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Goldman Sachs Asset Management Statement on the Russia-Ukraine War. Read it here.    

Public Pension Quarterly 4Q 2021

VARIANTS AND VOLATILITY

Originally thought to be the year we returned to normal, 2021 was far from standard. The combination of the fast spreading omicron variant, ongoing concerns related to inflation, and a hawkish Federal Reserve made for a turbulent fourth quarter. Although future returns are likely to be lower going forward, we still believe equities should outperform fixed income in the changing macro environment.

Based on new emerging drivers of equity returns and the concerns highlighted above, we believe that investors should rely on active management styles to navigate their portfolios through ongoing volatility and variants

Historical Aggregate Funded Status

Strong returns from public equities in the fourth quarter resulted in the estimate aggregate funded status for our sample of plans rise 4% in the fourth quarter and 8% for the full calendar year.

 

Source: Boston College Center for Retirement Research, Goldman Sachs Asset Management as of December 31, 2021. All aggregate funded statuses based on estimated asset returns and liability growth.  For illustrative purposes only.

Q&A With Our Team

Katie Koch

Chief Investment Officer, Public Equity, Goldman Sachs Asset Management

 

Given the dramatic run in public equities over the last two years, what are you hearing from clients as it relates to their public equity portfolios?

Despite the impressive run over the last few years, we believe clients should stay fully invested including in equities. Thus far, it appears that most U.S. public plans are doing so. We’re seeing interest in all forms of equities with implementation choice dependent on which problems clients aim to solve for. For example, thematic equities, US small caps, and select emerging market exposures are popular with clients looking to improve returns. We are also seeing interest in value equities and real asset equities in order to overcome yield and inflation challenges.

 

Many investors are exploring more thematic or non-traditional allocations, what are your views on this strategy?

Thematic equity strategies are being viewed as a turn-key way of overcoming this challenge and to complement existing exposures.  Since we define thematic investing as strategies that transcend traditional classifications to capture unique forms of secular growth, we’re seeing clients use them as part of global growth allocations, part of stand-alone “innovation” allocations, or as a replacement or complement to innovation-driven growth private exposures.

Related Insights

 

Disclosures

The views expressed herein are as of February 9, 2022 and subject to change in the future. Individual portfolio management teams for Goldman Sachs Asset Management 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.

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.

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.

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Fixed income investing involves interest rate risk. Equity securities are more volatile than bonds and subject to greater risks. Small and mid-sized company stocks involve greater risks than those customarily associated with larger companies. When interest rates rise, bond prices generally fall. All investing involves risk, including loss of principal.

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.

Economic and market forecasts presented herein reflect a series of assumptions and judgments as of the date of this presentation and are subject to change without notice. These forecasts do not take into account the specific investment objectives, restrictions, tax and financial situation or other needs of any specific client. Actual data will vary and may not be reflected here. These forecasts are subject to high levels of uncertainty that may affect actual performance. Accordingly, these forecasts should be viewed as merely representative of a broad range of possible outcomes. These forecasts are estimated, based on assumptions, and are subject to significant revision and may change materially as economic and market conditions change. Goldman Sachs has no obligation to provide updates or changes to these forecasts. Case studies and examples are for illustrative purposes only.

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Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. It should not be assumed that investment decisions made in the future will be profitable or will equal the performance of the securities discussed in this document.

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© 2022 Goldman Sachs. All rights reserved. Date of First Use: February 9, 2022. 268064-OTU-1554593

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