Trust the Process: Public Pension Investment Strategy

Aon believes that there is more to the public pension plan story story than is typically portrayed, so we intend to share the facts about the investment strategy component. The strategic process followed by many public pension plans is rigorous in its evaluation and statistics over the past decade show that public pension asset allocation has evolved with the global opportunity set providing a more diversified portfolio.

This paper delves deeper into the following key takeaways specific to public pension plans’ investment strategies:

• Rigorous Process: The approach to setting asset allocation includes robust stress testing and gives fiduciaries confidence to stay the course through market volatility
• Diversifying Asset Classes: Asset allocation has evolved over time along with the global opportunity set, reflecting an increase in exposure to diversifying investments and corresponding decrease in equity exposure
• Positioning for Future Volatility: This asset allocation evolution has better positioned plans for volatile markets, such as the volatility experienced in 2020,and for the lower expected return environment looking ahead
• Competitive Advantages: The continued focus on plans’ unique competitive advantages positions them well to navigate future market cycles