Multiemployer Pension Plans Can Grow Assets While Limiting Risk Through Increased Diversification
August 08, 2007 by Pension Management Research Panel
Multiemployer plan trustees have long weighed the pros and cons of the traditional conservative nature required to protect plan assets with the growth possibilities increased diversification can bring. Multiemployer plans have historically lagged when it comes to increasing diversification into some of the newer and more complex asset classes.
The reasons for this vary, but often trustees are under the misconception that non-traditional asset classes carry more risk and feel it is their fiduciary responsibility to keep the plan's assets in what they consider to be "safer" investments. This not only is a misconception, but in fact in certain cases, the opposite is true - multiemployer plans can effectively manage risk by increasing diversification.