Seatbelts Secure

Frequently, I find myself in an Uber. It is often less expensive to get an Uber from downtown Indianapolis to the airport than to pay for parking. Uber now has an alert reminding riders to fasten their seatbelts. While fastening our seatbelts is hopefully a habit for our safety, it is also a good metaphor for managing economic cycles and market dynamics.

At Pension Fund, we market ourselves as providing a strong, smart, and secure retirement. We assume the burden of market risk with our products, so our members are protected from a loss in account value and continue earning a base rate of interest with the possibility of Good Experience Credits (GECs).

To operate with the security and peace of mind we offer our members, we must maintain good discipline — a tight seatbelt. Last month, as the market began to decline, I wrote about our strategy of not chasing market sectors, which helps us avoid overexposure to risk. Given the continued self-inflicted wounds that have erased over $6.6T in market value, I thought I might write again to help calm nerves and address concerns.

While I am not a registered investment advisor, and this should not be taken as investment advice, the basic principle of individual investing is to save early and take on risk during the accumulation phase, then dial down your risk as you move into drawing on your funds — the decumulation phase.

When you are an institutional investor, structured like Pension Fund, you are investing on behalf of 14,000 people who are on 14,000 different cycles of accumulation and decumulation. Therefore, the investment approach must be more balanced with the long-term horizon in mind. We are not only planning for today and the May 1 pension payments but for the 25-year-old who could be with us 60-70 years.

Having your seatbelt securely fastened is a metaphor for maintaining discipline. Unrealized gains may vanish on paper, but losses are not realized until you sell. Daily, we review our asset allocation versus our standing in the market through a third-party (Parametric). When we hit a rebalance trigger, we carefully sell from overweight sectors and buy in areas where we are underweight. Rebalancing our portfolio is never done out of fear or angst but out of discipline and data.

As we move through these uncertain days, know that our seatbelts are fastened. We are a long way from 2008-2009, and, as Bill Ackman of Pershing Square investments shared, “hopefully we can negotiate with other countries and avoid a self-induced economic nuclear winter.”

Seatbelts fastened in service to you!

Rev. Dr. Todd A. Adams

President and CEO