October 7, 2020//-The extraordinary volatility in markets this year has been a key point of concern among retirement investors. To offer some analysis and perspective on this issue, Mike Moran, senior pension strategist for Goldman Sachs Asset Management, joined the Exchanges at Goldman Sachs podcast to discuss his view of how pensions and other retirement plans are responding to an extremely unsettled year.
Here are five takeaways from his conversation.
Retirement plans’ long time horizons buffer against short-term volatility. “These plans have long time horizons and investors often want to stick with that long-term plan that’s been put in place,” Moran says.
Investors are re-evaluating risk tolerance during the pandemic. Though retirement investors are largely focused on the long term, both defined benefit and defined contribution investors are mindful of the current challenges to the investing landscape and may be adjusting their investment strategies and risk profiles as a result.
Fund contributions come into focus. Given the more modest outlook for returns, governments, corporations and individuals are re-assessing how much they’re going to contribute and save in the coming years to stay on track with their financial goals. “Some may find that they need to increase their contributions in order to adequately fund these long-term liabilities,” Moran said.
Traditional 60/40 portfolio falls out of favor. With low interest rates seemingly here to stay, investors are taking a new look at the stocks vs. bonds breakdown in their portfolios, as well as turning to alternative asset classes to generate higher returns.
Demographics lead to fund outflows. America’s aging population means that many retirement plans are in distribution mode. Outflows are set to increase as individuals withdraw from defined contribution plans, and managing those outflows will take on increased importance.
Goldman Sachs
