Impact of Public Sector Assumed Returns on Investment Choices
The brief’s key findings are:
- Does the use of assumed investment returns to value liabilities and calculate required contributions lead public pension plans to invest more in risky assets?
- The analysis finds that, even after controlling for a number of factors, public plans invest more in riskier assets than private plans.
- In addition, for any given asset allocation, public plan return assumptions are on the optimistic end compared to those of investment professionals.