The massive and incredibly successful hedge fund Bridgewater Associates have completed a stress test on U.S. pensions. They determined most pensions are likely to receive an average return of 4% (or below) return on their assets moving forward. This return would bring 85% of pensions to failure, which would be troublesome for the large percentage of Americans that are counting on this income to get them through retirement.
Instead of trying to cut current payouts (which would mean taking on unions) or raise income (raise taxes), pension plans have decided to go with the most illogical path available; allocating their assets toward higher yield (higher risk) investments. They are moving heavily into stocks and real estate, joining the herd rushing to "reach for yield."
It is important to remember that this study took place after a five year artificial reflation of paper asset prices, which are all on the precipice of the next major decline. Following the next collapse the number of pensions projected to fail should be closer to 100%.
