0.36%;
1980-1989: 0.49%;
1990-1999: 0.44%;
2000-2009: 0.36%;
September 1976 through August 1987: 0.23%;
September 1987 through September 1993: 0.60%;
October 1993 through October 2001: 0.36%;
November 2001 through December 2009: 0.31%;
All (October 1976 through December 2009): 0.35%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: -0.26%;
1980-1989: 0.50%;
1990-1999: 0.52%;
2000-2009: 0.22%;
September 1976 through August 1987: 0.30%;
September 1987 through September 1993: 0.50%;
October 1993 through October 2001: 0.40%;
November 2001 through December 2009: 0.25%;
All (October 1976 through December 2009): 0.35%.
Dynamic Benchmark;
October 1976 through December 1979: -0.28%;
1980-1989: 0.57%;
1990-1999: 0.58%;
2000-2009: 0.21%;
September 1976 through August 1987: 0.39%;
September 1987 through September 1993: 0.44%;
October 1993 through October 2001: 0.44%;
November 2001 through December 2009: 0.26%;
All (October 1976 through December 2009): 0.38%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: 0.24%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: 0.27%;
All (October 1976 through December 2009): [Empty].
Monthly standard deviation (percentage):
S&P 500;
October 1976 through December 1979: 3.83%;
1980-1989: 4.75%;
1990-1999: 3.88%;
2000-2009: 4.67%;
September 1976 through August 1987: 4.25%;
September 1987 through September 1993: 4.66%;
October 1993 through October 2001: 4.36%;
November 2001 through December 2009: 4.52%;
All (October 1976 through December 2009): 4.42%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 2.09%;
1980-1989: 3.68%;
1990-1999: 2.15%;
2000-2009: 2.73%;
September 1976 through August 1987: 3.53%;
September 1987 through September 1993: 2.20%;
October 1993 through October 2001: 2.13%;
November 2001 through December 2009: 2.90%;
All (October 1976 through December 2009): 2.85%.
Wilshire 5000;
October 1976 through December 1979: 4.09%;
1980-1989: 4.87%;
1990-1999: 3.95%;
2000-2009: 4.77%;
September 1976 through August 1987: 4.41%;
September 1987 through September 1993: 4.70%;
October 1993 through October 2001: 4.45%;
November 2001 through December 2009: 4.60%;
All (October 1976 through December 2009): 4.52%.
PBGC Total Fund Return;
October 1976 through December 1979: 1.77%;
1980-1989: 3.17%;
1990-1999: 2.42%;
2000-2009: 2.31%;
September 1976 through August 1987: 2.80%;
September 1987 through September 1993: 2.93%;
October 1993 through October 2001: 2.28%;
November 2001 through December 2009: 2.31%;
All (October 1976 through December 2009): 2.59%.
PPA;
October 1976 through December 1979: 2.83%;
1980-1989: 3.58%;
1990-1999: 2.79%;
2000-2009: 3.06%;
September 1976 through August 1987: 3.40%;
September 1987 through September 1993: 3.16%;
October 1993 through October 2001: 2.93%;
November 2001 through December 2009: 3.01%;
All (October 1976 through December 2009): 3.15%.
Insurance Benchmark;
October 1976 through December 1979: 2.13%;
1980-1989: 3.41%;
1990-1999: 2.13;
2000-2009: 2.46%;
September 1976 through August 1987: 3.32%;
September 1987 through September 1993: 2.18%;
October 1993 through October 2001: 2.06%;
November 2001 through December 2009: 2.59%;
All (October 1976 through December 2009): 2.67%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 2.10%;
1980-1989: 2.97%;
1990-1999: 2.06%;
2000-2009: 2.21%;
September 1976 through August 1987: 2.90%;
September 1987 through September 1993: 2.18%;
October 1993 through October 2001: 2.02%;
November 2001 through December 2009: 2.27%;
All (October 1976 through December 2009): 2.43%.
Dynamic Benchmark;
October 1976 through December 1979: 2.17%;
1980-1989: 3.53%;
1990-1999: 2.32%;
2000-2009: 2.45%;
September 1976 through August 1987: 3.21%;
September 1987 through September 1993: 2.85%;
October 1993 through October 2001: 2.31%;
November 2001 through December 2009: 2.47%;
All (October 1976 through December 2009): 2.77%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: 2.30%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: 2.31%;
All (October 1976 through December 2009): [Empty].
Annualized semi-standard deviation (percentage):
S&P 500;
October 1976 through December 1979: 9.38%;
1980-1989: 10.99%;
1990-1999: 8.36%;
2000-2009: 12.55%;
September 1976 through August 1987: 8.88%;
September 1987 through September 1993: 12.09%;
October 1993 through October 2001: 10.26%;
November 2001 through December 2009: 11.88%;
All (October 1976 through December 2009): 10.64%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 6.71%;
1980-1989: 7.84%;
1990-1999: 4.74%;
2000-2009: 6.05%;
September 1976 through August 1987: 8.02%;
September 1987 through September 1993: 4.38%;
October 1993 through October 2001: 4.71%;
November 2001 through December 2009: 6.58%;
All (October 1976 through December 2009): 6.36%.
Wilshire 5000;
October 1976 through December 1979: 9.68%;
1980-1989: 11.56%;
1990-1999: 8.76%;
2000-2009: 12.85%;
September 1976 through August 1987: 9.48%;
September 1987 through September 1993: 12.45%;
October 1993 through October 2001: 10.85%;
November 2001 through December 2009: 11.97%;
All (October 1976 through December 2009): 11.04%.
PBGC Total Fund Return;
October 1976 through December 1979: 5.22%;
1980-1989: 7.35%;
1990-1999: 5.00%;
2000-2009: 5.57%;
September 1976 through August 1987: 6.15%;
September 1987 through September 1993: 7.14%;
October 1993 through October 2001: 5.00%;
November 2001 through December 2009: 5.65%;
All (October 1976 through December 2009): 5.97%.
PPA;
October 1976 through December 1979: 7.57%;
1980-1989: 7.58%;
1990-1999: 5.94%;
2000-2009: 8.00%;
September 1976 through August 1987: 7.21%;
September 1987 through September 1993: 7.40%;
October 1993 through October 2001: 6.59%;
November 2001 through December 2009: 7.81%;
All (October 1976 through December 2009): 7.26%.
Insurance Benchmark;
October 1976 through December 1979: 6.66%;
1980-1989: 7.07%;
1990-1999: 4.57%;
2000-2009: 5.66%;
September 1976 through August 1987: 7.37%;
September 1987 through September 1993: 4.47%;
October 1993 through October 2001: 4.40%;
November 2001 through December 2009: 6.10%;
All (October 1976 through December 2009): 5.93%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 6.17%;
1980-1989: 5.98%;
1990-1999: 4.37%;
2000-2009: 5.43%;
September 1976 through August 1987: 6.27%;
September 1987 through September 1993: 4.59%;
October 1993 through October 2001: 4.35%;
November 2001 through December 2009: 5.63%;
All (October 1976 through December 2009): 5.39%.
Dynamic Benchmark;
October 1976 through December 1979: 6.58%;
1980-1989: 7.61%;
1990-1999: 5.04%;
2000-2009: 5.91%;
September 1976 through August 1987: 6.87%;
September 1987 through September 1993: 7.11%;
October 1993 through October 2001: 5.01%;
November 2001 through December 2009: 6.01%;
All (October 1976 through December 2009): 6.30%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: 0.00%;
1980-1989: 0.00%;
1990-1999: 0.49%;
2000-2009: 5.58%;
September 1976 through August 1987: 0.00%;
September 1987 through September 1993: 0.00%;
October 1993 through October 2001: 2.49%;
November 2001 through December 2009: 5.66%;
All (October 1976 through December 2009): 3.08%.
Annualized arithmetic mean (percentage):
S&P 500;
October 1976 through December 1979: 6.77%;
1980-1989: 18.16%;
1990-1999: 17.75%;
2000-2009: 0.68%;
September 1976 through August 1987: 16.78%;
September 1987 through September 1993: 10.13%;
October 1993 through October 2001: 13.93%;
November 2001 through December 2009: 3.82%;
All (October 1976 through December 2009): 11.64%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 2.00%;
1980-1989: 13.54%;
1990-1999: 8.59%;
2000-2009: 8.04%;
September 1976 through August 1987: 10.10%;
September 1987 through September 1993: 13.21%;
October 1993 through October 2001: 8.09%;
November 2001 through December 2009: 6.29%;
All (October 1976 through December 2009): 9.24%.
Wilshire 5000;
October 1976 through December 1979: 11.38%;
1980-1989: 17.57%;
1990-1999: 17.25%;
2000-2009: 1.66%;
September 1976 through August 1987: 17.77%;
September 1987 through September 1993: 10.34%;
October 1993 through October 2001: 13.07%;
November 2001 through December 2009: 4.93%;
All (October 1976 through December 2009): 12.07%.
PBGC Total Fund Return;
October 1976 through December 1979: 5.47%;
1980-1989: 13.17%;
1990-1999: 12.06%;
2000-2009: 5.57%;
September 1976 through August 1987: 11.95%;
September 1987 through September 1993: 11.85%;
October 1993 through October 2001: 9.76%;
November 2001 through December 2009: 5.44%;
All (October 1976 through December 2009): 9.78%.
PPA;
October 1976 through December 1979: 4.86%;
1980-1989: 16.32%;
1990-1999: 14.08%;
2000-2009: 3.62%;
September 1976 through August 1987: 14.11%;
September 1987 through September 1993: 11.36%;
October 1993 through October 2001: 11.60%;
November 2001 through December 2009: 4.81%;
All (October 1976 through December 2009): 10.68%.
Insurance Benchmark;
October 1976 through December 1979: 2.71%;
1980-1989: 14.24%;
1990-1999: 9.97%;
2000-2009: 6.94%;
September 1976 through August 1987: 11.11%;
September 1987 through September 1993: 12.75%;
October 1993 through October 2001: 8.97%;
November 2001 through December 2009: 5.92%;
All (October 1976 through December 2009): 9.60%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 3.94%;
1980-1989: 14.41%;
1990-1999: 10.95%;
2000-2009: 5.29%;
September 1976 through August 1987: 11.93%;
September 1987 through September 1993: 11.52%;
October 1993 through October 2001: 9.50%;
November 2001 through December 2009: 5.14%;
All (October 1976 through December 2009): 9.58%.
Dynamic Benchmark;
October 1976 through December 1979: 3.65%;
1980-1989: 15.17%;
1990-1999: 11.65%;
2000-2009: 5.18%;
September 1976 through August 1987: 13.01%;
September 1987 through September 1993: 10.86%;
October 1993 through October 2001: 9.92%;
November 2001 through December 2009: 5.32%;
All (October 1976 through December 2009): 9.95%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: 5.51%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: 5.38%;
All (October 1976 through December 2009): [Empty].
Annualized mean excess return (percentage):
S&P 500;
October 1976 through December 1979: -0.29%;
1980-1989: 9.79%;
1990-1999: 13.05%;
2000-2009: -1.97%;
September 1976 through August 1987: 8.44%;
September 1987 through September 1993: 4.59%;
October 1993 through October 2001: 9.27%;
November 2001 through December 2009: 1.64%;
All (October 1976 through December 2009): 6.24%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: -5.07%;
1980-1989: 5.17%;
1990-1999: 3.89%;
2000-2009: 5.40%;
September 1976 through August 1987: 1.76%;
September 1987 through September 1993: 7.67%;
October 1993 through October 2001: 3.43%;
November 2001 through December 2009: 4.11%;
All (October 1976 through December 2009): 3.84%.
Wilshire 5000;
October 1976 through December 1979: 4.31%;
1980-1989: 9.20%;
1990-1999: 12.55%;
2000-2009: -0.99%;
September 1976 through August 1987: 9.42%;
September 1987 through September 1993: 4.80%;
October 1993 through October 2001: 8.41%;
November 2001 through December 2009: 2.75%;
All (October 1976 through December 2009): 6.66%.
PBGC Total Fund Return;
October 1976 through December 1979: -1.60%;
1980-1989: 4.79%;
1990-1999: 7.36%;
2000-2009: 2.92%;
September 1976 through August 1987: 3.60%;
September 1987 through September 1993: 6.31%;
October 1993 through October 2001: 5.09%;
November 2001 through December 2009: 3.26%;
All (October 1976 through December 2009): 4.38%.
PPA;
October 1976 through December 1979: -2.21%;
1980-1989: 7.94%;
1990-1999: 9.39%;
2000-2009: 0.98%;
September 1976 through August 1987: 5.76%;
September 1987 through September 1993: 5.82%;
October 1993 through October 2001: 6.93%;
November 2001 through December 2009: 2.63%;
All (October 1976 through December 2009): 5.28%.
Insurance Benchmark;
October 1976 through December 1979: -4.35%;
1980-1989: 5.86%;
1990-1999: 5.27%;
2000-2009: 4.29%;
September 1976 through August 1987: 2.76%;
September 1987 through September 1993: 7.21%;
October 1993 through October 2001: 4.30%;
November 2001 through December 2009: 3.74%;
All (October 1976 through December 2009): 4.20%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: -3.13%;
1980-1989: 6.04%;
1990-1999: 6.25%;
2000-2009: 2.65%;
September 1976 through August 1987: 3.58%;
September 1987 through September 1993: 5.98%;
October 1993 through October 2001: 4.84%;
November 2001 through December 2009: 2.96%;
All (October 1976 through December 2009): 4.18%.
Dynamic Benchmark;
October 1976 through December 1979: -3.42%;
1980-1989: 6.79%;
1990-1999: 6.95%;
2000-2009: 2.54%;
September 1976 through August 1987: 4.66%;
September 1987 through September 1993: 5.32%;
October 1993 through October 2001: 5.25%;
November 2001 through December 2009: 3.14%;
All (October 1976 through December 2009): 4.55%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: 2.8%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: 3.20%;
All (October 1976 through December 2009): [Empty].
Annualized standard deviation (percentage):
S&P 500;
October 1976 through December 1979: 13.28%;
1980-1989: 16.47%;
1990-1999: 13.43%;
2000-2009: 16.17%;
September 1976 through August 1987: 14.71%;
September 1987 through September 1993: 16.14%;
October 1993 through October 2001: 15.10%;
November 2001 through December 2009: 15.67%;
All (October 1976 through December 2009): 15.33%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 7.23%;
1980-1989: 12.74%;
1990-1999: 7.44%;
2000-2009: 9.47%;
September 1976 through August 1987: 12.23%;
September 1987 through September 1993: 7.63%;
October 1993 through October 2001: 7.38%;
November 2001 through December 2009: 10.05%;
All (October 1976 through December 2009): 9.87%.
Wilshire 5000;
October 1976 through December 1979: 14.18%;
1980-1989: 16.87%;
1990-1999: 13.68%;
2000-2009: 16.53%;
September 1976 through August 1987: 15.29%;
September 1987 through September 1993: 16.30%;
October 1993 through October 2001: 15.42%;
November 2001 through December 2009: 15.92%;
All (October 1976 through December 2009): 15.67%.
PBGC Total Fund Return;
October 1976 through December 1979: 6.12%;
1980-1989: 10.99%;
1990-1999: 8.39%;
2000-2009: 7.99%;
September 1976 through August 1987: 9.69%;
September 1987 through September 1993: 10.17%;
October 1993 through October 2001: 7.90%;
November 2001 through December 2009: 8.01%;
All (October 1976 through December 2009): 8.98%.
PPA;
October 1976 through December 1979: 9.80%;
1980-1989: 12.42%;
1990-1999: 9.68%;
2000-2009: 10.60%;
September 1976 through August 1987: 11.77%;
September 1987 through September 1993: 10.95%;
October 1993 through October 2001: 10.14%;
November 2001 through December 2009: 10.43%;
All (October 1976 through December 2009): 10.92%.
Insurance Benchmark;
October 1976 through December 1979: 7.39%;
1980-1989: 11.82%;
1990-1999: 7.39%;
2000-2009: 8.52%;
September 1976 through August 1987: 11.51%;
September 1987 through September 1993: 7.54%;
October 1993 through October 2001: 7.13%;
November 2001 through December 2009: 8.99%;
All (October 1976 through December 2009): 9.26%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 7.27%;
1980-1989: 10.28%;
1990-1999: 7.15%;
2000-2009: 7.66%;
September 1976 through August 1987: 10.04%;
September 1987 through September 1993: 7.55%;
October 1993 through October 2001: 7.01%;
November 2001 through December 2009: 7.85%;
All (October 1976 through December 2009): 8.40%.
Dynamic Benchmark;
October 1976 through December 1979: 7.51%;
1980-1989: 12.21%;
1990-1999: 8.04%;
2000-2009: 8.48%;
September 1976 through August 1987: 11.13%;
September 1987 through September 1993: 9.89%;
October 1993 through October 2001: 8.01%;
November 2001 through December 2009: 8.57%;
All (October 1976 through December 2009): 9.59%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: 7.98%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: 8.01%;
All (October 1976 through December 2009): [Empty].
Sharpe ratio (annualized):
S&P 500;
October 1976 through December 1979: -0.02%;
1980-1989: 0.59%;
1990-1999: 0.97%;
2000-2009: -0.12%;
September 1976 through August 1987: 0.57%;
September 1987 through September 1993: 0.28%;
October 1993 through October 2001: 0.61%;
November 2001 through December 2009: 0.10%;
All (October 1976 through December 2009): 0.41%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: -0.70%;
1980-1989: 0.41%;
1990-1999: 0.52%;
2000-2009: 0.57%;
September 1976 through August 1987: 0.14%;
September 1987 through September 1993: 1.01%;
October 1993 through October 2001: 0.46%;
November 2001 through December 2009: 0.41%;
All (October 1976 through December 2009): 0.39%.
Wilshire 5000;
October 1976 through December 1979: 0.30%;
1980-1989: 0.55%;
1990-1999: 0.92%;
2000-2009: -0.06%;
September 1976 through August 1987: 0.62%;
September 1987 through September 1993: 0.29%;
October 1993 through October 2001: 0.55%;
November 2001 through December 2009: 0.17%;
All (October 1976 through December 2009): 0.43%.
PBGC Total Fund Return;
October 1976 through December 1979: -0.26%;
1980-1989: 0.44%;
1990-1999: 0.88%;
2000-2009: 0.37%;
September 1976 through August 1987: 0.37%;
September 1987 through September 1993: 0.62%;
October 1993 through October 2001: 0.64%;
November 2001 through December 2009: 0.41%;
All (October 1976 through December 2009): 0.49%.
PPA;
October 1976 through December 1979: -0.22%;
1980-1989: 0.64%;
1990-1999: 0.97%;
2000-2009: 0.09%;
September 1976 through August 1987: 0.49%;
September 1987 through September 1993: 0.53%;
October 1993 through October 2001: 0.68%;
November 2001 through December 2009: 0.25%;
All (October 1976 through December 2009): 0.48%.
Insurance Benchmark;
October 1976 through December 1979: -0.59%;
1980-1989: 0.50%;
1990-1999: 0.71%;
2000-2009: 0.50%;
September 1976 through August 1987: 0.24%;
September 1987 through September 1993: 0.96%;
October 1993 through October 2001: 0.60%;
November 2001 through December 2009: 0.42%;
All (October 1976 through December 2009): 0.45%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: -0.43%;
1980-1989: 0.59%;
1990-1999: 0.87%;
2000-2009: 0.35%;
September 1976 through August 1987: 0.36%;
September 1987 through September 1993: 0.79%;
October 1993 through October 2001: 0.69%;
November 2001 through December 2009: 0.38%;
All (October 1976 through December 2009): 0.50%.
Dynamic Benchmark;
October 1976 through December 1979: -0.46%;
1980-1989: 0.56%;
1990-1999: 0.86%;
2000-2009: 0.30%;
September 1976 through August 1987: 0.42%;
September 1987 through September 1993: 0.54%;
October 1993 through October 2001: 0.66%;
November 2001 through December 2009: 0.37%;
All (October 1976 through December 2009): 0.47%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: 0.36%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: 0.40%;
All (October 1976 through December 2009): [Empty].
Sortino ratio (annualized):
S&P 500;
October 1976 through December 1979: -0.03%;
1980-1989: 0.89%;
1990-1999: 1.56%;
2000-2009: -0.16%;
September 1976 through August 1987: 0.95%;
September 1987 through September 1993: 0.38%;
October 1993 through October 2001: 0.90%;
November 2001 through December 2009: 0.14%;
All (October 1976 through December 2009): 0.59%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: -0.76%;
1980-1989: 0.66%;
1990-1999: 0.82%;
2000-2009: 0.89%;
September 1976 through August 1987: 0.22%;
September 1987 through September 1993: 1.75%;
October 1993 through October 2001: 0.73%;
November 2001 through December 2009: 0.62%;
All (October 1976 through December 2009): 0.60%.
Wilshire 5000;
October 1976 through December 1979: 0.45%;
1980-1989: 0.80%;
1990-1999: 1.43%;
2000-2009: -0.08%;
September 1976 through August 1987: 0.99%;
September 1987 through September 1993: 0.39%;
October 1993 through October 2001: 0.77%;
November 2001 through December 2009: 0.23%;
All (October 1976 through December 2009): 0.60%.
PBGC Total Fund Return;
October 1976 through December 1979: -0.31%;
1980-1989: 0.65%;
1990-1999: 1.47%;
2000-2009: 0.52%;
September 1976 through August 1987: 0.59%;
September 1987 through September 1993: 0.88%;
October 1993 through October 2001: 1.02%;
November 2001 through December 2009: 0.58%;
All (October 1976 through December 2009): 0.73%.
PPA;
October 1976 through December 1979: -0.29%;
1980-1989: 1.05%;
1990-1999: 1.58%;
2000-2009: 0.12%;
September 1976 through August 1987: 0.80%;
September 1987 through September 1993: 0.79%;
October 1993 through October 2001: 1.05%;
November 2001 through December 2009: 0.34%;
All (October 1976 through December 2009): 0.73%.
Insurance Benchmark;
October 1976 through December 1979: -0.65%;
1980-1989: 0.83%;
1990-1999: 1.15%;
2000-2009: 0.76%;
September 1976 through August 1987: 0.37%;
September 1987 through September 1993: 1.61%;
October 1993 through October 2001: 0.98%;
November 2001 through December 2009: 0.61%;
All (October 1976 through December 2009): 0.71%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: -0.51%;
1980-1989: 1.01%;
1990-1999: 1.43%;
2000-2009: 0.49%;
September 1976 through August 1987: 0.57%;
September 1987 through September 1993: 1.30%;
October 1993 through October 2001: 1.11%;
November 2001 through December 2009: 0.53%;
All (October 1976 through December 2009): 0.77%.
Dynamic Benchmark;
October 1976 through December 1979: -0.52%;
1980-1989: 0.89%;
1990-1999: 1.38%;
2000-2009: 0.43%;
September 1976 through August 1987: 0.68%;
September 1987 through September 1993: 0.75%;
October 1993 through October 2001: 1.05%;
November 2001 through December 2009: 0.52%;
All (October 1976 through December 2009): 0.72%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: 0.51%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: 0.57%;
All (October 1976 through December 2009): [Empty].
Omega ratio:
S&P 500;
October 1976 through December 1979: 0.98%;
1980-1989: 1.58%;
1990-1999: 2.03%;
2000-2009: 0.91%;
September 1976 through August 1987: 1.53%;
September 1987 through September 1993: 1.26%;
October 1993 through October 2001: 1.55%;
November 2001 through December 2009: 1.09%;
All (October 1976 through December 2009): 1.36%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 0.55%;
1980-1989: 1.36%;
1990-1999: 1.47%;
2000-2009: 1.56%;
September 1976 through August 1987: 1.12%;
September 1987 through September 1993: 2.11%;
October 1993 through October 2001: 1.40%;
November 2001 through December 2009: 1.37%;
All (October 1976 through December 2009): 1.35%.
Wilshire 5000;
October 1976 through December 1979: 1.26%;
1980-1989: 1.52%;
1990-1999: 1.95%;
2000-2009: 0.96%;
September 1976 through August 1987: 1.57%;
September 1987 through September 1993: 1.28%;
October 1993 through October 2001: 1.47%;
November 2001 through December 2009: 1.14%;
All (October 1976 through December 2009): 1.38%.
PBGC Total Fund Return;
October 1976 through December 1979: 0.79%;
1980-1989: 1.39%;
1990-1999: 1.92%;
2000-2009: 1.32%;
September 1976 through August 1987: 1.33%;
September 1987 through September 1993: 1.67%;
October 1993 through October 2001: 1.58%;
November 2001 through December 2009: 1.38%;
All (October 1976 through December 2009): 1.46%.
PPA;
October 1976 through December 1979: 0.84%;
1980-1989: 1.61%;
1990-1999: 2.02%;
2000-2009: 1.07%;
September 1976 through August 1987: 1.44%;
September 1987 through September 1993: 1.51%;
October 1993 through October 2001: 1.61%;
November 2001 through December 2009: 1.23%;
All (October 1976 through December 2009): 1.44%.
Insurance Benchmark;
October 1976 through December 1979: 0.61%;
1980-1989: 1.44%;
1990-1999: 1.72%;
2000-2009: 1.48%;
September 1976 through August 1987: 1.20%;
September 1987 through September 1993: 2.01%;
October 1993 through October 2001: 1.57%;
November 2001 through December 2009: 1.38%;
All (October 1976 through December 2009): 1.42%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 0.71%;
1980-1989: 1.53%;
1990-1999: 1.91%;
2000-2009: 1.31%;
September 1976 through August 1987: 1.31%;
September 1987 through September 1993: 1.78%;
October 1993 through October 2001: 1.64%;
November 2001 through December 2009: 1.35%;
All (October 1976 through December 2009): 1.46%.
Dynamic Benchmark;
October 1976 through December 1979: 0.69%;
1980-1989: 1.51%;
1990-1999: 1.90%;
2000-2009: 1.27%;
September 1976 through August 1987: 1.38%;
September 1987 through September 1993: 1.54%;
October 1993 through October 2001: 1.59%;
November 2001 through December 2009: 1.35%;
All (October 1976 through December 2009): 1.44%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: 1.91%;
2000-2009: 1.32%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: 1.20%;
November 2001 through December 2009: 1.37%;
All (October 1976 through December 2009): 1.33%.
Skewness, bias corrected:
S&P 500;
October 1976 through December 1979: -0.14%;
1980-1989: -0.81%;
1990-1999: -0.63%;
2000-2009: -0.59%;
September 1976 through August 1987: 0.16%;
September 1987 through September 1993: -1.44%;
October 1993 through October 2001: -0.72%;
November 2001 through December 2009: -0.86%;
All (October 1976 through December 2009): -0.66%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: -2.05%;
1980-1989: 0.42%;
1990-1999: -0.07%;
2000-2009: -0.03%;
September 1976 through August 1987: 0.47%;
September 1987 through September 1993: -0.10%;
October 1993 through October 2001: -0.05%;
November 2001 through December 2009: 0.07%;
All (October 1976 through December 2009): 0.28%.
Wilshire 5000%;
October 1976 through December 1979: -0.50;
1980-1989: -0.98%;
1990-1999: -0.77%;
2000-2009: -0.71%;
September 1976 through August 1987: -0.08%;
September 1987 through September 1993: -1.74%;
October 1993 through October 2001: -0.90%;
November 2001 through December 2009: -0.90%;
All (October 1976 through December 2009): -0.81%.
PBGC Total Fund Return;
October 1976 through December 1979: -1.72%;
1980-1989: -0.48%;
1990-1999: -0.03%;
2000-2009: -0.68%;
September 1976 through August 1987: 0.30%;
September 1987 through September 1993: -1.37%;
October 1993 through October 2001: -0.17%;
November 2001 through December 2009: -0.86%;
All (October 1976 through December 2009): -0.37%.
PPA;
October 1976 through December 1979: -0.58%;
1980-1989: -0.03%;
1990-1999: -0.38%;
2000-2009: -0.91%;
September 1976 through August 1987: 0.22%;
September 1987 through September 1993: -0.57%;
October 1993 through October 2001:
-0.45%;
November 2001 through December 2009: -1.22%;
All (October 1976 through December 2009): -0.34%.
Insurance Benchmark;
October 1976 through December 1979: -1.77%;
1980-1989: 0.43%;
1990-1999: -0.11%;
2000-2009: -0.40%;
September 1976 through August 1987: 0.44%;
September 1987 through September 1993: -0.20%;
October 1993 through October 2001: -0.05%;
November 2001 through December 2009: -0.37%;
All (October 1976 through December 2009): 0.18%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: -1.22%;
1980-1989: 0.40%;
1990-1999: -0.18%;
2000-2009: -0.88%;
September 1976 through August 1987: 0.37%;
September 1987 through September 1993: -0.10%;
October 1993 through October 2001: -0.15%;
November 2001 through December 2009: -1.02%;
All (October 1976 through December 2009): 0.01%.
Dynamic Benchmark;
October 1976 through December 1979: -1.57%;
1980-1989: -0.04%;
1990-1999: -0.33%;
2000-2009: -0.58%;
September 1976 through August 1987: 0.37%;
September 1987 through September 1993: -1.19%;
October 1993 through October 2001: -0.16%;
November 2001 through December 2009: -0.76%;
All (October 1976 through December 2009): -0.15%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: -0.14%;
2000-2009: -0.68%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: 0.14%;
November 2001 through December 2009: -0.86%;
All (October 1976 through December 2009): -0.69.
Kurtosis, bias corrected:
S&P 500;
October 1976 through December 1979: 2.94%;
1980-1989: 7.19%;
1990-1999: 4.77%;
2000-2009: 3.92%;
September 1976 through August 1987: 3.38%;
September 1987 through September 1993: 9.68%;
October 1993 through October 2001: 3.78%;
November 2001 through December 2009: 4.77%;
All (October 1976 through December 2009): 5.25%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 11.13%;
1980-1989: 3.94%;
1990-1999: 3.32%;
2000-2009: 6.08%;
September 1976 through August 1987: 4.77%;
September 1987 through September 1993: 2.87%;
October 1993 through October 2001: 3.50%;
November 2001 through December 2009: 5.79%;
All (October 1976 through December 2009): 5.52%.
Wilshire 5000;
October 1976 through December 1979: 3.50%;
1980-1989: 7.73%;
1990-1999: 5.18%;
2000-2009: 3.95%;
September 1976 through August 1987: 3.51%;
September 1987 through September 1993: 11.05%;
October 1993 through October 2001: 4.21%;
November 2001 through December 2009: 4.90%;
All (October 1976 through December 2009): 5.59%.
PBGC Total Fund Return;
October 1976 through December 1979: 8.83%;
1980-1989: 5.83%;
1990-1999: 3.69%;
2000-2009: 5.69%;
September 1976 through August 1987: 3.72%;
September 1987 through September 1993: 9.94%;
October 1993 through October 2001: 2.86%;
November 2001 through December 2009: 6.48%;
All (October 1976 through December 2009): 5.86%.
PPA;
October 1976 through December 1979: 3.67%;
1980-1989: 3.52%;
1990-1999: 3.77%;
2000-2009: 5.50%;
September 1976 through August 1987: 3.26%;
September 1987 through September 1993: 5.03%;
October 1993 through October 2001: 2.78%;
November 2001 through December 2009: 6.71%;
All (October 1976 through December 2009): 4.33%.
Insurance Benchmark;
October 1976 through December 1979: 9.21%;
1980-1989: 3.67%;
1990-1999: 3.59%;
2000-2009: 6.31%;
September 1976 through August 1987: 4.36%;
September 1987 through September 1993: 3.10%;
October 1993 through October 2001: 3.52%;
November 2001 through December 2009: 6.10%;
All (October 1976 through December 2009): 5.22%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 6.12%;
1980-1989: 3.12%;
1990-1999: 3.60%;
2000-2009: 6.52%;
September 1976 through August 1987: 3.76%;
September 1987 through September 1993: 3.25%;
October 1993 through October 2001: 2.83%;
November 2001 through December 2009: 6.96%;
All (October 1976 through December 2009): 4.63%.
Dynamic Benchmark;
October 1976 through December 1979: 7.79%;
1980-1989: 4.05%;
1990-1999: 3.66%;
2000-2009: 6.27%;
September 1976 through August 1987: 3.93%;
September 1987 through September 1993: 7.13%;
October 1993 through October 2001: 2.69%;
November 2001 through December 2009: 6.99%;
All (October 1976 through December 2009): 5.17%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: 0.12%;
2000-2009: 5.70%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: 2.08%;
November 2001 through December 2009: 6.49%;
All (October 1976 through December 2009): 5.79%.
Adjusted Sharpe ratio%:
S&P 500;
October 1976 through December 1979: -0.000391%;
1980-1989: 0.594592%;
1990-1999: 0.971118%;
2000-2009: -0.003190%;
September 1976 through August 1987: 0.573375%;
September 1987 through September 1993: 0.284191%;
October 1993 through October 2001: 0.613704%;
November 2001 through December 2009: 0.104676%;
All (October 1976 through December 2009): 0.407141%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: -0.003668%;
1980-1989: 0.405723%;
1990-1999: 0.523549%;
2000-2009: 0.569919%;
September 1976 through August 1987: 0.143676%;
September 1987 through September 1993: 1.005150%;
October 1993 through October 2001: 0.464111%;
November 2001 through December 2009: 0.408882%;
All (October 1976 through December 2009): 0.389147%.
Wilshire 5000;
October 1976 through December 1979: 0.303767%;
1980-1989: 0.545163%;
1990-1999: 0.917169%;
2000-2009: -0.001629%;
September 1976 through August 1987: 0.615824%;
September 1987 through September 1993: 0.294435%;
October 1993 through October 2001: 0.545306%;
November 2001 through December 2009: 0.172705%;
All (October 1976 through December 2009): 0.425189%.
PBGC Total Fund Return;
October 1976 through December 1979: -0.000980%;
1980-1989: 0.436005%;
1990-1999: 0.877346%;
2000-2009: 0.365748%;
September 1976 through August 1987: 0.371506%;
September 1987 through September 1993: 0.620555%;
October 1993 through October 2001: 0.644295%;
November 2001 through December 2009: 0.406838%;
All (October 1976 through December 2009): 0.487750%.
PPA;
October 1976 through December 1979: -0.002162%;
1980-1989: 0.639563%;
1990-1999: 0.969694%;
2000-2009: 0.092031%;
September 1976 through August 1987: 0.489602%;
September 1987 through September 1993: 0.531411%;
October 1993 through October 2001: 0.683582%;
November 2001 through December 2009: 0.252058%;
All (October 1976 through December 2009): 0.483584%.
Insurance Benchmark;
October 1976 through December 1979: -0.003219%;
1980-1989: 0.496088%;
1990-1999: 0.712917%;
2000-2009: 0.503391%;
September 1976 through August 1987: 0.239720%;
September 1987 through September 1993: 0.955671%;
October 1993 through October 2001: 0.603150%;
November 2001 through December 2009: 0.416168%;
All (October 1976 through December 2009): 0.453526%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: -0.002276%;
1980-1989: 0.587099%;
1990-1999: 0.874635%;
2000-2009: 0.345584%;
September 1976 through August 1987: 0.356897%;
September 1987 through September 1993: 0.791796%;
October 1993 through October 2001: 0.689409%;
November 2001 through December 2009: 0.376953%;
All (October 1976 through December 2009): 0.497025%.
Dynamic Benchmark;
October 1976 through December 1979: -0.002567%;
1980-1989: 0.556275%;
1990-1999: 0.864437%;
2000-2009: 0.299025%;
September 1976 through August 1987: 0.418946%;
September 1987 through September 1993: 0.537960%;
October 1993 through October 2001: 0.655910%;
November 2001 through December 2009: 0.366512%;
All (October 1976 through December 2009): 0.474242%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: 0.358696%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: 0.399521%;
All (October 1976 through December 2009): [Empty].
Minimum (percentage):
S&P 500;
October 1976 through December 1979: -8.72%;
1980-1989: -21.54%;
1990-1999: -14.46%;
2000-2009: -16.80%;
September 1976 through August 1987: -9.72%;
September 1987 through September 1993: -21.54%;
October 1993 through October 2001: -14.46%;
November 2001 through December 2009: -16.80%;
All (October 1976 through December 2009): -21.54%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: -8.84%;
1980-1989: -7.92%;
1990-1999: -4.48%;
2000-2009: -8.72%;
September 1976 through August 1987: -8.84%;
September 1987 through September 1993: -4.24%;
October 1993 through October 2001: -4.48%;
November 2001 through December 2009: -8.72%;
All (October 1976 through December 2009): -8.84%.
Wilshire 5000;
October 1976 through December 1979: -10.71%;
1980-1989: -22.78%;
1990-1999: -15.57%;
2000-2009: -17.57%;
September 1976 through August 1987: -12.14%;
September 1987 through September 1993: -22.78%;
October 1993 through October 2001: -15.57%;
November 2001 through December 2009: -17.57%;
All (October 1976 through December 2009): -22.78%.
PBGC Total Fund Return;
October 1976 through December 1979: -6.60%;
1980-1989: -13.18%;
1990-1999: -5.47%;
2000-2009: -9.33%;
September 1976 through August 1987: -6.60%;
September 1987 through September 1993: -13.18%;
October 1993 through October 2001: -4.53%;
November 2001 through December 2009: -9.33%;
All (October 1976 through December 2009): -13.18%.
PPA;
October 1976 through December 1979: -7.38%;
1980-1989: -10.51%;
1990-1999: -7.56%;
2000-2009: -12.95%;
September 1976 through August 1987: -7.38%;
September 1987 through September 1993: -10.51%;
October 1993 through October 2001:
-7.56%;
November 2001 through December 2009: -12.95%;
All (October 1976 through December 2009): -12.95%.
Insurance Benchmark;
October 1976 through December 1979: -8.47%;
1980-1989: -6.73%;
1990-1999: -4.49%;
2000-2009: -8.61%;
September 1976 through August 1987: -8.47%;
September 1987 through September 1993: -4.49%;
October 1993 through October 2001: -4.29%;
November 2001 through December 2009: -8.61%;
All (October 1976 through December 2009): -8.61%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: -7.14%;
1980-1989: -4.65%;
1990-1999: -4.86%;
2000-2009: -9.33%;
September 1976 through August 1987: -7.14%;
September 1987 through September 1993: -4.86%;
October 1993 through October 2001: -3.85%;
November 2001 through December 2009: -9.33%;
All (October 1976 through December 2009): -9.33%.
Dynamic Benchmark;
October 1976 through December 1979: -8.08%;
1980-1989: -11.40%;
1990-1999: -6.05%;
2000-2009: -10.03%;
September 1976 through August 1987: -8.08%;
September 1987 through September 1993: -11.40%;
October 1993 through October 2001: -4.02%;
November 2001 through December 2009: -10.03%;
All (October 1976 through December 2009): -11.40%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: -0.86%;
2000-2009: -9.34%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: -2.84%;
November 2001 through December 2009: -9.34%;
All (October 1976 through December 2009): -9.34.
Maximum (percentage):
S&P 500;
October 1976 through December 1979: 9.02%;
1980-1989: 13.47%;
1990-1999: 11.44%;
2000-2009: 9.78%;
September 1976 through August 1987: 13.47%;
September 1987 through September 1993: 11.44%;
October 1993 through October 2001: 9.78%;
November 2001 through December 2009: 9.57%;
All (October 1976 through December 2009): 13.47%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 3.22%;
1980-1989: 14.16%;
1990-1999: 7.25%;
2000-2009: 11.23%;
September 1976 through August 1987: 14.16%;
September 1987 through September 1993: 6.03%;
October 1993 through October 2001: 7.25%;
November 2001 through December 2009: 11.23%;
All (October 1976 through December 2009): 14.16%.
Wilshire 5000;
October 1976 through December 1979: 8.27%;
1980-1989: 12.80%;
1990-1999: 10.98%;
2000-2009: 10.52%;
September 1976 through August 1987: 12.80%;
September 1987 through September 1993: 10.98%;
October 1993 through October 2001: 8.23%;
November 2001 through December 2009: 10.52%;
All (October 1976 through December 2009): 12.80%.
PBGC Total Fund Return;
October 1976 through December 1979: 3.38%;
1980-1989: 9.56%;
1990-1999: 8.94%;
2000-2009: 7.31%;
September 1976 through August 1987: 9.56%;
September 1987 through September 1993: 8.94%;
October 1993 through October 2001: 6.72%;
November 2001 through December 2009: 7.31%;
All (October 1976 through December 2009): 9.56%.
PPA;
October 1976 through December 1979: 5.38%;
1980-1989: 10.48%;
1990-1999: 9.03%;
2000-2009: 6.83%;
September 1976 through August 1987: 10.48%;
September 1987 through September 1993: 9.03%;
October 1993 through October 2001: 7.06%;
November 2001 through December 2009: 6.03%;
All (October 1976 through December 2009): 10.48%.
Insurance Benchmark;
October 1976 through December 1979: 3.58%;
1980-1989: 12.73%;
1990-1999: 6.76%;
2000-2009: 9.71%;
September 1976 through August 1987: 12.73%;
September 1987 through September 1993: 6.31%;
October 1993 through October 2001: 6.76%;
November 2001 through December 2009: 9.71%;
All (October 1976 through December 2009): 12.73%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 3.65%;
1980-1989: 10.01%;
1990-1999: 6.71%;
2000-2009: 7.06%;
September 1976 through August 1987: 10.01%;
September 1987 through September 1993: 6.71%;
October 1993 through October 2001: 5.85%;
November 2001 through December 2009: 7.06%;
All (October 1976 through December 2009): 10.01%.
Dynamic Benchmark;
October 1976 through December 1979: 3.55%;
1980-1989: 11.24%;
1990-1999: 6.74%;
2000-2009: 8.53%;
September 1976 through August 1987: 11.24%;
September 1987 through September 1993: 6.74%;
October 1993 through October 2001: 6.50%;
November 2001 through December 2009: 8.53%;
All (October 1976 through December 2009): 11.24%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: 2.26%;
2000-2009: 7.30%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: 4.54%;
November 2001 through December 2009: 7.30%;
All (October 1976 through December 2009): 7.30%.
Range (percentage):
S&P 500;
October 1976 through December 1979: 17.74%;
1980-1989: 35.00%;
1990-1999: 25.90%;
2000-2009: 26.58%;
September 1976 through August 1987: 23.19%;
September 1987 through September 1993: 32.97%;
October 1993 through October 2001: 24.24%;
November 2001 through December 2009: 26.37%;
All (October 1976 through December 2009): 35.00%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 12.06%;
1980-1989: 22.08%;
1990-1999: 11.73%;
2000-2009: 19.95%;
September 1976 through August 1987: 23.00%;
September 1987 through September 1993: 10.27%;
October 1993 through October 2001: 11.73%;
November 2001 through December 2009: 19.95%;
All (October 1976 through December 2009): 23.00%.
Wilshire 5000;
October 1976 through December 1979: 18.98%;
1980-1989: 35.58%;
1990-1999: 26.55%;
2000-2009: 28.09%;
September 1976 through August 1987: 24.94%;
September 1987 through September 1993: 33.76%;
October 1993 through October 2001: 23.80%;
November 2001 through December 2009: 28.09%;
All (October 1976 through December 2009): 35.58%.
PBGC Total Fund Return;
October 1976 through December 1979: 9.99%;
1980-1989: 22.74%;
1990-1999: 14.41%;
2000-2009: 16.64%;
September 1976 through August 1987: 16.17%;
September 1987 through September 1993: 22.12%;
October 1993 through October 2001: 11.25%;
November 2001 through December 2009: 16.64%;
All (October 1976 through December 2009): 22.74%.
PPA;
October 1976 through December 1979: 12.76%;
1980-1989: 20.99%;
1990-1999: 16.59%;
2000-2009: 19.77%;
September 1976 through August 1987: 17.86%;
September 1987 through September 1993: 19.54%;
October 1993 through October 2001: 14.62%;
November 2001 through December 2009: 18.98%;
All (October 1976 through December 2009): 23.43%.
Insurance Benchmark;
October 1976 through December 1979: 12.05%;
1980-1989: 19.46%;
1990-1999: 11.25%;
2000-2009: 18.32%;
September 1976 through August 1987: 21.20%;
September 1987 through September 1993: 10.81%;
October 1993 through October 2001: 11.05%;
November 2001 through December 2009: 18.32%;
All (October 1976 through December 2009): 21.34%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 10.79%;
1980-1989: 14.67%;
1990-1999: 11.57%;
2000-2009: 16.39%;
September 1976 through August 1987: 17.15%;
September 1987 through September 1993: 11.57%;
October 1993 through October 2001: 9.71%;
November 2001 through December 2009: 16.39%;
All (October 1976 through December 2009): 19.34%.
Dynamic Benchmark;
October 1976 through December 1979: 11.63%;
1980-1989: 22.65%;
1990-1999: 12.80%;
2000-2009: 18.56%;
September 1976 through August 1987: 19.32%;
September 1987 through September 1993: 18.14%;
October 1993 through October 2001: 10.52%;
November 2001 through December 2009: 18.56%;
All (October 1976 through December 2009): 22.65%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: 3.12%;
2000-2009: 16.64%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: 7.39%;
November 2001 through December 2009: 16.64%;
All (October 1976 through December 2009): 16.64%.
VaR (99% confidence level, 1 month horizon) (percentage):
S&P 500;
October 1976 through December 1979: 8.35%;
1980-1989: 9.54%;
1990-1999: 7.54%;
2000-2009: 10.80%;
September 1976 through August 1987: 8.48%;
September 1987 through September 1993: 9.99%;
October 1993 through October 2001: 8.98%;
November 2001 through December 2009: 10.20%;
All (October 1976 through December 2009): 9.32%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 4.69%;
1980-1989: 7.43%;
1990-1999: 4.28%;
2000-2009: 5.69%;
September 1976 through August 1987: 7.37%;
September 1987 through September 1993: 4.02%;
October 1993 through October 2001: 4.28%;
November 2001 through December 2009: 6.23%;
All (October 1976 through December 2009): 5.86%.
Wilshire 5000;
October 1976 through December 1979: 8.57%;
1980-1989: 9.86%;
1990-1999: 7.75%;
2000-2009: 10.96%;
September 1976 through August 1987: 8.79%;
September 1987 through September 1993: 10.08%;
October 1993 through October 2001: 9.26%;
November 2001 through December 2009: 10.28%;
All (October 1976 through December 2009): 9.52%.
PBGC Total Fund Return;
October 1976 through December 1979: 3.66%;
1980-1989: 6.29%;
1990-1999: 4.63%;
2000-2009: 4.90%;
September 1976 through August 1987: 5.51%;
September 1987 through September 1993: 5.84%;
October 1993 through October 2001: 4.50%;
November 2001 through December 2009: 4.93%;
All (October 1976 through December 2009): 5.21%.
PPA;
October 1976 through December 1979: 6.18%;
1980-1989: 6.98%;
1990-1999: 5.33%;
2000-2009: 6.81%;
September 1976 through August 1987: 6.73%;
September 1987 through September 1993: 6.41%;
October 1993 through October 2001: 5.84%;
November 2001 through December 2009: 6.60%;
All (October 1976 through December 2009): 6.44%.
Insurance Benchmark;
October 1976 through December 1979: 4.74%;
1980-1989: 6.75%;
1990-1999: 4.13%;
2000-2009: 5.15%;
September 1976 through August 1987: 6.80%;
September 1987 through September 1993: 4.00%;
October 1993 through October 2001: 4.04%;
November 2001 through December 2009: 5.54%;
All (October 1976 through December 2009): 5.42%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 4.55%;
1980-1989: 5.71%;
1990-1999: 3.89%;
2000-2009: 4.70%;
September 1976 through August 1987: 5.75%;
September 1987 through September 1993: 4.11%;
October 1993 through October 2001: 3.92%;
November 2001 through December 2009: 4.84%;
All (October 1976 through December 2009): 4.84%.
Dynamic Benchmark;
October 1976 through December 1979: 4.74%;
1980-1989: 6.94%;
1990-1999: 4.43%;
2000-2009: 5.26%;
September 1976 through August 1987: 6.39%;
September 1987 through September 1993: 5.73%;
October 1993 through October 2001: 4.55%;
November 2001 through December 2009: 5.31%;
All (October 1976 through December 2009): 5.61%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: 4.90%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: 4.93%;
All (October 1976 through December 2009): [Empty].
Expected shortfall (99% confidence level, 1 month horizon)
(percentage):
S&P 500%;
October 1976 through December 1979: 9.65%;
1980-1989: 11.15%;
1990-1999: 8.86%;
2000-2009: 12.39%;
September 1976 through August 1987: 9.92%;
September 1987 through September 1993: 11.57%;
October 1993 through October 2001: 10.45%;
November 2001 through December 2009: 11.74%;
All (October 1976 through December 2009): 10.82%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 5.40%;
1980-1989: 8.67%;
1990-1999: 5.01%;
2000-2009: 6.61%;
September 1976 through August 1987: 8.57%;
September 1987 through September 1993: 4.77%;
October 1993 through October 2001: 5.01%;
November 2001 through December 2009: 7.21%;
All (October 1976 through December 2009): 6.82%.
Wilshire 5000;
October 1976 through December 1979: 9.96%;
1980-1989: 11.51%;
1990-1999: 9.09%;
2000-2009: 12.58%;
September 1976 through August 1987: 10.29%;
September 1987 through September 1993: 11.68%;
October 1993 through October 2001: 10.77%;
November 2001 through December 2009: 11.84%;
All (October 1976 through December 2009): 11.05%.
PBGC Total Fund Return;
October 1976 through December 1979: 4.25%;
1980-1989: 7.36%;
1990-1999: 5.45%;
2000-2009: 5.68%;
September 1976 through August 1987: 6.46%;
September 1987 through September 1993: 6.83%;
October 1993 through October 2001: 5.27%;
November 2001 through December 2009: 5.71%;
All (October 1976 through December 2009): 6.09%.
PPA;
October 1976 through December 1979: 7.14%;
1980-1989: 8.19%;
1990-1999: 6.27%;
2000-2009: 7.85%;
September 1976 through August 1987: 7.88%;
September 1987 through September 1993: 7.48%;
October 1993 through October 2001: 6.83%;
November 2001 through December 2009: 7.62%;
All (October 1976 through December 2009): 7.51%.
Insurance Benchmark;
October 1976 through December 1979: 5.46%;
1980-1989: 7.90%;
1990-1999: 4.85%;
2000-2009: 5.98%;
September 1976 through August 1987: 7.93%;
September 1987 through September 1993: 4.74%;
October 1993 through October 2001: 4.74%;
November 2001 through December 2009: 6.42%;
All (October 1976 through December 2009): 6.32%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 5.27%;
1980-1989: 6.71%;
1990-1999: 4.59%;
2000-2009: 5.45%;
September 1976 through August 1987: 6.73%;
September 1987 through September 1993: 4.85%;
October 1993 through October 2001: 4.60%;
November 2001 through December 2009: 5.61%;
All (October 1976 through December 2009): 5.67%.
Dynamic Benchmark;
October 1976 through December 1979: 5.47%;
1980-1989: 8.13%;
1990-1999: 5.22%;
2000-2009: 6.09%;
September 1976 through August 1987: 7.48%;
September 1987 through September 1993: 6.70%;
October 1993 through October 2001: 5.34%;
November 2001 through December 2009: 6.15%;
All (October 1976 through December 2009): 6.55%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: 5.68%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: 5.71%;
All (October 1976 through December 2009): [Empty].
Source: GAO analysis of PBGC data.
[End of table]
Asset-Only Comparison of the PBGC Total Fund Return Performance to the
Dynamic Benchmark Return Performance:
The results summarized in table 6 indicate that, over the particular
historical period studied, the PBGC Total Fund outperformed the
Dynamic Benchmark on a risk-adjusted basis, where risk is measured in
terms of the volatility of month returns.[Footnote 80] In particular,
all risk adjusted measures (Sharpe, Adjusted Sharpe, Sortino, and
Omega ratios) are slightly higher for the PBGC Total Fund than for the
Dynamic Benchmark for the overall period. For those three decade
subperiods where the Sharpe ratio is positive for the PBGC Total Fund
(1980-1989, 1990-1999, and 2000-2009) the PBGC Total Fund outperformed
the Dynamic Benchmark for two out of the three subperiods (1990-1999,
and 2000-2009). In the sub-period where the Sharpe and Sortino ratios
are negative, the Adjusted Sharpe measure for the PBGC Total Fund is
greater than that of the Dynamic Benchmark, again indicating that the
PBGC Total Fund outperformed the Dynamic Benchmark in that period.
Disaggregation of the PBGC Total Fund's return performance statistics
reveals that PBGC Total Fund returns tended to underperform the
Dynamic Benchmark returns on a risk-adjusted basis when the Total
Fund's allocation to equities is higher, not lower. For instance,
during allocation period 1--when the PBGC Total Fund equity allocation
had an upward trend and the fixed-income allocation had a downward
trend--the PBGC Total Fund Sharpe ratio was below that of the Dynamic
Benchmark. In contrast, the PBGC Total Fund outperformed the Dynamic
Benchmark in terms of the Sharpe ratio in allocation period 2, when
the total fund equity allocation was falling. Also, the average
allocation to equities was lower in allocation regime 4 than it was in
allocation period 3, and the PBGC Total Fund outperformed the Dynamic
Benchmark in allocation period 4 but slightly underperformed the
Dynamic Benchmark in allocation period 3. The Sortino and Omega ratios
show similar (and more pronounced in the case of the Omega ratio)
under-or over-performance patterns across the weight regimes, thus
corroborating and affirming the Sharpe ratio results.
Looking more closely at potential sources of the under-or over-
performance of the PBGC Total Fund returns versus the Dynamic
Benchmark returns, a driver of the PBGC Total Fund's under-or over-
performance appears to be the mean of the returns, inasmuch as the
pattern of under-or over-performance in the risk-adjusted return
metrics across decades matches that of the pattern of under-or over-
performance in the mean. This holds whether one views the
disaggregations by "decade" or by allocation period.
Asset-Only Assessment of the Effect of Fluctuations in the PBGC Total
Fund's Asset Allocation upon PBGC Performance:
According to our results, the Dynamic Benchmark outperformed every
static benchmark except the PPA and the Post Fiscal Year 2002
Benchmark--the benchmark portfolio with composition that roughly
reflects the PBGC Total Fund's portfolio allocation during allocation
period 4--while the PBGC Total Fund outperformed all the same
benchmarks the Dynamic Benchmark did as well as the PPA. In addition,
another finding is that all of the static benchmarks that involve
mixtures of fixed income and equity securities outperform those
benchmarks that allocate all funds to either bonds or equities.
With regard to question of whether fluctuations in asset allocations
had an adverse impact on PBGC Total Fund returns, the variable nature
of the results precludes concluding that the time variation in asset
allocations necessarily adversely impacted the PBGC Total Fund return
performance. Both the PBGC Total Fund and the Dynamic Benchmark have
fluctuating asset allocations, yet both have higher values for the
risk-adjusted performance metrics--Sharpe, Adjusted Sharpe, Omega, and
Sortino ratios--than the majority of the fixed allocation portfolios.
On the other hand, there is one fixed-allocation benchmark--the Post
Fiscal Year 2002 Benchmark portfolio--that, for the overall period,
had risk-adjusted performance metrics that were superior to both the
PBGC Total Fund and the Dynamic Benchmark. However, even this fixed
allocation portfolio is really based upon the PBGC Total Fund, for the
portfolio weights for the Post Fiscal Year 2002 Benchmark portfolio
are a stylized representation of the PBGC Total Fund weights over the
course of allocation period 4. In addition, note that, despite having
fluctuating asset allocations, the PBGC Total Fund has outperformed
the Post Fiscal Year 2002 Benchmark--in the sense of having higher
risk-adjusted performance measure values--over significant subperiods
of time in the past. For instance, the PBGC Total Fund has performed
better than the Post Fiscal Year 2002 Benchmark portfolio on a risk
adjusted basis for two out of the four "decade" subperiods--that is,
the subperiods 1990-1999 and 2000-2009 for a total of 20 years out of
the 33 1/4 years from October 1976 to December 2009. Thus, when
returns on assets are considered in isolation from the growth in the
liabilities, we did not find strong support in the data to indicate
that the variations in the PBGC asset allocations adversely impacted
the PBGC Total Funds' performance.
Lack of diversification across asset classes appeared to have a more
adverse impact on risk-adjusted performance. Additionally, the
portfolios with 100 percent allocations to equities had some
undesirable characteristics. Notably, out of the eight portfolios
considered in the portfolio performance analysis, all the portfolios
that represented a single asset class were among the bottom half of
the portfolios in terms of the Sharpe ratio for the entire data
sample, including the 100 percent fixed-income benchmark. The dominant
contributing factor to their relatively weak risk-adjusted return
performance is risk--all three had among the highest standard
deviation and kurtosis scores for the entire historical sample period.
The two portfolios that were 100 percent equities--the S&P 500 and the
Wilshire 5000--had an additional undesirable feature: negative
skewness. These two had the "most negative" skewness scores for the
total sample period out of the eight portfolios. The combination of
magnified negative skewness and kurtosis evident in the returns of the
two equity benchmark portfolios is undesirable because it implies that
investment in such portfolios has the potential to contribute of
extreme negative returns. Although both equity portfolios have the
highest average returns for the overall sample, the relatively low
Sharpe ratio scores associated with them imply that they do not offer
enough reward per unit of risk--that is, robust enough reward to risk
trade-offs--to outperform those portfolios, both static and dynamic,
that contain a diversified mix of both bonds and equities.
PBGC Single-Employer Total Fund Underperformed Benchmarks on an Asset-
Liability Basis, and Fluctuations in Asset Allocations Did Not
Adversely Impact Asset-Liability Performance:
A two-way comparison of the PBGC Total Fund and the Dynamic Benchmark
enabled us to evaluate PBGC Total Fund under-or over-performance
associated with factors other than the PBGC Total Fund asset
allocation. Next we examine the impact of fluctuations in the PBGC
Total Fund's asset allocation in the asset-liability context.
Comparison of The PBGC Total Fund Return Performance to the Dynamic
Benchmark Return Performance in the Asset-Liability Context:
A comparison of the PBGC Total Fund net-of-liability return
performance to the net-of-liability return performance of the Dynamic
Benchmark indicates that the PBGC Total Fund portfolio underperforms
the Dynamic Benchmark in risk-adjusted terms on an asset-liability
basis. In contrast to the results for the asset-only analysis, the
PBGC Total Fund had weaker performance than the Dynamic Benchmark in
that its Adjusted Sharpe ratio was lower for the overall time period
(October 1976 to December 2009).[Footnote 81] Despite the switch in
the performance rankings of the PBGC Total Fund and the Dynamic
Benchmark, there are many similarities between the asset-liability
performance analysis results and the asset-only performance analysis
returns. The areas of similarity are as follows:
1. Under-or over-performance pattern across "decade" and asset
allocation periods. The PBGC Total Fund underperformed the Dynamic
Benchmark for two out of the four decade subperiods and two out of the
four asset allocation regimes on a risk-adjusted, net-of-liability
return basis, according to the Adjusted Sharpe ratio statistic values.
2. Lack of materiality of investment expenses. Deducting investment
expenses from the PBGC Total Fund returns in the asset-liability
context did not affect the performance ranking of the PBGC Total Fund
relative to the Dynamic Benchmark on an Adjusted Sharpe ratio basis
(in those periods for which investment expenses data were available).
3. Tendency to perform relatively worse in regimes where equity asset
allocation is greater or rising. The PBGC Total Fund's relative
performance has tended to be worse in asset allocations periods where
there is an elevated or rising allocation to the equity asset class.
For example, as in the asset-only analysis, the PBGC Total Fund
returns, net of the liability returns, had an Adjusted Sharpe ratio
below that of the Dynamic Benchmark in allocation period 1 (which was
characterized by a rising allocations to the equity sector). Also, as
in the asset-only case, the PBGC Total Fund underperformed the Dynamic
Benchmark on a net of liability return basis in allocation period 3,
according to the Adjusted Sharpe ratio scores. In allocation period 4,
when the average allocation to equities in the PBGC Total Fund
portfolio was lower than in allocation regime 3, the PBGC Total Fund
had a higher Adjusted Sharpe ratio than the Dynamic Benchmark did.
However, unlike the asset-only case, the PBGC Total Fund Adjusted
Sharpe ratio was less than that of the Dynamic Benchmark in allocation
period 2, when the PBGC Total Fund allocation to equities was falling
and to bonds was rising. The similarity of the seemingly inverse
relation between the PBGC Total Fund Adjusted Sharpe ratio value and
the magnitude of the allocation to the equities asset class reinforces
the impression that elevated allocations of the PBGC Total Fund to the
equity asset class had adverse impact on PBGC Total Fund returns net
of the liability returns in an asset-liability context as well as when
the portfolio returns are considered in isolation from the liability
returns in an asset-only context. However the patterns in the equity
asset allocation and its relationship to performance should not be
viewed as implying causality.[Footnote 82]
4. Mean excess return prominence as a driver of risk-adjusted
performance metric values across subperiods. In every sub-period and
asset allocation regime where the excess mean return (net of the
liability return) for the PBGC Total Fund exceeded the excess mean
return (net of the liability return) for the Dynamic Benchmark
portfolio, the Adjusted Sharpe ratio for the PBGC Total Fund exceeded
the Adjusted Sharpe ratio for the Dynamic Benchmark.
Given all of the similarities between the results of the performance
comparisons in the asset-liability and asset-only contexts, the reason
for the contrast between the PBGC Total Fund's underperformance of the
Dynamic Benchmark in the asset-liability context and its
outperformance in the asset-only context appears to be risk. In the
asset-only performance comparison analysis, the PBGC Total Fund's
riskiness--as measured by the standard deviation and semi-standard
deviation of the returns---was lower than that of the Dynamic
Benchmark portfolio. However, in the asset-liability context, the
results indicate that the PBGC Total Fund returns have greater
standard deviation and semi-standard deviation values than the returns
for the Dynamic Benchmark, suggesting that the PBGC Total Fund returns
(net of the liability returns) are riskier and more volatile than the
Dynamic Benchmark returns (net of the liability returns). One factor
that likely played a role in elevating the PBGC Total Fund's riskiness
above that of the Dynamic Benchmark is the correlation of the actual
asset returns with the liability returns (not the correlation between
the liability returns and the asset returns net of the liability
returns). For the overall sample period, the PBGC Total Fund actual
returns had lower correlation with the liability returns --both scaled
by the funding ratio and unscaled--than the Dynamic Benchmark. Higher
correlation makes it more likely that movements in the liability
return are accompanied by movements in the asset portfolio return in
the same direction and of similar magnitude. Such co-movement of the
actual asset returns and the liability returns helps reduce the
volatility of the asset returns net of the liability returns.
Lower correlation has the opposite effect of higher correlation--lower
correlation reduces co-movement between asset returns and liability
returns and thus elevates the riskiness of asset returns net of the
liability returns. Thus, the extent to which the riskiness of the PBGC
Total Fund exceeds the riskiness of the Dynamic Benchmark on a net-of-
liability return basis probably reflects, at least in part, the extent
to which the liability returns are less correlated with the PBGC Total
Fund's actual returns than with the Dynamic Benchmark actual returns.
However, the question of why the PBGC Total Fund would be less
correlated with liability returns than the Dynamic Benchmark would
require a more detailed investigation.
Assessment of the Effect of Fluctuations in the PBGC Total Fund's
Asset Allocation upon PBGC Performance in the Asset-Liability Context:
The results of comparing the performance measures of the PBGC Total
Fund and the Dynamic Benchmark returns, net of the liability return,
to the performance measures of the static portfolios are that the
Dynamic Benchmark outperforms two out of the six static portfolios--
the Post Fiscal Year 2002 Benchmark and the Barclays Capital Long-Term
Government Credit Index--and is roughly tied in performance with the
S&P 500. However, the PBGC Total Fund did not outperform any of the
benchmarks. Moreover, two out of the three best-performing portfolios
have significant allocations to bonds and equities versus representing
only a single asset class.
In order to detect potential sources of underperformance, as measured
by the Adjusted Sharpe measure, in the PBGC Total Fund and the Dynamic
Benchmark, we conducted a detailed comparison of various performance
metrics for these two portfolios to performance metrics for the PPA
benchmark portfolio--the portfolio that had the highest Adjusted
Sharpe measure for the overall October 1976 through December 2009
sample period and, by that measure, the best risk-adjusted
performance. This detailed comparison suggests that a major source of
the underperformance of the PBGC Total Fund and the Dynamic Benchmark
relative to the PPA benchmark portfolio was weakness in the mean
excess return, for both portfolios had lower mean excess returns for
the overall sample period the mean excess return of the PPA benchmark
portfolio. However, both the PBGC Total Fund and the Dynamic Benchmark
portfolios appeared to be less risky than the PPA portfolio inasmuch
as the returns on both portfolios had lower standard deviation and
semi-standard deviation than the returns on the PPA portfolio. Thus,
the primary immediate reason both portfolios have lower Adjusted
Sharpe ratios than the PPA benchmark is that their returns (net of the
liability return) had lower mean excess returns than the PPA benchmark
return (net of the liability return) not because they were more risky
than the PPA benchmark. One other feature of the results that
underscores the extent to which both portfolios were less risky than
the PPA benchmark on an asset-liability basis is that the returns (net
of the liability return) for both portfolios had lower standard
deviations than the return (net of the liability return) for the PPA
benchmark for every decade sub-period in the case of the Dynamic
Benchmark and for three out of the four decade subperiods in the case
of the PBGC Total Fund.
Although the statistics clearly suggest that weakness in the mean
excess return played a role in lowering the risk-adjusted performance
of both the PBGC Total Fund and the Dynamic Benchmark portfolios, the
evidence provided by the performance measures about whether the
variation over time in asset allocations associated with both
portfolios necessarily lowered the risk-adjusted performance of their
returns on a net-of-liability basis is less clear. For example, on the
one hand, the Dynamic Benchmark has a lower Adjusted Sharpe ratio for
the overall sample period--and by that metric, weaker risk-adjusted
performance--than several static portfolios; however, on the other
hand, it also outperforms other fixed allocation portfolios on an
Adjusted Sharpe ratio basis, which suggests that fluctuations in asset
allocations alone do not immediately imply underperformance on a risk-
adjusted basis.
In general, the evidence from the performance metrics is too ambiguous
to support the conclusion that the variation in the asset allocations
inherent in the PBGC Total Fund and the Dynamic Benchmark portfolio
necessarily lowered the risk-adjusted performance of the returns of
both portfolios within the asset-liability analysis. Furthermore,
there are subperiods where the returns (net of the liability returns)
for both dynamic portfolios have higher Adjusted Sharpe ratios than
the PPA benchmark, even though this portfolio had the highest Adjusted
Sharpe ratio for the overall sample period. In particular, both the
PBGC Total Fund and the Dynamic Benchmark have higher Adjusted Sharpe
ratios than the PPA benchmark for two out of the four decade
subperiods; also, the Adjusted Sharpe ratios for both portfolios
exceed that of the PPA benchmark for one of the four asset allocation
regimes, a period of 8 years. The lengths of time over which the PBGC
Total Fund and the Dynamic Benchmark outperform, on a risk-adjusted
basis, the best static portfolio over significant subperiods of the
overall sample period does not indicate that the fluctuations in the
asset allocations for the PBGC Total Fund and the Dynamic Benchmark
alone are a preeminent source of weakness in the risk-adjusted
performance of the returns for both portfolios in the asset-liability
context.
This analysis has primarily (although not exclusively) focused on the
comparison of the risk-adjusted performance of the two dynamic
portfolios to the performance of the PPA benchmark, the static
portfolio which had the strongest risk-adjusted performance. However,
if the focus is expanded to include comparisons across all of the
static and dynamic portfolios, another feature of the results emerges.
That is, the influence of the correlation between the portfolio
returns and the liability return on the riskiness and the risk-
adjusted performance of the portfolio returns net of the liability
return. This influence is emphasized in the results for the best three
performing portfolios over the period studied--the PPA benchmark, the
Wilshire 5000, and the Life Insurance Benchmark portfolio performance
results. The PPA benchmark and the Life Insurance Benchmark both have
adjusted Sharpe ratios that equal or exceed that of the Wilshire 5000
for the overall sample period even though the mean excess return of
the Wilshire 5000 for the overall sample period is 49 percent greater
than that of the Life Insurance Benchmark and 31 percent greater than
that of the PPA benchmark. Because both the PPA and the Life Insurance
Benchmark have lower mean excess returns than the Wilshire 5000, the
source of their strong adjusted Sharpe ratio performance in comparison
to the Wilshire 5000 rests in the riskiness of the returns for those
two portfolios (in comparison to the Wilshire 5000). As shown in table
7, both portfolios have distinctly lower standard deviations and semi-
standard deviations--two measures of riskiness--than the Wilshire
5000. Specifically, the annualized standard deviation of the Life
Insurance Benchmark returns is 49 percent less than that of the
Wilshire 5000 returns, and the semi-standard deviation of the Life
Insurance Benchmark portfolio returns is 46 percent less than the semi-
standard deviation of the Wilshire 5000 returns. Similarly, the
annualized standard deviation of the PPA benchmark returns is 32
percent less than the annualized standard deviation of the Wilshire
5000 returns, and the annualized semi-standard deviation of the PPA
benchmark returns is 30 percent less than the semi-standard deviation
of the Wilshire 5000 returns.
Table 7: Portfolio Performance Comparison Results, October 1976
through December 2009 (All Asset Returns Are Net of Liability Return):
Total return (percentage):
S&P 500;
October 1976 through December 1979: 0.91%;
1980-1989: -8.58%;
1990-1999: 180.45%;
2000-2009: -57.30%;
September 1976 through August 1987: 25.82%;
September 1987 through September 1993: -29.58%;
October 1993 through October 2001: 106.13%;
November 2001 through December 2009: -39.51%;
All (October 1976 through December 2009): 10.48%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: -9.90%;
1980-1989: -48.61%;
1990-1999: 3.18%;
2000-2009: -6.30%;
September 1976 through August 1987: -38.10%;
September 1987 through September 1993: -25.69%;
October 1993 through October 2001: 19.17%;
November 2001 through December 2009: -18.32%;
All (October 1976 through December 2009): -55.23%.
Wilshire 5000;
October 1976 through December 1979: 17.78%;
1980-1989: -13.20%;
1990-1999: 157.61%;
2000-2009: -54.11%;
September 1976 through August 1987: 43.89%;
September 1987 through September 1993: -31.65%;
October 1993 through October 2001: 88.74%;
November 2001 through December 2009:
-34.89%;
All (October 1976 through December 2009): 20.86%.
PBGC Total Fund Return;
October 1976 through December 1979: [Empty];
1980-1989: -54.39%;
1990-1999: 45.35%;
2000-2009: -24.12%;
September 1976 through August 1987: -30.30%;
September 1987 through September 1993: -34.56%;
October 1993 through October 2001: 43.69%;
November 2001 through December 2009: -23.25%;
All (October 1976 through December 2009): -49.70%.
PPA;
October 1976 through December 1979: -3.08%;
1980-1989: -23.02%;
1990-1999: 94.73%;
2000-2009: -36.76%;
September 1976 through August 1987: -2.06%;
September 1987 through September 1993: -24.82%;
October 1993 through October 2001: 71.92%;
November 2001 through December 2009: -27.42%;
All (October 1976 through December 2009): -8.12%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: -8.11%;
1980-1989: -42.23%;
1990-1999: 22.15%;
2000-2009: -13.26%;
September 1976 through August 1987: -29.95%;
September 1987 through September 1993: -24.56%;
October 1993 through October 2001: 32.09%;
November 2001 through December 2009: -19.42%;
All (October 1976 through December 2009): -43.75%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: -4.92%;
1980-1989: -39.89%;
1990-1999: 35.36%;
2000-2009: -27.80%;
September 1976 through August 1987: -23.01%;
September 1987 through September 1993: -29.21%;
October 1993 through October 2001: 39.37%;
November 2001 through December 2009: -26.46%;
All (October 1976 through December 2009): -44.14%.
Dynamic Benchmark;
October 1976 through December 1979: -5.38%;
1980-1989: -36.34%;
1990-1999: 46.66%;
2000-2009: -27.08%;
September 1976 through August 1987: -15.54%;
September 1987 through September 1993: -30.99%;
October 1993 through October 2001: 45.84%;
November 2001 through December 2009: -24.21%;
All (October 1976 through December 2009): -35.58%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: -24.54%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: -23.62%;
All (October 1976 through December 2009): [Empty].
Liability Return;
October 1976 through December 1979: 9.46%;
1980-1989: 182.07%;
1990-1999: 109.95%;
2000-2009: 127.23%;
September 1976 through August 1987: 130.53%;
September 1987 through September 1993: 95.94%;
October 1993 through October 2001: 80.03%;
November 2001 through December 2009: 81.12%;
All (October 1976 through December 2009): 1,372.95%.
Monthly mean (percentage):
S&P 500;
October 1976 through December 1979: 0.09%;
1980-1989: 0.06%;
1990-1999: 0.94%;
2000-2009: -0.59%;
September 1976 through August 1987: 0.27%;
September 1987 through September 1993: -0.34%;
October 1993 through October 2001: 0.85%;
November 2001 through December 2009: -0.39%;
All (October 1976 through December 2009): 0.14%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: -0.25%;
1980-1989: -0.52%;
1990-1999: 0.05%;
2000-2009: -0.03%;
September 1976 through August 1987: -0.35%;
September 1987 through September 1993: -0.34%;
October 1993 through October 2001: 0.19%;
November 2001 through December 2009: -0.18%;
All (October 1976 through December 2009): -0.17%.
Wilshire 5000;
October 1976 through December 1979: 0.49%;
1980-1989: 0.02%;
1990-1999: 0.88%;
2000-2009: -0.52%;
September 1976 through August 1987: 0.38%;
September 1987 through September 1993: -0.37%;
October 1993 through October 2001: 0.76%;
November 2001 through December 2009: -0.31%;
All (October 1976 through December 2009): 0.16%.
PBGC Total Fund Return;
October 1976 through December 1979: 0.02%;
1980-1989: -0.58%;
1990-1999: 0.34%;
2000-2009: -0.20%;
September 1976 through August 1987:
-0.23%;
September 1987 through September 1993: -0.49%;
October 1993 through October 2001: 0.39%;
November 2001 through December 2009: -0.24%;
All (October 1976 through December 2009): -0.13%.
PPA;
October 1976 through December 1979: -0.05%;
1980-1989: -0.15%;
1990-1999: 0.60%;
2000-2009: -0.33%;
September 1976 through August 1987: 0.03%;
September 1987 through September 1993: -0.31%;
October 1993 through October 2001: 0.60%;
November 2001 through December 2009: -0.27%;
All (October 1976 through December 2009): 0.03%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: -0.20%;
1980-1989: -0.42%;
1990-1999: 0.19%;
2000-2009: -0.10%;
September 1976 through August 1987: -0.25%;
September 1987 through September 1993: -0.32%;
October 1993 through October 2001: 0.30%;
November 2001 through December 2009: -0.19%;
All (October 1976 through December 2009): -0.12%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: -0.11%;
1980-1989:
-0.38%;
1990-1999: 0.28%;
2000-2009: -0.24%;
September 1976 through August 1987: -0.17%;
September 1987 through September 1993: -0.41%;
October 1993 through October 2001: 0.36%;
November 2001 through December 2009: -0.28%;
All (October 1976 through December 2009): -0.11%.
Dynamic Benchmark;
October 1976 through December 1979: -0.12%;
1980-1989: -0.32%;
1990-1999: 0.35%;
2000-2009: -0.23%;
September 1976 through August 1987: -0.10%;
September 1987 through September 1993: -0.43%;
October 1993 through October 2001: 0.41%;
November 2001 through December 2009: -0.25%;
All (October 1976 through December 2009): -0.07%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: -0.21%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: -0.25%;
All (October 1976 through December 2009): [Empty].
Liability Return;
October 1976 through December 1979: 0.25%;
1980-1989: 0.94%;
1990-1999: 0.65%;
2000-2009: 0.72%;
September 1976 through August 1987: 0.70%;
September 1987 through September 1993: 0.96%;
October 1993 through October 2001: 0.63%;
November 2001 through December 2009: 0.64%;
All (October 1976 through December 2009): 0.72%.
Monthly mean excess return (percentage):
S&P 500;
October 1976 through December 1979: -0.50%;
1980-1989: -0.64%;
1990-1999: 0.55%;
2000-2009: -0.81%;
September 1976 through August 1987: -0.43%;
September 1987 through September 1993: -0.80%;
October 1993 through October 2001: 0.46%;
November 2001 through December 2009: -0.57%;
All (October 1976 through December 2009): -0.32%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: -0.84%;
1980-1989: -1.22%;
1990-1999: -0.34%;
2000-2009: -0.25%;
September 1976 through August 1987: -1.04%;
September 1987 through September 1993: -0.80%;
October 1993 through October 2001: -0.20%;
November 2001 through December 2009: -0.36%;
All (October 1976 through December 2009): -0.62%.
Wilshire 5000;
October 1976 through December 1979: -0.10%;
1980-1989: -0.68%;
1990-1999: 0.48%;
2000-2009: -0.74%;
September 1976 through August 1987: -0.32%;
September 1987 through September 1993: -0.83%;
October 1993 through October 2001: 0.37%;
November 2001 through December 2009: -0.49%;
All (October 1976 through December 2009): -0.29%.
PBGC Total Fund Return;
October 1976 through December 1979: -0.57%;
1980-1989: -1.28%;
1990-1999: -0.05%;
2000-2009: -0.42%;
September 1976 through August 1987: -0.92%;
September 1987 through September 1993: -0.95%;
October 1993 through October 2001: [Empty];
November 2001 through December 2009: -0.42%;
All (October 1976 through December 2009): -0.58%.
PPA%;
October 1976 through December 1979: -0.64;
1980-1989: -0.85%;
1990-1999: 0.20%;
2000-2009: -0.55%;
September 1976 through August 1987: -0.67%;
September 1987 through September 1993: -0.77%;
October 1993 through October 2001: 0.21%;
November 2001 through December 2009: -0.46%;
All (October 1976 through December 2009): -0.42%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: -0.79%;
1980-1989: -1.12%;
1990-1999: -0.20%;
2000-2009: -0.32%;
September 1976 through August 1987: -0.95%;
September 1987 through September 1993: -0.78%;
October 1993 through October 2001: -0.09%;
November 2001 through December 2009: -0.37%;
All (October 1976 through December 2009): -0.57%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: -0.70%;
1980-1989:
-1.08%;
1990-1999: -0.11%;
2000-2009: -0.46%;
September 1976 through August 1987: -0.87%;
September 1987 through September 1993: -0.87%;
October 1993 through October 2001: -0.03%;
November 2001 through December 2009: -0.46%;
All (October 1976 through December 2009): -0.56%.
Dynamic Benchmark;
October 1976 through December 1979: -0.71%;
1980-1989: -1.02%;
1990-1999: -0.04%;
2000-2009: -0.46%;
September 1976 through August 1987: -0.79%;
September 1987 through September 1993: -0.89%;
October 1993 through October 2001: 0.02%;
November 2001 through December 2009: -0.43%;
All (October 1976 through December 2009): -0.52%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: -0.43%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: -0.43%;
All (October 1976 through December 2009): [Empty].
Liability Return;
October 1976 through December 1979: -0.34%;
1980-1989: 0.24%;
1990-1999: 0.25%;
2000-2009: 0.50%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: 0.50%;
October 1993 through October 2001: 0.24%;
November 2001 through December 2009: 0.46%;
All (October 1976 through December 2009): 0.27%.
Monthly standard deviation (percentage):
S&P 500;
October 1976 through December 1979: 3.67%;
1980-1989: 5.13%;
1990-1999: 3.95%;
2000-2009: 5.01%;
September 1976 through August 1987: 4.30%;
September 1987 through September 1993: 5.26%;
October 1993 through October 2001: 4.21%;
November 2001 through December 2009: 4.97%;
All (October 1976 through December 2009): 4.65%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 1.82%;
1980-1989: 3.11%;
1990-1999: 2.16%;
2000-2009: 2.32%;
September 1976 through August 1987: 2.36%;
September 1987 through September 1993: 3.72%;
October 1993 through October 2001: 1.22%;
November 2001 through December 2009: 2.49%;
All (October 1976 through December 2009): 2.50%.
Wilshire 5000;
October 1976 through December 1979: 3.67%;
1980-1989: 5.17%;
1990-1999: 4.09%;
2000-2009: 5.08%;
September 1976 through August 1987: 4.33%;
September 1987 through September 1993: 5.38%;
October 1993 through October 2001: 4.33%;
November 2001 through December 2009: 5.01%;
All (October 1976 through December 2009): 4.72%.
PBGC Total Fund Return;
October 1976 through December 1979: 2.12%;
1980-1989: 4.16%;
1990-1999: 2.48%;
2000-2009: 2.33%;
September 1976 through August 1987: 3.36%;
September 1987 through September 1993: 4.25%;
October 1993 through October 2001: 1.73%;
November 2001 through December 2009: 2.39%;
All (October 1976 through December 2009): 3.03%.
PPA;
October 1976 through December 1979: 2.62%;
1980-1989: 3.72%;
1990-1999: 2.84%;
2000-2009: 3.22%;
September 1976 through August 1987: 3.07%;
September 1987 through September 1993: 4.09%;
October 1993 through October 2001: 2.60%;
November 2001 through December 2009: 3.23%;
All (October 1976 through December 2009): 3.23%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: 1.86%;
1980-1989: 3.01%;
1990-1999: 2.15%;
2000-2009: 2.18%;
September 1976 through August 1987: 2.34%;
September 1987 through September 1993: 3.61%;
October 1993 through October 2001: 1.25%;
November 2001 through December 2009: 2.32%;
All (October 1976 through December 2009): 2.43%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 2.08%;
1980-1989: 3.24%;
1990-1999: 2.29%;
2000-2009: 2.41%;
September 1976 through August 1987: 2.63%;
September 1987 through September 1993: 3.70%;
October 1993 through October 2001: 1.47%;
November 2001 through December 2009: 2.54%;
All (October 1976 through December 2009): 2.63%.
Dynamic Benchmark;
October 1976 through December 1979: 1.93%;
1980-1989: 3.58%;
1990-1999: 2.41%;
2000-2009: 2.45%;
September 1976 through August 1987: 2.72%;
September 1987 through September 1993: 4.04%;
October 1993 through October 2001: 1.79%;
November 2001 through December 2009: 2.51%;
All (October 1976 through December 2009): 2.79%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: 2.33%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: 2.39%;
All (October 1976 through December 2009): [Empty].
Liability Return;
October 1976 through December 1979: 1.85%;
1980-1989: 3.12%;
1990-1999: 2.24%;
2000-2009: 2.49%;
September 1976 through August 1987: 2.99%;
September 1987 through September 1993: 2.70%;
October 1993 through October 2001: 1.61%;
November 2001 through December 2009: 2.66%;
All (October 1976 through December 2009): 2.57%.
Annualized semi-standard deviation (semi-variance) (percentage):
S&P 500;
October 1976 through December 1979: 9.06%;
1980-1989: 14.37%;
1990-1999: 8.99%;
2000-2009: 14.46%;
September 1976 through August 1987: 10.99%;
September 1987 through September 1993: 15.09%;
October 1993 through October 2001: 10.32%;
November 2001 through December 2009: 14.15%;
All (October 1976 through December 2009): 12.52%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 6.24%;
1980-1989: 9.70%;
1990-1999: 4.39%;
2000-2009: 6.60%;
September 1976 through August 1987: 7.49%;
September 1987 through September 1993: 9.58%;
October 1993 through October 2001: 3.36%;
November 2001 through December 2009: 7.18%;
All (October 1976 through December 2009): 7.12%.
Wilshire 5000%;
October 1976 through December 1979: 8.60;
1980-1989: 14.72%;
1990-1999: 9.56%;
2000-2009: 14.64%;
September 1976 through August 1987: 11.09%;
September 1987 through September 1993: 15.62%;
October 1993 through October 2001: 10.98%;
November 2001 through December 2009: 14.12%;
All (October 1976 through December 2009): 12.79%.
PBGC Total Fund Return;
October 1976 through December 1979: 5.94%;
1980-1989: 12.96%;
1990-1999: 5.45%;
2000-2009: 6.86%;
September 1976 through August 1987: 10.02%;
September 1987 through September 1993: 12.06%;
October 1993 through October 2001: 4.39%;
November 2001 through December 2009: 7.05%;
All (October 1976 through December 2009): 8.74%.
PPA;
October 1976 through December 1979: 7.12%;
1980-1989: 10.94%;
1990-1999: 6.32%;
2000-2009: 9.46%;
September 1976 through August 1987: 8.64%;
September 1987 through September 1993: 11.23%;
October 1993 through October 2001: 6.37%;
November 2001 through December 2009: 9.45%;
All (October 1976 through December 2009): 8.92%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: 6.14%;
1980-1989: 9.36%;
1990-1999: 4.37%;
2000-2009: 6.28%;
September 1976 through August 1987: 7.35%;
September 1987 through September 1993: 9.31%;
October 1993 through October 2001: 3.22%;
November 2001 through December 2009: 6.76%;
All (October 1976 through December 2009): 6.88%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 6.13%;
1980-1989: 9.94%;
1990-1999: 4.79%;
2000-2009: 7.22%;
September 1976 through August 1987: 7.92%;
September 1987 through September 1993: 9.76%;
October 1993 through October 2001: 3.76%;
November 2001 through December 2009: 7.59%;
All (October 1976 through December 2009): 7.46%.
Dynamic Benchmark;
October 1976 through December 1979: 6.05%;
1980-1989: 10.98%;
1990-1999: 5.16%;
2000-2009: 7.22%;
September 1976 through August 1987: 8.16%;
September 1987 through September 1993: 11.17%;
October 1993 through October 2001: 4.45%;
November 2001 through December 2009: 7.43%;
All (October 1976 through December 2009): 7.95%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: 0.00%;
1980-1989: 0.00%;
1990-1999: 0.39%;
2000-2009: 6.88%;
September 1976 through August 1987: 0.00%;
September 1987 through September 1993: 0.00%;
October 1993 through October 2001: 2.80%;
November 2001 through December 2009: 7.06%;
All (October 1976 through December 2009): 3.78%.
Liability Return;
October 1976 through December 1979: 6.00%;
1980-1989: 7.33%;
1990-1999: 5.80%;
2000-2009: 5.06%;
September 1976 through August 1987: 7.44%;
September 1987 through September 1993: 6.99%;
October 1993 through October 2001: 3.57%;
November 2001 through December 2009: 5.45%;
All (October 1976 through December 2009): 6.12%.
Annualized arithmetic mean (percentage):
S&P 500;
October 1976 through December 1979: 1.06%;
1980-1989: 0.69%;
1990-1999: 11.28%;
2000-2009: -7.03%;
September 1976 through August 1987: 3.24%;
September 1987 through September 1993: -4.04%;
October 1993 through October 2001: 10.14%;
November 2001 through December 2009: -4.63%;
All (October 1976 through December 2009): 1.62%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: -3.01%;
1980-1989: -6.22%;
1990-1999: 0.58%;
2000-2009: -0.33%;
September 1976 through August 1987: -4.16%;
September 1987 through September 1993: -4.06%;
October 1993 through October 2001: 2.28%;
November 2001 through December 2009: -2.10%;
All (October 1976 through December 2009): -2.06%.
Wilshire 5000;
October 1976 through December 1979: 5.83%;
1980-1989: 0.19%;
1990-1999: 10.50%;
2000-2009: -6.26%;
September 1976 through August 1987: 4.53%;
September 1987 through September 1993: -4.44%;
October 1993 through October 2001: 9.10%;
November 2001 through December 2009: -3.71%;
All (October 1976 through December 2009): 1.94%.
PBGC Total Fund Return;
October 1976 through December 1979: 0.26%;
1980-1989: -6.98%;
1990-1999: 4.10%;
2000-2009: -2.45%;
September 1976 through August 1987:
-2.71%;
September 1987 through September 1993: -5.88%;
October 1993 through October 2001: 4.72%;
November 2001 through December 2009: -2.89%;
All (October 1976 through December 2009): -1.53%.
PPA;
October 1976 through December 1979: -0.56%;
1980-1989: -1.85%;
1990-1999: 7.16%;
2000-2009: -3.99%;
September 1976 through August 1987: 0.36%;
September 1987 through September 1993: -3.69%;
October 1993 through October 2001: 7.19%;
November 2001 through December 2009: -3.28%;
All (October 1976 through December 2009): 0.37%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: -2.40%;
1980-1989: -5.07%;
1990-1999: 2.26%;
2000-2009: -1.14%;
September 1976 through August 1987: -3.01%;
September 1987 through September 1993: -3.86%;
October 1993 through October 2001: 3.58%;
November 2001 through December 2009: -2.32%;
All (October 1976 through December 2009): -1.39%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: -1.30%;
1980-1989: -4.58%;
1990-1999: 3.33%;
2000-2009: -2.93%;
September 1976 through August 1987: -2.04%;
September 1987 through September 1993: -4.87%;
October 1993 through October 2001: 4.28%;
November 2001 through December 2009: -3.37%;
All (October 1976 through December 2009): -1.35%.
Dynamic Benchmark;
October 1976 through December 1979: -1.48%;
1980-1989: -3.85%;
1990-1999: 4.17%;
2000-2009: -2.82%;
September 1976 through August 1987: -1.14%;
September 1987 through September 1993: -5.12%;
October 1993 through October 2001: 4.91%;
November 2001 through December 2009: -3.01%;
All (October 1976 through December 2009): -0.87%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: -2.51%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: -2.95%;
All (October 1976 through December 2009): [Empty].
Liability Return;
October 1976 through December 1979: 2.99;
1980-1989: 11.26%;
1990-1999: 7.75%;
2000-2009: 8.67%;
September 1976 through August 1987: 8.39%;
September 1987 through September 1993: 11.56%;
October 1993 through October 2001: 7.53%;
November 2001 through December 2009: 7.71%;
All (October 1976 through December 2009): 8.60%.
Annualized mean excess return (percentage):
S&P 500;
October 1976 through December 1979: -6.01%;
1980-1989: -7.68%;
1990-1999: 6.58%;
2000-2009: -9.67%;
September 1976 through August 1987: -5.10%;
September 1987 through September 1993: -9.58%;
October 1993 through October 2001: 5.48%;
November 2001 through December 2009: -6.81%;
All (October 1976 through December 2009): -3.78%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: -10.08%;
1980-1989: -14.60%;
1990-1999: -4.12%;
2000-2009: -2.98%;
September 1976 through August 1987: -12.51%;
September 1987 through September 1993: -9.60%;
October 1993 through October 2001: -2.38%;
November 2001 through December 2009: -4.28%;
All (October 1976 through December 2009): -7.47%.
Wilshire 5000;
October 1976 through December 1979: -1.24%;
1980-1989: -8.18%;
1990-1999: 5.80%;
2000-2009: -8.90%;
September 1976 through August 1987: -3.82%;
September 1987 through September 1993: -9.98%;
October 1993 through October 2001: 4.44%;
November 2001 through December 2009: -5.89%;
All (October 1976 through December 2009): -3.47%.
PBGC Total Fund Return;
October 1976 through December 1979: -6.81%;
1980-1989: -15.35%;
1990-1999: -0.60%;
2000-2009: -5.10%;
September 1976 through August 1987: -11.05%;
September 1987 through September 1993: -11.42%;
October 1993 through October 2001: 0.05%;
November 2001 through December 2009: -5.07%;
All (October 1976 through December 2009): -6.94%.
PPA;
October 1976 through December 1979: -7.63%;
1980-1989: -10.22%;
1990-1999: 2.46%;
2000-2009: -6.63%;
September 1976 through August 1987: -7.99%;
September 1987 through September 1993: -9.23%;
October 1993 through October 2001: 2.53%;
November 2001 through December 2009: -5.46%;
All (October 1976 through December 2009): -5.03%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: -9.46%;
1980-1989: -13.44%;
1990-1999: -2.43%;
2000-2009: -3.79%;
September 1976 through August 1987: -11.36%;
September 1987 through September 1993: -9.40%;
October 1993 through October 2001: -1.09%;
November 2001 through December 2009: -4.49%;
All (October 1976 through December 2009): -6.80%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: -8.37%;
1980-1989:
-12.95%;
1990-1999: -1.37%;
2000-2009: -5.57%;
September 1976 through August 1987: -10.39%;
September 1987 through September 1993: -10.41%;
October 1993 through October 2001: -0.38%;
November 2001 through December 2009: -5.54%;
All (October 1976 through December 2009): -6.76%.
Dynamic Benchmark;
October 1976 through December 1979: -8.55%;
1980-1989: -12.22%;
1990-1999: -0.53%;
2000-2009: -5.47%;
September 1976 through August 1987:
-9.49%;
September 1987 through September 1993: -10.66%;
October 1993 through October 2001: 0.25%;
November 2001 through December 2009: -5.18%;
All (October 1976 through December 2009): -6.27%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: -5.16%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: -5.13%;
All (October 1976 through December 2009): [Empty].
Liability Return;
October 1976 through December 1979: -4.08%;
1980-1989: 2.88%;
1990-1999: 3.05%;
2000-2009: 6.02%;
September 1976 through August 1987: 0.04%;
September 1987 through September 1993: 6.01%;
October 1993 through October 2001: 2.86%;
November 2001 through December 2009: 5.53%;
All (October 1976 through December 2009): 3.19%.
Annualized standard deviation (percentage):
S&P 500;
October 1976 through December 1979: 12.72%;
1980-1989: 17.77%;
1990-1999: 13.67%;
2000-2009: 17.35%;
September 1976 through August 1987: 14.90%;
September 1987 through September 1993: 18.23%;
October 1993 through October 2001: 14.60%;
November 2001 through December 2009: 17.20%;
All (October 1976 through December 2009): 16.11%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 6.30%;
1980-1989: 10.78%;
1990-1999: 7.49%;
2000-2009: 8.05%;
September 1976 through August 1987: 8.19%;
September 1987 through September 1993: 12.88%;
October 1993 through October 2001: 4.24%;
November 2001 through December 2009: 8.61%;
All (October 1976 through December 2009): 8.66%.
Wilshire 5000;
October 1976 through December 1979: 12.70%;
1980-1989: 17.91%;
1990-1999: 14.18%;
2000-2009: 17.59%;
September 1976 through August 1987: 15.01%;
September 1987 through September 1993: 18.65%;
October 1993 through October 2001: 15.00%;
November 2001 through December 2009: 17.36%;
All (October 1976 through December 2009): 16.35%.
PBGC Total Fund Return;
October 1976 through December 1979: 7.35%;
1980-1989: 14.42%;
1990-1999: 8.59%;
2000-2009: 8.08%;
September 1976 through August 1987: 11.63%;
September 1987 through September 1993: 14.72%;
October 1993 through October 2001: 6.00%;
November 2001 through December 2009: 8.27%;
All (October 1976 through December 2009): 10.48%.
PPA;
October 1976 through December 1979: 9.07%;
1980-1989: 12.88%;
1990-1999: 9.84%;
2000-2009: 11.15%;
September 1976 through August 1987: 10.64%;
September 1987 through September 1993: 14.17%;
October 1993 through October 2001: 8.99%;
November 2001 through December 2009: 11.19%;
All (October 1976 through December 2009): 11.18%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: 6.46%;
1980-1989: 10.44%;
1990-1999: 7.46%;
2000-2009: 7.55%;
September 1976 through August 1987: 8.09%;
September 1987 through September 1993: 12.49%;
October 1993 through October 2001: 4.32%;
November 2001 through December 2009: 8.03%;
All (October 1976 through December 2009): 8.41%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 7.20%;
1980-1989: 11.24%;
1990-1999: 7.93%;
2000-2009: 8.36%;
September 1976 through August 1987: 9.10%;
September 1987 through September 1993: 12.83%;
October 1993 through October 2001: 5.09%;
November 2001 through December 2009: 8.79%;
All (October 1976 through December 2009): 9.11%.
Dynamic Benchmark;
October 1976 through December 1979: 6.69%;
1980-1989: 12.42%;
1990-1999: 8.35%;
2000-2009: 8.48%;
September 1976 through August 1987: 9.41%;
September 1987 through September 1993: 14.00%;
October 1993 through October 2001: 6.19%;
November 2001 through December 2009: 8.70%;
All (October 1976 through December 2009): 9.66%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: 8.08%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: 8.27%;
All (October 1976 through December 2009): [Empty].
Liability Return;
October 1976 through December 1979: 6.41%;
1980-1989: 10.82%;
1990-1999: 7.75%;
2000-2009: 8.62%;
September 1976 through August 1987: 10.37%;
September 1987 through September 1993: 9.37%;
October 1993 through October 2001: 5.59%;
November 2001 through December 2009: 9.21%;
All (October 1976 through December 2009): 8.90%.
Sharpe ratio (annualized):
S&P 500;
October 1976 through December 1979: -0.47%;
1980-1989: -0.43%;
1990-1999: 0.48%;
2000-2009: -0.56%;
September 1976 through August 1987: -0.34%;
September 1987 through September 1993: -0.53%;
October 1993 through October 2001: 0.38%;
November 2001 through December 2009: -0.40%;
All (October 1976 through December 2009): -0.23.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: -1.60%;
1980-1989: -1.35%;
1990-1999: -0.55%;
2000-2009: -0.37%;
September 1976 through August 1987: -1.53%;
September 1987 through September 1993: -0.75%;
October 1993 through October 2001: -0.56%;
November 2001 through December 2009: -0.50%;
All (October 1976 through December 2009): -0.86%.
Wilshire 5000;
October 1976 through December 1979: -0.10%;
1980-1989: -0.46%;
1990-1999: 0.41%;
2000-2009: -0.51%;
September 1976 through August 1987: -0.25%;
September 1987 through September 1993: -0.54%;
October 1993 through October 2001: 0.30%;
November 2001 through December 2009: -0.34%;
All (October 1976 through December 2009): -0.21%.
PBGC Total Fund Return;
October 1976 through December 1979: -0.93%;
1980-1989: -1.06%;
1990-1999: -0.07%;
2000-2009: -0.63%;
September 1976 through August 1987: -0.95%;
September 1987 through September 1993: -0.78%;
October 1993 through October 2001: 0.01%;
November 2001 through December 2009: -0.61%;
All (October 1976 through December 2009): -0.66%.
PPA;
October 1976 through December 1979: -0.84%;
1980-1989: -0.79%;
1990-1999: 0.25%;
2000-2009: -0.59%;
September 1976 through August 1987: -0.75%;
September 1987 through September 1993: -0.65%;
October 1993 through October 2001: 0.28%;
November 2001 through December 2009: -0.49%;
All (October 1976 through December 2009): -0.45%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: -1.47%;
1980-1989: -1.29%;
1990-1999: -0.33%;
2000-2009: -0.50%;
September 1976 through August 1987: -1.40%;
September 1987 through September 1993: -0.75%;
October 1993 through October 2001: -0.25%;
November 2001 through December 2009: -0.56%;
All (October 1976 through December 2009): -0.81%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: -1.16%;
1980-1989:
-1.15%;
1990-1999: -0.17%;
2000-2009: -0.67%;
September 1976 through August 1987: -1.14%;
September 1987 through September 1993: -0.81%;
October 1993 through October 2001: -0.08%;
November 2001 through December 2009: -0.63%;
All (October 1976 through December 2009): -0.74%.
Dynamic Benchmark;
October 1976 through December 1979: -1.28%;
1980-1989: -0.98%;
1990-1999: -0.06%;
2000-2009: -0.64%;
September 1976 through August 1987: -1.01%;
September 1987 through September 1993: -0.76%;
October 1993 through October 2001: 0.04%;
November 2001 through December 2009: -0.60%;
All (October 1976 through December 2009): -0.65%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: -0.64%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: -0.62%;
All (October 1976 through December 2009): [Empty].
Liability Return;
October 1976 through December 1979: -0.64%;
1980-1989: 0.27%;
1990-1999: 0.39%;
2000-2009: 0.70%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: 0.64%;
October 1993 through October 2001: 0.51%;
November 2001 through December 2009: 0.60%;
All (October 1976 through December 2009): 0.36%.
Sortino ratio (annualized):
S&P 500;
October 1976 through December 1979: -0.66%;
1980-1989: -0.53%;
1990-1999: 0.73%;
2000-2009: -0.67%;
September 1976 through August 1987: -0.46%;
September 1987 through September 1993: -0.63%;
October 1993 through October 2001: 0.53%;
November 2001 through December 2009: -0.48%;
All (October 1976 through December 2009): -0.30%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: -1.62%;
1980-1989: -1.51%;
1990-1999: -0.94%;
2000-2009: -0.45%;
September 1976 through August 1987: -1.67%;
September 1987 through September 1993: -1.00%;
October 1993 through October 2001: -0.71%;
November 2001 through December 2009: -0.60%;
All (October 1976 through December 2009): -1.05%.
Wilshire 5000;
October 1976 through December 1979: -0.14%;
1980-1989: -0.56%;
1990-1999: 0.61%;
2000-2009: -0.61%;
September 1976 through August 1987: -0.34%;
September 1987 through September 1993: -0.64%;
October 1993 through October 2001: 0.40%;
November 2001 through December 2009: -0.42%;
All (October 1976 through December 2009): -0.27%.
PBGC Total Fund Return;
October 1976 through December 1979: -1.15%;
1980-1989: -1.18%;
1990-1999: -0.11%;
2000-2009: -0.74%;
September 1976 through August 1987: -1.10%;
September 1987 through September 1993: -0.95%;
October 1993 through October 2001: 0.01%;
November 2001 through December 2009: -0.72%;
All (October 1976 through December 2009): -0.79%.
PPA;
October 1976 through December 1979: -1.07%;
1980-1989: -0.93%;
1990-1999: 0.39%;
2000-2009: -0.70%;
September 1976 through August 1987: -0.92%;
September 1987 through September 1993: -0.82%;
October 1993 through October 2001: 0.40%;
November 2001 through December 2009: -0.58%;
All (October 1976 through December 2009): -0.56%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: -1.54%;
1980-1989: -1.44%;
1990-1999: -0.56%;
2000-2009: -0.60%;
September 1976 through August 1987: -1.55%;
September 1987 through September 1993: -1.01%;
October 1993 through October 2001: -0.34%;
November 2001 through December 2009: -0.66%;
All (October 1976 through December 2009): -0.99%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: -1.37%;
1980-1989: -1.30%;
1990-1999: -0.29%;
2000-2009: -0.77%;
September 1976 through August 1987: -1.31%;
September 1987 through September 1993: -1.07%;
October 1993 through October 2001: -0.10%;
November 2001 through December 2009: -0.73%;
All (October 1976 through December 2009): -0.91%.
Dynamic Benchmark;
October 1976 through December 1979: -1.41%;
1980-1989: -1.11%;
1990-1999: -0.10%;
2000-2009: -0.76%;
September 1976 through August 1987: -1.16%;
September 1987 through September 1993: -0.95%;
October 1993 through October 2001: 0.06%;
November 2001 through December 2009: -0.70%;
All (October 1976 through December 2009): -0.79%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: -0.75%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: -0.73%;
All (October 1976 through December 2009): [Empty].
Liability Return;
October 1976 through December 1979: -0.68%;
1980-1989: 0.39%;
1990-1999: 0.53%;
2000-2009: 1.19%;
September 1976 through August 1987: 0.01%;
September 1987 through September 1993: 0.86%;
October 1993 through October 2001: 0.80%;
November 2001 through December 2009: 1.02%;
All (October 1976 through December 2009): 0.52%.
Omega ratio:
S&P 500;
October 1976 through December 1979: 0.71%;
1980-1989: 0.71%;
1990-1999: 1.44%;
2000-2009: 0.66%;
September 1976 through August 1987: 0.78%;
September 1987 through September 1993: 0.64%;
October 1993 through October 2001: 1.32%;
November 2001 through December 2009: 0.74%;
All (October 1976 through December 2009): 0.84%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 0.22%;
1980-1989: 0.31%;
1990-1999: 0.56%;
2000-2009: 0.70%;
September 1976 through August 1987: 0.30%;
September 1987 through September 1993: 0.43%;
October 1993 through October 2001: 0.66%;
November 2001 through December 2009: 0.62%;
All (October 1976 through December 2009): 0.44%.
Wilshire 5000;
October 1976 through December 1979: 0.93%;
1980-1989: 0.70%;
1990-1999: 1.36%;
2000-2009: 0.69%;
September 1976 through August 1987: 0.83%;
September 1987 through September 1993: 0.64%;
October 1993 through October 2001: 1.25%;
November 2001 through December 2009: 0.78%;
All (October 1976 through December 2009): 0.85%.
PBGC Total Fund Return;
October 1976 through December 1979: 0.48%;
1980-1989: 0.43%;
1990-1999: 0.94%;
2000-2009: 0.60%;
September 1976 through August 1987: 0.48%;
September 1987 through September 1993: 0.46%;
October 1993 through October 2001: 1.01%;
November 2001 through December 2009: 0.60%;
All (October 1976 through December 2009): 0.57%.
PPA;
October 1976 through December 1979: 0.54%;
1980-1989: 0.54%;
1990-1999: 1.22%;
2000-2009: 0.64%;
September 1976 through August 1987: 0.58%;
September 1987 through September 1993: 0.56%;
October 1993 through October 2001: 1.23%;
November 2001 through December 2009: 0.69%;
All (October 1976 through December 2009): 0.71%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: 0.27%;
1980-1989: 0.33%;
1990-1999: 0.71%;
2000-2009: 0.62%;
September 1976 through August 1987: 0.33%;
September 1987 through September 1993: 0.43%;
October 1993 through October 2001: 0.83%;
November 2001 through December 2009: 0.58%;
All (October 1976 through December 2009): 0.47%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 0.39%;
1980-1989: 0.39%;
1990-1999: 0.85%;
2000-2009: 0.58%;
September 1976 through August 1987: 0.42%;
September 1987 through September 1993: 0.43%;
October 1993 through October 2001: 0.95%;
November 2001 through December 2009: 0.59%;
All (October 1976 through December 2009): 0.53%.
Dynamic Benchmark;
October 1976 through December 1979: 0.34%;
1980-1989: 0.45%;
1990-1999: 0.94%;
2000-2009: 0.60%;
September 1976 through August 1987: 0.47%;
September 1987 through September 1993: 0.46%;
October 1993 through October 2001: 1.03%;
November 2001 through December 2009: 0.61%;
All (October 1976 through December 2009): 0.58%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: 2.69%;
2000-2009: 0.60%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: 0.75%;
November 2001 through December 2009: 0.60%;
All (October 1976 through December 2009): 0.62%.
Liability Return;
October 1976 through December 1979: 0.53%;
1980-1989: 1.23%;
1990-1999: 1.40%;
2000-2009: 1.79%;
September 1976 through August 1987: 1.00%;
September 1987 through September 1993: 1.74%;
October 1993 through October 2001: 1.46%;
November 2001 through December 2009: 1.65%;
All (October 1976 through December 2009): 1.35%.
Skewness, bias corrected:
S&P 500;
October 1976 through December 1979: 0.64%;
1980-1989: -0.62%;
1990-1999: -0.26%;
2000-2009: -0.42%;
September 1976 through August 1987: 0.38%;
September 1987 through September 1993: -0.83%;
October 1993 through October 2001:
-0.70%;
November 2001 through December 2009: -0.64%;
All (October 1976 through December 2009): -0.48%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: -0.39%;
1980-1989: -0.18%;
1990-1999: 4.35%;
2000-2009: -1.16%;
September 1976 through August 1987: 0.79%;
September 1987 through September 1993: 0.85%;
October 1993 through October 2001: 0.02%;
November 2001 through December 2009: -1.00%;
All (October 1976 through December 2009): 0.36%.
Wilshire 5000%;
October 1976 through December 1979: 0.26;
1980-1989: -0.76%;
1990-1999: -0.31%;
2000-2009: -0.48%;
September 1976 through August 1987: 0.22%;
September 1987 through September 1993: -0.93%;
October 1993 through October 2001: -0.88%;
November 2001 through December 2009: -0.64%;
All (October 1976 through December 2009): -0.59%.
PBGC Total Fund Return;
October 1976 through December 1979: 0.56%;
1980-1989: -0.28%;
1990-1999: 2.05%;
2000-2009: -0.79%;
September 1976 through August 1987: 0.09%;
September 1987 through September 1993: 0.20%;
October 1993 through October 2001: -0.22%;
November 2001 through December 2009: -0.91%;
All (October 1976 through December 2009): -0.12%.
PPA;
October 1976 through December 1979: 0.55%;
1980-1989: -0.19%;
1990-1999: 0.81%;
2000-2009: -0.52%;
September 1976 through August 1987: 0.36%;
September 1987 through September 1993: 0.35%;
October 1993 through October 2001: -0.50%;
November 2001 through December 2009: -0.73%;
All (October 1976 through December 2009): -0.09%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: -0.18%;
1980-1989: -0.13%;
1990-1999: 3.80%;
2000-2009: -1.18%;
September 1976 through August 1987: 0.61%;
September 1987 through September 1993: 0.99%;
October 1993 through October 2001: -0.01%;
November 2001 through December 2009: -1.11%;
All (October 1976 through December 2009): 0.38%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 0.52%;
1980-1989: 0.01%;
1990-1999: 3.13%;
2000-2009: -0.94%;
September 1976 through August 1987: 0.44%;
September 1987 through September 1993: 1.17%;
October 1993 through October 2001: -0.16%;
November 2001 through December 2009: -0.99%;
All (October 1976 through December 2009): 0.35%.
Dynamic Benchmark;
October 1976 through December 1979: 0.02%;
1980-1989: -0.35%;
1990-1999: 2.31%;
2000-2009: -0.75%;
September 1976 through August 1987: 0.20%;
September 1987 through September 1993: 0.48%;
October 1993 through October 2001: -0.19%;
November 2001 through December 2009: -0.90%;
All (October 1976 through December 2009): 0.01%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: 0.37%;
2000-2009: -0.79%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: 0.07%;
November 2001 through December 2009: -0.91%;
All (October 1976 through December 2009): -0.80%.
Liability Return;
October 1976 through December 1979: -2.98%;
1980-1989: 0.05%;
1990-1999: -2.08%;
2000-2009: 0.32%;
September 1976 through August 1987: 0.02%;
September 1987 through September 1993: -2.22%;
October 1993 through October 2001: -0.09%;
November 2001 through December 2009: 0.40%;
All (October 1976 through December 2009): -0.33%.
Kurtosis, bias corrected:
S&P 500;
October 1976 through December 1979: 2.83%;
1980-1989: 6.16%;
1990-1999: 5.55%;
2000-2009: 2.98%;
September 1976 through August 1987: 3.29%;
September 1987 through September 1993: 8.04%;
October 1993 through October 2001: 4.22%;
November 2001 through December 2009: 3.28%;
All (October 1976 through December 2009): 4.91%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 7.20%;
1980-1989: 10.45%;
1990-1999: 37.44%;
2000-2009: 9.35%;
September 1976 through August 1987: 5.16%;
September 1987 through September 1993: 15.11%;
October 1993 through October 2001: 2.65%;
November 2001 through December 2009: 8.44%;
All (October 1976 through December 2009): 15.80%.
Wilshire 5000;
October 1976 through December 1979: 2.55%;
1980-1989: 6.77%;
1990-1999: 6.10%;
2000-2009: 2.97%;
September 1976 through August 1987: 3.27%;
September 1987 through September 1993: 8.75%;
October 1993 through October 2001: 4.63%;
November 2001 through December 2009: 3.32%;
All (October 1976 through December 2009): 5.26%.
PBGC Total Fund Return;
October 1976 through December 1979: 5.02%;
1980-1989: 4.45%;
1990-1999: 19.99%;
2000-2009: 5.55%;
September 1976 through August 1987: 3.65%;
September 1987 through September 1993: 8.93%;
October 1993 through October 2001: 2.78%;
November 2001 through December 2009: 5.86%;
All (October 1976 through December 2009): 8.37%.
PPA;
October 1976 through December 1979: 3.18%;
1980-1989: 4.95%;
1990-1999: 9.89%;
2000-2009: 2.89%;
September 1976 through August 1987: 3.36%;
September 1987 through September 1993: 7.83%;
October 1993 through October 2001: 3.42%;
November 2001 through December 2009: 3.08%;
All (October 1976 through December 2009): 5.48%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: 6.44%;
1980-1989: 9.71%;
1990-1999: 33.53%;
2000-2009: 9.10%;
September 1976 through August 1987: 4.62%;
September 1987 through September 1993: 14.64%;
October 1993 through October 2001: 2.92%;
November 2001 through December 2009: 8.47%;
All (October 1976 through December 2009): 15.08%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 5.67%;
1980-1989: 6.53%;
1990-1999: 28.55%;
2000-2009: 5.80%;
September 1976 through August 1987: 4.08%;
September 1987 through September 1993: 12.77%;
October 1993 through October 2001: 2.72%;
November 2001 through December 2009: 5.65%;
All (October 1976 through December 2009): 10.99%.
Dynamic Benchmark;
October 1976 through December 1979: 5.83%;
1980-1989: 5.65%;
1990-1999: 21.09%;
2000-2009: 5.15%;
September 1976 through August 1987: 3.60%;
September 1987 through September 1993: 9.69%;
October 1993 through October 2001: 2.97%;
November 2001 through December 2009: 5.36%;
All (October 1976 through December 2009): 9.33%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: 0.12%;
2000-2009: 5.56%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: 2.29%;
November 2001 through December 2009: 5.87%;
All (October 1976 through December 2009): 5.60%.
Liability Return;
October 1976 through December 1979: 17.74%;
1980-1989: 4.20%;
1990-1999: 16.27%;
2000-2009: 6.39%;
September 1976 through August 1987: 5.23%;
September 1987 through September 1993: 14.03%;
October 1993 through October 2001: 3.19%;
November 2001 through December 2009: 6.00%;
All (October 1976 through December 2009): 7.57%.
Adjusted Sharpe ratio:
S&P 500;
October 1976 through December 1979: -0.0076%;
1980-1989: -0.0137%;
1990-1999: 0.4818%;
2000-2009: -0.0168%;
September 1976 through August 1987: -0.0076%;
September 1987 through September 1993: -0.0175%;
October 1993 through October 2001: 0.3753%;
November 2001 through December 2009: -0.0117%;
All (October 1976 through December 2009): -0.0061%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: -0.0063%;
1980-1989: -0.0157%;
1990-1999: -0.0031%;
2000-2009: -0.0024%;
September 1976 through August 1987: -0.0102%;
September 1987 through September 1993: -0.0124%;
October 1993 through October 2001: -0.0010%;
November 2001 through December 2009: -0.0037%;
All (October 1976 through December 2009): -0.0065%.
Wilshire 5000;
October 1976 through December 1979: -0.0016%;
1980-1989: -0.0146%;
1990-1999: 0.4092%;
2000-2009: -0.0157%;
September 1976 through August 1987: -0.0057%;
September 1987 through September 1993: -0.0186%;
October 1993 through October 2001: 0.2957%;
November 2001 through December 2009:
-0.0102%;
All (October 1976 through December 2009): -0.0057%.
PBGC Total Fund Return;
October 1976 through December 1979: -0.0050%;
1980-1989: -0.0221%;
1990-1999: -0.0005%;
2000-2009: -0.0041%;
September 1976 through August 1987: -0.0129%;
September 1987 through September 1993: -0.0168%;
October 1993 through October 2001: 0.0083%;
November 2001 through December 2009: -0.0042%;
All (October 1976 through December 2009): -0.0073%.
PPA;
October 1976 through December 1979: -0.0069%;
1980-1989: -0.0132%;
1990-1999: 0.2494%;
2000-2009: -0.0074%;
September 1976 through August 1987: -0.0085%;
September 1987 through September 1993: -0.0131%;
October 1993 through October 2001: 0.2809%;
November 2001 through December 2009: -0.0061%;
All (October 1976 through December 2009): -0.0056%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: -0.0061%;
1980-1989: -0.0140%;
1990-1999: -0.0018%;
2000-2009: -0.0029%;
September 1976 through August 1987: -0.0092%;
September 1987 through September 1993: -0.0118%;
October 1993 through October 2001: -0.0005%;
November 2001 through December 2009: -0.0036%;
All (October 1976 through December 2009): -0.0057%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: -0.0060%;
1980-1989: -0.0146%;
1990-1999: -0.0011%;
2000-2009: -0.0047%;
September 1976 through August 1987: -0.0095%;
September 1987 through September 1993: -0.0134%;
October 1993 through October 2001: -0.0002%;
November 2001 through December 2009: -0.0049%;
All (October 1976 through December 2009): -0.0062%.
Dynamic Benchmark;
October 1976 through December 1979: -0.0057%;
1980-1989: -0.0152%;
1990-1999: -0.0004%;
2000-2009: -0.0046%;
September 1976 through August 1987: -0.0089%;
September 1987 through September 1993: -0.0149%;
October 1993 through October 2001: 0.0400%;
November 2001 through December 2009:
-0.0045%;
All (October 1976 through December 2009): -0.0061%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: -0.0042%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: -0.0042%;
All (October 1976 through December 2009): [Empty].
Liability Return;
October 1976 through December 1979: -0.0026%;
1980-1989: 0.2666%;
1990-1999: 0.3931%;
2000-2009: 0.6986%;
September 1976 through August 1987: 0.0037%;
September 1987 through September 1993: 0.6419%;
October 1993 through October 2001: 0.5118%;
November 2001 through December 2009: 0.6009%;
All (October 1976 through December 2009): 0.3585%.
Minimum (percentage:
S&P 500;
October 1976 through December 1979: -5.25%;
1980-1989: -23.13%;
1990-1999: -14.82%;
2000-2009: -15.34%;
September 1976 through August 1987: -9.72%;
September 1987 through September 1993: -23.13%;
October 1993 through October 2001: -14.82%;
November 2001 through December 2009: -15.34%;
All (October 1976 through December 2009): -23.13%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: -5.47%;
1980-1989: -16.25%;
1990-1999: -5.78%;
2000-2009: -9.33%;
September 1976 through August 1987: -6.06%;
September 1987 through September 1993: -16.25%;
October 1993 through October 2001: -3.09%;
November 2001 through December 2009: -9.33%;
All (October 1976 through December 2009): -16.25%.
Wilshire 5000;
October 1976 through December 1979: -7.29%;
1980-1989: -24.42%;
1990-1999: -15.96%;
2000-2009: -16.13%;
September 1976 through August 1987: -10.31%;
September 1987 through September 1993: -24.42%;
October 1993 through October 2001: -15.96%;
November 2001 through December 2009: -16.13%;
All (October 1976 through December 2009): -24.42%.
PBGC Total Fund Return;
October 1976 through December 1979: -4.91%;
1980-1989: -15.34%;
1990-1999: -8.31%;
2000-2009: -8.69%;
September 1976 through August 1987: -9.90%;
September 1987 through September 1993: -15.34%;
October 1993 through October 2001: -3.61%;
November 2001 through December 2009: -8.69%;
All (October 1976 through December 2009): -15.34%.
PPA;
October 1976 through December 1979: -5.29%;
1980-1989: -12.39%;
1990-1999: -8.22%;
2000-2009: -8.42%;
September 1976 through August 1987: -7.07%;
September 1987 through September 1993: -12.39%;
October 1993 through October 2001:
-8.01%;
November 2001 through December 2009: -8.42%;
All (October 1976 through December 2009): -12.39%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: -5.35%;
1980-1989: -15.09%;
1990-1999: -6.16%;
2000-2009: -8.76%;
September 1976 through August 1987: -6.10%;
September 1987 through September 1993: -15.09%;
October 1993 through October 2001: -3.04%;
November 2001 through December 2009: -8.76%;
All (October 1976 through December 2009): -15.09%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: -5.21%;
1980-1989: -13.76%;
1990-1999: -6.98%;
2000-2009: -9.05%;
September 1976 through August 1987: -6.97%;
September 1987 through September 1993: -13.76%;
October 1993 through October 2001: -3.19%;
November 2001 through December 2009: -9.05%;
All (October 1976 through December 2009): -13.76%.
Dynamic Benchmark;
October 1976 through December 1979: -5.29%;
1980-1989: -13.36%;
1990-1999: -7.68%;
2000-2009: -8.74%;
September 1976 through August 1987: -7.20%;
September 1987 through September 1993: -13.36%;
October 1993 through October 2001: -4.56%;
November 2001 through December 2009: -8.74%;
All (October 1976 through December 2009): -13.36%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: -0.78%;
2000-2009: -8.70%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: -3.27%;
November 2001 through December 2009: -8.70%;
All (October 1976 through December 2009): -8.70%.
Liability Return;
October 1976 through December 1979: -8.78%;
1980-1989: -8.86%;
1990-1999: -13.57%;
2000-2009: -8.14%;
September 1976 through August 1987: -8.86%;
September 1987 through September 1993: -13.57%;
October 1993 through October 2001: -3.62%;
November 2001 through December 2009: -8.14%;
All (October 1976 through December 2009): -13.57%.
Maximum (percentage):
S&P 500;
October 1976 through December 1979: 9.72%;
1980-1989: 13.44%;
1990-1999: 15.43%;
2000-2009: 9.80%;
September 1976 through August 1987: 13.44%;
September 1987 through September 1993: 15.43%;
October 1993 through October 2001: 9.45%;
November 2001 through December 2009: 9.80%;
All (October 1976 through December 2009): 15.43%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 5.49%;
1980-1989: 12.17%;
1990-1999: 17.18%;
2000-2009: 7.45%;
September 1976 through August 1987: 8.67%;
September 1987 through September 1993: 17.18%;
October 1993 through October 2001: 2.83%;
November 2001 through December 2009: 7.45%;
All (October 1976 through December 2009): 17.18%.
Wilshire 5000;
October 1976 through December 1979: 8.92%;
1980-1989: 13.42%;
1990-1999: 16.54%;
2000-2009: 9.80%;
September 1976 through August 1987: 13.42%;
September 1987 through September 1993: 16.54%;
October 1993 through October 2001: 8.74%;
November 2001 through December 2009: 9.80%;
All (October 1976 through December 2009): 16.54%.
PBGC Total Fund Return;
October 1976 through December 1979: 6.90%;
1980-1989: 11.72%;
1990-1999: 16.74%;
2000-2009: 6.32%;
September 1976 through August 1987: 10.22%;
September 1987 through September 1993: 16.74%;
October 1993 through October 2001: 4.16%;
November 2001 through December 2009: 6.32%;
All (October 1976 through December 2009): 16.74%.
PPA;
October 1976 through December 1979: 6.20%;
1980-1989: 11.95%;
1990-1999: 15.90%;
2000-2009: 6.37%;
September 1976 through August 1987: 9.59%;
September 1987 through September 1993: 15.90%;
October 1993 through October 2001: 6.37%;
November 2001 through December 2009: 5.45%;
All (October 1976 through December 2009): 15.90%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: 5.65%;
1980-1989: 12.06%;
1990-1999: 16.81%;
2000-2009: 6.71%;
September 1976 through August 1987: 7.55%;
September 1987 through September 1993: 16.81%;
October 1993 through October 2001: 3.31%;
November 2001 through December 2009: 6.71%;
All (October 1976 through December 2009): 16.81%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 6.70%;
1980-1989: 11.90%;
1990-1999: 17.23%;
2000-2009: 6.00%;
September 1976 through August 1987: 8.53%;
September 1987 through September 1993: 17.23%;
October 1993 through October 2001: 3.80%;
November 2001 through December 2009: 6.00%;
All (October 1976 through December 2009): 17.23%.
Dynamic Benchmark;
October 1976 through December 1979: 5.87%;
1980-1989: 12.12%;
1990-1999: 16.72%;
2000-2009: 6.09%;
September 1976 through August 1987: 8.01%;
September 1987 through September 1993: 16.72%;
October 1993 through October 2001: 4.88%;
November 2001 through December 2009: 6.09%;
All (October 1976 through December 2009): 16.72%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: 2.77%;
2000-2009: 6.31%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: 4.15%;
November 2001 through December 2009: 6.31%;
All (October 1976 through December 2009): 6.31%.
Liability Return;
October 1976 through December 1979: 2.81%;
1980-1989: 10.72%;
1990-1999: 6.71%;
2000-2009: 9.42%;
September 1976 through August 1987: 10.72%;
September 1987 through September 1993: 6.71%;
October 1993 through October 2001: 5.34%;
November 2001 through December 2009: 9.42%;
All (October 1976 through December 2009): 10.72%.
Range (percentage):
S&P 500;
October 1976 through December 1979: 14.97%;
1980-1989: 36.57%;
1990-1999: 30.25%;
2000-2009: 25.14%;
September 1976 through August 1987: 23.16%;
September 1987 through September 1993: 38.56%;
October 1993 through October 2001: 24.26%;
November 2001 through December 2009: 25.14%;
All (October 1976 through December 2009): 38.56%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 10.95%;
1980-1989: 28.42%;
1990-1999: 22.96%;
2000-2009: 16.78%;
September 1976 through August 1987: 14.74%;
September 1987 through September 1993: 33.43%;
October 1993 through October 2001: 5.92%;
November 2001 through December 2009: 16.78%;
All (October 1976 through December 2009): 33.43%.
Wilshire 5000;
October 1976 through December 1979: 16.21%;
1980-1989: 37.84%;
1990-1999: 32.50%;
2000-2009: 25.93%;
September 1976 through August 1987: 23.73%;
September 1987 through September 1993: 40.96%;
October 1993 through October 2001: 24.70%;
November 2001 through December 2009: 25.93%;
All (October 1976 through December 2009): 40.96%.
PBGC Total Fund Return;
October 1976 through December 1979: 11.81%;
1980-1989: 27.06%;
1990-1999: 25.05%;
2000-2009: 15.01%;
September 1976 through August 1987: 20.12%;
September 1987 through September 1993: 32.08%;
October 1993 through October 2001: 7.77%;
November 2001 through December 2009: 15.01%;
All (October 1976 through December 2009): 32.08%.
PPA;
October 1976 through December 1979: 11.49%;
1980-1989: 24.34%;
1990-1999: 24.12%;
2000-2009: 14.80%;
September 1976 through August 1987: 16.66%;
September 1987 through September 1993: 28.29%;
October 1993 through October 2001: 14.38%;
November 2001 through December 2009: 13.88%;
All (October 1976 through December 2009): 28.29%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: 11.00%;
1980-1989: 27.16%;
1990-1999: 22.97%;
2000-2009: 15.47%;
September 1976 through August 1987: 13.65%;
September 1987 through September 1993: 31.90%;
October 1993 through October 2001: 6.35%;
November 2001 through December 2009: 15.47%;
All (October 1976 through December 2009): 31.90%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 11.91%;
1980-1989: 25.65%;
1990-1999: 24.20%;
2000-2009: 15.06%;
September 1976 through August 1987: 15.51%;
September 1987 through September 1993: 30.98%;
October 1993 through October 2001: 6.99%;
November 2001 through December 2009: 15.06%;
All (October 1976 through December 2009): 30.98%.
Dynamic Benchmark;
October 1976 through December 1979: 11.16%;
1980-1989: 25.49%;
1990-1999: 24.40%;
2000-2009: 14.83%;
September 1976 through August 1987: 15.22%;
September 1987 through September 1993: 30.09%;
October 1993 through October 2001: 9.44%;
November 2001 through December 2009: 14.83%;
All (October 1976 through December 2009): 30.09%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: 3.54%;
2000-2009: 15.00%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: 7.42%;
November 2001 through December 2009: 15.0%;
All (October 1976 through December 2009): 15.00%.
Liability Return;
October 1976 through December 1979: 11.58%;
1980-1989: 19.59%;
1990-1999: 20.28%;
2000-2009: 17.56%;
September 1976 through August 1987: 19.59%;
September 1987 through September 1993: 20.28%;
October 1993 through October 2001: 8.95%;
November 2001 through December 2009: 17.56%;
All (October 1976 through December 2009): 24.30%.
Correlation with liability return:
S&P 500;
October 1976 through December 1979: 0.43%;
1980-1989: 0.35%;
1990-1999: 0.29%;
2000-2009: 0.12%;
September 1976 through August 1987: 0.46%;
September 1987 through September 1993: 0.19%;
October 1993 through October 2001: 0.20%;
November 2001 through December 2009: 0.14%;
All (October 1976 through December 2009): 0.27%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 0.80%;
1980-1989: 0.84%;
1990-1999: 0.63%;
2000-2009: 0.72%;
September 1976 through August 1987: 0.90%;
September 1987 through September 1993: 0.39%;
October 1993 through October 2001: 0.83%;
November 2001 through December 2009: 0.71%;
All (October 1976 through December 2009): 0.76%.
Wilshire 5000;
October 1976 through December 1979: 0.47%;
1980-1989: 0.35%;
1990-1999: 0.25%;
2000-2009: 0.14%;
September 1976 through August 1987: 0.45%;
September 1987 through September 1993: 0.17%;
October 1993 through October 2001: 0.19%;
November 2001 through December 2009: 0.15%;
All (October 1976 through December 2009): 0.27%.
PBGC Total Fund Return;
October 1976 through December 1979: 0.70%;
1980-1989: 0.60%;
1990-1999: 0.53%;
2000-2009: 0.63%;
September 1976 through August 1987: 0.73%;
September 1987 through September 1993: 0.27%;
October 1993 through October 2001: 0.63%;
November 2001 through December 2009: 0.67%;
All (October 1976 through December 2009): 0.59%.
PPA;
October 1976 through December 1979: 0.58%;
1980-1989: 0.63%;
1990-1999: 0.44%;
2000-2009: 0.37%;
September 1976 through August 1987: 0.72%;
September 1987 through September 1993: 0.27%;
October 1993 through October 2001: 0.42%;
November 2001 through December 2009: 0.40%;
All (October 1976 through December 2009): 0.50%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: 0.78%;
1980-1989: 0.85%;
1990-1999: 0.62%;
2000-2009: 0.71%;
September 1976 through August 1987: 0.91%;
September 1987 through September 1993: 0.39%;
October 1993 through October 2001: 0.80%;
November 2001 through December 2009: 0.71%;
All (October 1976 through December 2009): 0.76%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 0.71%;
1980-1989: 0.80%;
1990-1999: 0.56%;
2000-2009: 0.61%;
September 1976 through August 1987: 0.86%;
September 1987 through September 1993: 0.36%;
October 1993 through October 2001: 0.66%;
November 2001 through December 2009: 0.63%;
All (October 1976 through December 2009): 0.68%.
Dynamic Benchmark;
October 1976 through December 1979: 0.75%;
1980-1989: 0.71%;
1990-1999: 0.53%;
2000-2009: 0.60%;
September 1976 through August 1987: 0.84%;
September 1987 through September 1993: 0.27%;
October 1993 through October 2001: 0.61%;
November 2001 through December 2009: 0.63%;
All (October 1976 through December 2009): 0.64%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: 0.63%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: 0.67%;
All (October 1976 through December 2009): [Empty].
Liability Return;
October 1976 through December 1979: 1.00%;
1980-1989: 1.00%;
1990-1999: 1.00%;
2000-2009: 1.00%;
September 1976 through August 1987: 1.00%;
September 1987 through September 1993: 1.00%;
October 1993 through October 2001: 1.00%;
November 2001 through December 2009: 1.00%;
All (October 1976 through December 2009): 1.00%.
Correlation with liability return scaled by funding ratio;
October 1976 through December 1979: [Empty]%;
1980-1989: [Empty]%;
1990-1999: [Empty]%;
2000-2009: [Empty]%;
September 1976 through August 1987: [Empty]%;
September 1987 through September 1993: [Empty]%;
October 1993 through October 2001: [Empty]%;
November 2001 through December 2009: [Empty]%;
All (October 1976 through December 2009): [Empty].
S&P 500;
October 1976 through December 1979: 0.44%;
1980-1989: 0.37%;
1990-1999: 0.26%;
2000-2009: 0.17%;
September 1976 through August 1987: 0.48%;
September 1987 through September 1993: 0.17%;
October 1993 through October 2001: 0.26%;
November 2001 through December 2009: 0.18%;
All (October 1976 through December 2009): 0.29%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 0.82%;
1980-1989: 0.82%;
1990-1999: 0.58%;
2000-2009: 0.67%;
September 1976 through August 1987: 0.90%;
September 1987 through September 1993: 0.36%;
October 1993 through October 2001: 0.84%;
November 2001 through December 2009: 0.68%;
All (October 1976 through December 2009): 0.74%.
Wilshire 5000;
October 1976 through December 1979: 0.49%;
1980-1989: 0.37%;
1990-1999: 0.23%;
2000-2009: 0.18%;
September 1976 through August 1987: 0.48%;
September 1987 through September 1993: 0.16%;
October 1993 through October 2001: 0.23%;
November 2001 through December 2009: 0.19%;
All (October 1976 through December 2009): 0.29%.
PBGC Total Fund Return;
October 1976 through December 1979: 0.70%;
1980-1989: 0.58%;
1990-1999: 0.49%;
2000-2009: 0.62%;
September 1976 through August 1987: 0.72%;
September 1987 through September 1993: 0.25%;
October 1993 through October 2001: 0.66%;
November 2001 through December 2009: 0.67%;
All (October 1976 through December 2009): 0.57%.
PPA;
October 1976 through December 1979: 0.60%;
1980-1989: 0.62%;
1990-1999: 0.39%;
2000-2009: 0.39%;
September 1976 through August 1987: 0.73%;
September 1987 through September 1993: 0.25%;
October 1993 through October 2001: 0.47%;
November 2001 through December 2009: 0.42%;
All (October 1976 through December 2009): 0.51%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: 0.80%;
1980-1989: 0.82%;
1990-1999: 0.57%;
2000-2009: 0.68%;
September 1976 through August 1987: 0.90%;
September 1987 through September 1993: 0.36%;
October 1993 through October 2001: 0.82%;
November 2001 through December 2009: 0.69%;
All (October 1976 through December 2009): 0.74%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 0.73%;
1980-1989: 0.77%;
1990-1999: 0.51%;
2000-2009: 0.60%;
September 1976 through August 1987: 0.86%;
September 1987 through September 1993: 0.33%;
October 1993 through October 2001: 0.69%;
November 2001 through December 2009: 0.63%;
All (October 1976 through December 2009): 0.68%.
Dynamic Benchmark;
October 1976 through December 1979: 0.77%;
1980-1989: 0.69%;
1990-1999: 0.48%;
2000-2009: 0.60%;
September 1976 through August 1987: 0.83%;
September 1987 through September 1993: 0.25%;
October 1993 through October 2001: 0.64%;
November 2001 through December 2009: 0.64%;
All (October 1976 through December 2009): 0.64%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: 0.62%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: 0.66%;
All (October 1976 through December 2009): [Empty].
VaR (99% confidence level, 1 month horizon) (percentage):
S&P 500;
October 1976 through December 1979: 8.45%;
1980-1989: 11.88%;
1990-1999: 8.24%;
2000-2009: 12.23%;
September 1976 through August 1987: 9.74%;
September 1987 through September 1993: 12.58%;
October 1993 through October 2001: 8.96%;
November 2001 through December 2009: 11.94%;
All (October 1976 through December 2009): 10.68%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 4.48%;
1980-1989: 7.76%;
1990-1999: 4.98%;
2000-2009: 5.43%;
September 1976 through August 1987: 5.84%;
September 1987 through September 1993: 8.99%;
October 1993 through October 2001: 2.66%;
November 2001 through December 2009: 5.96%;
All (October 1976 through December 2009): 5.99%.
Wilshire 5000;
October 1976 through December 1979: 8.05%;
1980-1989: 12.01%;
1990-1999: 8.65%;
2000-2009: 12.34%;
September 1976 through August 1987: 9.71%;
September 1987 through September 1993: 12.89%;
October 1993 through October 2001: 9.31%;
November 2001 through December 2009: 11.97%;
All (October 1976 through December 2009): 10.82%.
PBGC Total Fund Return;
October 1976 through December 1979: 4.91%;
1980-1989: 10.26%;
1990-1999: 5.43%;
2000-2009: 5.63%;
September 1976 through August 1987: 8.03%;
September 1987 through September 1993: 10.37%;
October 1993 through October 2001: 3.63%;
November 2001 through December 2009: 5.80%;
All (October 1976 through December 2009): 7.17%.
PPA;
October 1976 through December 1979: 6.13%;
1980-1989: 8.80%;
1990-1999: 6.01%;
2000-2009: 7.82%;
September 1976 through August 1987: 7.11%;
September 1987 through September 1993: 9.83%;
October 1993 through October 2001: 5.44%;
November 2001 through December 2009: 7.79%;
All (October 1976 through December 2009): 7.48%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: 4.53%;
1980-1989: 7.43%;
1990-1999: 4.82%;
2000-2009: 5.17%;
September 1976 through August 1987: 5.69%;
September 1987 through September 1993: 8.71%;
October 1993 through October 2001: 2.60%;
November 2001 through December 2009: 5.59%;
All (October 1976 through December 2009): 5.76%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 4.94%;
1980-1989: 7.93%;
1990-1999: 5.05%;
2000-2009: 5.86%;
September 1976 through August 1987: 6.28%;
September 1987 through September 1993: 9.02%;
October 1993 through October 2001: 3.06%;
November 2001 through December 2009: 6.18%;
All (October 1976 through December 2009): 6.23%.
Dynamic Benchmark;
October 1976 through December 1979: 4.61%;
1980-1989: 8.66%;
1990-1999: 5.26%;
2000-2009: 5.93%;
September 1976 through August 1987: 6.41%;
September 1987 through September 1993: 9.83%;
October 1993 through October 2001: 3.75%;
November 2001 through December 2009: 6.09%;
All (October 1976 through December 2009): 6.56%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: 5.64%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: 5.80%;
All (October 1976 through December 2009): [Empty].
Liability Return;
October 1976 through December 1979: 4.06%;
1980-1989: 6.33%;
1990-1999: 4.56%;
2000-2009: 5.07%;
September 1976 through August 1987: 6.26%;
September 1987 through September 1993: 5.33%;
October 1993 through October 2001: 3.12%;
November 2001 through December 2009: 5.54%;
All (October 1976 through December 2009): 5.26%.
Expected shortfall (99% confidence level, 1 month horizon)
(percentage):
S&P 500;
October 1976 through December 1979: 9.70%;
1980-1989: 13.62%;
1990-1999: 9.58%;
2000-2009: 13.93%;
September 1976 through August 1987: 11.19%;
September 1987 through September 1993: 14.36%;
October 1993 through October 2001: 10.38%;
November 2001 through December 2009: 13.62%;
All (October 1976 through December 2009): 12.26%.
Barclays Capital Long-Term Government Credit Index;
October 1976 through December 1979: 5.10%;
1980-1989: 8.81%;
1990-1999: 5.71%;
2000-2009: 6.22%;
September 1976 through August 1987: 6.64%;
September 1987 through September 1993: 10.25%;
October 1993 through October 2001: 3.07%;
November 2001 through December 2009: 6.80%;
All (October 1976 through December 2009): 6.84%.
Wilshire 5000;
October 1976 through December 1979: 9.29%;
1980-1989: 13.76%;
1990-1999: 10.03%;
2000-2009: 14.06%;
September 1976 through August 1987: 11.18%;
September 1987 through September 1993: 14.72%;
October 1993 through October 2001: 10.78%;
November 2001 through December 2009: 13.67%;
All (October 1976 through December 2009): 12.41%.
PBGC Total Fund Return;
October 1976 through December 1979: 5.63%;
1980-1989: 11.67%;
1990-1999: 6.27%;
2000-2009: 6.42%;
September 1976 through August 1987: 9.17%;
September 1987 through September 1993: 11.81%;
October 1993 through October 2001: 4.22%;
November 2001 through December 2009: 6.61%;
All (October 1976 through December 2009): 8.19%.
PPA;
October 1976 through December 1979: 7.02%;
1980-1989: 10.06%;
1990-1999: 6.98%;
2000-2009: 8.91%;
September 1976 through August 1987: 8.15%;
September 1987 through September 1993: 11.21%;
October 1993 through October 2001: 6.32%;
November 2001 through December 2009: 8.89%;
All (October 1976 through December 2009): 8.57%.
Insurance Benchmark (long-term government credit index);
October 1976 through December 1979: 5.17%;
1980-1989: 8.45%;
1990-1999: 5.55%;
2000-2009: 5.91%;
September 1976 through August 1987: 6.48%;
September 1987 through September 1993: 9.93%;
October 1993 through October 2001: 3.02%;
November 2001 through December 2009: 6.37%;
All (October 1976 through December 2009): 6.59%.
Post Fiscal Year 2002 Benchmark;
October 1976 through December 1979: 5.64%;
1980-1989: 9.03%;
1990-1999: 5.82%;
2000-2009: 6.68%;
September 1976 through August 1987: 7.17%;
September 1987 through September 1993: 10.27%;
October 1993 through October 2001: 3.56%;
November 2001 through December 2009: 7.04%;
All (October 1976 through December 2009): 7.12%.
Dynamic Benchmark;
October 1976 through December 1979: 5.27%;
1980-1989: 9.87%;
1990-1999: 6.08%;
2000-2009: 6.76%;
September 1976 through August 1987: 7.33%;
September 1987 through September 1993: 11.19%;
October 1993 through October 2001: 4.35%;
November 2001 through December 2009: 6.94%;
All (October 1976 through December 2009): 7.50%.
PBGC Total Fund Return Net Investment Expenses;
October 1976 through December 1979: [Empty];
1980-1989: [Empty];
1990-1999: [Empty];
2000-2009: 6.43%;
September 1976 through August 1987: [Empty];
September 1987 through September 1993: [Empty];
October 1993 through October 2001: [Empty];
November 2001 through December 2009: 6.61%;
All (October 1976 through December 2009): [Empty].
Liability Return;
October 1976 through December 1979: 4.68;
1980-1989: 7.39%;
1990-1999: 5.32%;
2000-2009: 5.91%;
September 1976 through August 1987: 7.28%;
September 1987 through September 1993: 6.25%;
October 1993 through October 2001: 3.67%;
November 2001 through December 2009: 6.44%;
All (October 1976 through December 2009): 6.13%.
Source: GAO analysis of PBGC data.
[End of table]
By examining the correlation of the PPA benchmark, the Life Insurance
Benchmark, and the Wilshire 5000 returns with the liability return in
conjunction with the standard deviation values for the returns on
those three portfolios, one can observe the potential role of the
correlation in reducing the riskiness of the PPA and Life Insurance
Benchmark return (net of the liability returns). In particular, the
correlation of the returns on both the PPA and Life Insurance
Benchmark portfolios with the liability return are distinctly higher
than the correlation of the return on the Wilshire 5000 with the
liability return. As shown in table 7, the correlation of the Wilshire
5000 return with the scaled liability return is 0.29, but the
analogous correlation statistic for the PPA benchmark return is 0.51
(76 percent higher than the Wilshire 5000 correlation statistic) and
for the Life Insurance Benchmark portfolio is 0.74 (155 percent higher
than the Wilshire 5000 correlation statistic). Furthermore, it appears
that, the higher the correlation, the lower the risk, since the
benchmark portfolio that has returns with the highest correlation with
the liability return--the Life Insurance Benchmark--has the least
risk. When considering all eight portfolios being studied (instead of
only the three portfolios with the strongest risk-adjusted
performance), the four portfolios with the highest correlations with
the liability return have the four lowest standard deviations, and the
four portfolios with the lowest correlations have the four highest
standard deviation estimates. Also, with the exception of the two
portfolios with the highest correlation scores and lowest standard
deviation values, the rankings of the standard deviation values
matches the rankings of the correlation estimates (in ascending order
by standard deviation and descending order by correlation). The strong
relation between extent of correlation with the liability return and
risk highlights how the relatively strong correlation of the PPA and
the Life Insurance Benchmark returns with the liability return seems
to contribute to lowering the riskiness of the returns (net of the
liability return) of these two portfolios, enhancing their Adjusted
Sharpe ratio values and risk-adjusted performance (according to the
Adjusted Sharpe ratio statistic).
The apparent linkage between the risk-adjusted performance metric and
the correlation between the actual portfolio return and the liability
return is most likely a reflection of the effect of the correlation
between the actual portfolio returns and the liability returns on the
volatility of the portfolio returns net of the liability return. As
was discussed in the comparison between the performance of the PBGC
Total Fund and the Dynamic Benchmark, higher correlation between the
(actual) portfolio returns and the liability returns implies a greater
degree of co-movement between the asset returns and the liability
returns, and greater co-movement between the asset returns and the
liability returns weakens or lowers the volatility of the portfolio
returns net of the liability return. One reflection of the lowered
volatility for the portfolio returns net of the liability return is a
lowered standard deviation value, and a lower standard deviation value
helps elevate the Adjusted Sharpe ratio value, implying stronger risk-
adjusted performance.
The strong relation between the correlation statistic and the Adjusted
Sharpe measure values provide at least a partial explanation of why
two out of the three portfolios that have the best risk-adjusted
performance (as indicated by their Adjusted Sharpe ratio scores) all
have allocations to the bond asset class sector of 40 percent or more.
The portfolio of the liabilities consists mostly of annuities and
annuity-like instruments, all of which are obligations of the PBGC. To
the extent that annuities are fixed-income contracts, the portfolio of
liabilities is essentially bond-like in nature. Hence, the fact that
the asset portfolios that have a significant allocation to bonds have
return behavior that is more similar to, and thus would have higher
correlation with, the liability returns is not surprising.
Among the three portfolios that have the returns with the strongest
risk-adjusted performance, the returns for the two portfolios that
have the highest allocation to bonds (the PPA benchmark and the Life
Insurance Benchmark) also have other desirable characteristics. For
instance, these two portfolios (as opposed to the Wilshire 5000) have
returns which, net of the liability return, have higher skewness for
the overall sample than the Wilshire 5000. The higher skewness of the
returns for the PPA benchmark and the Life Insurance Benchmark
portfolios suggests that those portfolios are less likely to have
months where the return on the asset portfolio falls extremely short
of the growth in the PBGC liabilities than the Wilshire 5000.
Minimization of the instances where the asset returns fall extremely
short of the liability returns would help prevent further growth of
the already sizeable PBGC funding deficit.
The desirable implications of the higher skewness can be seen through
other statistics. Note that the minimum values for the PPA Benchmark
and the Life Insurance Benchmark portfolios are less extreme. That is,
they are less negative than for the Wilshire 5000. To get a sense of
how much "less extreme" they are, note that the minimum monthly net-of-
liability return for the PPA Benchmark is negative 12.39 percent and
for the Life Insurance Benchmark is negative 15.09 percent in contrast
to the minimum negative return value for the Wilshire 5000 of negative
24.42 percent. Because returns on the two highest-performing benchmark
portfolios with significant allocations to bonds--the PPA Benchmark
and the Insurance Benchmark portfolios--have less extreme negative
values, lower semi-standard deviations, and lower standard deviations
than the returns on Wilshire 5000, there is a strong possibility that
the probability distributions associated with these returns have
assign less probability to on extreme negative values than the
probability distribution associated with the Wilshire 5000 returns,
characteristics that are consistent with and are associated with the
PPA and Life Insurance Benchmark portfolio returns having skewness
statistic estimates that exceed the (negative) skewness statistic for
the Wilshire 5000 returns.
The fact that the three best performing portfolios over the 1976
through 2009 period in this particular analysis were the PPA
benchmark, the Wilshire 5000, and the Life Insurance Benchmark does
not necessarily mean that any of these portfolios would be appropriate
for the PBGC going forward. The results of any particular analysis
will depend on the performance statistics used and how these
performance statistics balance risk and reward, and criteria would
also need to be established for meaningful differences in these
measurements. Also, as noted earlier, an asset allocation exercise
would look at multiple possible future scenarios, not one particular
historical period. High allocation to equities would be a particularly
controversial matter for the PBGC because of the lower, and
potentially, negative correlation between equity returns and new
claims. The various alternative static portfolios used in this report
were analyzed for the purpose of a "what-if" analysis--a historical
comparison of alternative investment strategies versus the fluctuating
asset allocation that the PBGC actually employed; they were not for
the purpose of recommending a particular static asset allocation going
forward.
[End of section]
Appendix IV: Comments from the Department of Labor:
Secretary Of Labor:
Washington, D.C. 20210:
June 14, 2011:
Mr. Gene Dodaro:
Comptroller General:
United States Government:
Accountability Office:
Washington, DC 20548:
Dear Mr. Dodaro:
I am responding on behalf of the Pension Benefit Guaranty Corporation
(PBGC) Board to your request for comments on the Government
Accountability Office's (GAO) draft report entitled "Pension Benefit
Guaranty Corporation: Asset Management Needs Better Stewardship" (GAO-
11-271).
My fellow Board members and I take our governance responsibilities of
the PBGC and oversight of the investment policy seriously, Following
more than a year of review, the PBGC Board approved a new Investment
Policy Statement in May 2011 (Policy). For the first time, a PBGC
investment policy statement is available to the public on the PBGC web
site. The Board is working with the PBGC Director and staff to ensure
the effective implementation of the Policy.
The Board undertook a comprehensive review of the investment policy,
including extensive consultation and analysis. During the course of
this review, the Board sought advice from the PBGC Advisory Committee,
outside investment advisors and consultants, academicians, the
business and labor community, and the PBGC Director and staff. The
PBGC also conducted comprehensive analyses of the impact of a range of
economic, portfolio and demographic risks on PBGC's liabilities,
including an analysis by the Corporation's investment consultant.
The Policy governs the total fund and represents broad consensus among
the three Board agencies. The Policy includes an investment objective
to maximize total return within a prudent risk framework that is
informed by PBGC's fixed obligations and asset composition of
potential trusteed plans. The elements of the Policy are consistent
with standards followed by institutional investors and represent a
systematic approach to documenting objectives, constraints, risk
tolerance, rebalancing, Board monitoring, and governance mechanisms
necessary to implement the Policy.
The Policy requires that the Board Representatives approve target
allocations and permitted ranges for sub-asset classes. PBGC staff is
preparing recommendations for the Board Representatives so they can
discuss options in order to ruin!l this responsibility. Supplemental
policy guidance regarding sub-asset class allocations and rebalancing
guidelines will follow, as well as other policy guidance related to
risk metrics, tolerances and management. In addition, in support of
the policy objectives we anticipate more frequent analyses of PBGC's
assets and liabilities.
Consistent with the Corporation's bylaws, the Board will continue to
review the investment policy statement at least every two years and
approve the investment policy statement at least every four years. The
Policy does not require that a new investment policy be adopted every
four years or sooner but it does require the Board to consider whether
the policy should be affirmed or revised. We believe the bylaws set an
appropriate review schedule and are consistent with prudent governance
practices.
We concur with both recommendations in your report. Actions taken by
this Board are consistent with institutional investor best practices
and with the two recommendations contained in the report. The Policy
adopted by the Board in May 2011 carries out the recommendations in
your report. The Policy establishes clear organizational
accountabilities governing the various entities that work on behalf of
the PBGC, and provides well-defined goals and risk management
parameters.
With specific regard to our oversight of the investment policy and its
implementation, the Board has undertaken a number of actions since the
start of the Administration, including the following activities.
* In early 2009, the PBGC Office of Inspector General brought to the
Board's attention serious concerns related to the implementation of
the investment policy. While these issues were being reviewed, and in
light of the Board's intent to review the PBGC Investment Policy
Statement, the Board unanimously approved Resolution 2009-06 directing
the PBGC to cease further activity to implement the 200S investment
policy.
* Following our adoption of Resolution 2009-06, the Board
Representatives, acting in accordance with the authority given to them
under the PBGC bylaws, provided written guidance in July 2009 to
implement the Resolution with respect to newly trusteed assets, and
provided additional temporary investment policy guidance and
transition guidance in October 2009.
* The October 2009 temporary investment policy guidance directed PBGC
to provide a monthly report on the transition to the target
allocation. These reports and frequent communications with PBGC
management provided information for the Board to oversee the
implementation of the Resolution and subsequent guidance.
We are pleased that your latest report acknowledges that this Board
and its representatives are meeting more frequently than past Boards,
although we believe that the report overlooks much of the extensive
oversight activity undertaken both by the Board directly and by our
Board Representatives and their staffs. In addition to Board and Board
Representative meetings with the PBGC Director, staff, and Advisory
Committee members, the Board exercises its oversight responsibilities
by providing policy direction through written resolution and through
our Board Representatives. Other formal oversight mechanisms in place
include required monthly transition and investment reports and written
documentation of policy guidance. The Board believes these oversight
mechanisms and informal guidance and communications are appropriate
oversight.
The Board is dedicated to overseeing the management of PBGC's
investment program and to protecting the pension benefits of the 44
million Americans covered by the PBGC's insurance program.
We appreciate the opportunity to review and comment on the draft
report.
Sincerely,
Signed by:
Hilda L. Solis:
Chair of the Board:
Pension Benefit Guaranty Corporation:
[End of section]
Appendix V: Comments from the Pension Benefit Guaranty Corporation:
PBGC:
Pension Benefit Guaranty Corporation
1200 K Street, N.W.
Washington, D.C. 20005-4026:
June 15, 2011:
Barbara D. Bovbjerg, Managing Director:
Education, Workforce, and Income Security Issues:
United States Government Accountability Office:
Washington, DC 20548:
Dear Ms. Bovbjerg:
This is in response to your request for comments on the GAO's draft
report on PBGCs investment policy and practices (GAO-11-271).
As you know from our many conversations on these subjects, PBGC and
its Board take our responsibilities as stewards of a substantial
investment portfolio very seriously.
In developing both PBGC's investment policy and its investment
practices, we have consulted widely, reviewed the practices in other
institutions. both public and private, and developed a policy and
procedures that we believe are consistent with the high standards that
you have recommended for PBGC.
We agree with both of your recommendations and are implementing them.
As you know, regarding your first recommendation, PBCGC's Board
recently approved a comprehensive investment policy statement
following a thorough review of policy options and extensive
consultation and analysis. The Board is responding separately on that
issue. Management will implement the policy under continued Board
supervision.
We agree with your second recommendation -- to develop clear
investment operating procedures and guidelines -- and are doing so.
After reviewing the practices of other institutions, PBGC's
Corporate Investment Department has developed and is implementing new
procedures and guidelines. These cover such areas as transition
management, cash management, investment procedures, special
situations, and manager due diligence. Working with our General Counsel,
we also developed a set of ethical guidelines specifically tailored to
our corporate investment activities.
We also reviewed GAO's analysis of PB0C's investment performance.
Given the complexity and technical nature of the analytics used in
your review, we are sharing our technical comments under separate
cover. PBGC appreciates GAO's acknowledgment that, "on an asset-only
basis, PBGC's portfolio achieved better risk-adjusted performance on
its investments than that achieved by six of the seven benchmark
portfolios."
As you know, investment industry practices are evolving continually.
We are continuing to review both our practices and those of others. We
look forward to your comments on the procedures we've implemented, and
view our discussions as part of a continuous improvement process.
As always, we appreciate the opportunity to review and comment on the
draft report. We recognize and appreciate GAO's role as an informed
watchdog of the public interest, and look forward to working with you
to advance the goals of accountability and retirement security that we
share.
Sincerely,
Signed by:
Josh Gotbaum:
cc: PBGC Board of Directors.
[End of section]
Appendix VI: GAO Contact and Staff Acknowledgments:
Contact:
Barbara Bovbjerg, (202) 512-7215 or bovbjergb@gao.gov:
Staff Acknowledgments:
In addition to the above, Orice Williams-Brown, Charles A. Jeszeck,
Thomas McCool, Frank Todisco, Serena Agoro-Menyang, James Bennett,
Susan Bernstein, Lawrance Evans Jr., Charles Ford, Kimberley M.
Granger-Heath, Michael Hoffman, Gene Kuehneman, Sheila McCoy, Michael
Morris, Christopher Ross, Margie Shields, and Craig Winslow made
important contributions to this report.
[End of section]
Bibliography:
[End of section]
Amenc, Noel and Veronique Le Sourd. Portfolio Theory And Performance
Analysis. New York: John Wiley & Sons, 2003.
Bacon, Carl R. Practical Portfolio Performance Measurement And
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Brealey, Richard A. and Stewart Myers. Principles Of Corporate
Finance. New York: McGraw-Hill, Inc. 1981.
Dowd, Kevin. Measuring Market Risk. New York: John Wiley & Sons, 2005.
Israelsen, Craig L. "Refining The Sharpe Ratio." The Journal Of
Performance Measurement. (Spring 2009): 23-27.
Maginn, John L., Donald Tuttle, Dennis McLeavey, and Jerald Pinto
(eds.). Managing Investment Portfolios. New York: John Wiley & Sons,
2007.
Matlab R2010a Documentation. Natick, MA: Mathworks, Inc., 2010.
Pearson, Neil D. Risk Budgeting. New York: John Wiley & Sons, 2002.
Sharpe, William F. "Budgeting And Monitoring Pension Fund Risk."
Financial Analysts Journal. Vol. 58 (2002): 74-86.
Sharpe, William F. "Mutual Fund Performance." Journal of Business.
Vol. 39 (1966): 119-138.
Sharpe, William F. and Lawrence Tint. "Liabilities--A New Approach."
Journal of Portfolio Management. Vol. 16 (1990): 5-10.
Sortino, Frank A. and Price, Lee N. Price, "Performance Measurement in
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Waring, Barton M. "Liability-Relative Investing II." Journal of
Portfolio Management. Vol. 31 (2004): 40-53.
[End of section]
Footnotes:
[1] Employee Retirement Income Security Act of 1974, Pub. L. No. 93-
406, tit. IV, 88 Stat. 829, 1003-35 (codified as amended at 29 U.S.C.
§§ 1301-1461).
[2] 29 U.S.C. §§ 1322 and 1322a.
[3] 29 U.S.C. § 1361.
[4] 29 U.S.C. § 1305(b).
[5] Although ERISA provided for the establishment of seven revolving
funds (29 U.S.C. § 1305), PBGC uses only three such funds in carrying
out its duties. In this report we refer to them as a single revolving
fund.
[6] 29 U.S.C. § 1302(d).
[7] 29 C.F.R. § 4002.3(a)(3) (2011).
[8] 29 C.F.R. § 4002.3(a)(4) (2011).
[9] 29 C.F.R. § 4002.3(b) (2011). Each of the board members may also
designate an official (not below the level of an assistant secretary)
to serve as an alternative representative.
[10] 29 U.S.C. § 1305(b)(3). By statute, PBGC is restricted to
investing some revolving funds in U.S. obligations which are fixed-
income assets. Other revolving funds may be invested as PBGC considers
appropriate, but current policy is to invest them in U.S. Treasury
securities. 29 U.S.C. § 1305(b)(3) and (f)(3).
[11] For example, the Pension Protection Act of 2006 included a number
of provisions aimed at improving plan funding and PBGC finances by
raising premiums, including variable premiums for plans with low
reserves. Pub. L. No. 109-280, 120 Stat. 780. It also raised the
funding requirements defined benefit pension plans must meet for
Internal Revenue Service qualification. The Worker, Retiree, and
Employer Recovery Act of 2008 provided plan sponsors with temporary
further relief from the changes in the Pension Protection Act of 2006
(Pub. L. No. 110-458, 122 Stat. 2092), as did Internal Revenue Service
guidance in 2009 concerning interest rates that could be used to value
plan liabilities in some cases. More recently, the Preservation of
Access to Care for Medicare Beneficiaries and Pension Relief Act of
2010 provided relief to private-sector pension sponsors, in part, by
allowing certain sponsors to elect one of two possible schedules to
reduce or delay contributions attributable to certain funding
shortfalls stemming from the economic downturn. Pub. L. No. 111-192,
124 Stat. 1280
[12] GAO, High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-07-310] (Washington, D.C.: January
2007).
[13] GAO, High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-09-271] (Washington, D.C.: January
2009).
[14] GAO, High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-11-278] (Washington, D.C.: February
2011).
[15] During relatively conservative investment periods, allocation
targets were aimed at increasing the proportion of fixed-income
investments. During relatively aggressive investment periods,
allocation targets were aimed at increasing the proportion of equity
investments.
[16] In 2009, PBGC's investment policy shifted to a more conservative
strategy but not for the purpose of immunizing against interest rate
risk. The 2009 interim policy consisted of 26.5 percent in equity
assets and 73.5 percent in fixed income assets.
[17] Under its bylaws, the board is required to review its investment
policy statement at least once every two years and approve it at least
every four years. 29 C.F.R. § 4002.3(a)(4) (2011).
[18] For example, experts noted that a long-term and disciplined
policy is needed to prevent market timing, which is the practice of
buying or selling assets by attempting to predict future market price
movements. According to experts, this practice can incur significant
opportunity costs--that is, costs incurred as a result of market
movements during a transaction.
[19] 29 U.S.C. § 1305(b)(3) and (f)(3).
[20] 29 U.S.C. § 1305(b)(3) and (f)(3).
[21] According to PBGC, this biennial review was as a result of a PBGC
Office of the Inspector General recommendation.
[22] Based on GAO analysis of the New York Stock Exchange Composite
Index during the period between February 1, 2008, and May 31, 2009.
[23] The resolution was executed by each board member on different
dates. The Secretary of Commerce executed the resolution on May 19,
2009, followed by the Secretary of Labor on May 21, 2009, and the
Secretary of the Treasury on June 30, 2009.
[24] This interim policy was a product of a series of specific staff
inquiries about how to go about transitioning assets until the board
adopted a new investment policy statement.
[25] For a diagram of the transitioning of funds to align with PBGC's
investment policy, see appendix II.
[26] Because transaction costs vary based on the volume and type of
assets acquired from newly terminated plans, as well as market
conditions, it was not possible to isolate the costs attributable to
implementation of a specific investment policy apart from these other
factors.
[27] We use this broad definition of transaction costs in this report.
One could also define transaction costs more narrowly to refer just to
the explicit costs of the trade.
[28] For example, transition managers can provide lower transaction
costs by "crossing"--that is, moving--securities from one client's
account to another client's account without incurring costs in the
open market.
[29] The costs or gains associated with financial transactions are
often expressed in terms of basis points, with each basis point equal
to 1/100th of 1 percent.
[30] In the course of implementing the 2008 policy, PBGC hired a
consultant for additional work at a cost of $600,000.
[31] In a prior report we noted that when PBGC took an asset-only
approach to guide its new investment policy, an analysis that
incorporates assets, liabilities, and the funded position should have
also been conducted. See GAO, PBGC Assets: Implementation of New
Investment Policy Will Need Stronger Board Oversight, [hyperlink,
http://www.gao.gov/products/GAO-08-667] (Washington, D.C.: July 17,
2008).
[32] PBGC's portfolio for this analysis includes PBGC's investments in
both the trust fund and the revolving fund combined.
[33] The exception was the Post Fiscal Year 2002 Benchmark portfolio;
however, this fixed allocation portfolio is also based upon the PBGC
total fund since the portfolio weights reflect the PBGC's investment
portfolio from November 2001 to December 2009.
[34] The primary driver of the total fund's performance lies in the
lower volatility of the returns, overall--that is, the returns
provided lower downside risks or fewer extreme negative returns.
[35] 29 U.S.C. § 1306. While these analyses have limitations and may
offer an incomplete picture of PBGC's overall performance, asset-only
and asset-net of liability analyses represent a traditional approach
to evaluating PBGC's investment performance. Although there are
different ways of incorporating liabilities into asset allocation
strategies, our asset-net of liability analysis excludes external cash
flows in a manner consistent with other practitioners. However, this
ignores both PBGC's inability to adjust premium rates by judging it
within a framework that assumes this flexibility. Furthermore, if new
terminations were included in the measure of liabilities the
correlation between stock market returns and liability returns would
likely be lower or even negative, resulting in lower risk adjusted
performance for portfolios with a heavier weighting toward stock. In
the approaches we reviewed, practitioners and others have incorporated
liabilities by including only the existing stock of liabilities when
calculating liability returns rather than including external cash-
flows of liabilities coming into the fund. It should be noted that
PBGC's current approach of calculating the liability growth uses
PBGC's existing stock of liabilities and not incoming cash-flows from
new plan terminations taken in by PBGC. Given this precedent, we have
followed this approach but acknowledge that an alternative approach
including external cash flows may be more appropriate for evaluating
PBGC's portfolio. External cash-flows would consist of assets and
liabilities received from terminated plans coming in to the PBGC. For
additional information, please refer to appendix III.
[36] While an analysis that focuses solely on investment returns
provides some useful information on PBGC's portfolio performance, our
explicit inclusion of the PBGC's liabilities is consistent with the
type of analysis we noted was necessary in a prior report. GAO-08-667.
[37] 29 U.S.C. § 1306.
[38] We use an adjusted Sharpe ratio to correct for the excess returns
net of liabilities for PBGC and the comparison benchmarks being
negative.
[39] PBGC's portfolio of assets has a higher allocation to bonds and a
higher correlation with the liability growth than the PPA portfolio,
but PPA's higher returns and relatively high correlation with the
liability growth resulted in better risk-adjusted performance overall.
[40] These results also differed significantly from those discussed
earlier in the asset-only context. As we pointed out in our previous
report (GAO-08-667), our concern with 2008 investment policy was that
it did not explicitly consider the PBGC's liabilities and may have
understated the risk inherent in a portfolio tilted toward equity and
alternative assets. In other words, the policy did not make it clear
that by striving for greater returns, PBGC would be sacrificing lower
risk and higher correlation with liabilities. Due to certain
limitations, these results should be interpreted with caution,
especially given the manner in which we incorporated liabilities into
the measures of risk-adjusted performance (see appendix III). Ideally,
a complete analysis of PBGC's assets net of liabilities would include
both its existing stock of liabilities, its incoming cash flows from
newly terminated plans and complete information regarding transitions,
and transaction costs in order to fully assess PBGC's past performance
and make a thorough assessment of future investment allocations for
long-term asset management. A complete approach would also accurately
reflect PBGC's ability, or inability, to set appropriate premiums
covering risk.
[41] S.W. Halpern, Governance of Public Pension Assets, paper
presented at the World Bank's Symposium on Public Pension Governance
and Investment Conference, (Indonesia, June 2009).
[42] We included items identified by at least two of the three bodies
as important.
[43] The PBGC has operated without a formal investment policy
statement since June 2009.
[44] 29 U.S.C. § 1302(f). A presidentially appointed, Senate-confirmed
director is responsible for administering the agency. 29 U.S.C. §
1302(a). Thus, the board approves policy which then the director
implements. Further, in order to execute the policy, the agency must
develop program guidance and implementing procedures. The guidance and
procedures would include designations of accountability for action and
reporting results, appropriate performance measures, and requirements
to document actions and oversight, thus enabling staff to apply the
policy consistently.
[45] According to PBGC's by-laws, board representatives may approve
the investment policy statement as long as the policy is ratified in
writing by board members. 29 C.F.R. § 4002.3(b)(2) (2011). From June
2009 to present, the board had not ratified a new investment policy
statement.
[46] Halpern, Governance of Public Pension Assets.
[47] Processes for asset allocation include which methodologies are
utilized, on what data and capital markets assumptions those
methodologies are based, in light of what factors those methodologies
are chosen (for example, the relationship between assets and
liabilities, the need for cash flow and liquidity, and the investment
horizon), and what procedures are in place for periodically
rebalancing the portfolio.
[48] Halpern, Governance of Public Pension Assets.
[49] These procedures are still in draft form. Until the board,
through the board representatives, reviews and comments on these
procedures they will not be final. Additionally, though CID staff may
believe the procedures are complete, PBGC has not formally submitted
the procedures to the board for its consideration.
[50] Halpern, Governance of Public Pension Assets.
[51] According to PBGC, one of PBGC's transition managers only retains
records for 7 years.
[52] Given the emphasis on the PBGC Single-Employer Total Fund in our
analysis, the phrase "PBGC Total Fund portfolio" will be used for
brevity for the remainder of this section and should be understood to
refer to the Single-Employer Total Fund at PBGC.
[53] Our analysis includes only liabilities from trusteed defined
benefit plans (instead of all terminated plans, both trusteed and
pending trusteeship by PBGC) because, according to PBGC, it is
ultimately liable only for the trusteed plans--not all terminated
plans.
[54] For the remainder of this section, the domestic equity class as
"domestic equities"; the international equity class as "international
equities"; the domestic and international equity classes combined as
"equities"; the fixed-income asset class as either "bonds" or "fixed
income"; and the short maturity fixed-income sector that is free of
systematic and credit risk as "cash" or the "risk-free" asset class,
where the return associated with this asset class will be referred to
as the "riskless" or "risk-free rate of return." Also, where needed,
we computed the excess return for an asset as the total return for the
asset minus the risk-free rate of return.
[55] The Pension Protection Act of 2006 requires PBGC to compare its
average return performance for its investments to a theoretical
portfolio consisting of an equity benchmark portfolio and a fixed-
income benchmark portfolio. No. 109-280, § 412, 120 Stat. 780, 936.
[56] We used the Barclays Capital Long-Term Government Credit Index to
construct the PPA benchmark instead of the Barclays Capital Aggregate
Bond Index, which is more customary, in order to achieve greater
comparability to the Barclays Capital Long-Term Government Credit
Index listed in item c as a fixed-income benchmark in this report.
Note that PPA allows for the use of fixed-income indices other than
the Barclays Capital Aggregate Bond Index in the construction of PPA
benchmark returns.
[57] [hyperlink, http://www.gao.gov/products/GAO-08-667], 10-11.
[58] Given the emphasis on the PBGC Single-Employer Total Fund in our
analysis, the phrase "PBGC Total Fund portfolio" will be used for
brevity for the remainder of this section and should be understood to
refer to the Single-Employer Total Fund at PBGC.
[59] Our analysis includes only liabilities from trusteed defined
benefit plans (instead of all terminated plans, both trusteed and
pending trusteeship by PBGC) because, according to PBGC, it is
ultimately liable only for the trusteed plans--not all terminated
plans.
[60] We use this definition of the asset return net of the liability
return because research shows that this is equivalent to maximizing
the end-of-month surplus (the end-of-month difference between
aggregate assets and liabilities) relative to the aggregate asset
value at the beginning of the month. William F. Sharpe, "Budgeting and
Monitoring Pension Fund Risk," Financial Analysts Journal, Vol. 58
(2002), 74-86; and William F. Sharpe and Lawrence Tint, "Liabilities--
A New Approach," Journal of Portfolio Management, Vol. 16 (1990), 5-10.
[61] These rates effectively form a yield curve where cash flows that
occur during the initial period are discounted by the "select"
interest rate and those occurring after the initial period are
discounted by the "ultimate" interest rate. For more on these rates
see [hyperlink, http://www.pbgc.gov/prac/interest.html].
[62] Implicitly it assumed that these liabilities are best dealt with
via the setting of premiums as opposed to being covered by the
investment portfolio.
[63] For the end of any month for which an observation was not
directly available, we estimated the value using the last available
total fund asset portfolio value preceding that month and the gross
liability return over the period corresponding to the missing data.
[64] Richard A Brealey and Stewart Myers, Principles of Corporate
Finance, (New York: McGraw-Hill, Inc., 1981). John L. Maginn, Dennis
McLeavey, Jerald Pinto, and Donald Tuttle, (eds.) Managing Investment
Portfolios, (New York: John Wiley & Sons, 2007).
[65] Another element of an analysis of this type is the length of the
time horizon and, if applicable, the particular calendar years
studied. Our analysis looks at the single historical period, from 1976
through 2009, since the purpose of the analysis was performance
assessment, not asset allocation recommendations. Typically, analyses
for the purpose of asset allocation would project forward over
multiple potential future economic scenarios in order to more fully
assess potential risk and reward.
[66] Sources for semi-standard deviation equation: Amenc and LeSourd
(2003), 54 and 116; Sortino and Price (1994).
[67] Source for VaR equation: Pearson (2002), 4 and 10-11.
[68] The notion of the confidence level is similar to but not to be
confused with the concepts of significance level and confidence
intervals from statistics. (Pearson (2002), 10-11).
[69] Source for expected shortfall equation: Dowd (2005), 154.
[70] Sources for Sharpe ratio: Sharpe (1966); Amenc and LeSourd
(2003), 109.
[71] Sources for Sortino ratio: Amenc and LeSourd (2003), 54 and 116;
Sortino and Price (1994).
[72] Source for Omega ration: Bacon (2008), 94.
[73] Source for Adjusted Sharpe ratio: Israelsen (2009).
[74] Sources for skewness equation: Bacon (2008), 83-84; Matlab R2010a
Documentation.
[75] Sources for kurtosis equation: Bacon (2008), 85-86; Matlab R2010a
Documentation.
[76] For the remainder of this section, the domestic equity class as
"domestic equities"; the international equity class as "international
equities"; the domestic and international equity classes combined as
"equities"; the fixed-income asset class as either "bonds" or "fixed
income"; and the short maturity fixed-income sector that is free of
systematic and credit risk as "cash" or the "risk-free" asset class,
where the return associated with this asset class will be referred to
as the "riskless" or "risk-free rate of return." Also, where needed,
we computed the excess return for an asset as the total return for the
asset minus the risk-free rate of return.
[77] PPA requires PBGC to compare its average return performance for
its investments to a theoretical portfolio consisting of an equity
benchmark portfolio and a fixed-income benchmark portfolio. Pub. L.
No. 109-280, § 412, 120 Stat. 780, 936.
[78] We used the Barclays Capital Long-Term Government Credit Index to
construct the PPA benchmark instead of the Barclays Capital Aggregate
Bond Index (which is more customary) in order to achieve greater
comparability to the Barclays Capital Long-Term Government Credit
Index listed in item c as a fixed-income benchmark in this report.
Note that PPA allows for the use of fixed-income indices other than
the Barclays Capital Aggregate Bond Index in the construction of PPA
benchmark returns.
[79] [hyperlink, http://www.gao.gov/products/GAO-08-667], 10-11.
[80] These qualifiers apply to all the results presented in this
section.
[81] One factor that complicates the analyses in this section and the
interpretation of the traditional Sharpe ratio is that all of the
portfolios exhibit negative mean excess returns and hence negative
Sharpe ratios for the overall time period and many subperiods. As
mentioned in the performance statistics section, this renders the
interpretation of the Sharpe ratio unclear. Thus, in executing
portfolio performance comparison on a net-of-liability returns basis,
greater emphasis is placed on the Adjusted Sharpe ratio, which is
specifically designed to address this problem and provide logically
consistent ranks to portfolios in a fashion that appropriately
reflects the impact of risk aversion on portfolio choice and asset
allocation decisions.
[82] For example, this finding should not be interpreted as equity
causing the underperformance.
[End of section]
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