Diverse is Key
Ride Out the Low-return Market with Diverse Investments
For public employee pension systems, diversification remains key to spreading investment risks within the current low-return market.
Economic experts predict the United States will continue to see restrained economic growth along with growing debt and low-key inflation during the next five to seven years. That means pension systems should expect to see stocks, bond markets, and interest rates lower for longer than what investors might have expected.
“It is clear that retirement dynamics have changed,” said Delia Roges, managing director of Invesco, a Houston-based investment management firm and associate advisor member of TEXPERS. “People living longer and running out of money in retirement is a real concern. This coupled with unexpected expenses means those nearing retirement need a well-diversified portfolio and access their options carefully.”
Roges made the statement after reviewing a Philly.com story regarding key findings presented during a retirement conference held May 4 and 5 in Pennsylvania. The conference was hosted by Olivia Mitchell, a professor of insurance, business economics and policy at the Wharton School of the University of Pennsylvania. During the event, a gathering of economists, financial experts, and portfolio managers discussed the current marketplace and how it could impact retirement.
Here are a few takeaways:
- Demand is high for quality bonds, which is resulting in low-yield returns
- President Donald Trump reversed an earlier call for raising interest rates
- Pension plans should get used to seeing lower annual bond returns
- Retirees should save 14 percent of income annually