If you have read the pages of Pensions & Investments over the past year, or really any news, you would know the challenges the coronavirus pandemic has persistently presented.
But you wouldn't get the sense that anything was amiss this past year by looking at the data P&I collected on the largest U.S. retirement plans. If anything, it looked like a downright uneventful year.
The resilience of plan sponsors was on full display in 2020. Yes, they were aided by central bank and fiscal policies, but the assets of the 1,000 largest retirement plans grew by 6.6% in the year ended Sept. 30. Pretty much on par with average years, but pretty unbelievable given where everything stood last March.
The past year showed the importance of long-term investing. Defined benefit plans were able to test their asset allocations and liquidity buffers while investing opportunistically across a large swath of distressed areas in the face of an unpredictable pandemic. The good news: Plan sponsors passed the test with flying colors and minimal pain to their portfolios. The bad news: Plans are still not out of the woods. Plan sponsors need to keep an even more watchful eye on the dichotomy of the economy and markets, the vaccination progress and mutation of the virus, and potential bubbles in several areas and future inflationary pressures.
But it is encouraging to see the active steps investment teams are making in quickly changing markets. This issue of P&I is full of anecdotes about how chief investment officers and their teams weathered the storm and struck back after markets bottomed out. Several themes of success stood out: Executives didn't panic, stuck to their long-term plans and acted fast to rebalance and invest in emerging opportunities.
Taking it beyond P&I's survey period, it is clear that the year ended Dec. 31 was a boon for many plan sponsors. Public pension plans are announcing huge double-digit returns for 2020, including 15.2% for Wisconsin Retirement System's $120.1 billion core trust fund.
It may have been a roller-coaster ride with big dips and even larger climbs to get to this point, but plan sponsors deserve credit for thriving in the most uncertain of times.