STEVE SHERMAN
In the fourth quarter of 2018, the stock market suffered its worst quarter in a decade, returning most benchmarks to a bear market, down more than 20 percent from recent highs.
Thus far, Newtown Township’s public employee pension plan manager says the fund is among the highest his company handles in terms of equity exposure.
Seventy-five percent of the plan’s assets are invested in stocks, he says.
At last week’s board of supervisors meeting, fund manager Grant Kalson recommended scaling that exposure back to 68 percent.
The supervisors agreed and voted unanimously to reduce the equity allocation of the plan.
“The fact that we’re on the outer edge among public pension plans, that kind of seals it for me,” said Supervisor Dennis Fisher.
For Newtown’s pension plan, the poor performance by the stock market in 2018 meant losses of more than 9 percent. Kalson says all that money has come back into the fund, thanks to healthy returns in the first quarter of this year.
“There’s no getting around how bad the fourth quarter was, not only for your funds, but for the markets in general and for public pension plans around the country,” said Kalson.
“I think we were very lucky; certainly, the market could have continued down.”
Keeping a large portion of the plan’s assets invested in stocks has been advantageous to the fund, says Kalson.
“The markets, for the last 10 years, have been irregularly up so the more you have in equity, the more up you go, so it’s been very beneficial,” said Kalson.
“(But) I’m scared to death right now; I want to step it down.”
While stocks have continued to rise since 2009, Kalson says that performance, more than likely, will not continue.
“The assumption is that things will not be as rosy, in terms of double digit equity returns, for the next 10 years,” he said.
“Forecasts can be dead wrong, but Goldman Sachs is saying that, Vanguard is saying that, and several others are saying that.”
Interest rates that have stabilized, progress between the United States and China in trade negotiations and a healthy job market are factors that helped the market rebound this year.
But there are negatives investors have to account for, Kalson says, including corporate earnings forecasts that are predicting more volatility in the future.
“Earnings were so high, they can’t be sustained – the rate of growth has to slow down,” said Kalson.
“And there’s a lot of uncertainty in Washington. There are populist governments all over the world so it’s sort of like us first, and the rest of you all second, and that’s not good.
“If global trade is a plus, that’s a minus.”
Township Manager Micah Lewis likes the job Kalson and the company he manages – Dahab Associates – have done for the township.
“Grant and Dahab have done a fantastic job navigating a very difficult 2018 as far as the markets and the equities (markets) go,” said Lewis.
“For us to be back to where we started 2018 – with the way things have been – is truly remarkable.”
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@stevesherman222
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