Impact of Public Sector Assumed Returns on Investment Choices

by and

SLP#63

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.

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