Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. Print
October 27, 2008 01:00 AM

Then and now

  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Roger Schillerstrom

    Investors must always look forward. They must look to the future because they have to try to make money in all kinds of markets — booms and busts, and all levels of uncertainty.

    However, on the occasion of Pensions & Investments' 35th anniversary — with investor uncertainty now at a high, as measured by the volatility index, and with the stock market plunge devastating retirement assets and investment confidence — it is appropriate to reflect on the past to gain perspective on the current crisis and the future.

    P&I was started in the depths of one of the worst markets in history, when analytical and informational tools were limited, when investment innovation was virtually non-existent, and much of the information now taken for granted was unavailable, if even collected.

    P&I published its first issue in the early months of what turned out to be the 1973-'74 bear market, which produced a -20.8% annualized return, the worst since the Depression years of 1931-'32 with their 27.9% annualized loss.

    Wall Street was then a powerful oligopoly and investors were compelled to trade securities under its fixed commission structure, although use of so-called off-Wall Street discount brokers was beginning.

    The freeing of commissions in 1975 began a gradual reduction in trading costs for investors, and contributed to a surge in trading volume.

    The seminal Ibbotson-Sinquefield study of stock, bonds, bills and inflation — which showed the returns for each asset class since 1926, provided empirical evidence for equities as the superior risk-adjusted asset class and became the foundation for asset allocation models — wasn't published until 1976.

    Even the idea of measuring pension fund performance was disputed in 1973, although pioneering firms like A.G. Becker Inc. with its Funds Evaluation Group already were showing how to do it. Academic theories like beta, a measure of the sensitivity of a portfolio to the market, were only beginning to come into use.

    The revolution in computer technology, especially the invention of the PC and Macintosh and their powerful analytical software, began to take hold only in the 1980s, transforming portfolio management. The Internet was unknown.

    Financial derivatives virtually were unknown in 1973. Only options were in common use. The S&P 500 futures contract, the first major equity index derivative, began trading in 1982.

    In 1973 investment management still was dominated by bank trust departments and insurance companies, while investment counselors, as they were called then, were only beginning to win pension fund clients.

    U.S. pension assets in 1973 totaled $283 billion. Last year, the top 1,000 defined benefit assets totaled $5.4 trillion.

    These changes and many others just as important — such as short selling, alternatives strategies, hedge funds, international diversification, etc. — have changed the ways in which institutional investors seek to make the assets under their control grow.

    Most large pension funds, endowments and foundations have sought to use the latest tools to mitigate the effects of market downturns. But institutional investors should now have learned they cannot completely insulate their assets from bear markets with even the most sophisticated programs.

    The best they can do is use the available tools to minimize the losses, and be prepared to take advantage of the economic and financial market recoveries when they come. They must rigorously analyze what strategies worked and why they worked, and which strategies failed, and why they failed. They must accept that while the market rises most of the time, for significant periods it can decline.

    Institutional investors today have a plethora of powerful tools to manage investments and risk, making them better equipped to do so than they were 35 years ago. But the market has kept up too, and usually is one step ahead — as it was in the current market debacle.

    The history of the past 35 years shows that as the financial markets evolve, institutional investors must evolve. But investors can never assume they have unlocked the secrets of high risk-adjusted returns in perpetuity.

    The market will always have new lessons to teach those who become overconfident.

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    Gender diversity is improving on FTSE 350 boards
    Gender diversity is improving on FTSE 350 boards
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    The Institutional Investor's Guide to ESG Investing
    Sponsored Content: The Institutional Investor's Guide to ESG Investing

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    Show Me the Income: Discovering plan sponsor and participant preferences for cr…
    Morningstar Indexes' Annual ESG Risk/Return Analysis
    The Future of Infrastructure: Building a Better Tomorrow
    Outlook 2023: Opportunity in a volatile world
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing