FROM: Lisa Sorani, Manager of HR Employee Services LS -
FROM: Lisa Sorani, Manager of HR Employee Services LS -
FROM: Lisa Sorani, Manager of HR Employee Services LS -
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
THE CURRENT INTEREST RATE ENVIRONMENT<br />
• The declining i interest t rate environment has been very positive for Plan Sponsors<br />
• As interest rates fell and pushed up Fixed Income returns, the performance sacrifice for<br />
holding Fixed Income instead <strong>of</strong> more risky Stocks was relatively small<br />
• Over the past 20 years, Fixed Income has returned 6.1% while stocks have earned 8.5%<br />
o<br />
This resulted in a relatively small 2.4% performance sacrifice for holding considerably safer Fixed Income rather than<br />
Stocks<br />
• Using a 70% Stock / 30% Fixed Income allocation earned 7.78% per year over that time<br />
period<br />
• However, using the same 70/30 mix with today’s low 2% yield on Fixed Income results in an<br />
annual return <strong>of</strong> only 6.55%!<br />
• This creates a challenging environment for Plan Sponsors as most plans have higher actuarial<br />
assumed investment return assumptions<br />
Pension Consulting Alliance, Inc. ││ EBMUD Fixed Income Discussion │ 6
Change language