Chicago, IL (1888PressRelease)
April 28, 2009 - The topic of risk was the focus of the discussion as Charles Millard addressed his peers at the U.S Pensions Summit, Boca Raton Resort and Club, Boca Raton, FL. He opened the line-up of keynotes that also featured Dr Alan Greenspan, Chairman, The Federal Reserve System (1987-2006). Focusing on the much-debated strategy implemented by the Pension Benefit Guaranty Corporation’s Board, Mr. Millard discussed the mitigation of risk and the value of a long-term plan.
In his opening statements Mr. Millard called the current economic environment a ‘historic opportunity’ for PBGC to implement a long–term policy and later concluded that the policy would have trounced average returns for 2008 if it had been implemented in that calendar year. Further, he believes that the new policy gives the PBGC the best chance to avoid congressional bailout and admonished critics who fault the effects of the policy which has not yet been implemented.
Rather than question what risk is, Charles Millard suggested that the critical question is: What risk? What are the risks that should be mitigated and avoided; volatility, longevity, correlation? After discussing the effect that each type of risk could have on PBGC, Mr. Millard had this to say, “What risks should concern the PBGC the most? I would argue there are two: First, not the ups and downs in a given year on a long-term policy, rather: protection against how bad it can get. Second, the risk that Congress will have to bail out the PBGC.”
On the topic of ‘funding-up’ he said, “I am amused by those who say that the PBGC should fund-up or raise capital and immunize. Such a method would do nothing to immunize against future liabilities, but besides that, the PBGC has no legal method for funding up or raising capital… it has no cash flow or profits, nor does it have a stock price.”
Mr. Millard concluded: “The PBGC investment policy is specifically designed to give the PBGC a better chance of paying its liabilities without the need for a Congressional bailout.” Further, he issued this challenge to the delegates, “This analysis applies to each of you here, not because you are responsible for guaranteeing 40,000,000 Americans’ pensions, but because every pension plan, endowment, foundation, insurance company or other large institutional investor must focus on risk. But, until you know what risk you are trying to avoid or mitigate, jumping into risk management can be a risky business.”
The US Pensions Summit brings together a diverse group of investment decision makers for the opportunity to network and share information while experiencing presentations from some of today's leading pension plan investment strategists, including Bradley Belt, Former Executive Director, PBGC and Chuck Blahous III, Senior Fellow, Hudson Institute and Former Deputy Director, National Economic Council.
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