Callan Releases Pension Plan-Focused Study: Consultant vs. Actuarial Performance Assumptions

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Oct 27, 2021, 08:03 ET

SAN FRANCISCO, Oct. 27, 2021 /PRNewswire/ -- Callan, a leading institutional investment consulting firm, announced the release of a study exploring the differences between how actuaries and investment consultants develop assumptions on expected returns.

Highlights:

Public defined benefit plan sponsors should understand that actuaries and investment consultants offer assumptions on expected return that are inherently different and often do not match.
Plan fiduciaries should understand these differences, because the two assumptions are used for different purposes and are based on different economic and financial inputs.
Setting asset allocation is more complex than just solving for the portfolio that provides the expected return equal to the actuarial discount rate.
Investment consulting forecasts often change with market conditions while changes to actuarial assumptions should be done infrequently because these changes can have major impacts on a plan's funded status and overall health.

Consultant expectations today are significantly below actuarial expectations, which will likely drive median actuarial expectations down from their current 7.0% level," said co-authors Brady O'Connell, senior vice president and investment consultant, and John Pirone, senior vice president and capital markets research consultant, in a joint statement. "When setting both actuarial discount rates and long-term asset-allocation strategies, public pension fiduciaries should be aware of what drives the differences between their actuarial discount rate and consultant's capital markets assumptions."

Mr. O'Connell and Mr. Pirone will be discussing the results of this study during a Callan Research Café webinar on October 28, which is open to the public at no cost. Register here.

Find the summary blog post and full study here.

Media Contact:
Elizabeth Anathan
[email protected]
415-274-3020

About Callan

Callan was founded as an employee-owned investment consulting firm in 1973. Ever since, we have empowered institutional clients with creative, customized investment solutions backed by proprietary research, exclusive data, and ongoing education. Today, Callan advises on more than $3 trillion in total fund sponsor assets, which makes it among the largest independently owned investment consulting firms in the U.S. Callan uses a client-focused consulting model to serve pension and defined contribution plan sponsors, endowments, foundations, independent investment advisers, investment managers, and other asset owners. Callan has six offices throughout the U.S. Learn more at callan.com.

SOURCE Callan LLC