Public pension funds fret over high-flying U.S. equities

With U.S. stock prices regularly hitting new records in 2017, pension plans are enjoying high returns from their public equity investments. But many institutional investors are beginning to get nervous, wondering when the good times will inevitably come to an end.

A recent Northern Trust Asset Management survey found that 65% of investment managers believe U.S. equities are overvalued, compared to just 30% in the first quarter of 2016. Some pension funds are reacting with cuts to public equity allocations,
others are standing pat, and some are second-guessing their recent shifts to non-U.S. equities.

“There are fewer and fewer managers that think U.S. equities are fairly valued or undervalued,” said Mark Meisel, senior vice president at Northern Trust. “Some people are beginning to reallocate toward European equities and emerging markets. You are seeing some assets flowing that way.”

Despite growing nerves around valuations, institutional investors tend to have faith in the overall U.S economic outlook, benefiting from a longterm investment horizon as a shield from the pressure. Scott Evans, CIO for the $160bn New York City Retirement Systems, attributed recent positive returns to “ebullient” markets, calling the funds’ situation “dicey” and “fraught with risk” at a June 21 quarterly meeting.

“This is as good as it gets, so we should not be complacent,” Evans said.

Read the full story: Public pension funds fret over high-flying U.S. equities

Published by Money Management Report/Pageant Media.

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