The thing about being a pension fund in a world where returns on risk free assets are at best an inflation adjusted zero and at worst guarantee a loss when held to maturity is that you’re effectively forced to go out and take bigger risks if you want to hit your targets. In the US, public sector pension funds cling to the fantasy that they can return 7-8% while still keeping risks manageable while a lower discount rate attributable to ZIRP and NIRP has caused the present value of eurozone defined benefit plan liabilities to soar. In short, the “lower for longer” rates regime can be tough for large pension funds to ... (full story)