Pension Indicator Updated for October 31, 2020

Blue Moon Halloween

By: Matthew Klein, Principal, Findley, A Division of USI

As an actuary, I am well versed in dealing with unknowns and contingencies.  Nassim Nicholas Taleb wrote his famous book “The Black Swan” describing the impact of highly improbable events.  It has been my observation that the “highly improbable” actually happens more often than you think. It feels like there has been a confluence of such highly unlikely events in 2020:

  • A 1 in 100-year pandemic event, which helped set off all kinds of records, like the fastest, most severe contraction in history AND the fastest recovery from a bear market in history
  • 28 named hurricanes, tied for the all-time record, with one month left in hurricane season1
  • A blue moon on Halloween
  • Record amounts of wildfires both in Australia and the western US
  • The Cleveland Browns are 5-3 as of publish date (that’s humor, maybe)

But is this really a confluence?  I would argue the answer is “no.”  While it certainly feels like a lot of bad things have happened this year, a large portion of that is tied back to the one event (the pandemic).  In reality, there are so many events that happen in the course of a year, the highly unusual becomes predictable because life is such a series of never-ending simulations.  You can go back and pick any random year and no doubt you will find instances of highly unusual events in any of them.

Investment managers and actuaries spend a lot of time worrying about “tail risk”- judging what probability should be given to unlikely events and how these events may impact our clients. We use historical experience and statistical modeling techniques to develop best estimate assumptions used in the calculation of projected assets and liabilities. We can also perform stress tests to see how assets and liabilities perform under more unlikely scenarios. With these techniques, we do our best to inform clients and prospects about the range of possible outcomes for any plan.

From all of us at Findley and Clearstead, we hope everyone and their families are safe and healthy. 

As always, thanks for reading, and drop us a comment on how we're doing.

This email address is being protected from spambots. You need JavaScript enabled to view it. or Clearstead  to discuss this information further.

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Information provided in this article is general in nature, is provided for informational purposes only, and should not be construed as investment advice. Performance data represents past performance.  Past performance is not indicative of future results.

1https://www.forbes.com/sites/marshallshepherd/2020/11/01/2020-hurricane-season-delivers-record-28th-named-storm-and-first-ever-tropical-storm-eta/?sh=5eed9a5364d7

Year to Date Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
Frozen (for several years) -7.8% -5.5% -3.3% -1.3%
 Recently Frozen -8.9% -6.7% -4.5% -2.6%
 Ongoing Traditional -10.0% -7.8% -5.6% -3.7%
 Cash Balance -8.2% -5.9% -3.7% -1.8%
Month-over-Month Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) -0.3% -0.3% -0.3% -0.1%
 Recently Frozen 0.3% 0.3% 0.3% 0.5%
 Ongoing Traditional 0.9% 0.9% 1.0% 1.1%
 Cash Balance -0.2% -0.1% -0.1% 0.0%
12-Month Change Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) -3.6% -2.0% -0.5% 0.2%
 Recently Frozen -4.6% -2.9% -1.5% -0.8%
 Ongoing Traditional
-5.4% -3.8% -2.4% -1.7%
 Cash Balance -3.9% -2.3% -0.8% -0.1%


Frozen Plan 7 31

Recently Frozen Plan 7 31

Ongoing Plan 7 31

Cash Balance 7 31

Disclosure