Many of the developed world’s maturing defined benefit pension plans find themselves in a negative cash flow position; they are paying out more in benefits than they are receiving in contributions. The need to service cash outflow is an additional burden for underfunded plans in a moderate growth, low return world in which rates grind slowly higher. Especially for closed or frozen plans, attempting to reach funding targets while in a negative cash flow position can feel like trying to fill a leaking bucket. What’s more, analysis based on our 2018 Long-Term Capital Market Assumptions suggests that rising rates are unlikely to save the day.
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ABOUT LONG-TERM CAPITAL MARKET ASSUMPTIONS
Our Long-Term Capital Market Assumptions are part of a deeply researched proprietary process that draws on in-depth quantitative and qualitative inputs from experts across J.P.Morgan Asset Management. We, and many of our clients, rely on the output as a foundation for multi-asset class investing.
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