Sage Advice Asset Liability Monitor 2Q2006

The perfect storm of falling equity prices and falling interest rates witnessed at the dawn of the new millennium revealed what can happen when market risk and interest rate risk work together against pension plans. Most financial professionals acknowledge that this scenario created a situation where diversification and downside protection failed. Justifications of insufficient investment strategies have led to submissions that there was “nothing that could have been done” to defend pension plans from the storm. Beneficiaries now face retirement losses due to unpredictable economic events which could not have been avoided. No matter what had been done prior to the arrival of the storm, it was impossible to avoid its path and devastation. Or was it?