U.S. retirement funds experience worst decline in 30 years

According to Pensions & Investments, the international newspaper of money management, U.S. retirement funds lost almost $1 trillion of their value in the year ended September 30, 2008, the worst decline in the 30 years Pensions & Investments has tracked the largest 1,000 plans.

The decline is due to largely disastrous returns from equity markets, noted Nancy K. Webman, P&I's editor. Domestic equities, as represented by the Russell 3,000 index, fell 23.1 percent for the year ended September 30. International equities performed even more poorly, with the Morgan Stanley Capital International Europe Australasia Far East index returning -32.5 percent.

The fourth quarter of 2008 made it worse: P&I estimates assets of the plans fell an additional $754 billion, or 11.8 percent. That puts the total loss at $1.7 trillion, or 23.3 percent, for the 15 months ended December 31. The results of the survey will be published in the January 26 issue of Pensions & Investments, the international newspaper of money management. The results are based on responses to detailed surveys sent to executives at corporate, public and union retirement plans. Statistics are compiled on both defined benefit and defined contribution - such as 401(k) - plans at each institution.

The bad news:

Aggregate assets of the 1,000 largest U.S. retirement plans dropped $965 billion, or 13.1 percent, to $6.4 trillion as of September 30, from the prior year.

Assets of P&I's top 200 funds declined 15.9 percent to $4.7 trillion as of Sept. 30, also the worst in the past 30 years.

Aggregate defined benefit plan assets among the top 200 dropped 16.5 percent to $3.7 trillion in the year ended September 30, the worst in the 20 years for which P&I has tracked the breakdown between defined benefit and defined contribution plans.

Defined contribution plan assets of the top 200 also declined, but by a slightly more palatable 13.7 percent, or $164 billion.

Since 1979, there were only two other years in which P&I's data showed a decrease in the assets of the 1,000 largest funds: In 2001, assets dropped 12.7 percent from the prior year's survey and in 2002 assets dropped 9.7 percent. Kevin P. Quirk, founding partner and principal of industry researcher Casey Quirk & Associates LLC, said the death march that the corporate defined benefit plan is on is reflected in P&I's survey data. (Defined benefit plans promise participants benefit payment at retirement.)

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