Defined Benefit

Putting 2022 Public DB Plan Performance into Perspective

Putting 2022 Public DB Plan Performance into Perspective
clock
1 min 42 sec

For many, the new year leads to a fair amount of reflection on the previous year and also a pivot to goals and objectives for the coming year. While public defined benefit (DB) plans tend to focus their investment results around fiscal years typically ending at midyear, they can’t help but look at their investment performance during the very challenging period that was 2022, a year that saw high inflation, unprecedented losses in fixed income, and a bear market for equities globally.

Public DB Plan Returns in 2022

Amid this challenging environment, the median public defined benefit (DB) plan fell 12.7%. As the chart below illustrates, this was just the sixth negative calendar year the median public plan has experienced during the past 30 years. This particular 30-year period includes major economic events such as the busting of the Dot-Com Bubble and the Global Financial Crisis. During 17 calendar years—over half of the time—the median public plan posted double-digit positive returns.

public db plan returns 2022

While much can be learned from performance during shorter time periods—and one year is indeed a short stretch of time for investors with long-term time horizons—we should also view recent results relative to longer-term returns. When adding this very difficult 2022 to previous years and viewing the trailing 10-, 20-, and 30-year periods, we see evidence of returns that are favorable when stacked up next to actuarial discount rates, which have ranged from 6.75% to 8% over the last 20 years and which often serve as the long-term investment objective for public retirement plans.

public db plan returns 2022

As we digest the full results from a difficult year, and turn our focus to the future, let us not lose sight of the long-term goals for most public retirement plans. It is also important to note that while rising interest rates created losses rarely seen in the bond markets, they have also created a forward-looking investment environment that offers much more compelling returns for bond investors than were available a year ago. For more information on our future outlook, we encourage our clients to view our recent webinar on Callan’s 2023 Capital Markets Assumptions.

Disclosures

The Callan Institute (the “Institute”) is, and will be, the sole owner and copyright holder of all material prepared or developed by the Institute. No party has the right to reproduce, revise, resell, disseminate externally, disseminate to any affiliate firms, or post on internal websites any part of any material prepared or developed by the Institute, without the Institute’s permission. Institute clients only have the right to utilize such material internally in their business.

Posted by

Share
Share on facebook
Share on twitter
Share on linkedin
Related Posts
Macro Trends

Our Capital Markets Assumptions: How'd We Do?

Greg Allen
Greg Allen and Julia Moriarty compare Callan's Capital Markets Assumptions to actual returns since 1989.
Macro Trends

Risky Business Update: Our 2024 CMAs Change the Equation

Julia Moriarty
Julia Moriarty provides an update to our famous "Risky Business" pie charts using our latest Capital Markets Assumptions.
Operations

How Your Public DB Plan's Returns Compare | 3Q23 Update

Public DB Plan Focus Group
The Public DB Plan Focus Group analyzes returns so far this fiscal year and puts them in historical context.
Operations

A Deeper Dive Into the Tradeoff Between Return and Risk

Kevin Machiz
Kevin Machiz analyzes the tradeoff between risk and return for public DB plans.
Operations

How Your Public DB Plan's Returns Compare | 2Q23 Update

Public DB Plan Focus Group
Callan Public DB Plan Focus Group provides an update on plan returns and analysis of how they compare over time.
Operations

How Your Public DB Plan's Returns Compare | 1Q23 Update

Public DB Plan Focus Group
Callan Public DB Plan Focus Group provides an update on plan returns and analysis of how they compare over time.
ESG

Biodiversity: A Relatively New Theme for ESG-focused Investors

Kristin Bradbury
Kristin Bradbury discusses the relatively new type of ESG thematic investing focused on biodiversity.
Macro Trends

Our Capital Markets Assumptions: How’d We Do?

Julia Moriarty
Greg Allen and Julia Moriarty examine how Callan's Capital Markets Assumptions compared to actual returns over time.
Macro Trends

Risky Business Update: After a Historic Year, What’s Changed?

Julia Moriarty
Julia Moriarty provides an update to our famous "Risky Business" pie charts using our latest Capital Markets Assumptions.
ESG

Callan Survey Sees First Decline in ESG Incorporation Since 2019

Thomas Shingler
Tom Shingler and Hannah Vieira describe the findings of our 2022 ESG Survey.

Callan Family Office

You are now leaving Callan LLC’s website and going to Callan Family Office’s website. Callan Family Office is not affiliated with Callan LLC.  Callan LLC has licensed the Callan® trademark to Callan Family Office for use in providing investment advisory services to ultra-high net worth clients, family foundations, and endowments. Callan Family Office and Callan LLC are independent, unaffiliated investment advisory firms separately registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940.

Callan LLC is not responsible for the services and content on Callan Family Office’s website. Inclusion of this link does not constitute or imply an endorsement, sponsorship, or recommendation by Callan LLC of their website, or its contents, and Callan LLC is not responsible or liable for your use of it. When visiting their website, you are subject to Callan Family Office’s terms of use and privacy policies.