Pension funds in the U.S. and Canada are paying close attention to volatile stock markets, whipsawed by President Donald Trump's tariffs and the threat of a global trade war -- but for now, they are not making major asset allocation changes.
“We are holding the course as long-term investors,” said Donald Kendig, retirement administrator at the $6.9 billion Fresno County (Calif.) Employees’ Retirement Association. “Our rebalancing protocols were altered during the COVID-19 market impacts. We are in a good position for what could come.”
Kendig added that the retirement system's board will discuss its rebalancing policy at a meeting on May 7.
Meanwhile, in Canada, a spokesperson for Public Sector Pension Investment Board, Montreal, said: “We are continually monitoring policies and evaluating how potential outcomes may impact our portfolio and will make adjustments if necessary. Our diversified strategy and long-term focus help us to navigate market fluctuations and continue to fulfill our mandate.”
PSP had C$264.9 billion ($195.6 billion) of net assets under management as of March 31, 2024, the most recent data available.
Katie Girardi, executive director at the $1.8 billion San Luis Obispo County (Calif.) Pension Trust, said “we’re paying attention to what’s happening, particularly the potential for slower growth and increased market volatility if the tariffs stick and escalate. That said, we’re long-term investors, and we don’t make allocation changes based on short-term policy moves, even big ones like this.”
Girardi added that at this point, the tariffs “haven’t prompted us to shift our asset allocation or rebalancing approach. But we’re watching closely and staying in touch with our consultant and managers to understand where the risks and opportunities might be.”
Robert Theller, retirement administrator at the $4.2 billion City of Fresno (Calif.) Retirement System, commented that the tariffs have been a “big topic of conversation” with the pension system’s two boards the past few days.
“CFRS has a long, long-time horizon and we’re well diversified across major asset classes,” he said. “CFRS’ long-term portfolio allocation was adopted after looking at long-term economics, long-term practicalities, long-term risk premiums and our long-term liabilities.”
CFRS’ focus has been and will remain the long-term portfolio structure, Theller asserted.
“Short-term wildly volatile news and political gamesmanship will definitely have a short-term impact on the portfolios,” he conceded. “It seems half the pundits are guessing this is only a short-term negotiating ploy to drive sovereign negotiators to the bargaining tables, and the rest think its economic Armageddon. Since CFRS is not privy to the president’s end game we are unsure which way to jump short term… and (we) need to stay on the long strategic course.”
Theller added: “We will actively and closely monitor the portfolios to ensure we maintain adequate liquidity and watch for opportunities to rebalance if and as needed.” CFRS comprises an Employees Retirement System and a Fire & Police Retirement System -- these are separate legal entities and have separate boards.
A spokesperson for $14 billion San Bernardino County (Calif.) Employees' Retirement Association said “while our fund is not immune to market volatility, our long-term income- focused strategy is built to minimize volatility to the fund and maximize investment returns so we can continue providing retirement security to our members now and well into the future.”
SBCERA has faced uncertain market conditions before, the spokesperson noted. “Over the past 40 years, a period that includes multiple recessions and other economic disruptions, we’ve earned an average annual return of more than 8.8%, the spokesperson added.
“SBCERA’s governance structure, investment strategy, and focus on diversification help position the retirement fund for long-term growth and stability.”
Jared Gross, managing director and head of institutional portfolio strategy at J.P. Morgan Asset Management, said that while rebalancing portfolios is crucial for institutional investors even in normal times, the recent market sell-off brought a new urgency to strategic asset allocation protocols.
Normally, Gross explained, portfolio rebalancing is a straightforward exercise that shifts capital from assets that appreciated in value into those that have underperformed, often from stocks to bonds, or vice versa, returning the portfolio to equilibrium. Certainly, the recent sell-off in equities and rally in bond markets suggests that this type of portfolio shift is on the table, he said.
However, the recent market turmoil may require a more fundamental reassessment of market conditions and the relative attractiveness of key asset classes.
Gross suggests that, based on an investor’s risk tolerance, a modest move into alternative assets, including real assets and infrastructure, may be appropriate. Such assets, he noted, typically have lower correlations to traditional stocks and bonds, generate contractual income, and provide solid total returns and protection against inflation. To the extent that assets and the revenues they generate are local, they may offer some immunity from the impact of tariffs.
