Pensions Funds - The Next Disaster??


Staff member
Pensions funds may be next in the western world to ask for bailouts.

Unlike in India, pension funds in the west invest large part of their corpus into stock markets.

e.g. at the time when Tata Steel acquired Corus, 40% of Corus' pension funds were invested in equities. Tatas reduce this to 25%, but still 25% is a significant exposure.

The current bear market has significantly eroded assets of many pension funds and these funds are now staring at huge deficits.

Although this article focuses more on public pension funds in the US, it is an eye-opener.

The misleading numbers posted by retirement fund administrators help mask this reality: Public pensions in the U.S. had total liabilities of $2.9 trillion as of Dec. 16, according to the Center for Retirement Research at Boston College. Their total assets are about 30 percent less than that, at $2 trillion.

With stock market losses this year, public pensions in the U.S. are now underfunded by more than $1 trillion.
Typically, public pension funds put 60 percent of their assets in stocks, 30 percent in fixed income, 5 percent in real estate and the rest in riskier investments such as hedge funds and commodities.