Friday, February 11, 2005

Reality Has Already Hit the Fan

Something smelled funny in the last article I last referenced on the average plan expected return reportedly at 9.1%. I consulted a nice reference resource for sponsors who are trying to judge the reasonableness of their own expected return assumptions. Goldman Sachs published a research report in October of last year (o4) which details the expected returns and asset allocations for a number of large corporate plans. This report shows an equal weighted expected average for 2004 of 8.5% and an asset weighted average of 8.7%. The report indicates that companies have been steadily reducing their expected return assumptions over the last few years so it is likely 2005 average expected returns might even be a tad lower. "The 2002 asset weighted expected return assumption for S&P 500 companies was 9.3%. That percentage fell to 8.7% for 2003".

Often times reality is not as dramatically different as some would like to think...but that may not make a good story.


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