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    Corporate Pension Quarterly Q2 2021

    Higher and Higher

    Increasing global vaccination numbers, falling jobless claims, and improving economic prospects helped to propel equity markets to new highs. With interest rates still near historic lows despite increases in 2021 and current valuations levels for public equity markets, many investors may be reviewing their portfolios to improve the likelihood of hitting their long-term return objectives.

    Historical Aggregate S&P 500 Funded Status

    We estimate that, in aggregate, pension asset returns were 2.4% and 6.3% for the month and quarter, respectively.

    Q2_FS_chart_web860x420

    Source: Goldman Sachs Asset Management as of June 30, 2021. Funded statuses reflect monthly estimates with the exception of year-end data. Estimate is based on U.S. plans (where specified) of pension plans within the S&P 500.

    Q&A with Our Team

    Michael Moran

    CFA, Senior Pension Strategist, Goldman Sachs Asset Management

     

    How are plan sponsors using leverage to increase returns?

    Although leverage can be used in several ways, we find that the use of public equity market futures is one of the most common ways that leverage is used to increase expected return.  Equity futures may allow an investor to gain equity market beta with a limited capital outlay which could free up capital for other return-seeking investments. 

    Matthew Maciaszek

    Fixed Income Portfolio Manager, Goldman Sachs Asset Management

     

    Are fixed income derivatives only useful for hedging liabilities?

    While interest rate derivatives are primarily used to hedge liabilities, they can also allow investors to maintain a certain level of duration, therefore freeing up capital to be invested in higher returning assets.

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      Ideas for Investing in a Low Return World

      Capital markets across the globe have rewarded investors considerably over the last decade. Now investors face a scarcity of attractively priced assets and lower return expectations for most asset classes.  Explore how investors may need to modify their portfolios to improve the chance of hitting their long-term return objectives.

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    Corporate Pension Quarterly 2Q21 Disclosures

    Definitions
    Funded status can refer either to the ratio of assets to liabilities or, in dollar terms, the deficit or surplus of a pension plan.
    Constant maturity US Treasury rates refers to an average yield of a range of Treasury securities maturing at various periods, intended to provide a reference rate for a particular tenor.

    Disclosures

    THESE MATERIALS ARE PROVIDED SOLELY ON THE BASIS THAT THEY WILL NOT CONSTITUTE INVESTMENT ADVICE AND WILL NOT FORM A PRIMARY BASIS FOR ANY PERSON’S OR PLAN’S INVESTMENT DECISIONS, AND GOLDMAN SACHS IS NOT A FIDUCIARY WITH RESPECT TO ANY PERSON OR PLAN BY REASON OF PROVIDING THE MATERIAL OR CONTENT HEREIN. PLAN FIDUCIARIES SHOULD CONSIDER THEIR OWN CIRCUMSTANCES IN ASSESSING ANY POTENTIAL INVESTMENT COURSE OF ACTION.

    Please refer to the attached report for important risks additional disclosures.

    The views expressed herein are as of 06/30/2021 and subject to change in the future. Individual portfolio management teams for GSAM may have views and opinions and/or make investment decisions that, in certain instances, may not always be consistent with the views and opinions expressed herein.

    Past performance does not guarantee future results, which may vary. The value of investments and the income derived from investments will fluctuate and can go down as well as up. A loss of principal may occur.

    THIS MATERIAL DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION WHERE OR TO ANY PERSON TO WHOM IT WOULD BE UNAUTHORIZED OR UNLAWFUL TO DO SO.

    Prospective investors should inform themselves as to any applicable legal requirements and taxation and exchange control regulations in the countries of their citizenship, residence or domicile which might be relevant.

    Fixed income investing involves interest rate risk. When interest rates rise, bond prices generally fall.

    High-yield, lower-rated securities involve greater price volatility and present greater credit risks than higher-rated fixed income securities.

    Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. We have relied upon and assumed without independent verification, the accuracy and completeness of all information available from public sources.

    This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. This material is not intended to be used as a general guide to investing, or as a source of any specific investment recommendations, and makes no implied or express recommendations concerning the manner in which any client’s account should or would be handled, as appropriate investment strategies depend upon the client’s investment objectives.

    Index Benchmarks

    Indices are unmanaged. The figures for the index reflect the reinvestment of all income or dividends, as applicable, but do not reflect the deduction of any fees or expenses which would reduce returns. Investors cannot invest directly in indices.
    The indices referenced herein have been selected because they are well known, easily recognized by investors, and reflect those indices that the Investment Manager believes, in part based on industry practice, provide a suitable benchmark against which to evaluate the investment or broader market described herein.

    This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. This material has been prepared by GSAM and is not financial research nor a product of Goldman Sachs Global Investment Research (GIR). It was not prepared in compliance with applicable provisions of law designed to promote the independence of financial analysis and is not subject to a prohibition on trading following the distribution of financial research. The views and opinions expressed may differ from those of Goldman Sachs Global Investment Research or other departments or divisions of Goldman Sachs and its affiliates. Investors are urged to consult with their financial advisors before buying or selling any securities. This information may not be current and GSAM has no obligation to provide any updates or changes.

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    All rights reserved. Date of First Use: 7/08/2021 245873-OTU-1439450

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