Chief investment officers' secret for investment success in 2020 was simple: stick to the plan.
None of the CIOs Pensions & Investments contacted said it was easy to manage multibillion-dollar defined benefit plans during the early phase of market turmoil that flared up in response to the COVID-19 outbreak.
But they stressed that by maintaining their asset allocations through rigorous portfolio rebalancing and by taking advantage of distressed investment opportunities created by pandemic conditions, their portfolios came out of the panic phase in 2020 in good shape and went on to produce strong performance in the year ended Dec. 31.
"The pandemic illustrated perfectly that good investment policy fulfills exactly the role that's needed to keep your portfolio on track. The power of this process can't be understated," said Ashbel C. Williams Jr., executive director and CIO of the Florida State Board of Administration, Tallahassee, in an interview.
The SBA managed a total of $168 billion in defined benefit plan assets and $12.2 billion in defined contribution plan assets as of Sept. 30, according to data from P&I's survey of the largest retirement plans.
Despite their resolve to stay the course and adhere to their asset allocations, many plan sponsors needed reassurance during the intense six-week "market free fall" beginning in February last year, said Jeffrey MacLean, CEO of investment consultant Verus Advisory Inc., El Segundo, Calif., in an interview.
"I did a lot of hand-holding, a lot of explaining, a lot of calming people down about the unusually high level of market volatility and a lot of reminding institutional investors to maintain their long-term asset allocations over the past year," Mr. MacLean said.
Asset owners like Florida SBA said they found that internal management of a significant portion of their defined benefit portfolios was a distinct advantage during tumultuous markets early last year.