U.S. pension guarantor alters investment strategy

The Pension Benefit Guaranty Corp. said Monday that it had adopted an investment policy designed to increase chances that the government pension guarantor would be fully funded within 10 years.

“The PBGC is responsible for the pensions of 1.3 million Americans, but we don’t currently have the resources to keep all of our future commitments,” Director Charles Millard said.

The agency, a privately funded corporation created by Congress in 1974 to guarantee payment of basic pension benefits for about 44 million American workers and retirees, had an accumulated deficit of $14 billion at the end of 2007.

“The new investment policy adopted by the PBGC board of directors will better manage our invested assets,” Millard said.

He added that although it should generate higher returns, its broader diversification offered lower risk.

The strategy is pegged to give the agency a 57% likelihood of full funding within 10 years, compared with a 19% chance under the previous policy, he said.

The agency currently has about $55 billion to invest in the new investment policy, under which 45% of assets will be allocated to a diversified set of fixed-income investments. Another 45% will be allocated to diversified equity investment and 10% to alternative investment classes.