Consultant vs. Actuarial performance assumptions

SAN FRANCISCO, October 27, 2021 / PRNewswire / – Callan, a leading institutional investment advisory firm, has announced the publication of a study exploring the differences between the way actuaries and investment consultants make assumptions about expected returns.

Strong points:

  • Sponsors of public defined benefit plans should understand that actuaries and investment consultants make assumptions about expected return that are inherently different and often different.
  • Plan trustees should understand these differences, as the two assumptions are used for different purposes and are based on different economic and financial inputs.
  • Defining asset allocation is more complex than solving the portfolio that provides an expected return equal to the actuarial discount rate.
  • The forecasts of investment consultants often change with market conditions, while changes in actuarial assumptions should be made infrequently, as such changes can have major impacts on the funding and overall health of a plan.

Consultants’ expectations are now significantly lower than actuarial expectations, which will likely lead to median actuarial expectations falling from their current level of 7.0%, ”the co-authors said. Brady O’Connell, Senior Vice-President and Investment Consultant, and Jean Pirone, Senior Vice President and Capital Markets Research Consultant, in a joint statement. “When setting both actuarial discount rates and long-term asset allocation strategies, public pension trustees should be aware of what determines the differences between their actuarial discount rates and the assumptions of the capital markets consultants. ”

Mr. O’Connell and Mr. Pirone will discuss the results of this study during a Callan Research Café webinar on October 28, which is open to the public at no cost. Register here.

Find the summary blog article and the full study here.

Media contact:
Elisabeth Anathan
[email protected]

About Callan

Callan was founded in 1973 as an employee-owned investment advisory firm. Since then, we have provided our institutional clients with creative and personalized investment solutions, backed by proprietary research, proprietary data and continuing education. Today, Callan advises over 3 trillion dollars in the total assets of fund sponsors, making it one of the largest independent investment advisory firms in the United States. asset owners. Callan has six offices across the United States. Learn more about


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