Defined Benefit Pension Plans: Plans Face Valuation and Other Challenges When Investing in Hedge Funds and Private Equity

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Testimony issued by the Government Accountability Office with an abstract that begins "Millions of Americans rely on private or public defined benefit pension plans, which promise to pay retirement benefits that are generally based on an employee's salary and years of service. Plan sponsors are increasingly investing in "alternative" assets such as hedge funds and private equity. This has raised concerns, given that these two types of investments have qualified for exemptions from some federal regulations and could present more risk to retirement assets than traditional investments. This testimony discusses (1) the extent to which defined benefit plans have invested ... continued below

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United States. Government Accountability Office. July 20, 2010.

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Testimony issued by the Government Accountability Office with an abstract that begins "Millions of Americans rely on private or public defined benefit pension plans, which promise to pay retirement benefits that are generally based on an employee's salary and years of service. Plan sponsors are increasingly investing in "alternative" assets such as hedge funds and private equity. This has raised concerns, given that these two types of investments have qualified for exemptions from some federal regulations and could present more risk to retirement assets than traditional investments. This testimony discusses (1) the extent to which defined benefit plans have invested in hedge funds and private equity, (2) challenges that such plans face in investing in hedge funds and private equity, (3) steps that plan sponsors can take to address these challenges, and (4) the implications of these challenges for the federal government. To prepare this statement, GAO relied primarily on its published reports on hedge funds and private equity (GAO-08-692 and GAO-08-200), and obtained new data on the extent of plan investments in hedge funds and private equity. GAO has previously recommended that the Secretary of Labor provide guidance designed to help ERISA fiduciaries better assess their ability to invest in hedge funds and private equity. Labor generally agreed with our recommendation, but has yet to take action."

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Government Accountability Office Reports

The U.S. Government Accountability Office (GAO) is an independent, nonpartisan agency that works for the U.S. Congress investigating how the federal government spends taxpayers' money. Its goal is to increase accountability and improve the performance of the federal government. The Government Accountability Office Reports Collection consists of over 13,000 documents on a variety of topics ranging from fiscal issues to international affairs.

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  • July 20, 2010

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  • June 11, 2014, 5:03 a.m.

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United States. Government Accountability Office. Defined Benefit Pension Plans: Plans Face Valuation and Other Challenges When Investing in Hedge Funds and Private Equity, text, July 20, 2010; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc295119/: accessed November 22, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.