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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

Michael Moran

 

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

Matthew Maciaszek

 

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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