A framed copy of the Employee Retirement Income Security Act and the actual pen that President Gerald R. Ford used to sign it into law hang on a wall in William Chadwick's Los Angeles office.
Mr. Chadwick was a coltish 26-year-old tax adviser-attorney to Treasury Secretary William Simon at the time.
"The signing ceremony was held in the Rose Garden," recalled Mr. Chadwick, who went on to become assistant secretary of labor for administration and enforcement of ERISA. "I was sitting in the second row on the right side. As soon as he (Ford) signed it, I ran up to him and asked for the pen.
"I was trying to be cool. I was a kid."
Today Mr. Chadwick, a successful real estate entrepreneur, reflects on ERISA's impact on the capital markets.
"Before ERISA, pension funds were invested disproportionally in fixed-income obligations," said Mr. Chadwick. "ERISA caused diversification and recognition of modern portfolio theory and the efficient frontier.
"That has had a profound impact on the returns of pension funds."
The law, which forced faster funding and diversification on corporate pension funds and helped propel the 1980s bull market, will continue to have a profound effect on the capital markets here and globally.
More U.S. money -- both institutional and individual -- will flow into overseas markets as pension funds continue to try to meet ERISA's diversification requirements.
Other countries will increasingly choose defined contribution plans -- an unintended effect of ERISA -- as the primary vehicle for providing employees with retirement benefits.
Finally, many are concerned that volatility could result when individuals are confronted with their first real bear market.
"Maybe, it (ERISA) will result in the homogenization of the world marketplace," said Sylvester J. Schieber, head of research at Watson Wyatt Worldwide, Bethesda, Md.
"In many ways we are seen as leaders," said Olivia Mitchell, professor of insurance and risk management at The Wharton School of Business in Philadelphia. "It is a matter of time before they want what we have."
Overseas diversification is a concept that American pension funds bought into long ago, but the rhetoric has not matched the reality.
"Institutions know they should be invested overseas, but the numbers hardly indicate that the typical U.S. investor is broadly diversified around the world," said Norton Reamer, chief executive officer of United Asset Management, Boston.
"Even the large defined benefit plans don't hold more than 10% to 15% in international stocks at any point and time," said Mr. Schieber.
The extended run of the U.S. stock market, Europe's heretofore uneven economic climate and the immaturity of stock markets in the developing economies have made it easy for U.S. investors to ignore the rest of the world.
But concerns about the longevity of the U.S. bull market is forcing investors to look elsewhere.
"If two-thirds of financial assets are outside of North America, why wouldn't two-thirds of my portfolio be elsewhere?" asked Mr. Schieber. "There is plenty of room for diversification."
But will allegedly unsophisticated individual investors follow the dictates of modern portfolio theory? Mr. Schieber believes so. Defined contribution providers are increasingly making international offerings available to their employees, he said.
Foreign markets have put out the welcome mat for U.S. capital by adopting the American model for economic growth, but they may have miscalculated the level of shareholder activism that will follow American dollars.
"American pension funds have been active shareholders," said Ms. Mitchell. "They target underperforming companies; they request meetings, offer suggestions or become more involved. Europe and Asia, historically, have been much less transparent with regard to the board and responsiveness to shareholders. As U.S. pension funds hold more foreign stocks and bonds, they will become more involved in governance issues in those regions of the world."
On a recent European vacation, Mr. Schieber read several stories in the financial press about the concerns European politicians and business leaders have about shareholder activism.
"Europe's laissez fare societies are now faced with significant shareholder involvement," he said.
Europe and many parts of the rest of the world are more welcoming of American-style defined contribution plans.
"Australia and the U.K. are talking about it," said Mr. Schieber. "France has some interest."
"As Europe becomes much more integrated, there will be a trend for companies to build systems that provide mobility across borders," said Ms. Mitchell.
Defined contribution plans have brought more people into the markets, but the diversification of those portfolios has been uneven, according to Michael Henkel, president of Ibbotson Associates, Chicago.
"If you look at how portfolios are invested in aggregate, the portfolios don't look that bad," said Mr. Henkel. The ratio of equities to fixed income is about 60/40, he said.
"If you look individually, however, some portfolios are 100% in cash and some are 100% in company stock," he said. "That is a highly risky situation. Ideally, your next 25 years will see people with better rounded portfolios."
The barbell effect that predominates in the self-directed portfolios of American workers implies a lack of sophistication and begs the question of how individuals will react when the bull market ends.
"Every time the markets take a dip, money managers and 401(k) administrators take a look over their shoulders at the individuals," said Ms. Mitchell.
The evidence so far is that individuals act similarly to sophisticated institutional investors.
Mr. Schieber recalls working on a book that would have addressed individual investor behavior during corrections by examining the two major market dips of 1998. The project was abandoned, however, because people didn't sell during the dips.