My purpose in writing is to share my thoughts on the comments by David Spaulding (Letters to the Editor, Feb. 21) and the response by Jonathan A. Boersma (Letters to the Editor, April 18) pertaining to the most appropriate calculation methodology for pension funds. To do so, I believe following the catchy lyrics of “The Gambler” sung by Kenny Rogers as a guide to my comments is most appropriate.
“You got to know when to hold 'em ...”
The time-weighted return methodology crafted by Peter Deitz is appropriate for manager-to-manager or even pension-to-pension comparison and should be applied in such circumstances.
“... know when to fold 'em ...”
However, the time-weighted return methodology has critical shortcomings and practitioners need to know when another calculation methodology is more appropriate.
“... know when to walk away ...”
Best practices serve to refine a process, but practitioners need to have the professional discipline and moral courage not to accept conventional wisdom or practices when an alternative methodology more accurately reflects results.
“... and know when to run.”
Perhaps “run” is a bit strong, but the point is valid. Unfortunately, the industry has forgotten that the dollar-weighted or internal rate of return methodology represents the “true” return and by definition is a more appropriate measure of the actual result retirees will receive.
The exchange of thought highlights how practitioners, and our industry, are best served by seeking independent, neutral sources of education and advice to further their ability to make more informed investment decisions to the ultimate benefit of their clients.
Douglas S. Rogers
Lake Barrington, Ill.
EDITOR'S NOTE: Mr. Rogers is not related to Kenny Rogers.