From the 401k statements upwards of 60% of the pension funds are in REIT trusts. With the 10 year going from 1.2ish% to 2.5% the losses in those funds will pile on quickly in Q1 and beyond. How protected are those funds with pensions? They guarantee a 7.5% return but when 60% is losing at some point they would adjust no?
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Stay away from any long bonds that are in those target date funds and the RI Fund. I'm only in the Short Treasury fund 85% and US Equity 15%. I can't afford to lose my shirt when anyone can be laid off tomorrow.
No, I meant quarterly report. If you dig through it you get the rate of return of 7.5%. If you dig in your pension statement it has 3 investments and two of those are REIT's and total 60% of the pension fund.
What's a pension?
A 401(k) and a pension are two completely different things. I don't know which company you work for, but for SLB you get to choose which investments your 401(k) is invested in. If your 401(k) is 60% in REITs then that was your choice. In the USA the pension is guaranteed up to a certain dollar amount depending on your age and several other factors by the PBGC (Pension Benefit Guarantee Corporation, a US government agency). Private sector employers that offer a defined benefits pension are required to pay for this 'insurance'.
As a side note, no one guarantees a 7.5% return. That amount you see in the last SLB 10-K filing in the notes on the pension plan is an accounting ASSUMPTION used by the company to determine how much the plan is under or over-funded and whether additional funds need to be added to the plan or can be taken out. Accounting is allowed to make many assumptions. When I read the notes I don't see anything that shows the pension is 60% invested in REITs. There are no hard limits on the funding level of a pension and you will likely find many companies that have pensions are currently underfunded, but companies I follow often keep it within roughly 25% of plan assets as a minimum. SLB carries the under-funded portion of pension obligations as a liability on their balance sheet so it isn't like they can hide this obligation. Going forward, the assumed 7.5% rate of return is likely much too high and SLB will be required to divert some portion of earnings to keep up required funding levels. Several other companies I follow only assume rates of 5.8% on average for expected, future return on investment plans. If SLB reduced its expected return to 5.8% then the liability will increase.