Courtesy of Mish.
It is extremely refreshing to see a large, prominent, and historically accurate fund manager lay it on the line.
GMO does that quarter after quarter, with no-nonsense projections.
As of March 31, their 7-Year Asset Class Real Return Forecast is as follows.
Serious Question for Pension Plans
Given pension plan assumptions of 7-8% annualized returns how many of them can survive negative returns for seven years? It's important to not that GMO is talking about "real" inflation-adjusted returns with an assumption of mean-reversion inflation to 2.2% over 15 years.
Still, that leaves US equities at zero to -1% returns and bonds US bonds at negative 2.4% returns.
Even if GMO is wrong by say 3%, many pension plans will be in deep serious trouble at those returns.
Illinois Pension Plans
I keep harping about this issue, but it's an important one. In the state of Illinois, and in spite of an enormous rally in the stock market since 2009, Illinois pension plans are only 39% funded.
A "Special Pension Briefing" last November, shows the Illinois State Retirement Systems are in dismal shape.
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