Thursday, January 29, 2009

Brethren Benefit Trust issues a report on its investment losses.

Brethren Benefit Trust (BBT) has issued a report on its investments, following the sharp market decline and national financial crisis. The report was written by Nevin Dulabaum, president of BBT, and is taken from the BBT newsletter "Benefit News":

"A 50 percent decline in one year--that was the dubious milestone reached by the S&P 500 in November during the time that the Brethren Benefit Trust Board was convened for its fall meetings. This decline was the sharpest by the equity markets since the 1930s. What is worse, there were few safe investment havens in 2008--all market sectors experienced declines, which means all investors in the equity markets experienced negative returns, including BBT.

"Through November, BBT’s assets under management, which include funds of Brethren Pension Plan and Brethren Foundation, had declined $119 million for the year to $320 million. However, they rebounded slightly in December as the markets showed a sign of recovery--the S&P 500 increased by about 10 percent for the month.

"Nevertheless, what does the aggregate decline in investments mean for BBT’s members and client organizations?

"It depends. For people who have more than one investment cycle left (generally 10 years) before they retire or for organizations making longterm investments, the downturn should have little impact, if history is any guide. The markets typically rebound over time, as equities began to do in December. In the meantime, investments made while the markets are lower will increase greatly as the markets climb upward, which will benefit portfolios invested in equities longterm.

"For people approaching retirement or for organizations wanting to access their funds in the near future, conservative asset allocation is the key--a less risky fund choice should be selected to ensure that there is no erosion of principle.

"For people who have retired through the Brethren Pension Plan, BBT has given them an annuity that will pay them for life. BBT’s mandate is to ensure that the Retirement Benefits Fund, from which the annuities are paid, remains able to fulfill its obligations for decades to come. Each year in January, BBT engages Hewitt Associates to perform an actuarial assessment that gives us a snapshot of the fund’s longterm viability. This year’s study will be more comprehensive than normal, given the severity of the markets’ sharp declines in 2008. The results of the study are expected to be ready for review by the BBT board and staff in February.

"In the meantime, the BBT board did take action in November to help BBT have one investment option that is expected to show a positive return over any rolling three-month period--its Short-Term Fund. The board hired a new fund manager, Sterling Capital Management of Charlotte, N.C., that specializes in investing in shorter duration notes, allowing the firm to be more agile in its investment selection and thus reduce the likelihood of negative returns.

"At its Nov. 20, 2008, meeting in Elgin, Ill., the BBT board’s Investment Committee reviewed the performances of its eight national investment managers, seeking to ensure that all managers were producing results that exceed their respective benchmarks and were positioned in the top quartile of their peers. By frequently reviewing the investment managers and ensuring that they are diversified among many investment sectors, BBT board members and staff seek to ensure that investments under management can weather most financial downturns with little adverse impact relative to their respective benchmarks.

"Whatever your investment situation, the best way to deal with your financial investments is to meet with a financial planner, develop a plan, and stick with it. That course of action will minimize the impact of a financial storm as was experienced in 2008."

Source: 1/29/2009 Newsline

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