How weapons of mass destruction saved a pension scheme
In 2005 the head of the General Motors pension scheme hit out at the new fashion for “liability-driven investing”.
Encouraged by the dotcom crash and new accounting and tax rules, pension schemes were overhauling their portfolios. No longer would they try to generate a decent return from shares. Instead, they would be laser-focused on matching investments with their obligations to future retirees, which implied buying mainly long-dated government securities.
“I struggle to understand why locking in the lowest possible rate of return is a good idea,” GM’s Allen Reed told Institutional Investor. He liked stocks, hedge funds and private equity that brought more risk but promised higher returns.
This story originally appeared on: Financial Times - Author:Tom Braithwaite
