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Opalesque Exclusive: Mercer reports US pension plans lose $70bln in turbulent quarter, European plans’ exposure to alternative assets expected to increase in 2008 Mercer reported on US and UK pension plans today in two separate reports.

US pension plans lose $70bln in turbulent quarter The full extent of the credit crunch on US pension plans may not be realized for several months due to US accounting rules where pension costs are determined using data from the prior reporting period. Adrian Hartshorn, a member of Mercer’s Financial Strategy Group reports “Using US accounting rules to place a value on the liabilities of S&P 1500 companies that sponsor pension plans, we estimate there was a net surplus of almost US $120 bln as of October 31st last year; this has now been replaced by a deficit of around US $20bln. However, the reality is that the accounting understates the true cost of settling the plan liabilities, so the real deficit is much higher.”

While suggesting that while the market is too turbulent right now for investment committees to rush to precipitous action regarding their portfolios, Mercer suggests additional risk management strategies should be outlined. Harshorn says “It is only by considering the investment strategy in tandem with the behavior of the liabilities under different economic scenarios that the true nature of the risk can be understood. This represents a change from traditional asset-only investment......................

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