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By Natalie Cohen 02-04-2020

Public Pensions May Have More Illiquid Investments Than You Think

(3 min read)
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Recent, dramatic declines in the value of equity markets (and more recently, fixed income) will probably appear in weaker public pension funding ratios as plans begin to disclose their returns.

Certainly, some plans incorporate asset value smoothing, which reduces the year-to-year volatility of gains and losses. However, the Government Accounting Standards Board (GASB) in required public plans to disclose how plan sponsors determine the value of their investments, beginning in 2017, and outlined a three-level hierarchy. (The corporate Financial Accounting Standards Board (FASB) implemented this approach in 2008, following the collapse of Enron in 2002 stemming from falsified holdings and off-the-books accounting.)

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