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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

June 2011: 

Pension Benefit Guaranty Corporation: 

Asset Management Needs Better Stewardship: 

GAO-11-271: 

GAO Highlights: 

Highlights of GAO-11-271, a report to congressional requesters. 

Why GAO Did This Study: 

The Pension Benefit Guaranty Corporations (PBGC) insures the pension 
benefits of more than 44 million people. Since its inception in 1974, 
PBGCs assets have grown from about $34 million to almost $80 billion 
in 2010, largely through assets received in plan terminations. Despite 
significant swings in PBGCs investment history, there has been little 
focus on the extent to which it has met its investment goals, the 
nature of its investment policies or how they compare with best 
practices in the industry. GAO examined (1) how PBGCs investment 
objectives have changed over time and the outcomes associated with 
those changes, (2) the performance of PBGCs investments, and (3) how 
well PBGCs investment policies and operations comport with best 
practices in the industry. To address these questions, GAO reviewed 
PBGCs investment policy statements and operational procedures; 
analyzed data on investments; and interviewed PBGC officials, 
officials from several state pension plans and foreign pension 
insurers, and other experts. 

What GAO Found: 

PBGCs investment objectives and stated asset allocation targets have 
changed frequently in the last 8 years, alternating between more 
conservative and more aggressive approaches to investing. Yet these 
changes in stated objectives had only a moderate effect on PBGCs 
actual asset allocation because, for a variety of reasons, PBGC did 
not meet its targets. In our review of their investment history, we 
found that PBGC did not routinely monitor transaction costs related to 
its policy shifts and, at certain times, significant transaction costs 
were incurred. For example, we determined based on data obtained from 
PBGCs investment managers that nearly $75 million in transaction 
costs were incurred during the economic downturn which coincided with 
the period when the 2008 policy was being implemented and subsequently 
suspended. 

Using seven benchmarks, one of which was a Pension Protection Act 
benchmark that GAO constructed, GAOs analysis shows that PBGCs 
investments performed better than most benchmarks on an asset-only 
basis, but tended to underperform all seven of the benchmarks when 
returns were assessed together with the growth in liabilities. GAO 
notes that both analyses have limitations and can be seen by some 
experts as incomplete. However, GAOs method of analysis is consistent 
with how financial economics literature suggests investment 
performance analysis should be conducted. Finally, GAOs analysis 
found no apparent adverse effect on PBGCs investment performance as a 
result of changes in policy. 

PBGCs policy statements and operating procedures are incomplete and 
do not provide sufficient guidance to ensure sound implementation of 
its investment policies. The investment policies issued by PBGCs 
board for strategic guidance in the planning and execution of 
investments have generally lacked a number of provisions recommended 
by the Chartered Financial Analyst Institute; Independent Fiduciary 
Services; and other experts of sound investment management, such as 
the Government Finance Officers Association. Moreover, according to 
our review and based on interviews with PBGC staff, the policy 
statements have been insufficiently detailed to provide adequate 
guidance for staff. In addition, PBGCs Corporate Investments 
Departments staff have largely functioned without the benefit of 
fully-developed and documented operating procedures. 

Although PBGC has grown from a relatively small agency to one holding 
almost $80 billion in assets, its policies and procedures still 
reflect in many ways its small agency past. To ensure that PBGC can 
effectively and consistently meet its obligation to manage a fund of 
this size and its liabilities, PBGCs board and its management must 
enact better stewardship, standards, and procedures to ensure that 
PBGC can effectively and consistently meet its obligation to conduct 
the many investment related functions it performs. 

What GAO Recommends: 

GAO recommends that the PBGC and its board of directors (1) develop 
and maintain comprehensive investment policy statements and (2) 
develop a complete set of operating procedures and guidelines for its 
investment activities. GAO received comments from the Department of 
Labor and the PBGC. They generally agreed with our recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-11-271] or key 
components for more information, contact Barbara Bovbjerg at (202) 512-
7215 or Bovbjergb@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Frequent Policy Changes Occurred, but Changes to Actual Asset 
Allocation Were Moderate: 

PBGC's Investment Performance Results Have Been Mixed: 

PBGC's Policies and Procedures for Implementing Its Investment Policy 
Are Incomplete: 

Conclusions: 

Recommendations for Executive Actions: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Process for Transitioning Funds to Align with PBGC's 
Investment Policy: 

Appendix III: Asset-Only and Net of Liability Analysis of Pension 
Benefit Guarantee Corporation's Single-Employer Total Fund: 

Appendix IV: Comments from the Department of Labor: 

Appendix V: Comments from the Pension Benefit Guaranty Corporation: 

Appendix VI: GAO Contact and Staff Acknowledgments: 

Bibliography: 

Tables: 

Table 1: Similarities and Differences between PBGC and Other 
Institutions: 

Table 2: Transaction Costs Incurred with Investment Policies Adopted 
in 2004, 2006, and 2008: 

Table 3: Descriptions of the Seven Benchmark Portfolios in GAO's 
Analysis: 

Table 4: A Comparison of PBGC Investment Policy Statements with Best 
Practices: 

Table 5: Descriptive Statistics for PBGC Total Fund Portfolio Weights 
by Allocation Period, September 1976 to December 2009: 

Table 6: Portfolio Performance Comparison Results, October 1976 
through December 2009: 

Table 7: Portfolio Performance Comparison Results, October 1976 
through December 2009 (All Asset Returns Are Net of Liability Return): 

Figures: 

Figure 1: Revenue Sources and Uses of PBGC's Funds: 

Figure 2: Growth of PBGC's Trust and Revolving Funds, 1975 to 2010: 

Figure 3: PBGC's Actual Equity Allocations Compared to Targets, 1991 
to 2010: 

Figure 4: Allocations of Bonds and Equities in PBGC Total Fund, 
September 1976 to December 2009: 

Figure 5: Allocation to Equities in PBGC Total Fund, September 1976 to 
December 2009: 

Figure 6: Allocation of Bonds and Equities in PBGC Total Fund, 
September 1976 to December 2009, with Business Cycle Shading: 

Abbreviations: 

CID: Corporate Investment Department: 

ERISA: Employee Retirement Income Security Act of 1974: 

PBGC: Pension Benefit Guaranty Corporation: 

PPA: Pension Protection Act of 2006: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

June 30, 2011: 

The Honorable Sander M. Levin:
Ranking Member:
Committee on Ways and Means:
House of Representatives: 

The Honorable Charles B. Rangel:
House of Representatives: 

The Pension Benefit Guaranty Corporation (PBGC) insures the pensions 
of more than 44 million private sector workers and retirees who are 
covered by more than 27,500 private defined benefit pension plans. 
Created in 1974 as a federal guarantor of these plans, PBGC finances 
its operations through insurance premiums paid by plan sponsors, funds 
received from terminated pension plans, and money earned from the 
investment of these funds.[Footnote 1] Despite PBGC's financial 
holdings of almost $80 billion, the agency currently faces a 
cumulative deficit of more than $23 billion. Alternating between more 
conservative and more aggressive investment strategies, PBGC has 
revised its investment policy several times since its inception. You 
asked us to study: 

* how PBGC's investment objectives have changed over time, whether 
policy goals were met, and what impact have those changes had on 
transaction costs; 

* how changes in investment policy have impacted investment returns; 
and: 

* what methodology did PBGC use to execute investment policy changes 
over the past 10 years and how well did PBGC comport with best 
practices in the industry in terms of development, execution, and 
oversight of its policies. 

To answer these questions, we collected and analyzed information using 
several methods. To identify changes to PBGC's investment objectives, 
policies, and associated costs, we examined the agency's investment 
policy statements, interviewed agency staff responsible for 
implementing them, and obtained data on costs from staff and 
transition managers. Our analysis did not include PBGC's recently 
released investment policy statement in late May 2011, since it was 
issued just after the completion of our audit work. To analyze the 
performance of PBGC's investments, we also obtained PBGC data on 
assets and liabilities and conducted a portfolio performance 
evaluation of PBGC's Single Employer Total Fund's monthly returns from 
October 1976 to December 2009. This analysis compared the fund's 
return performance to that of several benchmark portfolios using a 
variety of portfolio performance statistics. To determine how well 
PBGC comported with industry best practices regarding the development, 
execution, and oversight of their policies, we reviewed investment 
policy guidance from the Department of Labor, the Chartered Financial 
Analyst Institute, and the Government Finance Officer's Association. 
We then compared policy elements from such guidance with PBGC's 
investment policies, and interviewed PBGC staff, a former PBGC 
director, members of the Investment Advisory Committee, and board 
representatives to obtain information about PBGC operations. We also 
interviewed and examined documents from domestic private and public 
insurers, domestic pension plan sponsors, and foreign public insurers. 
For additional discussion of our scope and methodology, see appendix I. 

We conducted this performance audit from June 2009 through May 2011 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that evidence obtained provides a reasonable basis for our findings 
and conclusions based on our audit objectives. 

Background: 

The Employee Retirement Income Security Act of 1974 (ERISA) created 
PBGC as a government agency to help protect the retirement income of 
U.S. workers with private-sector defined benefit plans by guaranteeing 
their benefits up to certain legal limits.[Footnote 2] PBGC 
administers two separate insurance programs for these plans: a single-
employer program and a multiemployer program. The single-employer 
program covers about 34 million participants in approximately 26,000 
plans. The multiemployer program covers 10 million participants in 
another 1,500 collectively bargained plans that are maintained by two 
or more unrelated employers. If a multiemployer pension plan is unable 
to pay guaranteed benefits when due, PBGC will provide financial 
assistance to the plan, in the form of a loan, so that benefits may 
continue to be made up to the guaranteed benefit limits.[Footnote 3] 
However, if the sponsor of a single-employer plan is in financial 
distress and does not have sufficient assets to pay guaranteed 
promised benefits, the plan will be terminated and PBGC will likely 
become the plan's trustee, assuming responsibility for paying benefits 
to participants as they become due, up to the guaranteed benefit 
limits. Most of PBGC's $102.5 billion in liabilities are due to future 
benefit payments owed to participants of underfunded plans terminated 
under the single-employer insurance program. 

To finance these liabilities, PBGC currently has approximately $80 
billion in assets. PBGC's funds primarily come from three sources: 
insurance premiums paid by sponsors of defined benefit plans, assets 
acquired from terminated plans, and investment income earned on these 
assets.[Footnote 4] For example, in 2010 all plans insured by PBGC 
paid a total of approximately $2.3 billion in premiums. In addition, 
PBGC took over the assets from 147 defined benefit plans in fiscal 
year 2010, which totaled approximately $1.8 billion. Finally, over the 
course of the same year, PBGC recorded $7.8 billion in earnings from 
its investment portfolio, including interest, dividends, and capital 
gains. 

PBGC holds its assets in essentially two separate funds: the PBGC 
trust fund and the PBGC revolving fund (see figure 1).[Footnote 5] The 
PBGC Trust Fund holds assets received from terminated plans and the 
return on investing the assets held in the trust fund, while the PBGC 
Revolving Fund consists of premium receipts and the return on 
investing the premium receipts. Benefit payments and financial 
assistance are paid from the revolving fund, and then the trust fund 
reimburses the revolving fund through a proportional payment at least 
annually. 

Figure 1: Revenue Sources and Uses of PBGC's Funds: 

[Refer to PDF for image: illustration] 

Trust fund: 
Various assets based on investment strategy and holdings of terminated 
plans: 

Sources of funds: 
Assets from terminated plans trusteed by PBGC; 
Returns on investments. 

Uses of funds: 
Certain plan termination expenses[A]. 

From Trust Fund to Revolving Fund: 
Proportional funding transfers[B]; 
Administrative expense reimbursements[C]. 

Revolving fund: 
Fixed-income securities. 

Sources of funds: 
Premiums paid by plan sponsors; 
Returns on investments. 

Uses of funds: 
Benefits paid to participants in terminated plans; 
Financial assistance provided to multi-employer plans; 
Administrative expenses[D]. 

Source: GAO presentation of information in PBGC 6/1/2010 draft policy 
manual, Pension Benefit Guaranty Corporation Corporate Investment 
Department Policies and Procedures Manual. 

[A] Certain expenses related to plan terminations can be paid directly 
by the PBGC Trust Fund. 

[B] The PBGC Trust Fund reimburses the PBGC Revolving Fund for its 
share of payments made to beneficiaries with a proportional payment 
made at least annually. The formula for calculating this payment is: 
net trust fund assets divided by the present value of future benefits 
excluding probable terminations. 

[C] The PBGC Trust Fund reimburses the PBGC Revolving Fund for all 
administrative expenses initially paid by the revolving fund. 

[D] Administrative expenses include such items as payroll and payment 
of invoices. 

[End of figure] 

PBGC has grown significantly since the end of its first year of 
operation. As of June 30, 1975, the agency had $34 million in assets 
and $1.2 million in liabilities. At the end of fiscal year 2010, 
however, the trust and revolving funds combined contained about $80 
billion in assets (see figure 2), to cover total liabilities of $102.5 
billion, leaving a deficit of approximately $23 billion. 

[Refer to PDF for image] 

[End of figure] 

Figure 2: Growth of PBGC's Trust and Revolving Funds, 1975 to 2010: 

[Refer to PDF for image: stacked vertical bar graph] 

Year: 1975; 
Revolving fund: $0.35 billion; 
Trust fund: $0. 

Year: 1976; 
Revolving fund: $0.73 billion; 
Trust fund: $0. 

Year: 1977; 
Revolving fund: $0.107 billion; 
Trust fund: $0. 

Year: 1978; 
Revolving fund: $0.170 billion; 
Trust fund: $0. 

Year: 1979; 
Revolving fund: $0.136 billion; 
Trust fund: $0.70 billion. 

Year: 1980; 
Revolving fund: $0.155 billion; 
Trust fund: $0.113 billion. 

Year: 1981; 
Revolving fund: $0.174 billion; 
Trust fund: $0.159 billion. 

Year: 1982; 
Revolving fund: $0.273 billion; 
Trust fund: $0.201 billion. 

Year: 1983; 
Revolving fund: $0.289 billion; 
Trust fund: $0.421 billion. 

Year: 1984; 
Revolving fund: $0.282 billion; 
Trust fund: $0.511 billion. 

Year: 1985; 
Revolving fund: $0.344 billion; 
Trust fund: $0.582 billion. 

Year: 1986; 
Revolving fund: $0.486 billion; 
Trust fund: $0.812 billion. 

Year: 1987; 
Revolving fund: $0.504 billion; 
Trust fund: $1.241 billion. 

Year: 1988; 
Revolving fund: $0.79 billion; 
Trust fund: $1.144 billion. 

Year: 1989; 
Revolving fund: $0.95 billion; 
Trust fund: $1.6 billion. 

Year: 1990; 
Revolving fund: $1.6 billion; 
Trust fund: $1.0 billion. 

Year: 1991; 
Revolving fund: $2.5 billion; 
Trust fund: $2.3 billion. 

Year: 1992; 
Revolving fund: $3.2 billion; 
Trust fund: $3.0 billion. 

Year: 1993; 
Revolving fund: $5.0 billion; 
Trust fund: $3.3 billion. 

Year: 1994; 
Revolving fund: $4.9 billion; 
Trust fund: $3.3 billion. 

Year: 1995; 
Revolving fund: $6.4 billion; 
Trust fund: $4.1 billion. 

Year: 1996; 
Revolving fund: $7.2 billion; 
Trust fund: $5.0 billion. 

Year: 1997; 
Revolving fund: $9.0 billion; 
Trust fund: $6.6 billion. 

Year: 1998; 
Revolving fund: $11.6 billion; 
Trust fund: $6.5 billion. 

Year: 1999; 
Revolving fund: $10.8 billion; 
Trust fund: $7.8 billion. 

Year: 2000; 
Revolving fund: $12.1 billion; 
Trust fund: $8.9 billion. 

Year: 2001; 
Revolving fund: $14.4 billion; 
Trust fund: $7.6 billion. 

Year: 2002; 
Revolving fund: $17.0 billion; 
Trust fund: $9.0 billion. 

Year: 2003; 
Revolving fund: $16.4 billion; 
Trust fund: $18.1 billion. 

Year: 2004; 
Revolving fund: $16.2 billion; 
Trust fund: $21.3 billion. 

Year: 2005; 
Revolving fund: $16.4 billion; 
Trust fund: $32.6 billion. 

Year: 2006; 
Revolving fund: $15.2 billion; 
Trust fund: $44.0 billion. 

Year: 2007; 
Revolving fund: $14.5 billion; 
Trust fund: $48.1 billion. 

Year: 2008; 
Revolving fund: $14.97 billion; 
Trust fund: $35.8 billion. 

Year: 2009; 
Revolving fund: $15.86 billion; 
Trust fund: $48.05 billion. 

Year: 2010; 
Revolving fund: $17.58 billion; 
Trust fund: $53.61 billion. 

Source: GAO analysis of PBGC data. 

[End of figure] 

PBGC is governed by a three-member board of directors, which consists 
of the Secretary of Labor (Chair), the Secretary of the Treasury, and 
the Secretary of Commerce.[Footnote 6] The board is responsible for 
policy direction and oversight of PBGC's finances and operations. The 
board of directors is responsible for establishing and overseeing the 
policies of the corporation, including the approval of the 
corporation's investment policy statement.[Footnote 7] Under its 
bylaws, the board is required to review the corporation's investment 
policy statement at least every two years and approve the investment 
policy statement at least every four years.[Footnote 8] Each board 
member must designate an official (not below the level of an assistant 
secretary) to support the board's oversight. Board representatives are 
given the authority to act for all purposes under the bylaws, subject 
to some actions--such as approving the corporation's investment policy 
statement--being ratified by the board members.[Footnote 9] The board 
members often rely on these department representatives to conduct much 
of their PBGC related work on their behalf. 

PBGC uses institutional investment management firms to invest its 
assets, subject to the agency's oversight and in accordance with the 
investment policy statement as approved by its board and applicable 
legal requirements. For example, ERISA provides different requirements 
concerning how the assets held in the revolving fund and the trust 
fund can be invested. ERISA requires the PBGC Revolving Fund to be, in 
part, invested in U.S. obligations.[Footnote 10] PBGC has more 
flexibility to invest trust fund assets in other investments, and, 
along with revolving fund investments, the corporation's investment 
policy statement provides direction on how these assets are to be 
invested. With respect to the trust fund, PBGC does not determine the 
specific investments to be made, but instead relies on its investment 
managers' discretion to invest a portion of the funds consistent with 
the benchmarks and risk criteria provided to each investment manager. 
When PBGC receives assets from terminated plans, PBGC determines 
whether the assets fit into the agency's current investment policy 
objectives. For incoming assets that do not fit with their current 
policy, PBGC uses investment managers to liquidate them, as soon as 
practicable, and then reinvests the proceeds into assets that do align 
with PBGC policy. 

In its role as an insurer, PBGC's responsibilities are similar to 
those of other institutions that conduct such functions. However, the 
corporation also faces structural challenges that are not shared by 
other insurers, which gives the corporation less control over the 
terms by which it insures pension plans and constrains its ability to 
manage its risk of loss (see table 1). For example, in contrast with 
information provided by pension insurers in Canada and the 
Netherlands, PBGC tends to have less control over the terms by which 
it insures pension plans. Only Congress, through legislation, can 
change premiums or plan funding requirements for defined benefit plans 
in the United States.[Footnote 11] 

Table 1: Similarities and Differences between PBGC and Other 
Institutions: 

Life insurers, and property and casualty insurers: 
Similarities: 
* Like some life insurers, PBGC often has a long-term investment 
horizon; 
* Like some property and casualty insurers, PBGC often has 
unpredictable liabilities that require a certain amount of liquidity; 
Differences: 
* Unlike insurance companies, PBGC is unable to set the level of 
premiums that it receives from plan sponsors to insure their plans; 
* Unlike insurance companies, PBGC must take on new beneficiaries, 
irrespective of the financial health of the terminated plans. 

Foreign pension insurers: 
Similarities: 
* Like some foreign pension insurers, PBGC is responsible for paying 
benefits to participants of plans that it has taken over; 
Differences: 
* Unlike one foreign pension insurer, PBGC cannot change the terms 
under which it insures a pension plan or impose a higher premium on a 
plan that takes on significant investment risk; 
* Unlike one foreign pension insurer, PBGC cannot reduce benefit 
payments to participants in order to protect its own financial health; 
* Unlike another foreign pension insurer, PBGC cannot require the 
reduction of benefit accrual rates in order to improve the funded 
status of a plan; 
* Unlike one foreign pension insurer, PBGC lacks the ability to change 
funding rules applicable to the plans that it insures. 

Sources: GAO analysis of pension insurance information provided by 
Canada (Ontario), the Netherlands, Switzerland, and the United 
Kingdom; life and property and casualty insurer information provided 
by John Hancock, AIG Property and Casualty, and State Farm Property 
and Casualty. 

[End of table] 

Beginning in 2003, recognizing PBGC's long-term financial challenges, 
we included PBGC's single-employer insurance program on our list of 
"high-risk" programs needing attention and congressional action; 
[Footnote 12] in 2009, we added PBGC's multiemployer program as a 
program of concern.[Footnote 13] Both programs remain on our high- 
risk list today.[Footnote 14] 

Frequent Policy Changes Occurred, but Changes to Actual Asset 
Allocation Were Moderate: 

PBGC's investment policy has changed frequently since 1990, 
alternating between more conservative and more aggressive approaches 
to investment.[Footnote 15] The frequent changes in policy have had a 
moderate impact on PBGC's actual allocation of assets since 1976 
because there were no allocation targets in place prior to 1990 and 
the policy targets after that time were rarely ever met. Meanwhile, 
the transaction costs for the reinvestment of assets during each 
policy period have fluctuated with shifts in the market. 

PBGC's Investment Objective Changes Have Had Moderate Effect on Actual 
Asset Allocations: 

Since 1990, PBGC has shifted its investment policy five times. The 
shifts in investment policy that occurred in 1990 and 2004 were aimed 
at strategies that immunized against interest rate exposure by 
increasing the allocation of fixed-income securities. PBGC's 
investment policy was shifted in 2009 to a more conservative strategy 
of taking on a higher allocation of fixed-income securities.[Footnote 
16] In contrast, shifts in investment policy that occurred in 1994 and 
2008 were aimed at strategies that maximized returns by increasing the 
allocation of equities. Shifts in policy of this frequency are thought 
to reflect an undisciplined approach to investing. Experts we 
interviewed stated that a more disciplined approach would require that 
PBGC change its investment policy no more than once every 5 to 7 
years, except to review the policy during unusual circumstances, such 
as the recent market crash or when taking over the assets of a large 
terminated plan.[Footnote 17] They noted that it can take up to 5 
years for a policy to be fully implemented and to have an impact that 
can be evaluated. Moreover, these experts stated that a long-term and 
disciplined investment policy is needed in order to minimize the costs 
associated with shifts in policy.[Footnote 18] Since 1990, PBGC's 
investment policy was in place for more than 5 years only once--during 
the period from 1994 to 2004. All other policies were in place for 
shorter periods, generally about 2 to 4 years (see figure 3). 

Figure 3: PBGC's Actual Equity Allocations Compared to Targets, 1991 
to 2010: 

[Refer to PDF for image: line graph] 

Year: 1990; 
Percentage of PBGC assets in equities: 43.2; 
Equity allocation ceiling or target: 1990 policy (no more than 35%). 

Year: 1991; 
Percentage of PBGC assets in equities: 25.4; 
Equity allocation ceiling or target: 1990 policy (no more than 35%). 

Year: 1992; 
Percentage of PBGC assets in equities: 22.9; 
Equity allocation ceiling or target: 1990 policy (no more than 35%). 

Year: 1993; 
Percentage of PBGC assets in equities: 20.2; 
Equity allocation ceiling or target: 1990 policy (no more than 35%). 

Year: 1994; 
Percentage of PBGC assets in equities: 29.1; 
Equity allocation ceiling or target: 1990 policy (no more than 35%). 

Year: 1995; 
Percentage of PBGC assets in equities: 29.8; 
Unofficial equity allocation ceiling: 1994 policy (no more than 
50%)[A]. 

Year: 1996; 
Percentage of PBGC assets in equities: 35.2; 
Unofficial equity allocation ceiling: 1994 policy (no more than 
50%)[A]. 

Year: 1997; 
Percentage of PBGC assets in equities: 38.7; 
Unofficial equity allocation ceiling: 1994 policy (no more than 
50%)[A]. 

Year: 1998; 
Percentage of PBGC assets in equities: 38.2; 
Unofficial equity allocation ceiling: 1994 policy (no more than 
50%)[A]. 

Year: 1999; 
Percentage of PBGC assets in equities: 39.8; 
Unofficial equity allocation ceiling: 1994 policy (no more than 
50%)[A]. 

Year: 2000; 
Percentage of PBGC assets in equities: 42.8; 
Unofficial equity allocation ceiling: 1994 policy (no more than 
50%)[A]. 

Year: 2001; 
Percentage of PBGC assets in equities: 36.1; 
Unofficial equity allocation ceiling: 1994 policy (no more than 
50%)[A]. 

Year: 2002; 
Percentage of PBGC assets in equities: 29.5; 
Unofficial equity allocation ceiling: 1994 policy (no more than 
50%)[A]. 

Year: 2003; 
Percentage of PBGC assets in equities: 30.3; 
Unofficial equity allocation ceiling: 1994 policy (no more than 
50%)[A]. 

Year: 2004; 
Percentage of PBGC assets in equities: 33.2; 
Equity allocation ceiling or target: 2004 policy (15% to 25%). 

Year: 2005; 
Percentage of PBGC assets in equities: 29.3; 
Equity allocation ceiling or target: 2004 policy (15% to 25%). 

Year: 2006; 
Percentage of PBGC assets in equities: 28.2; 
Equity allocation ceiling or target: 2006 policy (15% to 25%). 

Year: 2007; 
Percentage of PBGC assets in equities: 30.9; 
Equity allocation ceiling or target: 2006 policy (15% to 25%). 

Year: 2008; 
Percentage of PBGC assets in equities: 28.8; 
Equity allocation ceiling or target: 2008 policy (Target of 45%). 

Year: 2009; 
Percentage of PBGC assets in equities: 24.9; 
Equity allocation ceiling or target: 2009 policy (No more than 26.5%). 

Year: 2010; 
Percentage of PBGC assets in equities: 33.1; 
Equity allocation ceiling or target: 2009 policy (No more than 26.5%). 

Source: GAO analysis of PBGC data. 

Note: For the entire graphic, the policy years and the axis years do 
not line up exactly because of a lag between when a policy statement 
is released and when the policy begins to be implemented. Also, the 
policy change from 2004 to 2006 was the addition of the international 
fund, though the target percentages did not change. 

[A] No explicit asset allocation was specified in the corporations 
investment policy statement, but the policy did set a ceiling for 
PBGC's equity allocation of 50 percent. 

[End of figure] 

PBGC's actual allocation of its total assets (both revolving fund and 
trust fund combined) reflects these changes in policy to some extent, 
but the impact has been tempered by a number of factors. First, PBGC 
must comply with certain statutory investment restrictions.[Footnote 
19] Therefore, because PBGC only invest the assets of its revolving 
fund in U.S. obligations which are fixed-income securities, 
accomplishing its investment policy goal is, in effect, limited to 
reallocating the assets of its trust fund--that is assets acquired 
from terminated plans under PBGC trusteeship. Second, during the 
period between 2004 and 2008, PBGC adopted the practice of using only 
assets of newly terminated plans to move toward new allocation 
targets, rather than reinvesting assets already in its trust fund. 
When in place, this practice further limited the amount of assets PBGC 
could use to meet its target allocations. Third, market conditions, at 
times, hindered PBGC in reaching its allocation targets by reducing 
the overall value--and as a result, the proportion--of assets invested 
in a particular sector. Finally, the frequency with which allocation 
targets changed also affected PBGC's ability to make significant 
changes in its allocation. During each period a policy was in place, 
PBGC made progress toward reaching new allocation targets with varying 
success before a new policy was adopted. 

1990 to 1994: 

In May 1990, PBGC adopted a new investment policy calling for a 
decrease in the proportion of equities to no more than 35 percent of 
its portfolio. This policy was initiated by PBGC's then newly 
appointed executive director in response to both an increase in 
unfunded liabilities and to the results of a commissioned study that 
examined PBGC's liabilities and investment options. The study of 
PBGC's trust and revolving funds together recommended that PBGC reduce 
its equity exposure and increase its allocation in long-duration fixed-
income assets. Accordingly, PBGC adopted a new investment policy that 
focused on matching its assets with its liabilities and targeted an 
asset allocation of no more than 35 percent in equities and no less 
than 65 percent in fixed income. In 4 months, PBGC decreased its 
equity allocation from 43 percent to 33 percent and was able to 
maintain this allocation range throughout the period for which the 
1990 policy was in effect. 

1994 to 2004: 

In October 1994, PBGC adopted a new investment policy that focused on 
maximizing the return on its investments by investing more heavily in 
equities in order to reduce the agency's deficit by achieving higher 
rates of return. Although no explicit asset allocation was specified 
in the investment policy statement, PBGC's 1994 annual report stated 
that, along with the adoption of the new investment policy, the agency 
had raised its ceiling for its equity allocation to 50 percent. The 
assets in PBGC's revolving fund is, pursuant partially to statute and 
partially to PBGC policy, invested only in U.S obligations which are 
fixed-income assets, hindering PBGC's efforts to increase its overall 
equity allocation.[Footnote 20] However, in the years that followed, 
the agency attempted to raise equity levels by investing all its trust 
fund assets into equities. In this way, over the course of fiscal year 
1994, PBGC increased its actual equity allocation from 17 percent to 
30 percent. During the subsequent 7 years this policy was in place, 
PBGC's equity allocation peaked in 1999 at 44 percent, and over the 
period, averaged about 35 percent according to data provided by the 
agency. 

2004 to 2006: 

In 2004, PBGC adopted a new investment policy that would, similar to 
the 1990 policy, match PBGC's assets to its liabilities by emphasizing 
fixed-income investments and limiting exposure to market risk. The 
2004 policy reduced the allocation target for equities down to the 15 
to 25 percent range and raised the allocation target for fixed-income 
securities to 75 to 85 percent. To implement this policy, however, 
PBGC's board directed staff to use only assets acquired from newly 
terminated plans, rather than to transition core trust fund assets 
already under management. As a result, according to PBGC officials, 
the volume of assets available to transition toward the target 
allocations was limited and the agency was not able to lower its 
allocation of equities down to the target range during the time this 
policy was in effect. 

2006 to 2008: 

In 2006, PBGC adopted a new policy as a result of its biennial review 
process.[Footnote 21] It allowed PBGC to invest in international 
securities, a departure from the past. The agency's overall investment 
policy, however, remained the same, with equity allocation targets set 
at 15 to 25 percent and fixed-income allocation targets set at 75 to 
85 percent. Despite this new policy, once again, PBGC officials said 
that the agency did not receive enough in newly trusteed assets to be 
able to shift its equity allocation down to this target range. Also, 
during most of this period, the returns on PBGC's equity investments 
outpaced those of its fixed-income investments, further hindering the 
agency's attempt to reach this allocation target. Equities were 
achieving returns of 11 to 17 percent in fiscal years 2006 and 2007, 
while the returns of its fixed-income investments were around 1 to 3 
percent annually. Hence, according to PBGC, the actual allocation 
hovered between 27 to 32 percent in equities and 67 to 72 percent in 
fixed income throughout this period. 

2008 to 2009: 

PBGC changed its investment policy again in 2008 with the goal of 
seeking to maximize returns on its investment. To this end, PBGC 
adopted an investment policy with target asset allocations of 45 
percent in equities; 45 percent in fixed income; and 10 percent in 
alternative investments, such as real estate and private equity. In 
addition, the policy called for expansion into two new subclasses of 
fixed-income securities: high yield and emerging market debt. In 
February 2008, when the policy was adopted, 28 percent of PBGC's 
assets were invested in equities. To move quickly toward its newly 
adopted allocation targets, PBGC decided to abandon its practice of 
relying only on newly acquired assets from terminated plans to 
transitioning a portion of core trust fund assets as well. PBGC 
transitioned nearly $5.7 billion from its existing trust fund 
investments in fixed-income securities to equities. Despite these 
efforts, the financial crisis and a 35 percent decline in the New York 
Stock Exchange Composite Index between early February 2008 and May 
2009[Footnote 22] caused PBGC's actual equity allocation to drop to as 
low as 23 percent during this period. 

2009 to Present: 

In May and June 2009, PBGC's three board members issued a resolution 
instructing staff to cease implementing the 2008 investment policy. 
[Footnote 23] This resolution was in response to an investigation, 
conducted by PBGC's Inspector General, concerning potential conflicts 
of interest involving PBGC's then Director with securing asset 
managers for the agency's portfolio. Transactions already initiated 
were allowed to proceed, but no new transactions were permitted until 
the board representatives issued investment policy guidance in July 
2009, since the board had not also issued a new investment policy 
statement after it ceased the 2008 policy. Instead, this new interim 
policy called for a return to the actual portfolio composition as it 
was on March 31, 2009, which was 26.5 percent in equities and 73.5 
percent in fixed income. This interim guidance served as the official 
policy.[Footnote 24] Since then, PBGC has transitioned its newly 
acquired assets to fixed-income investments. Nevertheless, the 
performance of the equities market improved enough that as of 
September 2010, equities made up 31 percent of PBGC's portfolio. 

Transaction Costs Have Fluctuated with Shifts in the Market: 

While the actual distribution of PBGC assets has remained within a 
fairly narrow range since 1990, the transaction costs incurred for the 
reinvestment of assets during each period a policy was in place have 
fluctuated with shifts in the market. Some transaction costs are 
always incurred with the assumption of assets from newly terminated 
plans and with the management of existing investments,[Footnote 25] 
but the magnitude of these costs can vary dramatically depending on 
the volume and type of assets being transitioned, the investment 
policy or goal in place, and the market conditions during the 
transition period.[Footnote 26] PBGC does not have a routine process 
for tracking the transaction costs associated with different 
investment policies, and does not consider these costs when developing 
new investment strategies. 

Transaction costs for reinvestment of assets generally consist of 
commissions, fees and certain taxes (referred to as explicit costs), 
and opportunity costs, due to market changes during the transaction 
(referred to as implicit costs).[Footnote 27] PBGC typically uses 
specialized transition investment managers when transitioning large 
pools of assets to keep explicit costs down through economies of scale 
and by taking advantage of other services offered by these 
managers.[Footnote 28] However, opportunity costs can vary widely 
based on market conditions, and can result in either a net loss or a 
net gain. Taking both explicit and implicit costs together, when 
transactions net an amount lower than the original value of the 
assets, a loss occurs; when transactions net an amount greater than 
the original value of the assets, a gain occurs. Although PBGC does 
not routinely track and conduct analytics on the transaction costs 
associated with implementing different investment policies, we were 
able to compile the costs incurred during each period a policy was in 
place from 2004 forward by obtaining records from PBGC officials as 
well as PBGC's external transition managers, as summarized in table 2. 

Table 2: Transaction Costs Incurred with Investment Policies Adopted 
in 2004, 2006, and 2008: 

Investment goal: Date policy established; 
2004 policy: Reduce equity investments to 15-25%: January 29, 2004; 
2006 policy: Maintain equity investments at 15-25%: February 14, 2006; 
2008 policy: Increase equity to 45% and certain subclasses of fixed-
income investments: February 12, 2008. 

Investment goal: New York Stock Exchange Composite Index[A]; 
2004 policy: Reduce equity investments to 15-25%: +25.9%; 
2006 policy: Maintain equity investments at 15-25%: +12.5%; 
2008 policy: Increase equity to 45% and certain subclasses of fixed-
income investments: -35.3%[B]. 

Investment goal: Volume of assets transitioned; 
2004 policy: Reduce equity investments to 15-25%: $8.8 billion; 
2006 policy: Maintain equity investments at 15-25%: $2.6 billion; 
2008 policy: Increase equity to 45% and certain subclasses of fixed-
income investments: $13 billion. 

Investment goal: Transaction costs[C,E]: 

Investment goal: Explicit costs (fees, commissions, and certain taxes); 
2004 policy: Reduce equity investments to 15-25%: $2.2 million; 
2006 policy: Maintain equity investments at 15-25%: $2.9 million; 
2008 policy: Increase equity to 45% and certain subclasses of fixed-
income investments: $5.7 million. 

Investment goal: Implicit costs (due to market changes during 
transactions)[D]; 
2004 policy: Reduce equity investments to 15-25%: $42.7 million (gain); 
2006 policy: Maintain equity investments at 15-25%: $4.7 million; 
2008 policy: Increase equity to 45% and certain subclasses of fixed-
income investments: $68.9 million. 

Investment goal: Total net transaction costs; 
2004 policy: Reduce equity investments to 15-25%: $40.5 million (gain); 
2006 policy: Maintain equity investments at 15-25%: $7.6 million; 
2008 policy: Increase equity to 45% and certain subclasses of fixed- 
income investments: $74.6 million. 

Sources: GAO analysis of data from PBGC, BlackRock, and State Street. 

[A] New York Stock Exchange Composite Index serves as an indicator of 
how the market was performing. 

[B] Return shown is for the period from February 2008 through May 2009. 

[C] Transaction costs primarily reflect the costs associated with 
trading equities rather than fixed-income securities. Transaction 
costs related to fixed-income trades were not tracked during 
implementation of the 2004 and 2006 policies, and for the initial 
implementation (between November 2008 and January 2009) of the 2008 
policy. PBGC provided costs related to fixed-income trades during 
implementation of later phases of the 2008 policy, but did not provide 
a breakdown of explicit and implicit costs. These costs, totaling 
$17.2 million, are included in implicit costs. 

[D] Implicit costs include what is referred to as the "implementation 
shortfall" and time to reach the new allocation, which is generally 
captured in the "spread costs"--that is, the cost between the bid 
(sell price) and the ask (buy price). 

[E] Transaction costs during implementation of the 2008 policy reflect 
the costs associated with asset trades of about $9.3 billion that were 
tracked during the last two phases of the transition. Transaction 
costs associated with asset trades of about $3.7 billion, made during 
the first phase of the transition, were not tracked. 

[End of table] 

From 2004 to 2008, PBGC's investment policy remained primarily the 
same: to transition assets from newly terminated plans to increase the 
level of fixed-income investments. When the 2004 policy was being 
implemented, assets valued at $8.8 billion were transitioned, and 
positive market conditions helped PBGC realize a net gain of $40.5 
million (or 46 basis points).[Footnote 29] When the 2006 policy was 
being implemented, assets of about $2.6 billion were transitioned, but 
declining market conditions towards the end of this period contributed 
to a loss of $7.6 million (or 30 basis points). 

In 2008, PBGC's investment policy shifted to increasing the level of 
equity investments and certain subclasses of fixed-income securities 
and the agency opted to use assets already in the trust fund, as well 
as newly terminated plan assets, to accelerate implementation of the 
policy.[Footnote 30] In total, assets of about $13 billion were 
transitioned while this investment policy was in place, with $5.4 
billion moving from fixed-income securities to equities and $7.6 
billion moving from one type of fixed-income securities to others 
(specifically, from long-duration securities to high-yield and 
emerging market debt). These transactions were completed in three 
phases. According to PBGC's own records, phase one was performed in an 
"ad hoc" manner and transaction costs were not tracked. Assets 
transitioned during this phase totaled approximately $3.7 billion. 
Phase two was more structured (referred to as "coordinated sales"), 
with PBGC assigning each fixed-income investment manager an amount of 
trust fund assets to sell over a 5-month period, allowing trades to be 
made on favorable trading days at the discretion of the investment 
manager. About $7.9 billion in assets were transitioned during this 
phase. During phase three, termed the "runoff" phase, the 2008 policy 
had been suspended, but PBGC officials told us they decided not to 
cancel the trades for about $1.4 billion in assets that their 
investment managers already had initiated. Due in part to the market 
downturn during the period the 2008 policy was in place, the 
transaction costs associated with asset trades of about $9.3 billion 
that were tracked during the last two phases of the transition totaled 
nearly $74.6 million (or 80 basis points). According to one PBGC 
investment manager, some trades related to the 2008 transition 
incurred opportunity costs of 400 to 500 basis points. 

In July 2009, a new interim directive was issued to decrease the level 
of equity investments back to the asset distribution held as of March 
31, 2009. PBGC staff estimated that implementing this new policy could 
incur transaction costs of as much as $52 million. In January 2011, 
PBGC provided data indicating that between June 2009 and September 
2010, $7.4 million in transaction costs had accrued since 
implementation of this 2009 directive. 

PBGC's Investment Performance Results Have Been Mixed: 

Our analysis of PBGC's investment performance found that PBGC's 
investments performed better than most on an asset-only basis compared 
with the seven benchmark portfolios (see table 3). However, PBGC's 
investment portfolio tended to underperform these benchmarks when 
returns were assessed together with the liability return (or growth in 
liabilities). Specifically, in the asset-only comparison, PBGC's 
portfolio achieved better risk-adjusted performance on its investments 
than that achieved by six of the seven benchmark portfolios. When 
assessed with liabilities, however, all seven benchmark portfolios 
performed better than PBGC's investment portfolio. This occurred for 
either one of two reasons: either the benchmark had a mix of assets 
that were better correlated (that is, moved more in tandem) with 
PBGC's liability return (growth in liability), or, when this was not 
the case, the benchmarks had returns sufficient to compensate for the 
lower correlations for the period examined. The best performing 
benchmark (the Pension Protection Act benchmark) incorporated elements 
of both features, with a mix of relatively high returns on assets and 
relatively high correlation of their assets with PBGC's liabilities. 

Our analysis looks at the single historical period from 1976 to 2009, 
since the purpose of the analysis is performance assessment, not asset 
allocation recommendations. Typically, analyses for the purpose of 
asset allocation would project forward over multiple potential future 
economic scenarios in order to more fully assess potential risk and 
reward. The various alternative static portfolios used in this report 
were analyzed for the purpose of a "what-if" analysis--a historical 
comparison of alternative investment strategies versus the fluctuating 
asset allocation that PBGC actually employed--they were not for the 
purpose of recommending a particular asset allocation going forward. 
Further, the fact that a particular portfolio performed well over the 
1976 to 2009 period in this particular analysis does not necessarily 
mean that such a portfolio would be appropriate for PBGC going forward. 

Table 3: Descriptions of the Seven Benchmark Portfolios in GAO's 
Analysis: 

Equity investment benchmarks[A]: 

Benchmark: S&P 500; 
Asset class composition: 
* 100% equities; 
* This is a static composition portfolio representing the equity asset 
class. 

Benchmark: Wilshire 5000; 
Asset class composition: 
* 100% equities; 
* This is a static composition portfolio representing the equity asset 
class with a greater allocation to smaller capitalization stocks than 
the S&P 500. 

Fixed-income investment benchmark: 

Benchmark: Barclays Capital Long-Term Government Credit Index; 
Asset class composition: 
* 100% fixed income; 
* This is a static composition portfolio representing the fixed-income 
asset class, including both corporate and U.S. government fixed-income 
asset classes. 

Mixed equity and fixed-income investment benchmarks: 

Benchmark: Pension Protection Act Benchmark[B]; 
Asset class composition: 
* 60% equities, 40% fixed income; 
* This is a static composition portfolio. 

Benchmark: Life Insurance Benchmark; 
Asset class composition: 
* 85% fixed income, 15% equities; 
* This is a static composition portfolio, and is intended as a 
stylized representation of the asset portfolio typically held by life 
insurance firms in their general accounts. 

Benchmark: Post Fiscal Year 2002 Benchmark; 
Asset class composition: 
* 30% equities, 60% fixed income, and 10% riskless short maturity 
fixed-income securities ("cash"); 
* This is a static composition portfolio, and is intended as a 
stylized representation of the average asset allocation of the PBGC 
Total Fund from November 2001 through December 2009.[B]. 

Benchmark: Dynamic Benchmark; 
Asset class composition: 
* Equivalent to the asset class composition for the PBGC Total Fund; 
* This is a dynamic composition portfolio whose asset allocation 
varies over time in concert with the PBGC total fund for several broad 
asset classes: domestic equity, international equity, fixed income, 
and cash. 

Source: GAO. 

Note: For more detailed discussion of these benchmark portfolios, see 
appendix III. 

[A] While equity portfolios are included for analytical purposes, PBGC 
can not invest in 100 percent equities because ERISA requires that 
certain portion of its assets is restricted to investing some 
revolving funds in U.S. obligations which are fixed-income assets. 
Other revolving funds may be invested as PBGC considers appropriate, 
but current policy is to invest them in U.S. Treasury securities. 29 
U.S.C.  1305(b)(3) and (f)(3). 

[B] The Pension Protection Act of 2006 requires PBGC to compare the 
performance of its investments to a hypothetical portfolio referred to 
in this report as the PPA benchmark. Pub. L. No. 109-280,  412, 120 
Stat. 780, 936. 

[End of table] 

We assessed performance by calculating risk-adjusted returns for 
PBGC's portfolio and for each benchmark, where higher returns improve 
performance while higher volatility reduces performance.[Footnote 31] 
The comparative benchmarks used for this analysis represent a range of 
equity and fixed-income allocations. Six of the benchmarks are largely 
static (fixed) allocations among asset classes; however, we also 
included one Dynamic Benchmark that had allocations that varied among 
asset classes over time. 

PBGC's Investments Outperformed Benchmark Portfolios on an Asset-Only 
Basis: 

Our analysis of PBGC's investment returns for the period 1976 to 
December 2009 found that, on an asset-only basis, PBGC's portfolio 
achieved better risk-adjusted performance on its investments than that 
achieved by six of the seven benchmark portfolios.[Footnote 32] 
Specifically, our analysis found that on an asset-only basis, PBGC's 
portfolio outperformed five of six fixed-allocation benchmarks, 
[Footnote 33] as well as the Dynamic Benchmark. In each instance, the 
results were maintained regardless of whether or not PBGC investment 
returns were net of investment expenses.[Footnote 34] Within this 
framework, the PBGC and benchmark portfolios were evaluated solely on 
how well the assets performed relative to the risks taken.[Footnote 
35] For details see appendix III. 

PBGC Investments Underperformed Relative to Benchmark Portfolios When 
Returns Were Assessed with the Liability Return: 

When consideration of changes in liabilities was included in our 
analysis, we found that PBGC's investments did not perform as well as 
the seven benchmark portfolios.[Footnote 36] PBGC must cover the 
liabilities from the underfunded plans it trustees in order to pay 
benefits to participants and beneficiaries. Other than the premiums 
assessed on plan sponsors that are statutorily set,[Footnote 37] the 
only revenue that PBGC has to cover its liabilities is the return on 
the assets it manages. Given this context, analyzing PBGC's investment 
performance in a framework that explicitly incorporates liabilities 
provides useful information. 

We found that PBGC's investments underperformed all seven of the 
benchmark portfolios on a risk-adjusted basis when the returns were 
analyzed net of the liability return.[Footnote 38] In simple terms, 
this means that all seven of the constructed benchmarks had a mix of 
assets with some combination of risk, return, and correlation levels 
that made their investment strategies achieve a higher level of risk- 
adjusted performance than PBGC's investment policy for the 1976 to 
2009 period. This occurred because either the benchmark portfolio had 
a mix of assets that had a higher correlation with the liability 
return, or, in cases where the correlations were lower, the benchmark 
portfolio had sufficient returns to compensate for the lower 
correlations for the period we examined. However, the dynamic 
portfolio, which maintains the same asset allocation as the PBGC total 
fund, performed as well as the S&P 500 benchmark and out performed the 
Barclays Capital and Post Fiscal Year 2002 benchmarks as well as the 
PBGC portfolio--three portfolios that have significant allocations to 
bonds. (For additional information, see appendix III). 

According to our analysis, the best performing portfolio for the 1976 
to 2009 period was the PPA Benchmark Portfolio, with a mix of 40 
percent bonds and 60 percent equities.[Footnote 39] Because, this 
analysis is strictly based on past performance, this result does not 
guarantee or imply that a PPA-like portfolio will perform better than 
the current PBGC allocation going forward. Moreover, the PPA benchmark 
and other portfolios with a significant weighting toward equity would 
likely not perform as well if incoming cash-flows from new plan 
terminations were included in the analysis. Rather than determining a 
particular asset allocation, this analysis highlights that an approach 
that was not only mindful of returns, but also accounted for the 
correlation between asset returns and the liability return, was more 
likely to result in an investment policy for PBGC that achieved higher 
risk-adjusted performance for the 1976 to 2009 period.[Footnote 40] 

No Clear Evidence that Fluctuation in the Allocation of Investments 
Had Adverse Effect on Performance: 

Our analysis found no link between the frequent changes in PBGC's 
investment policy since 1990 and the actual allocation between equity 
and fixed-asset investments. This is because while the stated policy 
shifts were significant, changes to the actual allocation were 
moderate. Hence, changes remained within a narrow range of a portfolio 
mix between fixed-income and equity allocations. As a result, although 
some shifts in actual allocations did occur, we found no conclusive 
evidence that fluctuations in the proportional allocation between 
equity and fixed-income investments had a notable adverse impact on 
PBGC returns. This was the case for both types of analysis--asset-only 
and assets net the liability return. 

Finally, in the assets net of liability context, our finding that 
PBGC's portfolio underperformed relative to the Dynamic Benchmark 
suggests that factors other than asset allocation are causing the 
underperformance--such factors could include the inflows of new 
assets, timing of shifts to meet allocation goals and their associated 
costs, or could reflect that there are no costs or fees in the Dynamic 
Benchmark. However, detailed information would be required to 
determine the reasons for the underperformance of the PBGC total fund 
relative to the Dynamic Benchmark. 

PBGC's Policies and Procedures for Implementing Its Investment Policy 
Are Incomplete: 

In our review of PBGC's internal documents, we found that the agency 
has largely functioned without complete investment policy statements 
and operating procedures. Compared to industry-recommended standards 
for pension funds and insurance companies, PBGC's investment policy 
statements are missing important provisions that provide 
implementation guidance. Further, PBGC staff have largely functioned 
without the benefit of fully developed and documented operating 
procedures. 

Investment Policy Statements Generally Lack Specifics in Key Areas: 

The investment policies issued by PBGC's board for strategic guidance 
in the planning and execution of investments have generally lacked a 
number of provisions recommended for sound investment management or 
have been insufficiently detailed to provide adequate guidance for 
staff concerning certain investment objectives. 

One expert we interviewed stated that while PBGC is unique and may not 
be obligated to articulate the same policy provisions as other 
institutions with similar responsibilities--such as foreign pension 
insurers, domestic pension funds, and private insurance companies--the 
agency faces similar investment problems, opportunities, and solutions 
as many investment programs do. Hence, it is equally important for 
PBGC to have a well-developed investment policy statement as it is for 
these other institutions. According to one expert, "an investment 
policy statement (IPS) is a foundational document for a pension fund's 
investment program. The essential purposes of the IPS are to 
articulate the consensus view of the board regarding the overall 
investment program and to document policies and procedures regarding 
major issues."[Footnote 41] 

However, we found items included in the PBGC's policy statements often 
are insufficiently detailed to provide adequate guidance for staff 
concerning certain investment objectives. For example, we found that 
prior to 1990, PBGC operated without a formal investment policy 
statement, and that the six different policy statements the PBGC board 
has issued since then have been silent in many areas cited as 
important by professional organizations such as the Chartered 
Financial Analyst Institute, the Association of Public Pension Fund 
Auditors, and the Foundation for Fiduciary Studies. We compiled a list 
of 25 items these organizations recommended be included in an 
investment policy statement in order to provide sound strategic 
guidance across the key areas of governance, investment objectives, 
and risk management.[Footnote 42] We then examined PBGC's policy 
statements against these items and found certain items were often 
missing (see table 4). The agency's 2008 policy statement has been the 
most thorough to date (including 15 of the items) while PBGC's most 
recent investment guidance, adopted by board representatives in 2009, 
included the fewest to date (only 6 of the items).[Footnote 43] 
Further, some of the provisions that were covered were, according to 
some staff, insufficiently detailed to offer adequate guidance. 

Table 4: A Comparison of PBGC Investment Policy Statements with Best 
Practices: 

Policy: Governance: 

1. Defines the organizational structure and mission; 
Years: 1990-1994: [Check]; 
Years: 1994-2004: [Check]; 
Years: 2004-2006: [Check]; 
Years: 2006-2008: [Check]; 
Years: 2008-2009: [Check]; 
Years: 2009-2010[A]: [Blank]. 

2. Specifies responsibilities for determining, executing, and 
monitoring the investment policy; 
Years: 1990-1994: [Check]; 
Years: 1994-2004: [Check]; 
Years: 2004-2006: [Check]; 
Years: 2006-2008: [Check]; 
Years: 2008-2009: [Check]; 
Years: 2009-2010[A]: [Blank]. 

3. Describes investment policy review; 
Years: 1990-1994: [Blank]; 
Years: 1994-2004: [Blank]; 
Years: 2004-2006: [Check]; 
Years: 2006-2008: [Check]; 
Years: 2008-2009: [Check]; 
Years: 2009-2010[A]: [Blank]. 

4. Describes responsibility for hiring, firing, and monitoring 
managers; 
Years: 1990-1994: [Check]; 
Years: 1994-2004: [Check]; 
Years: 2004-2006: [Check]; 
Years: 2006-2008: [Check]; 
Years: 2008-2009: [Check]; 
Years: 2009-2010[A]: [Blank]. 

5. Describes board and staff roles; 
Years: 1990-1994: [Check]; 
Years: 1994-2004: [Check]; 
Years: 2004-2006: [Check]; 
Years: 2006-2008: [Check]; 
Years: 2008-2009: [Check]; 
Years: 2009-2010[A]: [Blank]. 

6. Assigns responsibility for asset allocation; 
Years: 1990-1994: [Blank]; 
Years: 1994-2004: [Blank]; 
Years: 2004-2006: [Blank]; 
Years: 2006-2008: [Blank]; 
Years: 2008-2009: [Blank]; 
Years: 2009-2010[A]: [Blank]. 

7. Assigns responsibility for risk management, monitoring and 
reporting; 
Years: 1990-1994: [Blank]; 
Years: 1994-2004: [Blank]; 
Years: 2004-2006: [Blank]; 
Years: 2006-2008: [Blank]; 
Years: 2008-2009: [Blank]; 
Years: 2009-2010[A]: [Blank]. 

8. Describes fiduciary responsibilities; 
Years: 1990-1994: [Blank]; 
Years: 1994-2004: [Blank]; 
Years: 2004-2006: [Blank]; 
Years: 2006-2008: [Blank]; 
Years: 2008-2009: [Blank]; 
Years: 2009-2010[A]: [Blank]. 

Policy: Investment objectives: 

9. Describes investment objective; 
Years: 1990-1994: [Check]; 
Years: 1994-2004: [Check]; 
Years: 2004-2006: [Check]; 
Years: 2006-2008: [Check]; 
Years: 2008-2009: [Check]; 
Years: 2009-2010[A]: [Blank]. 

10. States return/risk requirements: 

* States performance objective (rate of return); 
Years: 1990-1994: [Blank]; 
Years: 1994-2004: [Blank]; 
Years: 2004-2006: [Blank]; 
Years: 2006-2008: [Blank]; 
Years: 2008-2009: [Blank]; 
Years: 2009-2010[A]: [Blank]. 

* Describes asset class investment guidelines (including allowable and 
prohibited investments); 
Years: 1990-1994: [Blank]; 
Years: 1994-2004: [Blank]; 
Years: 2004-2006: [Blank]; 
Years: 2006-2008: [Blank]; 
Years: 2008-2009: [Blank]; 
Years: 2009-2010[A]: [Blank]. 

* Describes an asset allocation policy (targets and ranges); 
Years: 1990-1994: [Check]; 
Years: 1994-2004: [Check]; 
Years: 2004-2006: [Check]; 
Years: 2006-2008: [Check]; 
Years: 2008-2009: [Check]; 
Years: 2009-2010[A]: [Check]. 

11. Defines risk tolerance; 
Years: 1990-1994: [Blank]; 
Years: 1994-2004: [Blank]; 
Years: 2004-2006: [Blank]; 
Years: 2006-2008: [Blank]; 
Years: 2008-2009: [Blank]; 
Years: 2009-2010[A]: [Blank]. 

12. Identifies liabilities; 
Years: 1990-1994: [Blank]; 
Years: 1994-2004: [Blank]; 
Years: 2004-2006: [Blank]; 
Years: 2006-2008: [Blank]; 
Years: 2008-2009: [Blank]; 
Years: 2009-2010[A]: [Blank]. 

13. Identifies relevant constraints: 

* Defines evaluation horizon; 
Years: 1990-1994: [Blank]; 
Years: 1994-2004: [Blank]; 
Years: 2004-2006: [Blank]; 
Years: 2006-2008: [Blank]; 
Years: 2008-2009: [Blank]; 
Years: 2009-2010[A]: [Blank]. 

* Identifies liquidity requirements; 
Years: 1990-1994: [Blank]; 
Years: 1994-2004: [Blank]; 
Years: 2004-2006: [Blank]; 
Years: 2006-2008: [Blank]; 
Years: 2008-2009: [Check]; 
Years: 2009-2010[A]: [Blank]. 

* Specifies leverage policy; 
Years: 1990-1994: [Check]; 
Years: 1994-2004: [Check]; 
Years: 2004-2006: [Check]; 
Years: 2006-2008: [Check]; 
Years: 2008-2009: [Check]; 
Years: 2009-2010[A]: [Blank]. 

* Identifies other constraints; 
Years: 1990-1994: [Check]; 
Years: 1994-2004: [Check]; 
Years: 2004-2006: [Check]; 
Years: 2006-2008: [Check]; 
Years: 2008-2009: [Check]; 
Years: 2009-2010[A]: [Check]. 

14. Describes other considerations: 

* Identifies proxy-voting policy; 
Years: 1990-1994: [Check]; 
Years: 1994-2004: [Check]; 
Years: 2004-2006: [Check]; 
Years: 2006-2008: [Check]; 
Years: 2008-2009: [Check]; 
Years: 2009-2010[A]: [Blank]. 

* Identifies securities lending policy; 
Years: 1990-1994: [Check]; 
Years: 1994-2004: [Check]; 
Years: 2004-2006: [Check]; 
Years: 2006-2008: [Check]; 
Years: 2008-2009: [Check]; 
Years: 2009-2010[A]: [Blank]. 

* Identifies special factors (such as ESG); 
Years: 1990-1994: [Blank]; 
Years: 1994-2004: [Blank]; 
Years: 2004-2006: [Blank]; 
Years: 2006-2008: [Blank]; 
Years: 2008-2009: [Blank]; 
Years: 2009-2010[A]: [Blank]. 

Policy: Risk management and monitoring: 

Policy: 15. Establishes performance measurement and reporting; 
Years: 1990-1994: [Check]; 
Years: 1994-2004: [Check]; 
Years: 2004-2006: [Check]; 
Years: 2006-2008: [Check]; 
Years: 2008-2009: [Blank]; 
Years: 2009-2010[A]: [Check]. 

* Defines rebalancing process; 
Years: 1990-1994: [Blank]; 
Years: 1994-2004: [Blank]; 
Years: 2004-2006: [Blank]; 
Years: 2006-2008: [Blank]; 
Years: 2008-2009: [Check]; 
Years: 2009-2010[A]: [Check]. 

* Describes investment cost monitoring; 
Years: 1990-1994: [Check]; 
Years: 1994-2004: [Check]; 
Years: 2004-2006: [Check]; 
Years: 2006-2008: [Check]; 
Years: 2008-2009: [Check]; 
Years: 2009-2010[A]: [Check]. 

* Describes transition policy; 
Years: 1990-1994: [Check]; 
Years: 1994-2004: [Check]; 
Years: 2004-2006: [Check]; 
Years: 2006-2008: [Check]; 
Years: 2008-2009: [Empty]; 
Years: 2009-2010[A]: [Empty]. 

Sources: PBGC, Chartered Financial Analyst Institute, Association of 
Public Pension Fund Auditors, and Foundation for Fiduciary Studies. 

Notes: 

1. Policy items mentioned in the investment policy statement--but not 
detailed--are marked with a [Check]. 

2. Policy items not mentioned in the investment policy--where no 
policy exists--are left blank. 

[A] The interim policy under which PBGC operated during the period was 
a product of a series of specific staff inquiries about how to go 
about transitioning assets until the board adopted a new investment 
policy statement consistent with its bylaws. A new investment policy 
statement was adopted by the board in May 2011. 

[End of table] 

Governance: 

In the governance area, PBGC's investment policy statements have not 
assigned responsibility for managing, monitoring, and reporting on 
portfolio risk. According to PBGC officials, those responsibilities 
were either informally communicated to staff or staff assumed 
responsibility for these activities on their own. Further, while most 
of PBGC's statements include a discussion of hiring and monitoring 
asset managers, they do not assign responsibility for these tasks to a 
specific group. By contrast, the investment policy statement of the 
United Kingdom's pension insurer, Pension Protection Fund, and most of 
the public pension plans that we reviewed do assign responsibility for 
these tasks to specific groups, such as the public plan's investment 
advisory committee. Also, while PBGC's investment policy statements 
assign responsibility for the execution of the investment program, 
they generally do not assign responsibility for developing or 
monitoring the implementation of the policy. 

According to statute, the PBGC board is responsible for establishing 
policy.[Footnote 44] In addition, the board has an oversight 
responsibility to ensure that PBGC is executing the board's policy in 
appropriate ways. According to PBGC staff, because of the lack of 
specific guidance in the policy statements, there have been instances 
when staff have had to request further policy guidance from PBGC's 
board and the board had not always been responsive. For example, in 
2004, the board had instructed staff to limit costs by using only 
incoming assets to transition to the new allocation target. When 
adherence to this directive, together with a low level of liquid, 
incoming assets caused the agency to miss its new allocation targets, 
staff told us they asked for guidance but did not receive it. More 
recently, in May and June 2009, the board members issued a resolution 
directing staff to cease implementation of the 2008 investment policy, 
but did not approve a new investment policy statement and did not 
provide further investment guidance. In response, PBGC's Corporate 
Investments Department's (CID) staff wrote a memo to PBGC's acting 
director indicating that they were concerned about the lack of a 
defined policy to provide direction to CID staff with respect to asset 
allocation. Principal areas of concern outlined were: (1) oversight 
and management, (2) investment of newly trusteed assets, and (3) asset 
allocation risk. Subsequently, policy guidance was provided by the 
board representatives until a new investment policy statement was 
approved by the board.[Footnote 45] 

In addition, while we have found that the board and board 
representatives are meeting more frequently than in the past, we could 
find no formal oversight or formal feedback mechanism in place for the 
board and board representatives--a mechanism that is a necessary 
element for ensuring that PBGC is executing the policy in appropriate 
ways. According to one expert we interviewed, the inventory of 
critical subjects regarding an investment program is extensive, and 
the board is ultimately responsible for assessing and overseeing all 
of them.[Footnote 46] Some of the key elements the expert noted that 
should require the board's focus include clearly articulated 
governance policies; a comprehensive, written investment policy 
statement; a well thought out asset allocation process;[Footnote 47] 
clearly defined and appropriate measures; monitoring processes; and 
monitoring of investment costs.[Footnote 48] Although PBGC staff told 
us that these things were accomplished below the level of the board 
members, we could find no documentation that indicated that such a 
formal oversight mechanism was in place. We reviewed decades of board 
meeting notes--up through the most recent meetings--in search of such 
evidence, but could find none. 

Investment Objectives: 

In the area of investment objectives, PBGC's statements have remained 
silent with respect to several items, such as return targets and 
statements of risk tolerance. By comparison, the United Kingdom's 
Pension Protection Fund board, in its policy statement, has 
specifically set a long-term target investment return of 1.8 percent 
above liabilities and a risk level equivalent to a tracking error of 4 
percent against liabilities. The Pension Protection Fund also 
identified nine risks that might affect its investments and identified 
approaches to mitigate those risks. Six of the eight public pension 
plans we reviewed also included a return target and a risk tolerance 
in their investment policies. One expert stressed, in particular, the 
importance of documenting tolerance for risk in the investment policy 
cautioning that without such documentation, a firm risks making 
changes at a bad time (selling at a deep discount) or in response to 
political pressure. In order to keep the investment policy out of the 
political realm, a well-documented, long-term, and disciplined view 
with an effective governing board is necessary, while following a well 
established allocation model that keeps long term perspective in mind. 

Risk Management: 

In the area of risk management, although most items were covered in 
PBGC's policy statements, almost all lacked sufficient detail to 
provide adequate guidance. For example, the cost management provision 
of PBGC's statements generally identified the types of investment 
expenses involved and offered a low-cost policy for investing, but did 
not provide guidance on how to monitor these costs. As noted by some 
experts, ultimately, investing is not about seeking returns but about 
managing risks, with well-grounded policies to ensure adequate 
monitoring of risks over time. 

Typically missing from PBGC's investment policy statements has been 
the practice of portfolio rebalancing. A provision for rebalancing was 
provided for the first time in 2008. All of the public pension plans 
that we studied included such tolerance ranges. Most also specified a 
time frame for rebalancing or assigned responsibility for determining 
a course of action. 

PBGC's Staff Has Functioned without Formal Operating Procedures: 

The PBGC's CID staff has largely operated without fully developed and 
documented operating procedures, although it has recently begun to 
create them. According to a PBGC staff member, the mission of the CID 
is twofold: (1) to transition newly trusteed assets into PBGC's 
investment portfolio and (2) to manage PBGC assets. Further, to 
transition newly trusteed assets into PBGC's investment portfolio, CID 
staff are responsible for transferring assets so that they are 
commingled in compliance with PBGC policies, and are consistent with 
PBGC's asset allocation. However, the staff member also said that PBGC 
historically has not had formal procedures for executing the 
investment policy and transitioning assets. As a result, according to 
PBGC's Inspector General, when the former board established the 2008 
investment policy, certain tasks were not performed in the proper 
order by CID staff. For example, according to PBGC's Inspector 
General, PBGC had actually undergone several transition related 
activities--such as the selection of three investment management firms 
for strategic partnership contracts for managing $2.5 billion in PBGC 
assets--before risks and mitigating methods related to the transition 
were even documented. In addition, CID staff provided a group of 
documents covering a number of transition related activities that had 
several notable weaknesses. For example, these documents indicated 
timelines for implementation, but provided no risk analysis, 
accountability measures to monitor progress, or a delineation of roles 
and corresponding responsibilities related to the transition. 

According to a PBGC staff member, to manage PBGC's assets, at a high 
level, CID staff are responsible for five operational tasks: (1) 
select, hire, and terminate investment managers; (2) oversee managers: 
(3) oversee the aggregate investment program: (4) implement board 
asset allocation and any other board investment policy; and (5) 
oversee all aspects of the PBGC investment programs including cash 
management and securities lending. In 2010, CID staff began to draft 
more complete working procedures for their investment operations, 
however, PBGC's CID staff and the Inspector General recently told us 
that this effort has been a slow undertaking. PBGC's CID staff stated 
that creating procedures takes away from their ability to do their 
mission work and, thus far, they have only been able to provide 
preliminary and incomplete drafts of some of the needed procedures. 
However, while complete operational procedures are lacking for most of 
the operational tasks under the purview of the CID, PBGC's CID staff 
have recently completed a draft compendium of formal procedures that 
detail processes and procedures for managing their securities lending 
program--the smallest program operated within the CID.[Footnote 49] 

According to one expert, well functioning operational policies and 
procedures are an essential mechanism for ensuring linkages between a 
fund's governance structure, which includes policy making, and its 
management systems. This expert wrote that with regard to operational 
policies, directors should (1) identify and address aspects of the 
fund's investment operations, organization, and portfolio necessary to 
control undue risk and expenses, minimize inefficiency, and achieve 
the desired long-term return; (2) evaluate the fund's organization and 
procedures relative to those of its peers and industry best practices; 
and (3) find ways to enhance public trust and confidence in the 
pension insurance system. The board must oversee and approve such 
policies and procedures.[Footnote 50] 

Conclusions: 

PBGC has grown from a relatively small agency with about $34 million 
in assets in its first year after its establishment in 1974, to one 
with almost $80 billion in assets in fiscal year 2010. As the agency 
has grown, so too has the frequency of changes to its investment 
policies. The agency's policies and procedures for asset management 
still reflect its small agency past. Indeed, there are few formally 
documented procedures and the investment policy statements are 
insufficiently detailed for the agency to manage its investments and 
apply the investment policy consistently during a transition period 
and during times of political change. Without a detailed investment 
policy and formal investment procedures, the agency operates in an 
environment that is ripe for costly transactions and sub-par returns. 
When factoring in the frequent changes to the investment policy with 
the incomplete policies and procedures, a picture emerges that 
suggests PBGC lacks a disciplined approach to investing--an unsettling 
picture of an agency with responsibility for a large asset portfolio 
and a challenging financial future. 

As the guarantor of basic pension benefits for 44 million Americans, 
PBGC must take a more disciplined and long-term approach to investment 
by developing and adhering to a long-term comprehensive investment 
policy and developing a complete compendium of operational policies 
and procedures. Well-functioning operational policies and procedures 
are an essential mechanism for ensuring linkages between pension 
funds' governance structure and management systems. Current work under 
way by PBGC's CID staff to develop such policies and procedure is an 
important first step, but greater commitment is needed from both the 
PBGC board and its management to assure that PBGC can effectively and 
consistently meet its obligation to conduct the many investment 
related functions it performs. 

Recommendations for Executive Action: 

We are making the following two recommendations: 

1. To ensure a disciplined and long-term approach to investment, we 
recommend PBGC and its board of directors develop and maintain a 
comprehensive investment policy statement that provides clear 
organizational accountability, well-defined goals, and risk management 
parameters. 

2. To ensure proper stewardship of PBGC's assets and effective 
implementation of its investment policy, we recommend that PBGC 
develop a complete set of operating procedures and guidelines 
consistent with recognized best practices in industry and government. 

Agency Comments and Our Evaluation: 

We obtained written comments on a draft of this report from PBGC and 
from the Department of Labor (Labor), which are reproduced in 
appendixes IV and V, respectively. PBGC and Labor also provided 
technical comments, which we incorporated into the report as 
appropriate. 

PBGC and Labor generally concurred with our recommendations and 
outlined actions the agency has taken to address many of the concerns 
we raised. For example, PBGC and its board recently issued a more 
comprehensive investment policy statement that has incorporated many 
of the policy items that we identified as missing from previously 
issued policy statements. In addition, PBGC is in the process of 
developing a complete set of operating procedures and guidelines. We 
are pleased to learn of the steps already taken and those underway to 
address our recommendations. In our view, these initial actions and 
continued efforts to implement our recommendations fully can only 
strengthen the stewardship of PBGC's investments to better assure that 
PBGC can effectively and consistently meet its obligation to conduct 
the many investment-related functions it performs. 

Underscoring its concern with the importance of PBGC's mission, Labor 
highlighted the increased oversight activity by the current board, its 
representatives and their staffs. The Secretary noted that the board 
also exercises its oversight responsibilities through monthly 
transition and investment reports written documentation and other 
activities. We acknowledge this increased oversight and appreciate the 
efforts by the current board to play a greater role in monitoring the 
PBGC. The increased oversight by the current board members and their 
representatives indeed represents an improvement in the way policies 
and processes are adopted and overseen at the PBGC, but we believe 
such improvements must be documented and institutionalized to assure 
that such levels of effort are sustained through subsequent boards. 
Our prior recommendations to Congress to improve governance at the 
PBGC through an expanded and restructured board continue to be needed 
to assure that such appropriate and continuous oversight is carried 
out, not only today but in the future. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies of the report 
to the Secretary of Labor, the Director of the PBGC, and other 
interested parties. We will also make copies available to others on 
request. This report is also available at no charge on the GAO Web 
site at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions regarding this report, please 
contact Barbara Bovbjerg at (202) 525-7215 or bovbergb@gao.gov. 
Contact points for our Congressional Relations and Office of Public 
Affairs can be found on the last page of this report. Key contributors 
are listed in appendix VI. 

Signed by: 

Barbara D. Bovbjerg: 
Managing Director, Education, Workforce, and Income Security: 

[End of section] 

Appendix I: Scope and Methodology: 

To determine how Pension Benefit Guaranty Corporation's (PBGC) 
investment objectives have changed over time and whether policy goals 
have been met, we collected and reviewed investment policies used by 
PBGC from 1990 through the policy dated October 2009. We started our 
review with PBGC's 1990 investment policy because it was the first 
investment policy that specified asset allocation targets, such as the 
proportion of assets to be invested in fixed-income assets versus 
equities. For each of these policies, we identified the overall 
objective, such as whether the policy attempted to maximize earnings 
using a higher proportion of equities or reduce risk by increasing the 
proportion of fixed-income securities matched to the duration of their 
liabilities. We also identified the percentages of each type of asset 
required by the policy, such as the percentage allocated to equities 
versus fixed-income investments, and compared these target allocations 
to actual allocations as stated in PBGC's annual reports, internal 
trust and revolving fund data, and other financial information 
received from PBGC officials. We then looked at the conditions leading 
up to each change in policy, such as changes in investment philosophy, 
incoming assets from terminated plans, and changes in leadership at 
the executive director level. We obtained this information through 
interviews with PBGC officials, and from other information provided by 
the agency, including internal memos, e-mails, inspector general audit 
reports, summary information prepared for board and advisory committee 
members, asset and liability studies, and other reports and memos 
prepared by various PBGC investment managers and consultants. We also 
performed a detailed review of PBGC board and advisory committee 
meeting minutes using NVivo content analysis software. To identify and 
summarize discussions related to investment policy development, 
review, and implementation, we reviewed investment policy statements, 
related investment advisory committee meeting notes and documentation, 
and board meeting notes when available. We obtained and reviewed this 
information from PBGC's inception in 1974 through the current policy, 
but focused our analysis on the period between 1990 and the 2009 
policy because the policies in place during that period were the focus 
of our review. 

We also interviewed past PBGC directors, board representatives, 
advisory committee members, and the PBGC Inspector General. We also 
reviewed relevant federal laws and regulations. To determine how 
PBGC's changes in investment policy compared to other entities, we 
interviewed officials from several pension consultants, investment and 
transition managers, life and property and casualty insurers, and 
large state pension plans. We also interviewed and reviewed investment 
policy-related information provided by foreign pension insurers in 
Canada, the Netherlands, Switzerland, and the United Kingdom. However, 
we did not conduct an independent legal analysis to verify the 
information provided by state pension plans or foreign pension 
insurers. Finally, we reviewed past our work on PBGC's investment 
policies and oversight structure. 

To determine how PBGC transitions assets between investment policies 
and the resulting costs, we interviewed PBGC officials responsible for 
transitioning assets and reviewed transition related documentation 
provided by PBGC officials, as available. For transitions where data 
was not available from PBGC, we obtained this information directly 
from PBGC's transition managers and interviewed officials from those 
firms to determine both implicit and explicit transaction costs 
associated with changing investment policies. We also looked at the 
procedures and costs associated with transitioning assets from 
terminated plans taken over by PBGC to determine whether or not it was 
possible to separate these costs from costs associated with changing 
policies. 

We interviewed the PBGC Inspector General and past PBGC directors to 
obtain additional information about PBGC's transition related policies 
and other adopted practices. In order to understand asset transitions 
more generally, we interviewed transition and investment managers, 
financial industry consultants, and officials at several large state 
pension plans. We also looked at market conditions and returns on 
equity and fixed-income investments during the periods in which PBGC 
was transitioning assets. We limited our analysis of transaction costs 
to the policies in place from 2004 through 2009 because of the lack of 
detailed cost data available from PBGC and their transition managers 
for transactions made prior to the 2004 policy.[Footnote 51] 

To assess the performance of PBGC's investments, we conducted a 
portfolio performance evaluation of the agency's Single-Employer Total 
Fund monthly returns from the period October 1976 to December 2009. 
This analysis focused on the single-employer program, which accounted 
for 96 percent--or $21.08 billion--of the $21.95 billion total deficit 
from the single-employer and multiemployer programs, as of September 
30, 2009.[Footnote 52] For those portions of this analysis involving 
PBGC liabilities, we used data on the liabilities associated with 
(terminated) trusteed plans within the single-employer program. 
[Footnote 53] The Single-Employer Total Fund represents the pool of 
trusteed assets that supports the liabilities associated with 
terminated defined benefit plans that have been trusteed by PBGC. 

As part of the portfolio performance evaluation, we compared PBGC's 
Total Fund portfolio return performance to the returns on several well-
diversified benchmark portfolios via a number of portfolio performance 
statistics. We selected well-diversified benchmark portfolios for the 
portfolio performance evaluation to ensure that the variability of the 
benchmark portfolio returns almost exclusively represented systematic 
risk and not the idiosyncratic risk associated with individual 
securities. Also, the portfolios were selected such that they 
represented exposure to the systematic risks that are reflected in the 
returns on several specific, broad asset classes. The asset classes 
are the domestic equity asset class (United States), the foreign 
equity asset class, the short maturity, risk-free asset class, and the 
long maturity fixed-income asset class. These particular asset classes 
were chosen because they are the ones emphasized in asset allocation 
data provided by PBGC.[Footnote 54] The benchmark portfolios used in 
this analysis are also distinguished by whether their asset class 
composition varies dynamically over time ("dynamic" composition 
portfolios) or is constant over time ("static" compositions 
portfolios). The benchmark portfolios and their characteristics are as 
follows: 

* S&P 500. Asset class composition: 100 percent equities. This is a 
static composition portfolio that represents the equity asset class. 

* Wilshire 5000. Asset class composition: 100 percent equities. This 
is a static composition portfolio. It represents the equity asset 
class with a greater allocation to smaller capitalization stocks than 
the S&P 500. 

* Barclays Capital Long-Term Government Credit Index. Asset class 
composition: 100 percent fixed income. This is a static composition 
portfolio representing the fixed-income asset class, including both 
corporate and U.S. government fixed-income asset classes. 

* Pension Protection Act Benchmark Portfolio.[Footnote 55] Asset class 
composition: 60 percent equities and 40 percent fixed income. This is 
a static composition portfolio.[Footnote 56] 

* Life Insurance Benchmark. Asset class composition: 85 percent fixed 
income and 15 percent equities. This is a static composition 
portfolio, and is intended as a stylized representation of the asset 
portfolio typically held by life insurance firms in their general 
accounts (with grouping mortgage assets into the fixed-income 
category).[Footnote 57] 

* Post Fiscal Year 2002 Benchmark. Asset class composition: 30 percent 
equities, 60 percent fixed income, and 10 percent cash. This is a 
static composition portfolio, and is intended as a stylized 
representation of the average asset allocation of the PBGC total fund 
during what is later termed "asset allocation period 4." This roughly 
corresponds to the period from beginning of fiscal year 2002 to the 
present. 

* Dynamic Benchmark. Asset class composition: equivalent to the asset 
class composition for the PBGC Total Fund. This is a dynamic 
composition portfolio, where the asset allocation varies over time in 
such a fashion so as to match that of the PBGC Total Fund for the 
broad asset classes domestic equity, foreign equity, fixed income, and 
riskless short maturity fixed-income assets (e.g., cash). The purpose 
of the Dynamic Benchmark in the PBGC Total Fund portfolio performance 
evaluation is to reflect the systematic risk exposure of the PBGC 
Total Fund as closely as possible while at the same time abstracting 
from any active tactical asset allocation undertaken by the PBGC Total 
Fund management, such as tactical allocations in specific subsectors 
within an asset class or investments in specific individual securities. 

The comparisons allowed us to analyze various aspects of the PBGC 
Total Fund's risk-adjusted performance. Given that the primary 
function of PBGC is to support its liabilities--the pension benefits 
associated with terminated, trusteed plans--the portfolio performance 
evaluation was conducted using asset-only returns and asset returns 
net of the liability return. 

To determine how well PBGC's investment policies and operations 
comport with best practices in the industry, we interviewed PBGC's 
Inspector General, current PBGC board member's representatives, and 
PBGC staff. We also reviewed relevant federal laws and regulations. To 
evaluate PBGC's operational guidelines and procedures, we obtained 
procedures manuals and documents that PBGC's staff uses to manage and 
oversee their operations. To evaluate PBGC's investment policy 
statements against industry best practices, we obtained information 
and documentation of actual practices used by industry experts, 
foreign pension insurers in Canada, the Netherlands, Switzerland, and 
the United Kingdom, investment committee documents from large state 
pension plan providers, and a property and casualty insurance 
provider. To identify a list of items that could be included in an 
investment policy we first conducted a literature search for documents 
with guidance on investment policy statements. We found documents from 
expert organizations which provide standards that financial industry 
professionals follow to ensure they are meeting the fiduciary 
requirements under relevant state and federal laws. These 
organizations include the Chartered Financial Analyst Institute, the 
Foundation for Fiduciary Studies, the Association of Pension Plan Fund 
Auditors, the Government Finance Officers Association, and Independent 
Fiduciary Services. We started with the Chartered Financial Analyst 
Institute's documents and listed elements of an investment policy 
identified in a document created by the institute and then compared 
that list to elements identified in the documents we reviewed created 
by other organizations. We also considered the investment policy 
statements of other entities and the elements that were frequently 
found in those statements. In our list, we kept items that were 
mentioned in more than one of the documents from the five expert 
organizations. We also added one item, transition policy, which was 
not found in the documents we used but we believe that it is specific 
and unique to the mission of PBGC since the agency transitions assets 
and liabilities from the defined benefit plans that are terminated. 
This list contains elements that multiple industry organizations have 
identified as desirable elements of investment policy statements, but, 
should not be considered an exhaustive, customized checklist. While we 
believe that PBGC should have some of the items contained in these 
lists, because every investor is unique, the actual items that PBGC 
should include in its investment policy needs to be tailored to their 
particular needs and situation. 

[End of section] 

Appendix II: Process for Transitioning Funds to Align with PBGC's 
Investment Policy: 

Figure: Process for Transitioning Funds to Align with PBGC's 
Investment Policy: 

[Refer to PDF for image: process illustration] 

1. Asset received from plans that are terminated and trusteed by 
PBGC[A]. 
Asset is liquid and/or marketable: go to #2. 
Asset is not liquid and/or marketable: go to #7. 

[#2 and #3 are Trust Fund Assets] 

2. Asset commingled with PBGCs portfolio[B]. 
PBGC can transfer to asset manager: go to #3. 
PBGC cannot transfer to asset manager: go to #5. 

3. Asset moved to existing PBGC asset managers according to investment 
policy in effect[C]. 

4. Assets rebalanced (reinvested) to expedite implementation of PBGCs 
investment policy. 

5. Liquidation strategy developed. 

6. Asset moved to a transition manager. Go to #8. 

7. Illiquid assets (such as real estate or private equity) assigned to 
specialists[D]. 

*. Asset sold or allowed to mature over time. 

Source: GAO analysis of PBGCs Corporate Investment Department 
Policies and Procedures Manual (draft dated 6/1/2010) and discussions 
with PBGC personnel. 

[A] Receipt of newly-terminated plan assets is a multi-step process. 
Assets are evaluated by an analyst with PBGC's Corporate Investment 
Department (CID).CID policy calls for various documents to be compiled 
into a file (including, for example, a plan asset listing, investment 
statements, trusteeship agreement, contact information), records 
receipt of the plan in CID's plan tracking worksheet, and assigns the 
plan to a CID analyst. The analyst then reviews the file and makes 
contact with the party/parties that have custody of the assets 
(typically more than one) to initiate the transfer, and a plan asset 
transfer methodology is determined. PBGC officials noted that it is 
CID priority to transfer all assets in-kind, but that is not always 
permitted (per contractual agreements between the former plan sponsor 
and the asset custodian and/or proprietary investment products) or 
optimal (for example, with small dollar mutual funds). To transfer the 
assets, the analyst prepares a direction letter that will include a 
copy of the trusteeship agreement and transfer instructions at a 
minimum. This letter is signed by authorized PBGC personnel and sent 
to the asset custodian. The assets are then transferred to PBGC's 
asset custodian and placed in a holding account until liquidity is 
determined and a certain dollar threshold is met. 

[B] PBGC officials noted that transfers of assets in-kind to existing 
investment managers can be done at minimal cost; however, decisions 
regarding whether or not assets will be transferred to existing 
investment managers are also impacted by PBGC's investment policy and 
the current asset allocation. For example, if there is a large equity 
position in a holding account and the PBGC investment portfolio is 
already at or near the maximum equity exposure permitted by the 
investment policy, these assets will typically be liquidated into 
cash. An exception may be if the amount of equities in the holding 
account is considered de minimus (for example, $50 million in equities 
going into a $70 billion portfolio) and there is minimal to no cost to 
transfer the assets to a manager. 

[C] PBGC officials noted that assets received in the form of cash are 
immediately considered part of the PBGC investment portfolio and can 
be utilized in various ways, such as contributing to existing 
investment managers, paying trust fund expenses, and contributing to 
the proportional funding payment to the revolving fund. 

[D] Illiquid assets, such as real property, are generally transferred 
to PBGC's Special Situation manager, where the manager seeks 
liquidation of the asset in a timely manner. Private equity (generally 
in the form of limited partnerships) is transferred to one of PBGC's 
private market overseers. 

[End of section] 

Appendix III: Asset-Only and Net of Liability Analysis of Pension 
Benefit Guarantee Corporation's Single-Employer Total Fund: 

We conducted a portfolio performance evaluation of the PBGC Single- 
Employer Total Fund monthly returns from the period October 1976 to 
December 2009. This analysis focused on the single-employer program, 
which accounted for 96 percent--or $21.08 billion--of the $21.95 
billion total deficit from the single-employer and multiemployer 
programs, as of September 30, 2009.[Footnote 58] For those portions of 
this analysis involving PBGC liabilities, we used data on the 
liabilities associated with (terminated) trusteed plans within the 
single-employer program.[Footnote 59] The Single-Employer Total Fund 
represents the pool of trusteed assets that supports the liabilities 
associated with terminated defined benefit plans that have been 
trusteed by PBGC. 

As part of the portfolio performance evaluation, we compared PBGC's 
Total Fund portfolio return performance to the returns on several well-
diversified benchmark portfolios via a number of portfolio performance 
statistics. The comparisons allowed us to analyze various aspects of 
the PBGC Total Fund's risk-adjusted performance. Given that the 
primary function of PBGC is to support its liabilities--the pension 
benefits associated with terminated, trusteed plans--the portfolio 
performance evaluation was conducted using asset-only returns and 
asset returns net of the liability return. The liability return refers 
to the rate of growth in the total value of the then-existing 
liabilities or terminated benefits, (i.e., exclusive of newly 
terminated plans). In computing the asset returns net of the liability 
return, we use what we term the "scaled" liability return--the product 
of the liability return and the inverse of the funding ratio (PBGC 
Total Fund aggregate assets to PBGC total fund aggregate liabilities). 
[Footnote 60] 

Our analysis also entailed examining patterns in the PBGC Total Fund's 
asset allocations (PBGC Total Fund portfolio "weights" across asset 
classes) over time in order to assess the effect of fluctuations in 
the PBGC Total Fund asset allocations on the performance of the PBGC 
Total Fund. This analysis included characterizing the behavior of the 
PBGC Total Fund portfolio weights and identifying asset allocation 
periods in the PBGC Total Fund. The result of this analysis was used 
in selecting some of the benchmark portfolios. 

Liability Returns: 

Monthly liability returns were provided by PBGC for the October 2003 
to January 2010 period. For the period prior to October 2003, we 
estimated the liability returns using an algorithm designed to 
approximate the liability return generation methodology employed by 
PBGC. The overall approach involved estimating the present value of 
the liabilities, including the aggregate benefit payment, at the end 
of each month (referred to by PBGC as the present value of future 
benefits). The two major data components for computing the liability 
return are (1) the identification of appropriate interest rates for 
use each month in discounting the projected cash flows and (2) the 
monthly approximation of the projected PBGC liability cash flow stream 
for each month during the October 1976 to September 2003 time period. 

To determine the appropriate interest rates for discounting the 
projected cash flows we used two interest rate factors obtained from 
PBGC that it uses in computing estimates of the present value of its 
liabilities--the "select" and "ultimate" rates.[Footnote 61] For the 
period prior to September 1993, we used a set of interest rates based 
on what PBGC terms the "immediate" interest rate. To produce monthly 
approximations of the projected liability cash flow stream, we 
transformed quarterly projections supplied by PBGC into a monthly 
series starting with the first fiscal year for which the present value 
of the trusted liability was available, September 1976, using the 
algorithm we developed. For each month the liability return is 
calculated as the monthly percentage change in the estimated present 
value of the liabilities plus the estimated benefit paid at the end of 
the month divided by the estimated present value of the liabilities at 
the end of the previous month. 

Because our liability return methodology relies upon estimates of what 
PBGC would have hypothetically projected the future liability cash 
flow to be, it is subject to error. Additionally, our liability return 
measure is sensitive to valuation assumptions and other inputs, such 
as our choice of discount rates, used to calculate the present value 
of the expected of the expected future payments. Moreover we relied on 
a static set of cash flows unlike the actual cash flow projection that 
PBGC would have produced in the past. Such projections would vary over 
time due to alterations in the assumed beneficiary survival 
probabilities as a consequence of any changes in the choice of 
mortality tables, among other things. Also, the algorithm, in 
approximating the way in which PBGC calculates its present value 
calculations, implicitly assumes the all beneficiaries were receiving 
cash flows. Despite these limitations the correlation of the series 
produced by our liability return estimation algorithm and PBGC's 
liability returns was 0.9994, suggesting near perfect correlation. 
Thus, despite the limitation, we believe that our liability return 
generating algorithm produces estimates that are robust. 

It should be noted that incoming cash flows from newly terminated 
plans are not included in the measure of liability return. This 
exclusion is consistent with approaches we have reviewed and the 
liability return estimates produced by PBGC.[Footnote 62] However, 
some pension experts have advocated that any assessment of PBGC 
investment policy take into account the correlation between new plan 
terminations and financial market performance. Specifically, given the 
possibility of a negative correlation between stock market returns and 
new plan terminations, an economic environment in which the stock 
market suffers losses could potentially be accompanied by an increase 
in new plan terminations of underfunded plans and a deterioration in 
the funded status of existing trusteed plans. Incorporating the 
correlation between stock market returns and new claims could result 
in lower risk adjusted performance for portfolios with a heavier 
weighting toward stock. While such an analysis would be 
methodologically more complex and is beyond the scope of this report, 
consideration could be given to including this phenomenon in an 
expanded study. While the risk of new plan terminations could also be 
addressed through a more actuarial approach to setting PBGC premiums, 
such an approach would not eliminate the existence of correlation risk 
between PBGC's investment portfolio and the amount of newly terminated 
plans. 

Our methodology also requires an estimate of the funding ratio since, 
as mentioned previously, following Sharpe (2002) and Sharpe and Tint 
(1990), our measure of the liability return is scaled by the inverse 
funding ratio (the greater PBGC's deficit the more weight liability 
returns are given within the asset net of liability framework). As a 
result greater credit was given to portfolios that correlated with 
liabilities when the PGCG experienced a greater degree of 
underfunding. Using a scaled liability return measures the net effect 
of the asset and liability returns on the dollar amount of surplus or 
deficit; an alternative approach would have been to use the un-scaled 
liability return, which would measure the net effect of the asset and 
liability returns on the funding ratio. Moreover, while we have given 
full weight to the scaled liability return, others may place less 
importance on liabilities. Note, however, that the lower the weight 
given to the scaled liabilities the more the approach will resemble 
outcomes in the asset-only framework. We define the funding ratio as 
the ratio of the PBGC total fund trusteed asset portfolio to the 
present value of the PBGC total fund trusteed liabilities. Because the 
data on liability values was unavailable for the September 1976 to 
September 1978 period, we computed estimates using the present value 
of future benefits from PBGC annual and actuarial reports. Where the 
data was not directly available from a PBGC data source for a 
particular month we imputed these values using the existing data. 
[Footnote 63] 

Performance Statistics: 

The portfolio performance literature usually assumes that most 
investors (that is, economic agents who seek to allocate funds across 
a variety of assets) are risk averse.[Footnote 64] Therefore, we 
assessed the performance of the PBGC total fund asset portfolio and 
the benchmark portfolios using statistics that measure and summarize 
the magnitude of the portfolio returns, the riskiness of the portfolio 
returns, and the optimality of the trade-off between the magnitude and 
the riskiness of the portfolio returns (risk-return trade-off). 
Statistics which measure the magnitude of the portfolio returns 
include the mean, minimum, and maximum; statistics which measure the 
riskiness of the returns include the standard deviation, semi-standard 
deviation, skewness, kurtosis, Value At Risk, and expected shortfall; 
and statistics which quantify the trade-off between the magnitudes of 
risk and return include the Sharpe, Sortino, Omega, and Adjusted 
Sharpe measures. Higher values of the statistics that measure risk 
imply that greater riskiness, volatility, or uncertainty is associated 
with the portfolio returns. Higher values of the statistics that 
measure the magnitude of portfolios returns imply larger portfolio 
return values. Higher values of the statistics that quantify the 
optimality of the reward to risk trade-off imply better trade-offs 
between the magnitude of portfolio returns and the riskiness 
associated with them and thus, better risk-adjusted portfolio 
performance. The performance statistics used in this report are well-
established measures but they are not the only statistics that could 
have been reviewed. 

Another important element of any performance statistic is the unit of 
time measurement. Our analysis measures returns on a monthly basis, 
and measures risk based on the variation in month-to-month returns. 
Using a different unit of time, such as a single year or even a multi-
year period, could give a different picture of the risk or reward 
tradeoff.[Footnote 65] Another decision in any performance assessment 
is whether to do the analysis on a time-weighted or a dollar-weighted 
basis. A time-weighted basis gives equal weight to each unit of time; 
thus, a monthly rate of return in 1976 gets just as much weight in the 
analysis as a monthly rate of return in 2009. A dollar-weighted basis 
gives greater weight to the periods when more money is at stake; since 
PBGC's portfolio of assets and liabilities was many times bigger in 
2009 than it was in 1976, performance in 2009 was of greater economic 
consequence than performance in 1976. We used a time-weighted basis 
for our analysis, in order to focus on investment performance itself, 
rather than on the particular economic consequences in the time period 
under study. 

In the list that follows, we provide observations and descriptions of 
the performance statistics used, where t is a monthly time index; RP,t 
is the return on a portfolio P from time t 1 to time t; Rf,t is the 
risk-free rate from time t 1 to time t; T is the number of months for 
which there is return data; and E[] is the expectation operator such 
that E[RP,t] is the mean of the return on portfolio P ; and P is the 
standard deviation of RP,t: 

* Semi-standard deviation.[Footnote 66] The semi-standard deviation is 
similar to the standard deviation except that it focuses more tightly 
on the portion of the return variability that is associated with low 
returns. There are multiple definitions of the semi-standard 
deviation; the one used in our analysis is: 

[formula illustration] 

where SD is used to denote the semi-standard deviation and MAR is 
defined as the "minimum acceptable return.": 

* Value At Risk (VaR).[Footnote 67] VaR of the returns is the negative 
of a quantile of the probability distribution of the returns over a 
given time horizon, where the quantile is often referred to as "alpha" 
(). Once and a time horizon (arbitrarily labeled T* here) are 
specified, then VaR is defined as the negative of the value such that 
the probability that a rate of return over time horizon T* will fall 
at or below that value is . For example, if the probability that the 1-
month portfolio return will fall at or below negative 4 percent is 
equal to 1 percent, then the 1 percent alpha VaR of the 1-month 
returns is 4 percent (not negative 4 percent). 

[End of section] 

As an alternative to , VaR is often expressed in connection with a 
"confidence level" where the confidence level is defined as 1-. 
In[Footnote 68] the previous example, the 99 percent confidence VaR 
was 4 percent. 

Under the assumption that portfolio returns are normally distributed, 
one can estimate VaR as: 

[formula illustration] 

where z1-is the 1-quantile of the normal distribution and P is the 
standard deviation of RP,t. 

* Expected shortfall.[Footnote 69] Expected shortfall is the (negative 
of the) mean value of the returns, conditional upon the returns being 
below (negative of) VaR. In the context of the example in point (b), 
if the expected shortfall is 6 percent, then negative 6 percent is the 
mean value of the returns that are less than negative 4 percent. Under 
the assumption that the returns RP,t are normally distributed, the 
expected shortfall can be computed as: 

[formula illustration] 

where ES denotes expected shortfall, "() is used to denote the 
standard normal probability density function, and "(z1-) is standard 
normal probability density function evaluated at z1-. 

* The Sharpe ratio.[Footnote 70] The Sharpe ratio is the ratio of the 
expected excess return to the standard deviation of the return. 
Letting S denote the Sharpe ratio, the Sharpe ratio can be computed as: 

[formula illustration] 

The greater the value, the better the reward to risk trade-off for the 
portfolio. Portfolios that have higher Sharpe ratios have better risk- 
adjusted performance. Note that in the asset/liability management 
context, RP,t can represent the portfolio return net of the liability 
return. 

* The Sortino ratio.[Footnote 71] The Sortino ratio is the ratio of 
the expected return in excess of the minimum acceptable return (MAR) 
to the semi-standard deviation. The general expression is: 

[formula illustration] 

where SSortino is used to denote the Sortino ratio. The advantage of 
this performance measure is that it reflects the trade-off between the 
magnitude of return and the risk associated with undesirable return 
outcomes (such as returns falling below the MAR) more specifically 
than the Sharpe ratio does. In this work, an annualized Sortino ratio 
for the excess returns is utilized. The applicable equation in this 
case is: 

[formula illustration] 

Higher Sortino ratio values indicate better risk-adjusted portfolio 
performance. 

* The Omega ratio.[Footnote 72] The Omega ratio is a risk-reward trade-
off measure that is designed to adjust for the impact of outliers and 
deviations of the return distribution from normality. The general 
definition of the Omega ratio (denoted by ) is: 

[formula illustration] 

* The Adjusted Sharpe ratio.[Footnote 73] Israelsen showed that when 
the expected excess returns for portfolios are negative, the 
traditional Sharpe ratio can yield portfolio performance rankings that 
are not consistent with the standard notions that investors are risk 
averse and also prefer portfolios with higher returns to portfolios 
with lower returns. To address this problem, Israelsen modified the 
Sharpe ratio as follows: 

[formula illustration] 

where Sadj denotes the Adjusted Sharpe ratio and abs(E[RP,t]-Rf,t) is 
the absolute value of E[RP,t]-Rf,t. Higher Adjusted Sharpe ratio 
scores imply superior risk-adjusted performance. Note that when 
expected excess returns are negative, the Adjusted Sharpe ratio is 
negative, and higher Adjusted Sharpe ratios are those that are less 
negative (in other words, smaller in absolute value). 

* Skewness (sample skewness).[Footnote 74] The skewness statistic 
indicates the extent of extreme return values above or below the mean 
return. Positive skewness implies the incidence of a large number of 
extreme returns above the mean return; accordingly, negative skewness 
implies the incidence of a large number of extreme returns below the 
mean. The normal distribution has a skewness value of zero. To 
estimate the skewness of the portfolio returns, the following equation 
was used, which incorporates a correction for bias (denoting skewness 
by sk): 

[formula illustration] 

* Kurtosis (sample kurtosis).[Footnote 75] The kurtosis provides a 
measure of the incidence of extreme return values above and below the 
mean return. The higher the kurtosis, the greater the number of 
extreme return values both above and below the mean return within the 
sample of returns. Visually, a probability density with a large 
kurtosis value will appear to have fat "tails." The normal 
distribution has a kurtosis of three. As with the skewness, the 
kurtosis was estimated using an equation that incorporates a sample-
size bias correction. Denoting the kurtosis by k, the kurtosis 
equation utilized is: 

Selected Benchmarks: 

We selected well-diversified benchmark portfolios for the portfolio 
performance evaluation to ensure that the variability of the benchmark 
portfolio returns almost exclusively represented systematic risk and 
not the idiosyncratic risk associated with individual securities. 
Also, the portfolios were selected such that they represented exposure 
to the systematic risks that are reflected in the returns on several 
specific, broad asset classes. The asset classes are the domestic 
equity asset class (United States), the foreign equity asset class, 
the short maturity, risk-free asset class, and the long maturity fixed-
income asset class. These particular asset classes were chosen because 
they are the ones emphasized in asset allocation data provided by 
PBGC.[Footnote 76] The benchmark portfolios used in this analysis are 
also distinguished by whether their asset class composition varies 
dynamically over time ("dynamic" composition portfolios) or is 
constant over time ("static" compositions portfolios). The static 
composition portfolios are assumed to be rebalanced monthly. The 
benchmark portfolios and their characteristics are as follows: 

* S&P 500. Asset class composition: 100 percent equities. This is a 
static composition portfolio that represents the equity asset class. 

* Wilshire 5000. Asset class composition: 100 percent equities. This 
is a static composition portfolio. It represents the equity asset 
class with a greater allocation to smaller capitalization stocks than 
the S&P 500. 

* Barclays Capital Long-Term Government Credit Index. Asset class 
composition: 100 percent fixed income. This is a static composition 
portfolio representing the fixed-income asset class (including both 
corporate and U.S. government fixed-income asset classes). 

* PPA Benchmark Portfolio.[Footnote 77] Asset class composition: 60 
percent equities and 40 percent fixed income. This is a static 
composition portfolio.[Footnote 78] 

* Life Insurance Benchmark. Asset class composition: 85 percent fixed 
income and 15 percent equities. This is a static composition 
portfolio. This is intended as a stylized representation of the asset 
portfolio typically held by life insurance firms in their general 
accounts (with grouping mortgage assets into the fixed-income 
category).[Footnote 79] 

* Post Fiscal Year 2002 Benchmark. Asset class composition: 30 percent 
equities, 60 percent fixed income, and 10 percent cash. This is a 
static composition portfolio. This is intended as a stylized 
representation of the average asset allocation of the PBGC Total Fund 
during what is later termed "asset allocation period 4." This roughly 
corresponds to the period from beginning of fiscal year 2002 to 
December 2009. 

* Dynamic Benchmark. Asset class composition: equivalent to the asset 
class composition for the PBGC Total Fund. This is a dynamic 
composition portfolio, where the asset allocation varies over time in 
such a fashion so as to match that of the PBGC Total Fund for the 
broad asset classes domestic equity, foreign equity, fixed income, and 
riskless short maturity fixed-income assets (e.g., cash). The purpose 
of the Dynamic Benchmark in the PBGC Total Fund portfolio performance 
evaluation is to reflect the systematic risk exposure of the PBGC 
Total Fund as closely as possible while at the same time abstracting 
from any active tactical asset allocation undertaken by the PBGC Total 
Fund management (such as tactical allocations in specific subsectors 
within an asset class or investments in specific individual 
securities). 

PBGC Asset Allocations Over Time: 

Our analysis of PBGC's asset allocations for the Total Fund indicate 
several broad behaviors: 

1. The PBGC total fund asset allocations have varied over the time 
period from September 1976 to December 2009 indicating that the PBGC 
Total Fund is a dynamic asset portfolio (see figure 4). However, since 
November 2001, the combined allocation to both domestic and 
international equities has been more stable than it was in the period 
before November 2001, since the standard deviation of the total fund 
portfolio allocation to equities has been 2.82 percent since November 
2001, which is distinctly less than the standard deviation of the 
equity weight prior to that time, which was 10.58 percent per month. 
See table 1 below. With the exception of cash, the standard deviation 
values of all the asset classes shown in table 1 were lower in the 
period from November 2001 to December 2009 than in the period prior to 
November 2001, suggesting that PBGC asset allocations have been less 
variable for over the last 8 years than they were in the more distant 
past with the exception of the relatively small cash category. While 
some have characterized PBGC Total Fund's asset allocations as time- 
varying, this seems more relevant to the period from September 1976 to 
October 2001 than to the last approximately 8 years (the period since 
November 2001). 

Figure 4: Allocations of Bonds and Equities in PBGC Total Fund, 
September 1976 to December 2009: 

[Refer to PDF for image: multiple line graph] 

Allocation regime 1: 

September 1976; 
Bonds: 84.48%; 
All equities: 14.66%. 

September 1977; 
Bonds: 76.83%; 
All equities: 22.15%. 

September 1978; 
Bonds: 75.31%; 
All equities: 24.01%. 

September 1979; 
Bonds: 69.51%; 
All equities: 30.25%. 

September 1980; 
Bonds: 59.32%; 
All equities: 40.26%. 

September 1981; 
Bonds: 63.71%; 
All equities: 35.79%. 

September 1982; 
Bonds: 61.95; 
All equities: 37.97%. 

September 1983; 
Bonds: 61.58%; 
All equities: 38.34%. 

September 1984; 
Bonds: 48.18%; 
All equities: 46.4%. 

September 1985; 
Bonds: 42.75%; 
All equities: 42.73%. 

September 1986; 
Bonds: 39.2%; 
All equities: 47.1%. 

Allocation regime 2: 

September 1987; 
Bonds: 28.23%; 
All equities: 57.32%. 

September 1988; 
Bonds: 39.74%; 
All equities: 46.3%. 

September 1989; 
Bonds: 42.71%; 
All equities: 49.83%. 

September 1990; 
Bonds: 58.62%; 
All equities: 33.01%. 

September 1991; 
Bonds: 70.76%; 
All equities: 22.4%. 

September 1992; 
Bonds: 75.7%; 
All equities: 20.25%. 

Allocation regime 3: 

September 1993; 
Bonds: 78.75%; 
All equities: 17.13%. 

September 1994; 
Bonds: 62.74%; 
All equities: 30.34%. 

September 1995; 
Bonds: 64.84%; 
All equities: 31.65%. 

September 1996; 
Bonds: 58.57%; 
All equities: 38.48%. 

September 1997; 
Bonds: 57.5%; 
All equities: 39.47%. 

September 1998; 
Bonds: 62.98%; 
All equities: 33.6%. 

September 1999; 
Bonds: 58.53%; 
All equities: 40.4%. 

September 2000; 
Bonds: 58.09%; 
All equities: 41.05%. 

Allocation regime 4: 

September 2001; 
Bonds: 66.28%; 
All equities: 28.22%. 

September 2002; 
Bonds: 68.49%; 
All equities: 27.66%. 

September 2003; 
Bonds: 56.88%; 
All equities: 32.39%. 

September 2004; 
Bonds: 49.75%; 
All equities: 29.61%. 

September 2005; 
Bonds: 70.23%; 
All equities: 27.58%. 

September 2006; 
Bonds: 69.4%; 
All equities: 28.07%. 

September 2007; 
Bonds: 64.1%; 
All equities: 32.2%. 

September 2008; 
Bonds: 68.77%; 
All equities: 26.89%. 

September 2009; 
Bonds: 55.7%; 
All equities: 37.19%. 

Sources: PBGC; GAO analysis of PBGC data. 

[End of figure] 

2. However, one aspect of the PBGC Total Fund asset allocation that 
has altered significantly since October 2008 is the international and 
domestic allocation within the equity asset allocation. The PBGC Total 
Fund's allocation to international equities has grown from 2.26 
percent at the end of October 2008 to 16.25 percent at the end of 
December 2009 (see figure 5). 

Figure 5: Allocation to Equities in PBGC Total Fund, September 1976 to 
December 2009: 

[Refer to PDF for image: multiple line graph] 

Allocation regime 1: 

September 1976; 
All equities: 14.66%. 

September 1977; 
All equities: 22.15%. 

September 1978; 
All equities: 24.01. 

September 1979; 
All equities: 30.25%. 

September 1980; 
All equities: 40.26%. 

September 1981; 
All equities: 35.79%. 

September 1982; 
All equities: 37.97%. 

September 1983; 
All equities: 38.34%. 

September 1984; 
All equities: 46.4%. 

September 1985; 
All equities: 42.73%. 

September 1986; 
All equities: 47.1%. 

Allocation regime 2: 

September 1987; 
All equities: 57.32%. 

September 1988; 
All equities: 46.3%. 

September 1989; 
All equities: 49.83%. 

September 1990; 
All equities: 33.01%. 

September 1991; 
All equities: 22.4%. 

September 1992; 
All equities: 20.25%. 

Allocation regime 3: 

September 1993; 
All equities: 17.13%. 

September 1994; 
All equities: 30.34%. 

September 1995; 
All equities: 31.65%. 

September 1996; 
All equities: 38.48%. 

September 1997; 
All equities: 39.47%. 

September 1998; 
All equities: 33.6%. 

September 1999; 
All equities: 40.4%. 

September 2000; 
All equities: 41.05%. 

Allocation regime 4: 

September 2001; 
All equities: 28.22%. 

September 2002; 
All equities: 27.66%. 

September 2003; 
All equities: 32.39%. 

September 2004; 
All equities: 29.61%. 

September 2005; 
All equities: 27.58%. 

September 2006; 
All equities: 28.07%. 

September 2007; 
Domestic equities: 28.69%; 
International equities: 3.51%; 
All equities: 32.2%. 

September 2008; 
Domestic equities: 24.27%; 
International equities: 2.62%; 
All equities: 26.89%. 

September 2009; 
Domestic equities: 20.57%; 
International equities: 16.62%; 
All equities: 37.19%. 

Sources: PBGC; GAO analysis of PBGC data. 

[End of figure] 

3. The PBGC Total Fund has exhibited a tendency to reduce equity 
portfolio weight and increase bond portfolio weight at the start of 
economic recessions. As shown in figure 6, for three out of the last 
five recessions (including the most recent economic contraction), the 
portfolio allocation to equities has fallen either within 1 month of 
the start of the recession (1981-1982 and 1990-1991 recessions) or 
within 5 months of the recession (2000-2001 recession). 

Figure 6: Allocation of Bonds and Equities in PBGC Total Fund, 
September 1976 to December 2009, with Business Cycle Shading: 

[Refer to PDF for image: multiple line graph] 

The following period of recession are depicted on the graph with 
shading: 

July-September 1090; 
September 1981-September 1982; 
September 1990-September 1991; 
September 2001-September 2002; 
September 2008-September 2009. 

September 1976; 
Bonds: 84.48%; 
All equities: 14.66%. 

September 1977; 
Bonds: 76.83%; 
All equities: 22.15%. 

September 1978; 
Bonds: 75.31%; 
All equities: 24.01%. 

September 1979; 
Bonds: 69.51%; 
All equities: 30.25%. 

September 1980; 
Bonds: 59.32%; 
All equities: 40.26%. 

September 1981; 
Bonds: 63.71%; 
All equities: 35.79%. 

September 1982; 
Bonds: 61.95%; 
All equities: 37.97%. 

September 1983; 
Bonds: 61.58%; 
All equities: 38.34%. 

September 1984; 
Bonds: 48.18%; 
All equities: 46.4%. 

September 1985; 
Bonds: 42.75%; 
All equities: 42.73%. 

September 1986; 
Bonds: 39.2%; 
All equities: 47.1%. 

September 1987; 
Bonds: 28.23%; 
All equities: 57.32%. 

September 1988; 
Bonds: 39.74%; 
All equities: 46.3%. 

September 1989; 
Bonds: 42.71%; 
All equities: 49.83%. 

September 1990; 
Bonds: 58.62%; 
All equities: 33.01%. 

September 1991; 
Bonds: 70.76%; 
All equities: 22.4%. 

September 1992; 
Bonds: 75.7%; 
All equities: 20.25%. 

September 1993; 
Bonds: 78.75%; 
All equities: 17.13%. 

September 1994; 
Bonds: 62.74%; 
All equities: 30.34%. 

September 1995; 
Bonds: 64.84%; 
All equities: 31.65%. 

September 1996; 
Bonds: 58.57%; 
All equities: 38.48%. 

September 1997; 
Bonds: 57.5%; 
All equities: 39.47%. 

September 1998; 
Bonds: 62.98%; 
All equities: 33.6%. 

September 1999; 
Bonds: 58.53%; 
All equities: 40.4%. 

September 2000; 
Bonds: 58.09%; 
All equities: 41.05%. 

September 2001; 
Bonds: 66.28%; 
All equities: 28.22%. 

September 2002; 
Bonds: 68.49%; 
All equities: 27.66%. 

September 2003; 
Bonds: 56.88%; 
All equities: 32.39%. 

September 2004; 
Bonds: 49.75%; 
All equities: 29.61%. 

September 2005; 
Bonds: 70.23%; 
All equities: 27.58%. 

September 2006; 
Bonds: 69.4%; 
All equities: 28.07%. 

September 2007; 
Bonds: 64.1%; 
All equities: 32.2%. 

September 2008; 
Bonds: 68.77%; 
All equities: 26.89%. 

September 2009; 
Bonds: 55.7%; 
All equities: 37.19%. 

Sources: PBGC; GAO analysis of PBGC data. 

[End of figure] 

Figures 46 and the statistics in table 5 suggest the following asset 
allocation periods for the PBGC Total Fund: 

* Asset allocation period 1. This period (September 1976 to August 
1987) was characterized by a trend of allocation away from bonds into 
equities such that the allocation altered from 15 percent equities, 84 
percent bonds in September 1976 to 64 percent equities, 31 percent 
bonds by August 1987. By way of comparison, the PBGC Total Fund 
allocation in September 1976 (the beginning of the historical sample 
period) was similar to that found among life insurance companies. 

* Asset allocation period 2. This period (September 1987 to September 
1993) was marked by rebalancing away from equities towards fixed 
income that accelerated at the beginning of the 1990-1991 recession. 
In September of 1987, the allocations were 57 percent equities and 28 
percent bonds, but this had shifted to 17 percent equities and 79 
percent bonds by September 1993. As in September 1976, 17 years 
earlier, the portfolio composition was again qualitatively similar to 
the allocations associated with life insurance companies. 

* Asset allocation period 3. Within this period (October 1993 to 
October 2001), the proportion of the PBGC portfolio allocated to 
equities rose from 17 percent in September 1993 to 28 percent by 
October 2001. 

* Asset allocation period 4. (November 2001 to December 2009) Figure 5 
indicates that the average weights on domestic equities and equities 
as a whole were smaller in this regime than in asset allocation period 
3. 

Table 5: Descriptive Statistics for PBGC Total Fund Portfolio Weights 
by Allocation Period, September 1976 to December 2009: 

Average portfolio weight: 

Asset class: Domestic equity; 
Period 1: September 1976 through August 1987: Average portfolio 
weight: 35.95%; 
Period 2: September 1987 through September 1993: 34.88%; 
Period 3: October 1993 through October 2001: 35.49%; 
Period 4: November 2001 through December 2009: 27.79%; 
Periods 1-3: September 1976 through December 2001: 35.54%; 
All periods: September 1976 through December 2009: 33.57%. 

Asset class: International equity; 
Period 1: September 1976 through August 1987: Average portfolio 
weight: 0; 
Period 2: September 1987 through September 1993: 0; 
Period 3: October 1993 through October 2001: 0; 
Period 4: November 2001 through December 2009: 2.69%; 
Periods 1-3: September 1976 through December 2001: 0; 
All periods: September 1976 through December 2009: 0.67%. 

Asset class: All equities; 
Period 1: September 1976 through August 1987: Average portfolio 
weight: 35.95%; 
Period 2: September 1987 through September 1993: 34.88%; 
Period 3: October 1993 through October 2001: 35.49%; 
Period 4: November 2001 through December 2009: 30.29%; 
Periods 1-3: September 1976 through December 2001: 35.54%; 
All periods: September 1976 through December 2009: 34.24%. 

Asset class: Fixed income; 
Period 1: September 1976 through August 1987: Average portfolio 
weight: 60.42%; 
Period 2: September 1987 through September 1993: 58.18%; 
Period 3: October 1993 through October 2001: 61.14%; 
Period 4: November 2001 through December 2009: 62.9%; 
Periods 1-3: September 1976 through December 2001: 60.11%; 
All periods: September 1976 through December 2009: 60.8%. 

Asset class: Cash; 
Period 1: September 1976 through August 1987: Average portfolio 
weight: 2.07%; 
Period 2: September 1987 through September 1993: 4.08%; 
Period 3: October 1993 through October 2001: 2.65%; 
Period 4: November 2001 through December 2009: 4.28;% 
Periods 1-3: September 1976 through December 2001: 2.74%; 
All periods: September 1976 through December 2009: 3.12%. 

Standard deviation ff portfolio weight: 

Percent: Asset class : Domestic equity; 
Period 1: September 1976 through August 1987: Average portfolio 
weight: 11.78%; 
Period 2: September 1987 through September 1993: 13.3%; 
Period 3: October 1993 through October 2001: 5.31%; 
Period 4: November 2001 through December 2009: 4.5%; 
Periods 1-3: September 1976 through December 2001: 10.58%; 
All periods: September 1976 through December 2009: 10.04%. 

Asset class: International equity; 
Period 1: September 1976 through August 1987: Average portfolio 
weight: 0; 
Period 2: September 1987 through September 1993: 0; 
Period 3: October 1993 through October 2001: 0; 
Period 4: November 2001 through December 2009: 4.81%; 
Periods 1-3: September 1976 through December 2001: 0; 
All periods: September 1976 through December 2009: 2.66%. 

Asset class: All equities; 
Period 1: September 1976 through August 1987: Average portfolio 
weight: 11.78%; 
Period 2: September 1987 through September 1993: 13.30%; 
Period 3: October 1993 through October 2001: 5.31%; 
Period 4: November 2001 through December 2009: 2.82%; 
Periods 1-3: September 1976 through December 2001: 10.58%; 
All periods: September 1976 through December 2009: 9.55%. 

Asset class: Fixed income; 
Period 1: September 1976 through August 1987: Average portfolio 
weight: 15.4%; 
Period 2: September 1987 through September 1993: 16.36%; 
Period 3: October 1993 through October 2001: 4.26%; 
Period 4: November 2001 through December 2009: 6.03%; 
Periods 1-3: September 1976 through December 2001: 13.2%; 
All periods: September 1976 through December 2009: 11.89%. 

Asset class: Cash; 
Period 1: September 1976 through August 1987: Average portfolio 
weight: 2.65%; 
Period 2: September 1987 through September 1993: 3.86%; 
Period 3: October 1993 through October 2001: 1.61%; 
Period 4: November 2001 through December 2009: 4.11%; 
Periods 1-3: September 1976 through December 2001: 2.85%; 
All periods: September 1976 through December 2009: 3.27%. 

Source: GAO analysis of PBGC data. 

[End of table] 

PBGC Single-Employer Total Fund Outperformed Most of Its Benchmarks on 
an Asset-Only Basis, and Fluctuations in Asset Allocations Did Not 
Adversely Impact Asset-Only Performance: 

The results immediately below provide a two-way comparison, on an 
asset-only basis, of the PBGC Total Returns to the Dynamic Benchmark--
the two dynamic portfolios among those included in our portfolio 
performance evaluation analyses. Due to the design of the Dynamic 
Benchmark, these results reflect PBGC Total Fund under-or over- 
performance linked to influences other than the asset class 
allocation, such as asset allocations to specific subsectors within an 
asset class or investments in specific securities. Then, in the 
following subsection, we assess the effect of variation in the PBGC 
Total Fund's asset allocation in an asset-only context by comparing 
the performance of the Dynamic Benchmark and the PBGC Total Fund 
against the static benchmark portfolios. Special emphasis was placed 
on analyzing the differences in performance between the portfolios 
that have particularly strong performance and the two portfolios with 
dynamic asset allocations. This special emphasis allows us to then 
assess whether the time variation in the asset allocations associated 
with the PBGC Total Fund and the Dynamic Benchmark appeared to hurt or 
help their risk-adjusted performance. Also, we examine whether the 
data suggests other aspects of asset allocation aside from variation 
in portfolio weights that might bolster or harm risk-adjusted return 
performance. 

The performance statistics for this section are shown in table 6 
unless otherwise noted. The phrases "decade subperiods" and "decade" 
will be used to denote the four subperiods--October 1976 through 
December 1979, 1980-1989, 1990-1999, and 2000-2009 for which 
statistical estimates are shown in table 6. 

Table 6: Portfolio Performance Comparison Results, October 1976 
through December 2009: 

Total return (percentage): 

S&P 500; 
October 1976 through December 1979: 21.14%; 
1980-1989: 408.49%; 
1990-1999: 432.79%; 
2000-2009: -6.24%; 
September 1976 through August 1987: 429.38%; 
September 1987 through September 1993: 70.32%; 
October 1993 through October 2001: 176.74%; 
November 2001 through December 2009: 23.33%; 
All (October 1976 through December 2009): 2,977.25%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 5.80%; 
1980-1989: 244.49%; 
1990-1999: 129.16%; 
2000-2009: 112.00%; 
September 1976 through August 1987: 170.77%; 
September 1987 through September 1993: 118.60%; 
October 1993 through October 2001: 86.64%; 
November 2001 through December 2009: 60.27%; 
All (October 1976 through December 2009): 1,670.60%. 

Wilshire 5000; 
October 1976 through December 1979: 39.97%; 
1980-1989: 376.63%; 
1990-1999: 405.39%; 
2000-2009: 2.75%; 
September 1976 through August 1987: 481.40%; 
September 1987 through September 1993: 72.08%; 
October 1993 through October 2001: 157.39%; 
November 2001 through December 2009: 34.54%; 
All (October 1976 through December 2009): 3,364.44%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 18.68%; 
1980-1989: 238.35%; 
1990-1999: 220.90%; 
2000-2009: 68.12%; 
September 1976 through August 1987: 238.55%; 
September 1987 through September 1993: 98.58%; 
October 1993 through October 2001: 112.39%; 
November 2001 through December 2009: 51.72%; 
All (October 1976 through December 2009): 2,066.41%. 

PPA; 
October 1976 through December 1979: 15.31%; 
1980-1989: 351.45%; 
1990-1999: 287.49%; 
2000-2009: 35.35%; 
September 1976 through August 1987: 315.79%; 
September 1987 through September 1993: 91.95%; 
October 1993 through October 2001: 141.82%; 
November 2001 through December 2009: 41.47%; 
All (October 1976 through December 2009): 2,630.29%. 

Insurance Benchmark; 
October 1976 through December 1979: 8.25%; 
1980-1989: 272.26%; 
1990-1999: 162.71%; 
2000-2009: 91.65%; 
September 1976 through August 1987: 203.71%; 
September 1987 through September 1993: 112.68%; 
October 1993 through October 2001: 100.38%; 
November 2001 through December 2009: 56.75%; 
All (October 1976 through December 2009): 1,928.82. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 12.67%; 
1980-1989: 284.67%; 
1990-1999: 190.11%; 
2000-2009: 64.02%; 
September 1976 through August 1987: 236.84%; 
September 1987 through September 1993: 97.50%; 
October 1993 through October 2001: 109.18%; 
November 2001 through December 2009: 48.20%; 
All (October 1976 through December 2009): 1,962.32%. 

Dynamic Benchmark; 
October 1976 through December 1979: 11.55%; 
1980-1989: 305.14%; 
1990-1999: 208.87%; 
2000-2009: 61.19%; 
September 1976 through August 1987: 273.03%; 
September 1987 through September 1993: 87.42%; 
October 1993 through October 2001: 114.97%; 
November 2001 through December 2009: 49.72%; 
All (October 1976 through December 2009): 2,150.16%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: 67.18%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: 51.00%; 
All (October 1976 through December 2009): [Empty]. 

Monthly mean (percentage): 

S&P 500; 
October 1976 through December 1979: 0.56%; 
1980-1989: 1.51%; 
1990-1999: 1.48%; 
2000-2009: 0.06%; 
September 1976 through August 1987: 1.40%; 
September 1987 through September 1993: 0.84%; 
October 1993 through October 2001: 1.16%; 
November 2001 through December 2009: 0.32%; 
All (October 1976 through December 2009): 0.97%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 0.17%; 
1980-1989: 1.13%; 
1990-1999: 0.72%; 
2000-2009: 0.67%; 
September 1976 through August 1987: 0.84%; 
September 1987 through September 1993: 1.10%; 
October 1993 through October 2001: 0.67%; 
November 2001 through December 2009: 0.52%; 
All (October 1976 through December 2009): 0.77%. 

Wilshire 5000; 
October 1976 through December 1979: 0.95%; 
1980-1989: 1.46%; 
1990-1999: 1.44%; 
2000-2009: 0.14%; 
September 1976 through August 1987: 1.48%; 
September 1987 through September 1993: 0.86%; 
October 1993 through October 2001: 1.09%; 
November 2001 through December 2009: 0.41%; 
All (October 1976 through December 2009): 1.01%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 0.46%; 
1980-1989: 1.10%; 
1990-1999: 1.01%; 
2000-2009: 0.46%; 
September 1976 through August 1987: 1.00%; 
September 1987 through September 1993: 0.99%; 
October 1993 through October 2001: 0.81%; 
November 2001 through December 2009: 0.45%; 
All (October 1976 through December 2009): 0.82%. 

PPA; 
October 1976 through December 1979: 0.41%; 
1980-1989: 1.36%; 
1990-1999: 1.17%; 
2000-2009: 0.30%; 
September 1976 through August 1987: 1.18%; 
September 1987 through September 1993: 0.95%; 
October 1993 through October 2001: 0.97%; 
November 2001 through December 2009: 0.40%; 
All (October 1976 through December 2009): 0.89%. 

Insurance Benchmark; 
October 1976 through December 1979: 0.23%; 
1980-1989: 1.19%; 
1990-1999: 0.83%; 
2000-2009: 0.58%; 
September 1976 through August 1987: 0.93%; 
September 1987 through September 1993: 1.06%; 
October 1993 through October 2001: 0.75%; 
November 2001 through December 2009: 0.49%; 
All (October 1976 through December 2009): 0.80%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 0.33%; 
1980-1989: 1.20%; 
1990-1999: 0.91%; 
2000-2009: 0.44%; 
September 1976 through August 1987: 0.99%; 
September 1987 through September 1993: 0.96%; 
October 1993 through October 2001: 0.79%; 
November 2001 through December 2009: 0.43%; 
All (October 1976 through December 2009): 0.80%. 

Dynamic Benchmark; 
October 1976 through December 1979: 0.30%; 
1980-1989: 1.26%; 
1990-1999: 0.9%7; 
2000-2009: 0.43%; 
September 1976 through August 1987: 1.08%; 
September 1987 through September 1993: 0.91%; 
October 1993 through October 2001: 0.83%; 
November 2001 through December 2009: 0.44%; 
All (October 1976 through December 2009): 0.83%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: 0.46%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: 0.45%; 
All (October 1976 through December 2009): [Empty]. 

Monthly mean excess return (percentage): 

S&P 500; 
October 1976 through December 1979: -0.02%; 
1980-1989: 0.82%; 
1990-1999: 1.09%; 
2000-2009: -0.16%; 
September 1976 through August 1987: 0.70%; 
September 1987 through September 1993: 0.38%; 
October 1993 through October 2001: 0.77%; 
November 2001 through December 2009: 0.14%; 
All (October 1976 through December 2009): 0.52%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: -0.42%; 
1980-1989: 0.4%3; 
1990-1999: 0.32%; 
2000-2009: 0.45%; 
September 1976 through August 1987: 0.15%; 
September 1987 through September 1993: 0.64%; 
October 1993 through October 2001: 0.29%; 
November 2001 through December 2009: 0.34%; 
All (October 1976 through December 2009): 0.32%. 

Wilshire 5000; 
October 1976 through December 1979: 0.36%; 
1980-1989: 0.77%; 
1990-1999: 1.05%; 
2000-2009: -0.08%; 
September 1976 through August 1987: 0.78%; 
September 1987 through September 1993: 0.40%; 
October 1993 through October 2001: 0.70%; 
November 2001 through December 2009: 0.23%; 
All (October 1976 through December 2009): 0.56%. 

PBGC Total Fund Return; 
October 1976 through December 1979: -0.13%; 
1980-1989: 0.40%; 
1990-1999: 0.61%; 
2000-2009: 0.24%; 
September 1976 through August 1987: 0.30%; 
September 1987 through September 1993: 0.53%; 
October 1993 through October 2001: 0.42%; 
November 2001 through December 2009: 0.27%; 
All (October 1976 through December 2009): 0.36%. 

PPA; 
October 1976 through December 1979: -0.18%; 
1980-1989: 0.66%; 
1990-1999: 0.78%; 
2000-2009: 0.08%; 
September 1976 through August 1987: 0.48%; 
September 1987 through September 1993: 0.48%; 
October 1993 through October 2001: 0.58%; 
November 2001 through December 2009: 0.22%; 
All (October 1976 through December 2009): 0.44%. 

Insurance Benchmark; 
October 1976 through December 1979: -0.36%; 
1980-1989: 0.49%; 
1990-1999: 0.44%; 
2000-2009: 0.36%; 
September 1976 through August 1987: 0.23%; 
September 1987 through September 1993: 0.60%; 
October 1993 through October 2001: 0.36%; 
November 2001 through December 2009: 0.31%; 
All (October 1976 through December 2009): 0.35%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: -0.26%; 
1980-1989: 0.50%; 
1990-1999: 0.52%; 
2000-2009: 0.22%; 
September 1976 through August 1987: 0.30%; 
September 1987 through September 1993: 0.50%; 
October 1993 through October 2001: 0.40%; 
November 2001 through December 2009: 0.25%; 
All (October 1976 through December 2009): 0.35%. 

Dynamic Benchmark; 
October 1976 through December 1979: -0.28%; 
1980-1989: 0.57%; 
1990-1999: 0.58%; 
2000-2009: 0.21%; 
September 1976 through August 1987: 0.39%; 
September 1987 through September 1993: 0.44%; 
October 1993 through October 2001: 0.44%; 
November 2001 through December 2009: 0.26%; 
All (October 1976 through December 2009): 0.38%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: 0.24%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: 0.27%; 
All (October 1976 through December 2009): [Empty]. 

Monthly standard deviation (percentage): 

S&P 500; 
October 1976 through December 1979: 3.83%; 
1980-1989: 4.75%; 
1990-1999: 3.88%; 
2000-2009: 4.67%; 
September 1976 through August 1987: 4.25%; 
September 1987 through September 1993: 4.66%; 
October 1993 through October 2001: 4.36%; 
November 2001 through December 2009: 4.52%; 
All (October 1976 through December 2009): 4.42%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 2.09%; 
1980-1989: 3.68%; 
1990-1999: 2.15%; 
2000-2009: 2.73%; 
September 1976 through August 1987: 3.53%; 
September 1987 through September 1993: 2.20%; 
October 1993 through October 2001: 2.13%; 
November 2001 through December 2009: 2.90%; 
All (October 1976 through December 2009): 2.85%. 

Wilshire 5000; 
October 1976 through December 1979: 4.09%; 
1980-1989: 4.87%; 
1990-1999: 3.95%; 
2000-2009: 4.77%; 
September 1976 through August 1987: 4.41%; 
September 1987 through September 1993: 4.70%; 
October 1993 through October 2001: 4.45%; 
November 2001 through December 2009: 4.60%; 
All (October 1976 through December 2009): 4.52%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 1.77%; 
1980-1989: 3.17%; 
1990-1999: 2.42%; 
2000-2009: 2.31%; 
September 1976 through August 1987: 2.80%; 
September 1987 through September 1993: 2.93%; 
October 1993 through October 2001: 2.28%; 
November 2001 through December 2009: 2.31%; 
All (October 1976 through December 2009): 2.59%. 

PPA; 
October 1976 through December 1979: 2.83%; 
1980-1989: 3.58%; 
1990-1999: 2.79%; 
2000-2009: 3.06%; 
September 1976 through August 1987: 3.40%; 
September 1987 through September 1993: 3.16%; 
October 1993 through October 2001: 2.93%; 
November 2001 through December 2009: 3.01%; 
All (October 1976 through December 2009): 3.15%. 

Insurance Benchmark; 
October 1976 through December 1979: 2.13%; 
1980-1989: 3.41%; 
1990-1999: 2.13; 
2000-2009: 2.46%; 
September 1976 through August 1987: 3.32%; 
September 1987 through September 1993: 2.18%; 
October 1993 through October 2001: 2.06%; 
November 2001 through December 2009: 2.59%; 
All (October 1976 through December 2009): 2.67%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 2.10%; 
1980-1989: 2.97%; 
1990-1999: 2.06%; 
2000-2009: 2.21%; 
September 1976 through August 1987: 2.90%; 
September 1987 through September 1993: 2.18%; 
October 1993 through October 2001: 2.02%; 
November 2001 through December 2009: 2.27%; 
All (October 1976 through December 2009): 2.43%. 

Dynamic Benchmark; 
October 1976 through December 1979: 2.17%; 
1980-1989: 3.53%; 
1990-1999: 2.32%; 
2000-2009: 2.45%; 
September 1976 through August 1987: 3.21%; 
September 1987 through September 1993: 2.85%; 
October 1993 through October 2001: 2.31%; 
November 2001 through December 2009: 2.47%; 
All (October 1976 through December 2009): 2.77%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: 2.30%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: 2.31%; 
All (October 1976 through December 2009): [Empty]. 

Annualized semi-standard deviation (percentage): 

S&P 500; 
October 1976 through December 1979: 9.38%; 
1980-1989: 10.99%; 
1990-1999: 8.36%; 
2000-2009: 12.55%; 
September 1976 through August 1987: 8.88%; 
September 1987 through September 1993: 12.09%; 
October 1993 through October 2001: 10.26%; 
November 2001 through December 2009: 11.88%; 
All (October 1976 through December 2009): 10.64%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 6.71%; 
1980-1989: 7.84%; 
1990-1999: 4.74%; 
2000-2009: 6.05%; 
September 1976 through August 1987: 8.02%; 
September 1987 through September 1993: 4.38%; 
October 1993 through October 2001: 4.71%; 
November 2001 through December 2009: 6.58%; 
All (October 1976 through December 2009): 6.36%. 

Wilshire 5000; 
October 1976 through December 1979: 9.68%; 
1980-1989: 11.56%; 
1990-1999: 8.76%; 
2000-2009: 12.85%; 
September 1976 through August 1987: 9.48%; 
September 1987 through September 1993: 12.45%; 
October 1993 through October 2001: 10.85%; 
November 2001 through December 2009: 11.97%; 
All (October 1976 through December 2009): 11.04%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 5.22%; 
1980-1989: 7.35%; 
1990-1999: 5.00%; 
2000-2009: 5.57%; 
September 1976 through August 1987: 6.15%; 
September 1987 through September 1993: 7.14%; 
October 1993 through October 2001: 5.00%; 
November 2001 through December 2009: 5.65%; 
All (October 1976 through December 2009): 5.97%. 

PPA; 
October 1976 through December 1979: 7.57%; 
1980-1989: 7.58%; 
1990-1999: 5.94%; 
2000-2009: 8.00%; 
September 1976 through August 1987: 7.21%; 
September 1987 through September 1993: 7.40%; 
October 1993 through October 2001: 6.59%; 
November 2001 through December 2009: 7.81%; 
All (October 1976 through December 2009): 7.26%. 

Insurance Benchmark; 
October 1976 through December 1979: 6.66%; 
1980-1989: 7.07%; 
1990-1999: 4.57%; 
2000-2009: 5.66%; 
September 1976 through August 1987: 7.37%; 
September 1987 through September 1993: 4.47%; 
October 1993 through October 2001: 4.40%; 
November 2001 through December 2009: 6.10%; 
All (October 1976 through December 2009): 5.93%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 6.17%; 
1980-1989: 5.98%; 
1990-1999: 4.37%; 
2000-2009: 5.43%; 
September 1976 through August 1987: 6.27%; 
September 1987 through September 1993: 4.59%; 
October 1993 through October 2001: 4.35%; 
November 2001 through December 2009: 5.63%; 
All (October 1976 through December 2009): 5.39%. 

Dynamic Benchmark; 
October 1976 through December 1979: 6.58%; 
1980-1989: 7.61%; 
1990-1999: 5.04%; 
2000-2009: 5.91%; 
September 1976 through August 1987: 6.87%; 
September 1987 through September 1993: 7.11%; 
October 1993 through October 2001: 5.01%; 
November 2001 through December 2009: 6.01%; 
All (October 1976 through December 2009): 6.30%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: 0.00%; 
1980-1989: 0.00%; 
1990-1999: 0.49%; 
2000-2009: 5.58%; 
September 1976 through August 1987: 0.00%; 
September 1987 through September 1993: 0.00%; 
October 1993 through October 2001: 2.49%; 
November 2001 through December 2009: 5.66%; 
All (October 1976 through December 2009): 3.08%. 

Annualized arithmetic mean (percentage): 

S&P 500; 
October 1976 through December 1979: 6.77%; 
1980-1989: 18.16%; 
1990-1999: 17.75%; 
2000-2009: 0.68%; 
September 1976 through August 1987: 16.78%; 
September 1987 through September 1993: 10.13%; 
October 1993 through October 2001: 13.93%; 
November 2001 through December 2009: 3.82%; 
All (October 1976 through December 2009): 11.64%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 2.00%; 
1980-1989: 13.54%; 
1990-1999: 8.59%; 
2000-2009: 8.04%; 
September 1976 through August 1987: 10.10%; 
September 1987 through September 1993: 13.21%; 
October 1993 through October 2001: 8.09%; 
November 2001 through December 2009: 6.29%; 
All (October 1976 through December 2009): 9.24%. 

Wilshire 5000; 
October 1976 through December 1979: 11.38%; 
1980-1989: 17.57%; 
1990-1999: 17.25%; 
2000-2009: 1.66%; 
September 1976 through August 1987: 17.77%; 
September 1987 through September 1993: 10.34%; 
October 1993 through October 2001: 13.07%; 
November 2001 through December 2009: 4.93%; 
All (October 1976 through December 2009): 12.07%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 5.47%; 
1980-1989: 13.17%; 
1990-1999: 12.06%; 
2000-2009: 5.57%; 
September 1976 through August 1987: 11.95%; 
September 1987 through September 1993: 11.85%; 
October 1993 through October 2001: 9.76%; 
November 2001 through December 2009: 5.44%; 
All (October 1976 through December 2009): 9.78%. 

PPA; 
October 1976 through December 1979: 4.86%; 
1980-1989: 16.32%; 
1990-1999: 14.08%; 
2000-2009: 3.62%; 
September 1976 through August 1987: 14.11%; 
September 1987 through September 1993: 11.36%; 
October 1993 through October 2001: 11.60%; 
November 2001 through December 2009: 4.81%; 
All (October 1976 through December 2009): 10.68%. 

Insurance Benchmark; 
October 1976 through December 1979: 2.71%; 
1980-1989: 14.24%; 
1990-1999: 9.97%; 
2000-2009: 6.94%; 
September 1976 through August 1987: 11.11%; 
September 1987 through September 1993: 12.75%; 
October 1993 through October 2001: 8.97%; 
November 2001 through December 2009: 5.92%; 
All (October 1976 through December 2009): 9.60%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 3.94%; 
1980-1989: 14.41%; 
1990-1999: 10.95%; 
2000-2009: 5.29%; 
September 1976 through August 1987: 11.93%; 
September 1987 through September 1993: 11.52%; 
October 1993 through October 2001: 9.50%; 
November 2001 through December 2009: 5.14%; 
All (October 1976 through December 2009): 9.58%. 

Dynamic Benchmark; 
October 1976 through December 1979: 3.65%; 
1980-1989: 15.17%; 
1990-1999: 11.65%; 
2000-2009: 5.18%; 
September 1976 through August 1987: 13.01%; 
September 1987 through September 1993: 10.86%; 
October 1993 through October 2001: 9.92%; 
November 2001 through December 2009: 5.32%; 
All (October 1976 through December 2009): 9.95%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: 5.51%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: 5.38%; 
All (October 1976 through December 2009): [Empty]. 

Annualized mean excess return (percentage): 

S&P 500; 
October 1976 through December 1979: -0.29%; 
1980-1989: 9.79%; 
1990-1999: 13.05%; 
2000-2009: -1.97%; 
September 1976 through August 1987: 8.44%; 
September 1987 through September 1993: 4.59%; 
October 1993 through October 2001: 9.27%; 
November 2001 through December 2009: 1.64%; 
All (October 1976 through December 2009): 6.24%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: -5.07%; 
1980-1989: 5.17%; 
1990-1999: 3.89%; 
2000-2009: 5.40%; 
September 1976 through August 1987: 1.76%; 
September 1987 through September 1993: 7.67%; 
October 1993 through October 2001: 3.43%; 
November 2001 through December 2009: 4.11%; 
All (October 1976 through December 2009): 3.84%. 

Wilshire 5000; 
October 1976 through December 1979: 4.31%; 
1980-1989: 9.20%; 
1990-1999: 12.55%; 
2000-2009: -0.99%; 
September 1976 through August 1987: 9.42%; 
September 1987 through September 1993: 4.80%; 
October 1993 through October 2001: 8.41%; 
November 2001 through December 2009: 2.75%; 
All (October 1976 through December 2009): 6.66%. 

PBGC Total Fund Return; 
October 1976 through December 1979: -1.60%; 
1980-1989: 4.79%; 
1990-1999: 7.36%; 
2000-2009: 2.92%; 
September 1976 through August 1987: 3.60%; 
September 1987 through September 1993: 6.31%; 
October 1993 through October 2001: 5.09%; 
November 2001 through December 2009: 3.26%; 
All (October 1976 through December 2009): 4.38%. 

PPA; 
October 1976 through December 1979: -2.21%; 
1980-1989: 7.94%; 
1990-1999: 9.39%; 
2000-2009: 0.98%; 
September 1976 through August 1987: 5.76%; 
September 1987 through September 1993: 5.82%; 
October 1993 through October 2001: 6.93%; 
November 2001 through December 2009: 2.63%; 
All (October 1976 through December 2009): 5.28%. 

Insurance Benchmark; 
October 1976 through December 1979: -4.35%; 
1980-1989: 5.86%; 
1990-1999: 5.27%; 
2000-2009: 4.29%; 
September 1976 through August 1987: 2.76%; 
September 1987 through September 1993: 7.21%; 
October 1993 through October 2001: 4.30%; 
November 2001 through December 2009: 3.74%; 
All (October 1976 through December 2009): 4.20%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: -3.13%; 
1980-1989: 6.04%; 
1990-1999: 6.25%; 
2000-2009: 2.65%; 
September 1976 through August 1987: 3.58%; 
September 1987 through September 1993: 5.98%; 
October 1993 through October 2001: 4.84%; 
November 2001 through December 2009: 2.96%; 
All (October 1976 through December 2009): 4.18%. 

Dynamic Benchmark; 
October 1976 through December 1979: -3.42%; 
1980-1989: 6.79%; 
1990-1999: 6.95%; 
2000-2009: 2.54%; 
September 1976 through August 1987: 4.66%; 
September 1987 through September 1993: 5.32%; 
October 1993 through October 2001: 5.25%; 
November 2001 through December 2009: 3.14%; 
All (October 1976 through December 2009): 4.55%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: 2.8%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: 3.20%; 
All (October 1976 through December 2009): [Empty]. 

Annualized standard deviation (percentage): 

S&P 500; 
October 1976 through December 1979: 13.28%; 
1980-1989: 16.47%; 
1990-1999: 13.43%; 
2000-2009: 16.17%; 
September 1976 through August 1987: 14.71%; 
September 1987 through September 1993: 16.14%; 
October 1993 through October 2001: 15.10%; 
November 2001 through December 2009: 15.67%; 
All (October 1976 through December 2009): 15.33%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 7.23%; 
1980-1989: 12.74%; 
1990-1999: 7.44%; 
2000-2009: 9.47%; 
September 1976 through August 1987: 12.23%; 
September 1987 through September 1993: 7.63%; 
October 1993 through October 2001: 7.38%; 
November 2001 through December 2009: 10.05%; 
All (October 1976 through December 2009): 9.87%. 

Wilshire 5000; 
October 1976 through December 1979: 14.18%; 
1980-1989: 16.87%; 
1990-1999: 13.68%; 
2000-2009: 16.53%; 
September 1976 through August 1987: 15.29%; 
September 1987 through September 1993: 16.30%; 
October 1993 through October 2001: 15.42%; 
November 2001 through December 2009: 15.92%; 
All (October 1976 through December 2009): 15.67%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 6.12%; 
1980-1989: 10.99%; 
1990-1999: 8.39%; 
2000-2009: 7.99%; 
September 1976 through August 1987: 9.69%; 
September 1987 through September 1993: 10.17%; 
October 1993 through October 2001: 7.90%; 
November 2001 through December 2009: 8.01%; 
All (October 1976 through December 2009): 8.98%. 

PPA; 
October 1976 through December 1979: 9.80%; 
1980-1989: 12.42%; 
1990-1999: 9.68%; 
2000-2009: 10.60%; 
September 1976 through August 1987: 11.77%; 
September 1987 through September 1993: 10.95%; 
October 1993 through October 2001: 10.14%; 
November 2001 through December 2009: 10.43%; 
All (October 1976 through December 2009): 10.92%. 

Insurance Benchmark; 
October 1976 through December 1979: 7.39%; 
1980-1989: 11.82%; 
1990-1999: 7.39%; 
2000-2009: 8.52%; 
September 1976 through August 1987: 11.51%; 
September 1987 through September 1993: 7.54%; 
October 1993 through October 2001: 7.13%; 
November 2001 through December 2009: 8.99%; 
All (October 1976 through December 2009): 9.26%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 7.27%; 
1980-1989: 10.28%; 
1990-1999: 7.15%; 
2000-2009: 7.66%; 
September 1976 through August 1987: 10.04%; 
September 1987 through September 1993: 7.55%; 
October 1993 through October 2001: 7.01%; 
November 2001 through December 2009: 7.85%; 
All (October 1976 through December 2009): 8.40%. 

Dynamic Benchmark; 
October 1976 through December 1979: 7.51%; 
1980-1989: 12.21%; 
1990-1999: 8.04%; 
2000-2009: 8.48%; 
September 1976 through August 1987: 11.13%; 
September 1987 through September 1993: 9.89%; 
October 1993 through October 2001: 8.01%; 
November 2001 through December 2009: 8.57%; 
All (October 1976 through December 2009): 9.59%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: 7.98%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: 8.01%; 
All (October 1976 through December 2009): [Empty]. 

Sharpe ratio (annualized): 

S&P 500; 
October 1976 through December 1979: -0.02%; 
1980-1989: 0.59%; 
1990-1999: 0.97%; 
2000-2009: -0.12%; 
September 1976 through August 1987: 0.57%; 
September 1987 through September 1993: 0.28%; 
October 1993 through October 2001: 0.61%; 
November 2001 through December 2009: 0.10%; 
All (October 1976 through December 2009): 0.41%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: -0.70%; 
1980-1989: 0.41%; 
1990-1999: 0.52%; 
2000-2009: 0.57%; 
September 1976 through August 1987: 0.14%; 
September 1987 through September 1993: 1.01%; 
October 1993 through October 2001: 0.46%; 
November 2001 through December 2009: 0.41%; 
All (October 1976 through December 2009): 0.39%. 

Wilshire 5000; 
October 1976 through December 1979: 0.30%; 
1980-1989: 0.55%; 
1990-1999: 0.92%; 
2000-2009: -0.06%; 
September 1976 through August 1987: 0.62%; 
September 1987 through September 1993: 0.29%; 
October 1993 through October 2001: 0.55%; 
November 2001 through December 2009: 0.17%; 
All (October 1976 through December 2009): 0.43%. 

PBGC Total Fund Return; 
October 1976 through December 1979: -0.26%; 
1980-1989: 0.44%; 
1990-1999: 0.88%; 
2000-2009: 0.37%; 
September 1976 through August 1987: 0.37%; 
September 1987 through September 1993: 0.62%; 
October 1993 through October 2001: 0.64%; 
November 2001 through December 2009: 0.41%; 
All (October 1976 through December 2009): 0.49%. 

PPA; 
October 1976 through December 1979: -0.22%; 
1980-1989: 0.64%; 
1990-1999: 0.97%; 
2000-2009: 0.09%; 
September 1976 through August 1987: 0.49%; 
September 1987 through September 1993: 0.53%; 
October 1993 through October 2001: 0.68%; 
November 2001 through December 2009: 0.25%; 
All (October 1976 through December 2009): 0.48%. 

Insurance Benchmark; 
October 1976 through December 1979: -0.59%; 
1980-1989: 0.50%; 
1990-1999: 0.71%; 
2000-2009: 0.50%; 
September 1976 through August 1987: 0.24%; 
September 1987 through September 1993: 0.96%; 
October 1993 through October 2001: 0.60%; 
November 2001 through December 2009: 0.42%; 
All (October 1976 through December 2009): 0.45%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: -0.43%; 
1980-1989: 0.59%; 
1990-1999: 0.87%; 
2000-2009: 0.35%; 
September 1976 through August 1987: 0.36%; 
September 1987 through September 1993: 0.79%; 
October 1993 through October 2001: 0.69%; 
November 2001 through December 2009: 0.38%; 
All (October 1976 through December 2009): 0.50%. 

Dynamic Benchmark; 
October 1976 through December 1979: -0.46%; 
1980-1989: 0.56%; 
1990-1999: 0.86%; 
2000-2009: 0.30%; 
September 1976 through August 1987: 0.42%; 
September 1987 through September 1993: 0.54%; 
October 1993 through October 2001: 0.66%; 
November 2001 through December 2009: 0.37%; 
All (October 1976 through December 2009): 0.47%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: 0.36%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: 0.40%; 
All (October 1976 through December 2009): [Empty]. 

Sortino ratio (annualized): 

S&P 500; 
October 1976 through December 1979: -0.03%; 
1980-1989: 0.89%; 
1990-1999: 1.56%; 
2000-2009: -0.16%; 
September 1976 through August 1987: 0.95%; 
September 1987 through September 1993: 0.38%; 
October 1993 through October 2001: 0.90%; 
November 2001 through December 2009: 0.14%; 
All (October 1976 through December 2009): 0.59%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: -0.76%; 
1980-1989: 0.66%; 
1990-1999: 0.82%; 
2000-2009: 0.89%; 
September 1976 through August 1987: 0.22%; 
September 1987 through September 1993: 1.75%; 
October 1993 through October 2001: 0.73%; 
November 2001 through December 2009: 0.62%; 
All (October 1976 through December 2009): 0.60%. 

Wilshire 5000; 
October 1976 through December 1979: 0.45%; 
1980-1989: 0.80%; 
1990-1999: 1.43%; 
2000-2009: -0.08%; 
September 1976 through August 1987: 0.99%; 
September 1987 through September 1993: 0.39%; 
October 1993 through October 2001: 0.77%; 
November 2001 through December 2009: 0.23%; 
All (October 1976 through December 2009): 0.60%. 

PBGC Total Fund Return; 
October 1976 through December 1979: -0.31%; 
1980-1989: 0.65%; 
1990-1999: 1.47%; 
2000-2009: 0.52%; 
September 1976 through August 1987: 0.59%; 
September 1987 through September 1993: 0.88%; 
October 1993 through October 2001: 1.02%; 
November 2001 through December 2009: 0.58%; 
All (October 1976 through December 2009): 0.73%. 

PPA; 
October 1976 through December 1979: -0.29%; 
1980-1989: 1.05%; 
1990-1999: 1.58%; 
2000-2009: 0.12%; 
September 1976 through August 1987: 0.80%; 
September 1987 through September 1993: 0.79%; 
October 1993 through October 2001: 1.05%; 
November 2001 through December 2009: 0.34%; 
All (October 1976 through December 2009): 0.73%. 

Insurance Benchmark; 
October 1976 through December 1979: -0.65%; 
1980-1989: 0.83%; 
1990-1999: 1.15%; 
2000-2009: 0.76%; 
September 1976 through August 1987: 0.37%; 
September 1987 through September 1993: 1.61%; 
October 1993 through October 2001: 0.98%; 
November 2001 through December 2009: 0.61%; 
All (October 1976 through December 2009): 0.71%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: -0.51%; 
1980-1989: 1.01%; 
1990-1999: 1.43%; 
2000-2009: 0.49%; 
September 1976 through August 1987: 0.57%; 
September 1987 through September 1993: 1.30%; 
October 1993 through October 2001: 1.11%; 
November 2001 through December 2009: 0.53%; 
All (October 1976 through December 2009): 0.77%. 

Dynamic Benchmark; 
October 1976 through December 1979: -0.52%; 
1980-1989: 0.89%; 
1990-1999: 1.38%; 
2000-2009: 0.43%; 
September 1976 through August 1987: 0.68%; 
September 1987 through September 1993: 0.75%; 
October 1993 through October 2001: 1.05%; 
November 2001 through December 2009: 0.52%; 
All (October 1976 through December 2009): 0.72%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: 0.51%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: 0.57%; 
All (October 1976 through December 2009): [Empty]. 

Omega ratio: 

S&P 500; 
October 1976 through December 1979: 0.98%; 
1980-1989: 1.58%; 
1990-1999: 2.03%; 
2000-2009: 0.91%; 
September 1976 through August 1987: 1.53%; 
September 1987 through September 1993: 1.26%; 
October 1993 through October 2001: 1.55%; 
November 2001 through December 2009: 1.09%; 
All (October 1976 through December 2009): 1.36%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 0.55%; 
1980-1989: 1.36%; 
1990-1999: 1.47%; 
2000-2009: 1.56%; 
September 1976 through August 1987: 1.12%; 
September 1987 through September 1993: 2.11%; 
October 1993 through October 2001: 1.40%; 
November 2001 through December 2009: 1.37%; 
All (October 1976 through December 2009): 1.35%. 

Wilshire 5000; 
October 1976 through December 1979: 1.26%; 
1980-1989: 1.52%; 
1990-1999: 1.95%; 
2000-2009: 0.96%; 
September 1976 through August 1987: 1.57%; 
September 1987 through September 1993: 1.28%; 
October 1993 through October 2001: 1.47%; 
November 2001 through December 2009: 1.14%; 
All (October 1976 through December 2009): 1.38%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 0.79%; 
1980-1989: 1.39%; 
1990-1999: 1.92%; 
2000-2009: 1.32%; 
September 1976 through August 1987: 1.33%; 
September 1987 through September 1993: 1.67%; 
October 1993 through October 2001: 1.58%; 
November 2001 through December 2009: 1.38%; 
All (October 1976 through December 2009): 1.46%. 

PPA; 
October 1976 through December 1979: 0.84%; 
1980-1989: 1.61%; 
1990-1999: 2.02%; 
2000-2009: 1.07%; 
September 1976 through August 1987: 1.44%; 
September 1987 through September 1993: 1.51%; 
October 1993 through October 2001: 1.61%; 
November 2001 through December 2009: 1.23%; 
All (October 1976 through December 2009): 1.44%. 

Insurance Benchmark; 
October 1976 through December 1979: 0.61%; 
1980-1989: 1.44%; 
1990-1999: 1.72%; 
2000-2009: 1.48%; 
September 1976 through August 1987: 1.20%; 
September 1987 through September 1993: 2.01%; 
October 1993 through October 2001: 1.57%; 
November 2001 through December 2009: 1.38%; 
All (October 1976 through December 2009): 1.42%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 0.71%; 
1980-1989: 1.53%; 
1990-1999: 1.91%; 
2000-2009: 1.31%; 
September 1976 through August 1987: 1.31%; 
September 1987 through September 1993: 1.78%; 
October 1993 through October 2001: 1.64%; 
November 2001 through December 2009: 1.35%; 
All (October 1976 through December 2009): 1.46%. 

Dynamic Benchmark; 
October 1976 through December 1979: 0.69%; 
1980-1989: 1.51%; 
1990-1999: 1.90%; 
2000-2009: 1.27%; 
September 1976 through August 1987: 1.38%; 
September 1987 through September 1993: 1.54%; 
October 1993 through October 2001: 1.59%; 
November 2001 through December 2009: 1.35%; 
All (October 1976 through December 2009): 1.44%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: 1.91%; 
2000-2009: 1.32%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: 1.20%; 
November 2001 through December 2009: 1.37%; 
All (October 1976 through December 2009): 1.33%. 

Skewness, bias corrected: 

S&P 500; 
October 1976 through December 1979: -0.14%; 
1980-1989: -0.81%; 
1990-1999: -0.63%; 
2000-2009: -0.59%; 
September 1976 through August 1987: 0.16%; 
September 1987 through September 1993: -1.44%; 
October 1993 through October 2001: -0.72%; 
November 2001 through December 2009: -0.86%; 
All (October 1976 through December 2009): -0.66%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: -2.05%; 
1980-1989: 0.42%; 
1990-1999: -0.07%; 
2000-2009: -0.03%; 
September 1976 through August 1987: 0.47%; 
September 1987 through September 1993: -0.10%; 
October 1993 through October 2001: -0.05%; 
November 2001 through December 2009: 0.07%; 
All (October 1976 through December 2009): 0.28%. 

Wilshire 5000%; 
October 1976 through December 1979: -0.50; 
1980-1989: -0.98%; 
1990-1999: -0.77%; 
2000-2009: -0.71%; 
September 1976 through August 1987: -0.08%; 
September 1987 through September 1993: -1.74%; 
October 1993 through October 2001: -0.90%; 
November 2001 through December 2009: -0.90%; 
All (October 1976 through December 2009): -0.81%. 

PBGC Total Fund Return; 
October 1976 through December 1979: -1.72%; 
1980-1989: -0.48%; 
1990-1999: -0.03%; 
2000-2009: -0.68%; 
September 1976 through August 1987: 0.30%; 
September 1987 through September 1993: -1.37%; 
October 1993 through October 2001: -0.17%; 
November 2001 through December 2009: -0.86%; 
All (October 1976 through December 2009): -0.37%. 

PPA; 
October 1976 through December 1979: -0.58%; 
1980-1989: -0.03%; 
1990-1999: -0.38%; 
2000-2009: -0.91%; 
September 1976 through August 1987: 0.22%; 
September 1987 through September 1993: -0.57%; 
October 1993 through October 2001: 
-0.45%; 
November 2001 through December 2009: -1.22%; 
All (October 1976 through December 2009): -0.34%. 

Insurance Benchmark; 
October 1976 through December 1979: -1.77%; 
1980-1989: 0.43%; 
1990-1999: -0.11%; 
2000-2009: -0.40%; 
September 1976 through August 1987: 0.44%; 
September 1987 through September 1993: -0.20%; 
October 1993 through October 2001: -0.05%; 
November 2001 through December 2009: -0.37%; 
All (October 1976 through December 2009): 0.18%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: -1.22%; 
1980-1989: 0.40%; 
1990-1999: -0.18%; 
2000-2009: -0.88%; 
September 1976 through August 1987: 0.37%; 
September 1987 through September 1993: -0.10%; 
October 1993 through October 2001: -0.15%; 
November 2001 through December 2009: -1.02%; 
All (October 1976 through December 2009): 0.01%. 

Dynamic Benchmark; 
October 1976 through December 1979: -1.57%; 
1980-1989: -0.04%; 
1990-1999: -0.33%; 
2000-2009: -0.58%; 
September 1976 through August 1987: 0.37%; 
September 1987 through September 1993: -1.19%; 
October 1993 through October 2001: -0.16%; 
November 2001 through December 2009: -0.76%; 
All (October 1976 through December 2009): -0.15%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: -0.14%; 
2000-2009: -0.68%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: 0.14%; 
November 2001 through December 2009: -0.86%; 
All (October 1976 through December 2009): -0.69. 

Kurtosis, bias corrected: 

S&P 500; 
October 1976 through December 1979: 2.94%; 
1980-1989: 7.19%; 
1990-1999: 4.77%; 
2000-2009: 3.92%; 
September 1976 through August 1987: 3.38%; 
September 1987 through September 1993: 9.68%; 
October 1993 through October 2001: 3.78%; 
November 2001 through December 2009: 4.77%; 
All (October 1976 through December 2009): 5.25%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 11.13%; 
1980-1989: 3.94%; 
1990-1999: 3.32%; 
2000-2009: 6.08%; 
September 1976 through August 1987: 4.77%; 
September 1987 through September 1993: 2.87%; 
October 1993 through October 2001: 3.50%; 
November 2001 through December 2009: 5.79%; 
All (October 1976 through December 2009): 5.52%. 

Wilshire 5000; 
October 1976 through December 1979: 3.50%; 
1980-1989: 7.73%; 
1990-1999: 5.18%; 
2000-2009: 3.95%; 
September 1976 through August 1987: 3.51%; 
September 1987 through September 1993: 11.05%; 
October 1993 through October 2001: 4.21%; 
November 2001 through December 2009: 4.90%; 
All (October 1976 through December 2009): 5.59%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 8.83%; 
1980-1989: 5.83%; 
1990-1999: 3.69%; 
2000-2009: 5.69%; 
September 1976 through August 1987: 3.72%; 
September 1987 through September 1993: 9.94%; 
October 1993 through October 2001: 2.86%; 
November 2001 through December 2009: 6.48%; 
All (October 1976 through December 2009): 5.86%. 

PPA; 
October 1976 through December 1979: 3.67%; 
1980-1989: 3.52%; 
1990-1999: 3.77%; 
2000-2009: 5.50%; 
September 1976 through August 1987: 3.26%; 
September 1987 through September 1993: 5.03%; 
October 1993 through October 2001: 2.78%; 
November 2001 through December 2009: 6.71%; 
All (October 1976 through December 2009): 4.33%. 

Insurance Benchmark; 
October 1976 through December 1979: 9.21%; 
1980-1989: 3.67%; 
1990-1999: 3.59%; 
2000-2009: 6.31%; 
September 1976 through August 1987: 4.36%; 
September 1987 through September 1993: 3.10%; 
October 1993 through October 2001: 3.52%; 
November 2001 through December 2009: 6.10%; 
All (October 1976 through December 2009): 5.22%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 6.12%; 
1980-1989: 3.12%; 
1990-1999: 3.60%; 
2000-2009: 6.52%; 
September 1976 through August 1987: 3.76%; 
September 1987 through September 1993: 3.25%; 
October 1993 through October 2001: 2.83%; 
November 2001 through December 2009: 6.96%; 
All (October 1976 through December 2009): 4.63%. 

Dynamic Benchmark; 
October 1976 through December 1979: 7.79%; 
1980-1989: 4.05%; 
1990-1999: 3.66%; 
2000-2009: 6.27%; 
September 1976 through August 1987: 3.93%; 
September 1987 through September 1993: 7.13%; 
October 1993 through October 2001: 2.69%; 
November 2001 through December 2009: 6.99%; 
All (October 1976 through December 2009): 5.17%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: 0.12%; 
2000-2009: 5.70%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: 2.08%; 
November 2001 through December 2009: 6.49%; 
All (October 1976 through December 2009): 5.79%. 

Adjusted Sharpe ratio%: 

S&P 500; 
October 1976 through December 1979: -0.000391%; 
1980-1989: 0.594592%; 
1990-1999: 0.971118%; 
2000-2009: -0.003190%; 
September 1976 through August 1987: 0.573375%; 
September 1987 through September 1993: 0.284191%; 
October 1993 through October 2001: 0.613704%; 
November 2001 through December 2009: 0.104676%; 
All (October 1976 through December 2009): 0.407141%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: -0.003668%; 
1980-1989: 0.405723%; 
1990-1999: 0.523549%; 
2000-2009: 0.569919%; 
September 1976 through August 1987: 0.143676%; 
September 1987 through September 1993: 1.005150%; 
October 1993 through October 2001: 0.464111%; 
November 2001 through December 2009: 0.408882%; 
All (October 1976 through December 2009): 0.389147%. 

Wilshire 5000; 
October 1976 through December 1979: 0.303767%; 
1980-1989: 0.545163%; 
1990-1999: 0.917169%; 
2000-2009: -0.001629%; 
September 1976 through August 1987: 0.615824%; 
September 1987 through September 1993: 0.294435%; 
October 1993 through October 2001: 0.545306%; 
November 2001 through December 2009: 0.172705%; 
All (October 1976 through December 2009): 0.425189%. 

PBGC Total Fund Return; 
October 1976 through December 1979: -0.000980%; 
1980-1989: 0.436005%; 
1990-1999: 0.877346%; 
2000-2009: 0.365748%; 
September 1976 through August 1987: 0.371506%; 
September 1987 through September 1993: 0.620555%; 
October 1993 through October 2001: 0.644295%; 
November 2001 through December 2009: 0.406838%; 
All (October 1976 through December 2009): 0.487750%. 

PPA; 
October 1976 through December 1979: -0.002162%; 
1980-1989: 0.639563%; 
1990-1999: 0.969694%; 
2000-2009: 0.092031%; 
September 1976 through August 1987: 0.489602%; 
September 1987 through September 1993: 0.531411%; 
October 1993 through October 2001: 0.683582%; 
November 2001 through December 2009: 0.252058%; 
All (October 1976 through December 2009): 0.483584%. 

Insurance Benchmark; 
October 1976 through December 1979: -0.003219%; 
1980-1989: 0.496088%; 
1990-1999: 0.712917%; 
2000-2009: 0.503391%; 
September 1976 through August 1987: 0.239720%; 
September 1987 through September 1993: 0.955671%; 
October 1993 through October 2001: 0.603150%; 
November 2001 through December 2009: 0.416168%; 
All (October 1976 through December 2009): 0.453526%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: -0.002276%; 
1980-1989: 0.587099%; 
1990-1999: 0.874635%; 
2000-2009: 0.345584%; 
September 1976 through August 1987: 0.356897%; 
September 1987 through September 1993: 0.791796%; 
October 1993 through October 2001: 0.689409%; 
November 2001 through December 2009: 0.376953%; 
All (October 1976 through December 2009): 0.497025%. 

Dynamic Benchmark; 
October 1976 through December 1979: -0.002567%; 
1980-1989: 0.556275%; 
1990-1999: 0.864437%; 
2000-2009: 0.299025%; 
September 1976 through August 1987: 0.418946%; 
September 1987 through September 1993: 0.537960%; 
October 1993 through October 2001: 0.655910%; 
November 2001 through December 2009: 0.366512%; 
All (October 1976 through December 2009): 0.474242%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: 0.358696%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: 0.399521%; 
All (October 1976 through December 2009): [Empty]. 

Minimum (percentage): 

S&P 500; 
October 1976 through December 1979: -8.72%; 
1980-1989: -21.54%; 
1990-1999: -14.46%; 
2000-2009: -16.80%; 
September 1976 through August 1987: -9.72%; 
September 1987 through September 1993: -21.54%; 
October 1993 through October 2001: -14.46%; 
November 2001 through December 2009: -16.80%; 
All (October 1976 through December 2009): -21.54%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: -8.84%; 
1980-1989: -7.92%; 
1990-1999: -4.48%; 
2000-2009: -8.72%; 
September 1976 through August 1987: -8.84%; 
September 1987 through September 1993: -4.24%; 
October 1993 through October 2001: -4.48%; 
November 2001 through December 2009: -8.72%; 
All (October 1976 through December 2009): -8.84%. 

Wilshire 5000; 
October 1976 through December 1979: -10.71%; 
1980-1989: -22.78%; 
1990-1999: -15.57%; 
2000-2009: -17.57%; 
September 1976 through August 1987: -12.14%; 
September 1987 through September 1993: -22.78%; 
October 1993 through October 2001: -15.57%; 
November 2001 through December 2009: -17.57%; 
All (October 1976 through December 2009): -22.78%. 

PBGC Total Fund Return; 
October 1976 through December 1979: -6.60%; 
1980-1989: -13.18%; 
1990-1999: -5.47%; 
2000-2009: -9.33%; 
September 1976 through August 1987: -6.60%; 
September 1987 through September 1993: -13.18%; 
October 1993 through October 2001: -4.53%; 
November 2001 through December 2009: -9.33%; 
All (October 1976 through December 2009): -13.18%. 

PPA; 
October 1976 through December 1979: -7.38%; 
1980-1989: -10.51%; 
1990-1999: -7.56%; 
2000-2009: -12.95%; 
September 1976 through August 1987: -7.38%; 
September 1987 through September 1993: -10.51%; 
October 1993 through October 2001: 
-7.56%; 
November 2001 through December 2009: -12.95%; 
All (October 1976 through December 2009): -12.95%. 

Insurance Benchmark; 
October 1976 through December 1979: -8.47%; 
1980-1989: -6.73%; 
1990-1999: -4.49%; 
2000-2009: -8.61%; 
September 1976 through August 1987: -8.47%; 
September 1987 through September 1993: -4.49%; 
October 1993 through October 2001: -4.29%; 
November 2001 through December 2009: -8.61%; 
All (October 1976 through December 2009): -8.61%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: -7.14%; 
1980-1989: -4.65%; 
1990-1999: -4.86%; 
2000-2009: -9.33%; 
September 1976 through August 1987: -7.14%; 
September 1987 through September 1993: -4.86%; 
October 1993 through October 2001: -3.85%; 
November 2001 through December 2009: -9.33%; 
All (October 1976 through December 2009): -9.33%. 

Dynamic Benchmark; 
October 1976 through December 1979: -8.08%; 
1980-1989: -11.40%; 
1990-1999: -6.05%; 
2000-2009: -10.03%; 
September 1976 through August 1987: -8.08%; 
September 1987 through September 1993: -11.40%; 
October 1993 through October 2001: -4.02%; 
November 2001 through December 2009: -10.03%; 
All (October 1976 through December 2009): -11.40%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: -0.86%; 
2000-2009: -9.34%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: -2.84%; 
November 2001 through December 2009: -9.34%; 
All (October 1976 through December 2009): -9.34. 

Maximum (percentage): 

S&P 500; 
October 1976 through December 1979: 9.02%; 
1980-1989: 13.47%; 
1990-1999: 11.44%; 
2000-2009: 9.78%; 
September 1976 through August 1987: 13.47%; 
September 1987 through September 1993: 11.44%; 
October 1993 through October 2001: 9.78%; 
November 2001 through December 2009: 9.57%; 
All (October 1976 through December 2009): 13.47%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 3.22%; 
1980-1989: 14.16%; 
1990-1999: 7.25%; 
2000-2009: 11.23%; 
September 1976 through August 1987: 14.16%; 
September 1987 through September 1993: 6.03%; 
October 1993 through October 2001: 7.25%; 
November 2001 through December 2009: 11.23%; 
All (October 1976 through December 2009): 14.16%. 

Wilshire 5000; 
October 1976 through December 1979: 8.27%; 
1980-1989: 12.80%; 
1990-1999: 10.98%; 
2000-2009: 10.52%; 
September 1976 through August 1987: 12.80%; 
September 1987 through September 1993: 10.98%; 
October 1993 through October 2001: 8.23%; 
November 2001 through December 2009: 10.52%; 
All (October 1976 through December 2009): 12.80%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 3.38%; 
1980-1989: 9.56%; 
1990-1999: 8.94%; 
2000-2009: 7.31%; 
September 1976 through August 1987: 9.56%; 
September 1987 through September 1993: 8.94%; 
October 1993 through October 2001: 6.72%; 
November 2001 through December 2009: 7.31%; 
All (October 1976 through December 2009): 9.56%. 

PPA; 
October 1976 through December 1979: 5.38%; 
1980-1989: 10.48%; 
1990-1999: 9.03%; 
2000-2009: 6.83%; 
September 1976 through August 1987: 10.48%; 
September 1987 through September 1993: 9.03%; 
October 1993 through October 2001: 7.06%; 
November 2001 through December 2009: 6.03%; 
All (October 1976 through December 2009): 10.48%. 

Insurance Benchmark; 
October 1976 through December 1979: 3.58%; 
1980-1989: 12.73%; 
1990-1999: 6.76%; 
2000-2009: 9.71%; 
September 1976 through August 1987: 12.73%; 
September 1987 through September 1993: 6.31%; 
October 1993 through October 2001: 6.76%; 
November 2001 through December 2009: 9.71%; 
All (October 1976 through December 2009): 12.73%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 3.65%; 
1980-1989: 10.01%; 
1990-1999: 6.71%; 
2000-2009: 7.06%; 
September 1976 through August 1987: 10.01%; 
September 1987 through September 1993: 6.71%; 
October 1993 through October 2001: 5.85%; 
November 2001 through December 2009: 7.06%; 
All (October 1976 through December 2009): 10.01%. 

Dynamic Benchmark; 
October 1976 through December 1979: 3.55%; 
1980-1989: 11.24%; 
1990-1999: 6.74%; 
2000-2009: 8.53%; 
September 1976 through August 1987: 11.24%; 
September 1987 through September 1993: 6.74%; 
October 1993 through October 2001: 6.50%; 
November 2001 through December 2009: 8.53%; 
All (October 1976 through December 2009): 11.24%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: 2.26%; 
2000-2009: 7.30%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: 4.54%; 
November 2001 through December 2009: 7.30%; 
All (October 1976 through December 2009): 7.30%. 

Range (percentage): 

S&P 500; 
October 1976 through December 1979: 17.74%; 
1980-1989: 35.00%; 
1990-1999: 25.90%; 
2000-2009: 26.58%; 
September 1976 through August 1987: 23.19%; 
September 1987 through September 1993: 32.97%; 
October 1993 through October 2001: 24.24%; 
November 2001 through December 2009: 26.37%; 
All (October 1976 through December 2009): 35.00%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 12.06%; 
1980-1989: 22.08%; 
1990-1999: 11.73%; 
2000-2009: 19.95%; 
September 1976 through August 1987: 23.00%; 
September 1987 through September 1993: 10.27%; 
October 1993 through October 2001: 11.73%; 
November 2001 through December 2009: 19.95%; 
All (October 1976 through December 2009): 23.00%. 

Wilshire 5000; 
October 1976 through December 1979: 18.98%; 
1980-1989: 35.58%; 
1990-1999: 26.55%; 
2000-2009: 28.09%; 
September 1976 through August 1987: 24.94%; 
September 1987 through September 1993: 33.76%; 
October 1993 through October 2001: 23.80%; 
November 2001 through December 2009: 28.09%; 
All (October 1976 through December 2009): 35.58%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 9.99%; 
1980-1989: 22.74%; 
1990-1999: 14.41%; 
2000-2009: 16.64%; 
September 1976 through August 1987: 16.17%; 
September 1987 through September 1993: 22.12%; 
October 1993 through October 2001: 11.25%; 
November 2001 through December 2009: 16.64%; 
All (October 1976 through December 2009): 22.74%. 

PPA; 
October 1976 through December 1979: 12.76%; 
1980-1989: 20.99%; 
1990-1999: 16.59%; 
2000-2009: 19.77%; 
September 1976 through August 1987: 17.86%; 
September 1987 through September 1993: 19.54%; 
October 1993 through October 2001: 14.62%; 
November 2001 through December 2009: 18.98%; 
All (October 1976 through December 2009): 23.43%. 

Insurance Benchmark; 
October 1976 through December 1979: 12.05%; 
1980-1989: 19.46%; 
1990-1999: 11.25%; 
2000-2009: 18.32%; 
September 1976 through August 1987: 21.20%; 
September 1987 through September 1993: 10.81%; 
October 1993 through October 2001: 11.05%; 
November 2001 through December 2009: 18.32%; 
All (October 1976 through December 2009): 21.34%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 10.79%; 
1980-1989: 14.67%; 
1990-1999: 11.57%; 
2000-2009: 16.39%; 
September 1976 through August 1987: 17.15%; 
September 1987 through September 1993: 11.57%; 
October 1993 through October 2001: 9.71%; 
November 2001 through December 2009: 16.39%; 
All (October 1976 through December 2009): 19.34%. 

Dynamic Benchmark; 
October 1976 through December 1979: 11.63%; 
1980-1989: 22.65%; 
1990-1999: 12.80%; 
2000-2009: 18.56%; 
September 1976 through August 1987: 19.32%; 
September 1987 through September 1993: 18.14%; 
October 1993 through October 2001: 10.52%; 
November 2001 through December 2009: 18.56%; 
All (October 1976 through December 2009): 22.65%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: 3.12%; 
2000-2009: 16.64%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: 7.39%; 
November 2001 through December 2009: 16.64%; 
All (October 1976 through December 2009): 16.64%. 

VaR (99% confidence level, 1 month horizon) (percentage): 

S&P 500; 
October 1976 through December 1979: 8.35%; 
1980-1989: 9.54%; 
1990-1999: 7.54%; 
2000-2009: 10.80%; 
September 1976 through August 1987: 8.48%; 
September 1987 through September 1993: 9.99%; 
October 1993 through October 2001: 8.98%; 
November 2001 through December 2009: 10.20%; 
All (October 1976 through December 2009): 9.32%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 4.69%; 
1980-1989: 7.43%; 
1990-1999: 4.28%; 
2000-2009: 5.69%; 
September 1976 through August 1987: 7.37%; 
September 1987 through September 1993: 4.02%; 
October 1993 through October 2001: 4.28%; 
November 2001 through December 2009: 6.23%; 
All (October 1976 through December 2009): 5.86%. 

Wilshire 5000; 
October 1976 through December 1979: 8.57%; 
1980-1989: 9.86%; 
1990-1999: 7.75%; 
2000-2009: 10.96%; 
September 1976 through August 1987: 8.79%; 
September 1987 through September 1993: 10.08%; 
October 1993 through October 2001: 9.26%; 
November 2001 through December 2009: 10.28%; 
All (October 1976 through December 2009): 9.52%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 3.66%; 
1980-1989: 6.29%; 
1990-1999: 4.63%; 
2000-2009: 4.90%; 
September 1976 through August 1987: 5.51%; 
September 1987 through September 1993: 5.84%; 
October 1993 through October 2001: 4.50%; 
November 2001 through December 2009: 4.93%; 
All (October 1976 through December 2009): 5.21%. 

PPA; 
October 1976 through December 1979: 6.18%; 
1980-1989: 6.98%; 
1990-1999: 5.33%; 
2000-2009: 6.81%; 
September 1976 through August 1987: 6.73%; 
September 1987 through September 1993: 6.41%; 
October 1993 through October 2001: 5.84%; 
November 2001 through December 2009: 6.60%; 
All (October 1976 through December 2009): 6.44%. 

Insurance Benchmark; 
October 1976 through December 1979: 4.74%; 
1980-1989: 6.75%; 
1990-1999: 4.13%; 
2000-2009: 5.15%; 
September 1976 through August 1987: 6.80%; 
September 1987 through September 1993: 4.00%; 
October 1993 through October 2001: 4.04%; 
November 2001 through December 2009: 5.54%; 
All (October 1976 through December 2009): 5.42%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 4.55%; 
1980-1989: 5.71%; 
1990-1999: 3.89%; 
2000-2009: 4.70%; 
September 1976 through August 1987: 5.75%; 
September 1987 through September 1993: 4.11%; 
October 1993 through October 2001: 3.92%; 
November 2001 through December 2009: 4.84%; 
All (October 1976 through December 2009): 4.84%. 

Dynamic Benchmark; 
October 1976 through December 1979: 4.74%; 
1980-1989: 6.94%; 
1990-1999: 4.43%; 
2000-2009: 5.26%; 
September 1976 through August 1987: 6.39%; 
September 1987 through September 1993: 5.73%; 
October 1993 through October 2001: 4.55%; 
November 2001 through December 2009: 5.31%; 
All (October 1976 through December 2009): 5.61%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: 4.90%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: 4.93%; 
All (October 1976 through December 2009): [Empty]. 

Expected shortfall (99% confidence level, 1 month horizon) 
(percentage): 

S&P 500%; 
October 1976 through December 1979: 9.65%; 
1980-1989: 11.15%; 
1990-1999: 8.86%; 
2000-2009: 12.39%; 
September 1976 through August 1987: 9.92%; 
September 1987 through September 1993: 11.57%; 
October 1993 through October 2001: 10.45%; 
November 2001 through December 2009: 11.74%; 
All (October 1976 through December 2009): 10.82%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 5.40%; 
1980-1989: 8.67%; 
1990-1999: 5.01%; 
2000-2009: 6.61%; 
September 1976 through August 1987: 8.57%; 
September 1987 through September 1993: 4.77%; 
October 1993 through October 2001: 5.01%; 
November 2001 through December 2009: 7.21%; 
All (October 1976 through December 2009): 6.82%. 

Wilshire 5000; 
October 1976 through December 1979: 9.96%; 
1980-1989: 11.51%; 
1990-1999: 9.09%; 
2000-2009: 12.58%; 
September 1976 through August 1987: 10.29%; 
September 1987 through September 1993: 11.68%; 
October 1993 through October 2001: 10.77%; 
November 2001 through December 2009: 11.84%; 
All (October 1976 through December 2009): 11.05%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 4.25%; 
1980-1989: 7.36%; 
1990-1999: 5.45%; 
2000-2009: 5.68%; 
September 1976 through August 1987: 6.46%; 
September 1987 through September 1993: 6.83%; 
October 1993 through October 2001: 5.27%; 
November 2001 through December 2009: 5.71%; 
All (October 1976 through December 2009): 6.09%. 

PPA; 
October 1976 through December 1979: 7.14%; 
1980-1989: 8.19%; 
1990-1999: 6.27%; 
2000-2009: 7.85%; 
September 1976 through August 1987: 7.88%; 
September 1987 through September 1993: 7.48%; 
October 1993 through October 2001: 6.83%; 
November 2001 through December 2009: 7.62%; 
All (October 1976 through December 2009): 7.51%. 

Insurance Benchmark; 
October 1976 through December 1979: 5.46%; 
1980-1989: 7.90%; 
1990-1999: 4.85%; 
2000-2009: 5.98%; 
September 1976 through August 1987: 7.93%; 
September 1987 through September 1993: 4.74%; 
October 1993 through October 2001: 4.74%; 
November 2001 through December 2009: 6.42%; 
All (October 1976 through December 2009): 6.32%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 5.27%; 
1980-1989: 6.71%; 
1990-1999: 4.59%; 
2000-2009: 5.45%; 
September 1976 through August 1987: 6.73%; 
September 1987 through September 1993: 4.85%; 
October 1993 through October 2001: 4.60%; 
November 2001 through December 2009: 5.61%; 
All (October 1976 through December 2009): 5.67%. 

Dynamic Benchmark; 
October 1976 through December 1979: 5.47%; 
1980-1989: 8.13%; 
1990-1999: 5.22%; 
2000-2009: 6.09%; 
September 1976 through August 1987: 7.48%; 
September 1987 through September 1993: 6.70%; 
October 1993 through October 2001: 5.34%; 
November 2001 through December 2009: 6.15%; 
All (October 1976 through December 2009): 6.55%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: 5.68%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: 5.71%; 
All (October 1976 through December 2009): [Empty]. 

Source: GAO analysis of PBGC data. 

[End of table] 

Asset-Only Comparison of the PBGC Total Fund Return Performance to the 
Dynamic Benchmark Return Performance: 

The results summarized in table 6 indicate that, over the particular 
historical period studied, the PBGC Total Fund outperformed the 
Dynamic Benchmark on a risk-adjusted basis, where risk is measured in 
terms of the volatility of month returns.[Footnote 80] In particular, 
all risk adjusted measures (Sharpe, Adjusted Sharpe, Sortino, and 
Omega ratios) are slightly higher for the PBGC Total Fund than for the 
Dynamic Benchmark for the overall period. For those three decade 
subperiods where the Sharpe ratio is positive for the PBGC Total Fund 
(1980-1989, 1990-1999, and 2000-2009) the PBGC Total Fund outperformed 
the Dynamic Benchmark for two out of the three subperiods (1990-1999, 
and 2000-2009). In the sub-period where the Sharpe and Sortino ratios 
are negative, the Adjusted Sharpe measure for the PBGC Total Fund is 
greater than that of the Dynamic Benchmark, again indicating that the 
PBGC Total Fund outperformed the Dynamic Benchmark in that period. 

Disaggregation of the PBGC Total Fund's return performance statistics 
reveals that PBGC Total Fund returns tended to underperform the 
Dynamic Benchmark returns on a risk-adjusted basis when the Total 
Fund's allocation to equities is higher, not lower. For instance, 
during allocation period 1--when the PBGC Total Fund equity allocation 
had an upward trend and the fixed-income allocation had a downward 
trend--the PBGC Total Fund Sharpe ratio was below that of the Dynamic 
Benchmark. In contrast, the PBGC Total Fund outperformed the Dynamic 
Benchmark in terms of the Sharpe ratio in allocation period 2, when 
the total fund equity allocation was falling. Also, the average 
allocation to equities was lower in allocation regime 4 than it was in 
allocation period 3, and the PBGC Total Fund outperformed the Dynamic 
Benchmark in allocation period 4 but slightly underperformed the 
Dynamic Benchmark in allocation period 3. The Sortino and Omega ratios 
show similar (and more pronounced in the case of the Omega ratio) 
under-or over-performance patterns across the weight regimes, thus 
corroborating and affirming the Sharpe ratio results. 

Looking more closely at potential sources of the under-or over-
performance of the PBGC Total Fund returns versus the Dynamic 
Benchmark returns, a driver of the PBGC Total Fund's under-or over- 
performance appears to be the mean of the returns, inasmuch as the 
pattern of under-or over-performance in the risk-adjusted return 
metrics across decades matches that of the pattern of under-or over- 
performance in the mean. This holds whether one views the 
disaggregations by "decade" or by allocation period. 

Asset-Only Assessment of the Effect of Fluctuations in the PBGC Total 
Fund's Asset Allocation upon PBGC Performance: 

According to our results, the Dynamic Benchmark outperformed every 
static benchmark except the PPA and the Post Fiscal Year 2002 
Benchmark--the benchmark portfolio with composition that roughly 
reflects the PBGC Total Fund's portfolio allocation during allocation 
period 4--while the PBGC Total Fund outperformed all the same 
benchmarks the Dynamic Benchmark did as well as the PPA. In addition, 
another finding is that all of the static benchmarks that involve 
mixtures of fixed income and equity securities outperform those 
benchmarks that allocate all funds to either bonds or equities. 

With regard to question of whether fluctuations in asset allocations 
had an adverse impact on PBGC Total Fund returns, the variable nature 
of the results precludes concluding that the time variation in asset 
allocations necessarily adversely impacted the PBGC Total Fund return 
performance. Both the PBGC Total Fund and the Dynamic Benchmark have 
fluctuating asset allocations, yet both have higher values for the 
risk-adjusted performance metrics--Sharpe, Adjusted Sharpe, Omega, and 
Sortino ratios--than the majority of the fixed allocation portfolios. 
On the other hand, there is one fixed-allocation benchmark--the Post 
Fiscal Year 2002 Benchmark portfolio--that, for the overall period, 
had risk-adjusted performance metrics that were superior to both the 
PBGC Total Fund and the Dynamic Benchmark. However, even this fixed 
allocation portfolio is really based upon the PBGC Total Fund, for the 
portfolio weights for the Post Fiscal Year 2002 Benchmark portfolio 
are a stylized representation of the PBGC Total Fund weights over the 
course of allocation period 4. In addition, note that, despite having 
fluctuating asset allocations, the PBGC Total Fund has outperformed 
the Post Fiscal Year 2002 Benchmark--in the sense of having higher 
risk-adjusted performance measure values--over significant subperiods 
of time in the past. For instance, the PBGC Total Fund has performed 
better than the Post Fiscal Year 2002 Benchmark portfolio on a risk 
adjusted basis for two out of the four "decade" subperiods--that is, 
the subperiods 1990-1999 and 2000-2009 for a total of 20 years out of 
the 33 1/4 years from October 1976 to December 2009. Thus, when 
returns on assets are considered in isolation from the growth in the 
liabilities, we did not find strong support in the data to indicate 
that the variations in the PBGC asset allocations adversely impacted 
the PBGC Total Funds' performance. 

Lack of diversification across asset classes appeared to have a more 
adverse impact on risk-adjusted performance. Additionally, the 
portfolios with 100 percent allocations to equities had some 
undesirable characteristics. Notably, out of the eight portfolios 
considered in the portfolio performance analysis, all the portfolios 
that represented a single asset class were among the bottom half of 
the portfolios in terms of the Sharpe ratio for the entire data 
sample, including the 100 percent fixed-income benchmark. The dominant 
contributing factor to their relatively weak risk-adjusted return 
performance is risk--all three had among the highest standard 
deviation and kurtosis scores for the entire historical sample period. 
The two portfolios that were 100 percent equities--the S&P 500 and the 
Wilshire 5000--had an additional undesirable feature: negative 
skewness. These two had the "most negative" skewness scores for the 
total sample period out of the eight portfolios. The combination of 
magnified negative skewness and kurtosis evident in the returns of the 
two equity benchmark portfolios is undesirable because it implies that 
investment in such portfolios has the potential to contribute of 
extreme negative returns. Although both equity portfolios have the 
highest average returns for the overall sample, the relatively low 
Sharpe ratio scores associated with them imply that they do not offer 
enough reward per unit of risk--that is, robust enough reward to risk 
trade-offs--to outperform those portfolios, both static and dynamic, 
that contain a diversified mix of both bonds and equities. 

PBGC Single-Employer Total Fund Underperformed Benchmarks on an Asset-
Liability Basis, and Fluctuations in Asset Allocations Did Not 
Adversely Impact Asset-Liability Performance: 

A two-way comparison of the PBGC Total Fund and the Dynamic Benchmark 
enabled us to evaluate PBGC Total Fund under-or over-performance 
associated with factors other than the PBGC Total Fund asset 
allocation. Next we examine the impact of fluctuations in the PBGC 
Total Fund's asset allocation in the asset-liability context. 

Comparison of The PBGC Total Fund Return Performance to the Dynamic 
Benchmark Return Performance in the Asset-Liability Context: 

A comparison of the PBGC Total Fund net-of-liability return 
performance to the net-of-liability return performance of the Dynamic 
Benchmark indicates that the PBGC Total Fund portfolio underperforms 
the Dynamic Benchmark in risk-adjusted terms on an asset-liability 
basis. In contrast to the results for the asset-only analysis, the 
PBGC Total Fund had weaker performance than the Dynamic Benchmark in 
that its Adjusted Sharpe ratio was lower for the overall time period 
(October 1976 to December 2009).[Footnote 81] Despite the switch in 
the performance rankings of the PBGC Total Fund and the Dynamic 
Benchmark, there are many similarities between the asset-liability 
performance analysis results and the asset-only performance analysis 
returns. The areas of similarity are as follows: 

1. Under-or over-performance pattern across "decade" and asset 
allocation periods. The PBGC Total Fund underperformed the Dynamic 
Benchmark for two out of the four decade subperiods and two out of the 
four asset allocation regimes on a risk-adjusted, net-of-liability 
return basis, according to the Adjusted Sharpe ratio statistic values. 

2. Lack of materiality of investment expenses. Deducting investment 
expenses from the PBGC Total Fund returns in the asset-liability 
context did not affect the performance ranking of the PBGC Total Fund 
relative to the Dynamic Benchmark on an Adjusted Sharpe ratio basis 
(in those periods for which investment expenses data were available). 

3. Tendency to perform relatively worse in regimes where equity asset 
allocation is greater or rising. The PBGC Total Fund's relative 
performance has tended to be worse in asset allocations periods where 
there is an elevated or rising allocation to the equity asset class. 
For example, as in the asset-only analysis, the PBGC Total Fund 
returns, net of the liability returns, had an Adjusted Sharpe ratio 
below that of the Dynamic Benchmark in allocation period 1 (which was 
characterized by a rising allocations to the equity sector). Also, as 
in the asset-only case, the PBGC Total Fund underperformed the Dynamic 
Benchmark on a net of liability return basis in allocation period 3, 
according to the Adjusted Sharpe ratio scores. In allocation period 4, 
when the average allocation to equities in the PBGC Total Fund 
portfolio was lower than in allocation regime 3, the PBGC Total Fund 
had a higher Adjusted Sharpe ratio than the Dynamic Benchmark did. 
However, unlike the asset-only case, the PBGC Total Fund Adjusted 
Sharpe ratio was less than that of the Dynamic Benchmark in allocation 
period 2, when the PBGC Total Fund allocation to equities was falling 
and to bonds was rising. The similarity of the seemingly inverse 
relation between the PBGC Total Fund Adjusted Sharpe ratio value and 
the magnitude of the allocation to the equities asset class reinforces 
the impression that elevated allocations of the PBGC Total Fund to the 
equity asset class had adverse impact on PBGC Total Fund returns net 
of the liability returns in an asset-liability context as well as when 
the portfolio returns are considered in isolation from the liability 
returns in an asset-only context. However the patterns in the equity 
asset allocation and its relationship to performance should not be 
viewed as implying causality.[Footnote 82] 

4. Mean excess return prominence as a driver of risk-adjusted 
performance metric values across subperiods. In every sub-period and 
asset allocation regime where the excess mean return (net of the 
liability return) for the PBGC Total Fund exceeded the excess mean 
return (net of the liability return) for the Dynamic Benchmark 
portfolio, the Adjusted Sharpe ratio for the PBGC Total Fund exceeded 
the Adjusted Sharpe ratio for the Dynamic Benchmark. 

Given all of the similarities between the results of the performance 
comparisons in the asset-liability and asset-only contexts, the reason 
for the contrast between the PBGC Total Fund's underperformance of the 
Dynamic Benchmark in the asset-liability context and its 
outperformance in the asset-only context appears to be risk. In the 
asset-only performance comparison analysis, the PBGC Total Fund's 
riskiness--as measured by the standard deviation and semi-standard 
deviation of the returns---was lower than that of the Dynamic 
Benchmark portfolio. However, in the asset-liability context, the 
results indicate that the PBGC Total Fund returns have greater 
standard deviation and semi-standard deviation values than the returns 
for the Dynamic Benchmark, suggesting that the PBGC Total Fund returns 
(net of the liability returns) are riskier and more volatile than the 
Dynamic Benchmark returns (net of the liability returns). One factor 
that likely played a role in elevating the PBGC Total Fund's riskiness 
above that of the Dynamic Benchmark is the correlation of the actual 
asset returns with the liability returns (not the correlation between 
the liability returns and the asset returns net of the liability 
returns). For the overall sample period, the PBGC Total Fund actual 
returns had lower correlation with the liability returns --both scaled 
by the funding ratio and unscaled--than the Dynamic Benchmark. Higher 
correlation makes it more likely that movements in the liability 
return are accompanied by movements in the asset portfolio return in 
the same direction and of similar magnitude. Such co-movement of the 
actual asset returns and the liability returns helps reduce the 
volatility of the asset returns net of the liability returns. 

Lower correlation has the opposite effect of higher correlation--lower 
correlation reduces co-movement between asset returns and liability 
returns and thus elevates the riskiness of asset returns net of the 
liability returns. Thus, the extent to which the riskiness of the PBGC 
Total Fund exceeds the riskiness of the Dynamic Benchmark on a net-of- 
liability return basis probably reflects, at least in part, the extent 
to which the liability returns are less correlated with the PBGC Total 
Fund's actual returns than with the Dynamic Benchmark actual returns. 
However, the question of why the PBGC Total Fund would be less 
correlated with liability returns than the Dynamic Benchmark would 
require a more detailed investigation. 

Assessment of the Effect of Fluctuations in the PBGC Total Fund's 
Asset Allocation upon PBGC Performance in the Asset-Liability Context: 

The results of comparing the performance measures of the PBGC Total 
Fund and the Dynamic Benchmark returns, net of the liability return, 
to the performance measures of the static portfolios are that the 
Dynamic Benchmark outperforms two out of the six static portfolios--
the Post Fiscal Year 2002 Benchmark and the Barclays Capital Long-Term 
Government Credit Index--and is roughly tied in performance with the 
S&P 500. However, the PBGC Total Fund did not outperform any of the 
benchmarks. Moreover, two out of the three best-performing portfolios 
have significant allocations to bonds and equities versus representing 
only a single asset class. 

In order to detect potential sources of underperformance, as measured 
by the Adjusted Sharpe measure, in the PBGC Total Fund and the Dynamic 
Benchmark, we conducted a detailed comparison of various performance 
metrics for these two portfolios to performance metrics for the PPA 
benchmark portfolio--the portfolio that had the highest Adjusted 
Sharpe measure for the overall October 1976 through December 2009 
sample period and, by that measure, the best risk-adjusted 
performance. This detailed comparison suggests that a major source of 
the underperformance of the PBGC Total Fund and the Dynamic Benchmark 
relative to the PPA benchmark portfolio was weakness in the mean 
excess return, for both portfolios had lower mean excess returns for 
the overall sample period the mean excess return of the PPA benchmark 
portfolio. However, both the PBGC Total Fund and the Dynamic Benchmark 
portfolios appeared to be less risky than the PPA portfolio inasmuch 
as the returns on both portfolios had lower standard deviation and 
semi-standard deviation than the returns on the PPA portfolio. Thus, 
the primary immediate reason both portfolios have lower Adjusted 
Sharpe ratios than the PPA benchmark is that their returns (net of the 
liability return) had lower mean excess returns than the PPA benchmark 
return (net of the liability return) not because they were more risky 
than the PPA benchmark. One other feature of the results that 
underscores the extent to which both portfolios were less risky than 
the PPA benchmark on an asset-liability basis is that the returns (net 
of the liability return) for both portfolios had lower standard 
deviations than the return (net of the liability return) for the PPA 
benchmark for every decade sub-period in the case of the Dynamic 
Benchmark and for three out of the four decade subperiods in the case 
of the PBGC Total Fund. 

Although the statistics clearly suggest that weakness in the mean 
excess return played a role in lowering the risk-adjusted performance 
of both the PBGC Total Fund and the Dynamic Benchmark portfolios, the 
evidence provided by the performance measures about whether the 
variation over time in asset allocations associated with both 
portfolios necessarily lowered the risk-adjusted performance of their 
returns on a net-of-liability basis is less clear. For example, on the 
one hand, the Dynamic Benchmark has a lower Adjusted Sharpe ratio for 
the overall sample period--and by that metric, weaker risk-adjusted 
performance--than several static portfolios; however, on the other 
hand, it also outperforms other fixed allocation portfolios on an 
Adjusted Sharpe ratio basis, which suggests that fluctuations in asset 
allocations alone do not immediately imply underperformance on a risk- 
adjusted basis. 

In general, the evidence from the performance metrics is too ambiguous 
to support the conclusion that the variation in the asset allocations 
inherent in the PBGC Total Fund and the Dynamic Benchmark portfolio 
necessarily lowered the risk-adjusted performance of the returns of 
both portfolios within the asset-liability analysis. Furthermore, 
there are subperiods where the returns (net of the liability returns) 
for both dynamic portfolios have higher Adjusted Sharpe ratios than 
the PPA benchmark, even though this portfolio had the highest Adjusted 
Sharpe ratio for the overall sample period. In particular, both the 
PBGC Total Fund and the Dynamic Benchmark have higher Adjusted Sharpe 
ratios than the PPA benchmark for two out of the four decade 
subperiods; also, the Adjusted Sharpe ratios for both portfolios 
exceed that of the PPA benchmark for one of the four asset allocation 
regimes, a period of 8 years. The lengths of time over which the PBGC 
Total Fund and the Dynamic Benchmark outperform, on a risk-adjusted 
basis, the best static portfolio over significant subperiods of the 
overall sample period does not indicate that the fluctuations in the 
asset allocations for the PBGC Total Fund and the Dynamic Benchmark 
alone are a preeminent source of weakness in the risk-adjusted 
performance of the returns for both portfolios in the asset-liability 
context. 

This analysis has primarily (although not exclusively) focused on the 
comparison of the risk-adjusted performance of the two dynamic 
portfolios to the performance of the PPA benchmark, the static 
portfolio which had the strongest risk-adjusted performance. However, 
if the focus is expanded to include comparisons across all of the 
static and dynamic portfolios, another feature of the results emerges. 
That is, the influence of the correlation between the portfolio 
returns and the liability return on the riskiness and the risk-
adjusted performance of the portfolio returns net of the liability 
return. This influence is emphasized in the results for the best three 
performing portfolios over the period studied--the PPA benchmark, the 
Wilshire 5000, and the Life Insurance Benchmark portfolio performance 
results. The PPA benchmark and the Life Insurance Benchmark both have 
adjusted Sharpe ratios that equal or exceed that of the Wilshire 5000 
for the overall sample period even though the mean excess return of 
the Wilshire 5000 for the overall sample period is 49 percent greater 
than that of the Life Insurance Benchmark and 31 percent greater than 
that of the PPA benchmark. Because both the PPA and the Life Insurance 
Benchmark have lower mean excess returns than the Wilshire 5000, the 
source of their strong adjusted Sharpe ratio performance in comparison 
to the Wilshire 5000 rests in the riskiness of the returns for those 
two portfolios (in comparison to the Wilshire 5000). As shown in table 
7, both portfolios have distinctly lower standard deviations and semi- 
standard deviations--two measures of riskiness--than the Wilshire 
5000. Specifically, the annualized standard deviation of the Life 
Insurance Benchmark returns is 49 percent less than that of the 
Wilshire 5000 returns, and the semi-standard deviation of the Life 
Insurance Benchmark portfolio returns is 46 percent less than the semi-
standard deviation of the Wilshire 5000 returns. Similarly, the 
annualized standard deviation of the PPA benchmark returns is 32 
percent less than the annualized standard deviation of the Wilshire 
5000 returns, and the annualized semi-standard deviation of the PPA 
benchmark returns is 30 percent less than the semi-standard deviation 
of the Wilshire 5000 returns. 

Table 7: Portfolio Performance Comparison Results, October 1976 
through December 2009 (All Asset Returns Are Net of Liability Return): 

Total return (percentage): 

S&P 500; 
October 1976 through December 1979: 0.91%; 
1980-1989: -8.58%; 
1990-1999: 180.45%; 
2000-2009: -57.30%; 
September 1976 through August 1987: 25.82%; 
September 1987 through September 1993: -29.58%; 
October 1993 through October 2001: 106.13%; 
November 2001 through December 2009: -39.51%; 
All (October 1976 through December 2009): 10.48%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: -9.90%; 
1980-1989: -48.61%; 
1990-1999: 3.18%; 
2000-2009: -6.30%; 
September 1976 through August 1987: -38.10%; 
September 1987 through September 1993: -25.69%; 
October 1993 through October 2001: 19.17%; 
November 2001 through December 2009: -18.32%; 
All (October 1976 through December 2009): -55.23%. 

Wilshire 5000; 
October 1976 through December 1979: 17.78%; 
1980-1989: -13.20%; 
1990-1999: 157.61%; 
2000-2009: -54.11%; 
September 1976 through August 1987: 43.89%; 
September 1987 through September 1993: -31.65%; 
October 1993 through October 2001: 88.74%; 
November 2001 through December 2009: 
-34.89%; 
All (October 1976 through December 2009): 20.86%. 

PBGC Total Fund Return; 
October 1976 through December 1979: [Empty]; 
1980-1989: -54.39%; 
1990-1999: 45.35%; 
2000-2009: -24.12%; 
September 1976 through August 1987: -30.30%; 
September 1987 through September 1993: -34.56%; 
October 1993 through October 2001: 43.69%; 
November 2001 through December 2009: -23.25%; 
All (October 1976 through December 2009): -49.70%. 

PPA; 
October 1976 through December 1979: -3.08%; 
1980-1989: -23.02%; 
1990-1999: 94.73%; 
2000-2009: -36.76%; 
September 1976 through August 1987: -2.06%; 
September 1987 through September 1993: -24.82%; 
October 1993 through October 2001: 71.92%; 
November 2001 through December 2009: -27.42%; 
All (October 1976 through December 2009): -8.12%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: -8.11%; 
1980-1989: -42.23%; 
1990-1999: 22.15%; 
2000-2009: -13.26%; 
September 1976 through August 1987: -29.95%; 
September 1987 through September 1993: -24.56%; 
October 1993 through October 2001: 32.09%; 
November 2001 through December 2009: -19.42%; 
All (October 1976 through December 2009): -43.75%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: -4.92%; 
1980-1989: -39.89%; 
1990-1999: 35.36%; 
2000-2009: -27.80%; 
September 1976 through August 1987: -23.01%; 
September 1987 through September 1993: -29.21%; 
October 1993 through October 2001: 39.37%; 
November 2001 through December 2009: -26.46%; 
All (October 1976 through December 2009): -44.14%. 

Dynamic Benchmark; 
October 1976 through December 1979: -5.38%; 
1980-1989: -36.34%; 
1990-1999: 46.66%; 
2000-2009: -27.08%; 
September 1976 through August 1987: -15.54%; 
September 1987 through September 1993: -30.99%; 
October 1993 through October 2001: 45.84%; 
November 2001 through December 2009: -24.21%; 
All (October 1976 through December 2009): -35.58%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: -24.54%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: -23.62%; 
All (October 1976 through December 2009): [Empty]. 

Liability Return; 
October 1976 through December 1979: 9.46%; 
1980-1989: 182.07%; 
1990-1999: 109.95%; 
2000-2009: 127.23%; 
September 1976 through August 1987: 130.53%; 
September 1987 through September 1993: 95.94%; 
October 1993 through October 2001: 80.03%; 
November 2001 through December 2009: 81.12%; 
All (October 1976 through December 2009): 1,372.95%. 

Monthly mean (percentage): 

S&P 500; 
October 1976 through December 1979: 0.09%; 
1980-1989: 0.06%; 
1990-1999: 0.94%; 
2000-2009: -0.59%; 
September 1976 through August 1987: 0.27%; 
September 1987 through September 1993: -0.34%; 
October 1993 through October 2001: 0.85%; 
November 2001 through December 2009: -0.39%; 
All (October 1976 through December 2009): 0.14%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: -0.25%; 
1980-1989: -0.52%; 
1990-1999: 0.05%; 
2000-2009: -0.03%; 
September 1976 through August 1987: -0.35%; 
September 1987 through September 1993: -0.34%; 
October 1993 through October 2001: 0.19%; 
November 2001 through December 2009: -0.18%; 
All (October 1976 through December 2009): -0.17%. 

Wilshire 5000; 
October 1976 through December 1979: 0.49%; 
1980-1989: 0.02%; 
1990-1999: 0.88%; 
2000-2009: -0.52%; 
September 1976 through August 1987: 0.38%; 
September 1987 through September 1993: -0.37%; 
October 1993 through October 2001: 0.76%; 
November 2001 through December 2009: -0.31%; 
All (October 1976 through December 2009): 0.16%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 0.02%; 
1980-1989: -0.58%; 
1990-1999: 0.34%; 
2000-2009: -0.20%; 
September 1976 through August 1987: 
-0.23%; 
September 1987 through September 1993: -0.49%; 
October 1993 through October 2001: 0.39%; 
November 2001 through December 2009: -0.24%; 
All (October 1976 through December 2009): -0.13%. 

PPA; 
October 1976 through December 1979: -0.05%; 
1980-1989: -0.15%; 
1990-1999: 0.60%; 
2000-2009: -0.33%; 
September 1976 through August 1987: 0.03%; 
September 1987 through September 1993: -0.31%; 
October 1993 through October 2001: 0.60%; 
November 2001 through December 2009: -0.27%; 
All (October 1976 through December 2009): 0.03%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: -0.20%; 
1980-1989: -0.42%; 
1990-1999: 0.19%; 
2000-2009: -0.10%; 
September 1976 through August 1987: -0.25%; 
September 1987 through September 1993: -0.32%; 
October 1993 through October 2001: 0.30%; 
November 2001 through December 2009: -0.19%; 
All (October 1976 through December 2009): -0.12%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: -0.11%; 
1980-1989: 
-0.38%; 
1990-1999: 0.28%; 
2000-2009: -0.24%; 
September 1976 through August 1987: -0.17%; 
September 1987 through September 1993: -0.41%; 
October 1993 through October 2001: 0.36%; 
November 2001 through December 2009: -0.28%; 
All (October 1976 through December 2009): -0.11%. 

Dynamic Benchmark; 
October 1976 through December 1979: -0.12%; 
1980-1989: -0.32%; 
1990-1999: 0.35%; 
2000-2009: -0.23%; 
September 1976 through August 1987: -0.10%; 
September 1987 through September 1993: -0.43%; 
October 1993 through October 2001: 0.41%; 
November 2001 through December 2009: -0.25%; 
All (October 1976 through December 2009): -0.07%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: -0.21%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: -0.25%; 
All (October 1976 through December 2009): [Empty]. 

Liability Return; 
October 1976 through December 1979: 0.25%; 
1980-1989: 0.94%; 
1990-1999: 0.65%; 
2000-2009: 0.72%; 
September 1976 through August 1987: 0.70%; 
September 1987 through September 1993: 0.96%; 
October 1993 through October 2001: 0.63%; 
November 2001 through December 2009: 0.64%; 
All (October 1976 through December 2009): 0.72%. 

Monthly mean excess return (percentage): 

S&P 500; 
October 1976 through December 1979: -0.50%; 
1980-1989: -0.64%; 
1990-1999: 0.55%; 
2000-2009: -0.81%; 
September 1976 through August 1987: -0.43%; 
September 1987 through September 1993: -0.80%; 
October 1993 through October 2001: 0.46%; 
November 2001 through December 2009: -0.57%; 
All (October 1976 through December 2009): -0.32%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: -0.84%; 
1980-1989: -1.22%; 
1990-1999: -0.34%; 
2000-2009: -0.25%; 
September 1976 through August 1987: -1.04%; 
September 1987 through September 1993: -0.80%; 
October 1993 through October 2001: -0.20%; 
November 2001 through December 2009: -0.36%; 
All (October 1976 through December 2009): -0.62%. 

Wilshire 5000; 
October 1976 through December 1979: -0.10%; 
1980-1989: -0.68%; 
1990-1999: 0.48%; 
2000-2009: -0.74%; 
September 1976 through August 1987: -0.32%; 
September 1987 through September 1993: -0.83%; 
October 1993 through October 2001: 0.37%; 
November 2001 through December 2009: -0.49%; 
All (October 1976 through December 2009): -0.29%. 

PBGC Total Fund Return; 
October 1976 through December 1979: -0.57%; 
1980-1989: -1.28%; 
1990-1999: -0.05%; 
2000-2009: -0.42%; 
September 1976 through August 1987: -0.92%; 
September 1987 through September 1993: -0.95%; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: -0.42%; 
All (October 1976 through December 2009): -0.58%. 

PPA%; 
October 1976 through December 1979: -0.64; 
1980-1989: -0.85%; 
1990-1999: 0.20%; 
2000-2009: -0.55%; 
September 1976 through August 1987: -0.67%; 
September 1987 through September 1993: -0.77%; 
October 1993 through October 2001: 0.21%; 
November 2001 through December 2009: -0.46%; 
All (October 1976 through December 2009): -0.42%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: -0.79%; 
1980-1989: -1.12%; 
1990-1999: -0.20%; 
2000-2009: -0.32%; 
September 1976 through August 1987: -0.95%; 
September 1987 through September 1993: -0.78%; 
October 1993 through October 2001: -0.09%; 
November 2001 through December 2009: -0.37%; 
All (October 1976 through December 2009): -0.57%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: -0.70%; 
1980-1989: 
-1.08%; 
1990-1999: -0.11%; 
2000-2009: -0.46%; 
September 1976 through August 1987: -0.87%; 
September 1987 through September 1993: -0.87%; 
October 1993 through October 2001: -0.03%; 
November 2001 through December 2009: -0.46%; 
All (October 1976 through December 2009): -0.56%. 

Dynamic Benchmark; 
October 1976 through December 1979: -0.71%; 
1980-1989: -1.02%; 
1990-1999: -0.04%; 
2000-2009: -0.46%; 
September 1976 through August 1987: -0.79%; 
September 1987 through September 1993: -0.89%; 
October 1993 through October 2001: 0.02%; 
November 2001 through December 2009: -0.43%; 
All (October 1976 through December 2009): -0.52%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: -0.43%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: -0.43%; 
All (October 1976 through December 2009): [Empty]. 

Liability Return; 
October 1976 through December 1979: -0.34%; 
1980-1989: 0.24%; 
1990-1999: 0.25%; 
2000-2009: 0.50%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: 0.50%; 
October 1993 through October 2001: 0.24%; 
November 2001 through December 2009: 0.46%; 
All (October 1976 through December 2009): 0.27%. 

Monthly standard deviation (percentage): 

S&P 500; 
October 1976 through December 1979: 3.67%; 
1980-1989: 5.13%; 
1990-1999: 3.95%; 
2000-2009: 5.01%; 
September 1976 through August 1987: 4.30%; 
September 1987 through September 1993: 5.26%; 
October 1993 through October 2001: 4.21%; 
November 2001 through December 2009: 4.97%; 
All (October 1976 through December 2009): 4.65%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 1.82%; 
1980-1989: 3.11%; 
1990-1999: 2.16%; 
2000-2009: 2.32%; 
September 1976 through August 1987: 2.36%; 
September 1987 through September 1993: 3.72%; 
October 1993 through October 2001: 1.22%; 
November 2001 through December 2009: 2.49%; 
All (October 1976 through December 2009): 2.50%. 

Wilshire 5000; 
October 1976 through December 1979: 3.67%; 
1980-1989: 5.17%; 
1990-1999: 4.09%; 
2000-2009: 5.08%; 
September 1976 through August 1987: 4.33%; 
September 1987 through September 1993: 5.38%; 
October 1993 through October 2001: 4.33%; 
November 2001 through December 2009: 5.01%; 
All (October 1976 through December 2009): 4.72%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 2.12%; 
1980-1989: 4.16%; 
1990-1999: 2.48%; 
2000-2009: 2.33%; 
September 1976 through August 1987: 3.36%; 
September 1987 through September 1993: 4.25%; 
October 1993 through October 2001: 1.73%; 
November 2001 through December 2009: 2.39%; 
All (October 1976 through December 2009): 3.03%. 

PPA; 
October 1976 through December 1979: 2.62%; 
1980-1989: 3.72%; 
1990-1999: 2.84%; 
2000-2009: 3.22%; 
September 1976 through August 1987: 3.07%; 
September 1987 through September 1993: 4.09%; 
October 1993 through October 2001: 2.60%; 
November 2001 through December 2009: 3.23%; 
All (October 1976 through December 2009): 3.23%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: 1.86%; 
1980-1989: 3.01%; 
1990-1999: 2.15%; 
2000-2009: 2.18%; 
September 1976 through August 1987: 2.34%; 
September 1987 through September 1993: 3.61%; 
October 1993 through October 2001: 1.25%; 
November 2001 through December 2009: 2.32%; 
All (October 1976 through December 2009): 2.43%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 2.08%; 
1980-1989: 3.24%; 
1990-1999: 2.29%; 
2000-2009: 2.41%; 
September 1976 through August 1987: 2.63%; 
September 1987 through September 1993: 3.70%; 
October 1993 through October 2001: 1.47%; 
November 2001 through December 2009: 2.54%; 
All (October 1976 through December 2009): 2.63%. 

Dynamic Benchmark; 
October 1976 through December 1979: 1.93%; 
1980-1989: 3.58%; 
1990-1999: 2.41%; 
2000-2009: 2.45%; 
September 1976 through August 1987: 2.72%; 
September 1987 through September 1993: 4.04%; 
October 1993 through October 2001: 1.79%; 
November 2001 through December 2009: 2.51%; 
All (October 1976 through December 2009): 2.79%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: 2.33%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: 2.39%; 
All (October 1976 through December 2009): [Empty]. 

Liability Return; 
October 1976 through December 1979: 1.85%; 
1980-1989: 3.12%; 
1990-1999: 2.24%; 
2000-2009: 2.49%; 
September 1976 through August 1987: 2.99%; 
September 1987 through September 1993: 2.70%; 
October 1993 through October 2001: 1.61%; 
November 2001 through December 2009: 2.66%; 
All (October 1976 through December 2009): 2.57%. 

Annualized semi-standard deviation (semi-variance) (percentage): 

S&P 500; 
October 1976 through December 1979: 9.06%; 
1980-1989: 14.37%; 
1990-1999: 8.99%; 
2000-2009: 14.46%; 
September 1976 through August 1987: 10.99%; 
September 1987 through September 1993: 15.09%; 
October 1993 through October 2001: 10.32%; 
November 2001 through December 2009: 14.15%; 
All (October 1976 through December 2009): 12.52%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 6.24%; 
1980-1989: 9.70%; 
1990-1999: 4.39%; 
2000-2009: 6.60%; 
September 1976 through August 1987: 7.49%; 
September 1987 through September 1993: 9.58%; 
October 1993 through October 2001: 3.36%; 
November 2001 through December 2009: 7.18%; 
All (October 1976 through December 2009): 7.12%. 

Wilshire 5000%; 
October 1976 through December 1979: 8.60; 
1980-1989: 14.72%; 
1990-1999: 9.56%; 
2000-2009: 14.64%; 
September 1976 through August 1987: 11.09%; 
September 1987 through September 1993: 15.62%; 
October 1993 through October 2001: 10.98%; 
November 2001 through December 2009: 14.12%; 
All (October 1976 through December 2009): 12.79%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 5.94%; 
1980-1989: 12.96%; 
1990-1999: 5.45%; 
2000-2009: 6.86%; 
September 1976 through August 1987: 10.02%; 
September 1987 through September 1993: 12.06%; 
October 1993 through October 2001: 4.39%; 
November 2001 through December 2009: 7.05%; 
All (October 1976 through December 2009): 8.74%. 

PPA; 
October 1976 through December 1979: 7.12%; 
1980-1989: 10.94%; 
1990-1999: 6.32%; 
2000-2009: 9.46%; 
September 1976 through August 1987: 8.64%; 
September 1987 through September 1993: 11.23%; 
October 1993 through October 2001: 6.37%; 
November 2001 through December 2009: 9.45%; 
All (October 1976 through December 2009): 8.92%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: 6.14%; 
1980-1989: 9.36%; 
1990-1999: 4.37%; 
2000-2009: 6.28%; 
September 1976 through August 1987: 7.35%; 
September 1987 through September 1993: 9.31%; 
October 1993 through October 2001: 3.22%; 
November 2001 through December 2009: 6.76%; 
All (October 1976 through December 2009): 6.88%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 6.13%; 
1980-1989: 9.94%; 
1990-1999: 4.79%; 
2000-2009: 7.22%; 
September 1976 through August 1987: 7.92%; 
September 1987 through September 1993: 9.76%; 
October 1993 through October 2001: 3.76%; 
November 2001 through December 2009: 7.59%; 
All (October 1976 through December 2009): 7.46%. 

Dynamic Benchmark; 
October 1976 through December 1979: 6.05%; 
1980-1989: 10.98%; 
1990-1999: 5.16%; 
2000-2009: 7.22%; 
September 1976 through August 1987: 8.16%; 
September 1987 through September 1993: 11.17%; 
October 1993 through October 2001: 4.45%; 
November 2001 through December 2009: 7.43%; 
All (October 1976 through December 2009): 7.95%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: 0.00%; 
1980-1989: 0.00%; 
1990-1999: 0.39%; 
2000-2009: 6.88%; 
September 1976 through August 1987: 0.00%; 
September 1987 through September 1993: 0.00%; 
October 1993 through October 2001: 2.80%; 
November 2001 through December 2009: 7.06%; 
All (October 1976 through December 2009): 3.78%. 

Liability Return; 
October 1976 through December 1979: 6.00%; 
1980-1989: 7.33%; 
1990-1999: 5.80%; 
2000-2009: 5.06%; 
September 1976 through August 1987: 7.44%; 
September 1987 through September 1993: 6.99%; 
October 1993 through October 2001: 3.57%; 
November 2001 through December 2009: 5.45%; 
All (October 1976 through December 2009): 6.12%. 

Annualized arithmetic mean (percentage): 

S&P 500; 
October 1976 through December 1979: 1.06%; 
1980-1989: 0.69%; 
1990-1999: 11.28%; 
2000-2009: -7.03%; 
September 1976 through August 1987: 3.24%; 
September 1987 through September 1993: -4.04%; 
October 1993 through October 2001: 10.14%; 
November 2001 through December 2009: -4.63%; 
All (October 1976 through December 2009): 1.62%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: -3.01%; 
1980-1989: -6.22%; 
1990-1999: 0.58%; 
2000-2009: -0.33%; 
September 1976 through August 1987: -4.16%; 
September 1987 through September 1993: -4.06%; 
October 1993 through October 2001: 2.28%; 
November 2001 through December 2009: -2.10%; 
All (October 1976 through December 2009): -2.06%. 

Wilshire 5000; 
October 1976 through December 1979: 5.83%; 
1980-1989: 0.19%; 
1990-1999: 10.50%; 
2000-2009: -6.26%; 
September 1976 through August 1987: 4.53%; 
September 1987 through September 1993: -4.44%; 
October 1993 through October 2001: 9.10%; 
November 2001 through December 2009: -3.71%; 
All (October 1976 through December 2009): 1.94%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 0.26%; 
1980-1989: -6.98%; 
1990-1999: 4.10%; 
2000-2009: -2.45%; 
September 1976 through August 1987: 
-2.71%; 
September 1987 through September 1993: -5.88%; 
October 1993 through October 2001: 4.72%; 
November 2001 through December 2009: -2.89%; 
All (October 1976 through December 2009): -1.53%. 

PPA; 
October 1976 through December 1979: -0.56%; 
1980-1989: -1.85%; 
1990-1999: 7.16%; 
2000-2009: -3.99%; 
September 1976 through August 1987: 0.36%; 
September 1987 through September 1993: -3.69%; 
October 1993 through October 2001: 7.19%; 
November 2001 through December 2009: -3.28%; 
All (October 1976 through December 2009): 0.37%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: -2.40%; 
1980-1989: -5.07%; 
1990-1999: 2.26%; 
2000-2009: -1.14%; 
September 1976 through August 1987: -3.01%; 
September 1987 through September 1993: -3.86%; 
October 1993 through October 2001: 3.58%; 
November 2001 through December 2009: -2.32%; 
All (October 1976 through December 2009): -1.39%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: -1.30%; 
1980-1989: -4.58%; 
1990-1999: 3.33%; 
2000-2009: -2.93%; 
September 1976 through August 1987: -2.04%; 
September 1987 through September 1993: -4.87%; 
October 1993 through October 2001: 4.28%; 
November 2001 through December 2009: -3.37%; 
All (October 1976 through December 2009): -1.35%. 

Dynamic Benchmark; 
October 1976 through December 1979: -1.48%; 
1980-1989: -3.85%; 
1990-1999: 4.17%; 
2000-2009: -2.82%; 
September 1976 through August 1987: -1.14%; 
September 1987 through September 1993: -5.12%; 
October 1993 through October 2001: 4.91%; 
November 2001 through December 2009: -3.01%; 
All (October 1976 through December 2009): -0.87%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: -2.51%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: -2.95%; 
All (October 1976 through December 2009): [Empty]. 

Liability Return; 
October 1976 through December 1979: 2.99; 
1980-1989: 11.26%; 
1990-1999: 7.75%; 
2000-2009: 8.67%; 
September 1976 through August 1987: 8.39%; 
September 1987 through September 1993: 11.56%; 
October 1993 through October 2001: 7.53%; 
November 2001 through December 2009: 7.71%; 
All (October 1976 through December 2009): 8.60%. 

Annualized mean excess return (percentage): 

S&P 500; 
October 1976 through December 1979: -6.01%; 
1980-1989: -7.68%; 
1990-1999: 6.58%; 
2000-2009: -9.67%; 
September 1976 through August 1987: -5.10%; 
September 1987 through September 1993: -9.58%; 
October 1993 through October 2001: 5.48%; 
November 2001 through December 2009: -6.81%; 
All (October 1976 through December 2009): -3.78%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: -10.08%; 
1980-1989: -14.60%; 
1990-1999: -4.12%; 
2000-2009: -2.98%; 
September 1976 through August 1987: -12.51%; 
September 1987 through September 1993: -9.60%; 
October 1993 through October 2001: -2.38%; 
November 2001 through December 2009: -4.28%; 
All (October 1976 through December 2009): -7.47%. 

Wilshire 5000; 
October 1976 through December 1979: -1.24%; 
1980-1989: -8.18%; 
1990-1999: 5.80%; 
2000-2009: -8.90%; 
September 1976 through August 1987: -3.82%; 
September 1987 through September 1993: -9.98%; 
October 1993 through October 2001: 4.44%; 
November 2001 through December 2009: -5.89%; 
All (October 1976 through December 2009): -3.47%. 

PBGC Total Fund Return; 
October 1976 through December 1979: -6.81%; 
1980-1989: -15.35%; 
1990-1999: -0.60%; 
2000-2009: -5.10%; 
September 1976 through August 1987: -11.05%; 
September 1987 through September 1993: -11.42%; 
October 1993 through October 2001: 0.05%; 
November 2001 through December 2009: -5.07%; 
All (October 1976 through December 2009): -6.94%. 

PPA; 
October 1976 through December 1979: -7.63%; 
1980-1989: -10.22%; 
1990-1999: 2.46%; 
2000-2009: -6.63%; 
September 1976 through August 1987: -7.99%; 
September 1987 through September 1993: -9.23%; 
October 1993 through October 2001: 2.53%; 
November 2001 through December 2009: -5.46%; 
All (October 1976 through December 2009): -5.03%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: -9.46%; 
1980-1989: -13.44%; 
1990-1999: -2.43%; 
2000-2009: -3.79%; 
September 1976 through August 1987: -11.36%; 
September 1987 through September 1993: -9.40%; 
October 1993 through October 2001: -1.09%; 
November 2001 through December 2009: -4.49%; 
All (October 1976 through December 2009): -6.80%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: -8.37%; 
1980-1989: 
-12.95%; 
1990-1999: -1.37%; 
2000-2009: -5.57%; 
September 1976 through August 1987: -10.39%; 
September 1987 through September 1993: -10.41%; 
October 1993 through October 2001: -0.38%; 
November 2001 through December 2009: -5.54%; 
All (October 1976 through December 2009): -6.76%. 

Dynamic Benchmark; 
October 1976 through December 1979: -8.55%; 
1980-1989: -12.22%; 
1990-1999: -0.53%; 
2000-2009: -5.47%; 
September 1976 through August 1987: 
-9.49%; 
September 1987 through September 1993: -10.66%; 
October 1993 through October 2001: 0.25%; 
November 2001 through December 2009: -5.18%; 
All (October 1976 through December 2009): -6.27%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: -5.16%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: -5.13%; 
All (October 1976 through December 2009): [Empty]. 

Liability Return; 
October 1976 through December 1979: -4.08%; 
1980-1989: 2.88%; 
1990-1999: 3.05%; 
2000-2009: 6.02%; 
September 1976 through August 1987: 0.04%; 
September 1987 through September 1993: 6.01%; 
October 1993 through October 2001: 2.86%; 
November 2001 through December 2009: 5.53%; 
All (October 1976 through December 2009): 3.19%. 

Annualized standard deviation (percentage): 

S&P 500; 
October 1976 through December 1979: 12.72%; 
1980-1989: 17.77%; 
1990-1999: 13.67%; 
2000-2009: 17.35%; 
September 1976 through August 1987: 14.90%; 
September 1987 through September 1993: 18.23%; 
October 1993 through October 2001: 14.60%; 
November 2001 through December 2009: 17.20%; 
All (October 1976 through December 2009): 16.11%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 6.30%; 
1980-1989: 10.78%; 
1990-1999: 7.49%; 
2000-2009: 8.05%; 
September 1976 through August 1987: 8.19%; 
September 1987 through September 1993: 12.88%; 
October 1993 through October 2001: 4.24%; 
November 2001 through December 2009: 8.61%; 
All (October 1976 through December 2009): 8.66%. 

Wilshire 5000; 
October 1976 through December 1979: 12.70%; 
1980-1989: 17.91%; 
1990-1999: 14.18%; 
2000-2009: 17.59%; 
September 1976 through August 1987: 15.01%; 
September 1987 through September 1993: 18.65%; 
October 1993 through October 2001: 15.00%; 
November 2001 through December 2009: 17.36%; 
All (October 1976 through December 2009): 16.35%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 7.35%; 
1980-1989: 14.42%; 
1990-1999: 8.59%; 
2000-2009: 8.08%; 
September 1976 through August 1987: 11.63%; 
September 1987 through September 1993: 14.72%; 
October 1993 through October 2001: 6.00%; 
November 2001 through December 2009: 8.27%; 
All (October 1976 through December 2009): 10.48%. 

PPA; 
October 1976 through December 1979: 9.07%; 
1980-1989: 12.88%; 
1990-1999: 9.84%; 
2000-2009: 11.15%; 
September 1976 through August 1987: 10.64%; 
September 1987 through September 1993: 14.17%; 
October 1993 through October 2001: 8.99%; 
November 2001 through December 2009: 11.19%; 
All (October 1976 through December 2009): 11.18%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: 6.46%; 
1980-1989: 10.44%; 
1990-1999: 7.46%; 
2000-2009: 7.55%; 
September 1976 through August 1987: 8.09%; 
September 1987 through September 1993: 12.49%; 
October 1993 through October 2001: 4.32%; 
November 2001 through December 2009: 8.03%; 
All (October 1976 through December 2009): 8.41%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 7.20%; 
1980-1989: 11.24%; 
1990-1999: 7.93%; 
2000-2009: 8.36%; 
September 1976 through August 1987: 9.10%; 
September 1987 through September 1993: 12.83%; 
October 1993 through October 2001: 5.09%; 
November 2001 through December 2009: 8.79%; 
All (October 1976 through December 2009): 9.11%. 

Dynamic Benchmark; 
October 1976 through December 1979: 6.69%; 
1980-1989: 12.42%; 
1990-1999: 8.35%; 
2000-2009: 8.48%; 
September 1976 through August 1987: 9.41%; 
September 1987 through September 1993: 14.00%; 
October 1993 through October 2001: 6.19%; 
November 2001 through December 2009: 8.70%; 
All (October 1976 through December 2009): 9.66%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: 8.08%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: 8.27%; 
All (October 1976 through December 2009): [Empty]. 

Liability Return; 
October 1976 through December 1979: 6.41%; 
1980-1989: 10.82%; 
1990-1999: 7.75%; 
2000-2009: 8.62%; 
September 1976 through August 1987: 10.37%; 
September 1987 through September 1993: 9.37%; 
October 1993 through October 2001: 5.59%; 
November 2001 through December 2009: 9.21%; 
All (October 1976 through December 2009): 8.90%. 

Sharpe ratio (annualized): 

S&P 500; 
October 1976 through December 1979: -0.47%; 
1980-1989: -0.43%; 
1990-1999: 0.48%; 
2000-2009: -0.56%; 
September 1976 through August 1987: -0.34%; 
September 1987 through September 1993: -0.53%; 
October 1993 through October 2001: 0.38%; 
November 2001 through December 2009: -0.40%; 
All (October 1976 through December 2009): -0.23. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: -1.60%; 
1980-1989: -1.35%; 
1990-1999: -0.55%; 
2000-2009: -0.37%; 
September 1976 through August 1987: -1.53%; 
September 1987 through September 1993: -0.75%; 
October 1993 through October 2001: -0.56%; 
November 2001 through December 2009: -0.50%; 
All (October 1976 through December 2009): -0.86%. 

Wilshire 5000; 
October 1976 through December 1979: -0.10%; 
1980-1989: -0.46%; 
1990-1999: 0.41%; 
2000-2009: -0.51%; 
September 1976 through August 1987: -0.25%; 
September 1987 through September 1993: -0.54%; 
October 1993 through October 2001: 0.30%; 
November 2001 through December 2009: -0.34%; 
All (October 1976 through December 2009): -0.21%. 

PBGC Total Fund Return; 
October 1976 through December 1979: -0.93%; 
1980-1989: -1.06%; 
1990-1999: -0.07%; 
2000-2009: -0.63%; 
September 1976 through August 1987: -0.95%; 
September 1987 through September 1993: -0.78%; 
October 1993 through October 2001: 0.01%; 
November 2001 through December 2009: -0.61%; 
All (October 1976 through December 2009): -0.66%. 

PPA; 
October 1976 through December 1979: -0.84%; 
1980-1989: -0.79%; 
1990-1999: 0.25%; 
2000-2009: -0.59%; 
September 1976 through August 1987: -0.75%; 
September 1987 through September 1993: -0.65%; 
October 1993 through October 2001: 0.28%; 
November 2001 through December 2009: -0.49%; 
All (October 1976 through December 2009): -0.45%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: -1.47%; 
1980-1989: -1.29%; 
1990-1999: -0.33%; 
2000-2009: -0.50%; 
September 1976 through August 1987: -1.40%; 
September 1987 through September 1993: -0.75%; 
October 1993 through October 2001: -0.25%; 
November 2001 through December 2009: -0.56%; 
All (October 1976 through December 2009): -0.81%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: -1.16%; 
1980-1989: 
-1.15%; 
1990-1999: -0.17%; 
2000-2009: -0.67%; 
September 1976 through August 1987: -1.14%; 
September 1987 through September 1993: -0.81%; 
October 1993 through October 2001: -0.08%; 
November 2001 through December 2009: -0.63%; 
All (October 1976 through December 2009): -0.74%. 

Dynamic Benchmark; 
October 1976 through December 1979: -1.28%; 
1980-1989: -0.98%; 
1990-1999: -0.06%; 
2000-2009: -0.64%; 
September 1976 through August 1987: -1.01%; 
September 1987 through September 1993: -0.76%; 
October 1993 through October 2001: 0.04%; 
November 2001 through December 2009: -0.60%; 
All (October 1976 through December 2009): -0.65%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: -0.64%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: -0.62%; 
All (October 1976 through December 2009): [Empty]. 

Liability Return; 
October 1976 through December 1979: -0.64%; 
1980-1989: 0.27%; 
1990-1999: 0.39%; 
2000-2009: 0.70%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: 0.64%; 
October 1993 through October 2001: 0.51%; 
November 2001 through December 2009: 0.60%; 
All (October 1976 through December 2009): 0.36%. 

Sortino ratio (annualized): 

S&P 500; 
October 1976 through December 1979: -0.66%; 
1980-1989: -0.53%; 
1990-1999: 0.73%; 
2000-2009: -0.67%; 
September 1976 through August 1987: -0.46%; 
September 1987 through September 1993: -0.63%; 
October 1993 through October 2001: 0.53%; 
November 2001 through December 2009: -0.48%; 
All (October 1976 through December 2009): -0.30%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: -1.62%; 
1980-1989: -1.51%; 
1990-1999: -0.94%; 
2000-2009: -0.45%; 
September 1976 through August 1987: -1.67%; 
September 1987 through September 1993: -1.00%; 
October 1993 through October 2001: -0.71%; 
November 2001 through December 2009: -0.60%; 
All (October 1976 through December 2009): -1.05%. 

Wilshire 5000; 
October 1976 through December 1979: -0.14%; 
1980-1989: -0.56%; 
1990-1999: 0.61%; 
2000-2009: -0.61%; 
September 1976 through August 1987: -0.34%; 
September 1987 through September 1993: -0.64%; 
October 1993 through October 2001: 0.40%; 
November 2001 through December 2009: -0.42%; 
All (October 1976 through December 2009): -0.27%. 

PBGC Total Fund Return; 
October 1976 through December 1979: -1.15%; 
1980-1989: -1.18%; 
1990-1999: -0.11%; 
2000-2009: -0.74%; 
September 1976 through August 1987: -1.10%; 
September 1987 through September 1993: -0.95%; 
October 1993 through October 2001: 0.01%; 
November 2001 through December 2009: -0.72%; 
All (October 1976 through December 2009): -0.79%. 

PPA; 
October 1976 through December 1979: -1.07%; 
1980-1989: -0.93%; 
1990-1999: 0.39%; 
2000-2009: -0.70%; 
September 1976 through August 1987: -0.92%; 
September 1987 through September 1993: -0.82%; 
October 1993 through October 2001: 0.40%; 
November 2001 through December 2009: -0.58%; 
All (October 1976 through December 2009): -0.56%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: -1.54%; 
1980-1989: -1.44%; 
1990-1999: -0.56%; 
2000-2009: -0.60%; 
September 1976 through August 1987: -1.55%; 
September 1987 through September 1993: -1.01%; 
October 1993 through October 2001: -0.34%; 
November 2001 through December 2009: -0.66%; 
All (October 1976 through December 2009): -0.99%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: -1.37%; 
1980-1989: -1.30%; 
1990-1999: -0.29%; 
2000-2009: -0.77%; 
September 1976 through August 1987: -1.31%; 
September 1987 through September 1993: -1.07%; 
October 1993 through October 2001: -0.10%; 
November 2001 through December 2009: -0.73%; 
All (October 1976 through December 2009): -0.91%. 

Dynamic Benchmark; 
October 1976 through December 1979: -1.41%; 
1980-1989: -1.11%; 
1990-1999: -0.10%; 
2000-2009: -0.76%; 
September 1976 through August 1987: -1.16%; 
September 1987 through September 1993: -0.95%; 
October 1993 through October 2001: 0.06%; 
November 2001 through December 2009: -0.70%; 
All (October 1976 through December 2009): -0.79%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: -0.75%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: -0.73%; 
All (October 1976 through December 2009): [Empty]. 

Liability Return; 
October 1976 through December 1979: -0.68%; 
1980-1989: 0.39%; 
1990-1999: 0.53%; 
2000-2009: 1.19%; 
September 1976 through August 1987: 0.01%; 
September 1987 through September 1993: 0.86%; 
October 1993 through October 2001: 0.80%; 
November 2001 through December 2009: 1.02%; 
All (October 1976 through December 2009): 0.52%. 

Omega ratio: 

S&P 500; 
October 1976 through December 1979: 0.71%; 
1980-1989: 0.71%; 
1990-1999: 1.44%; 
2000-2009: 0.66%; 
September 1976 through August 1987: 0.78%; 
September 1987 through September 1993: 0.64%; 
October 1993 through October 2001: 1.32%; 
November 2001 through December 2009: 0.74%; 
All (October 1976 through December 2009): 0.84%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 0.22%; 
1980-1989: 0.31%; 
1990-1999: 0.56%; 
2000-2009: 0.70%; 
September 1976 through August 1987: 0.30%; 
September 1987 through September 1993: 0.43%; 
October 1993 through October 2001: 0.66%; 
November 2001 through December 2009: 0.62%; 
All (October 1976 through December 2009): 0.44%. 

Wilshire 5000; 
October 1976 through December 1979: 0.93%; 
1980-1989: 0.70%; 
1990-1999: 1.36%; 
2000-2009: 0.69%; 
September 1976 through August 1987: 0.83%; 
September 1987 through September 1993: 0.64%; 
October 1993 through October 2001: 1.25%; 
November 2001 through December 2009: 0.78%; 
All (October 1976 through December 2009): 0.85%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 0.48%; 
1980-1989: 0.43%; 
1990-1999: 0.94%; 
2000-2009: 0.60%; 
September 1976 through August 1987: 0.48%; 
September 1987 through September 1993: 0.46%; 
October 1993 through October 2001: 1.01%; 
November 2001 through December 2009: 0.60%; 
All (October 1976 through December 2009): 0.57%. 

PPA; 
October 1976 through December 1979: 0.54%; 
1980-1989: 0.54%; 
1990-1999: 1.22%; 
2000-2009: 0.64%; 
September 1976 through August 1987: 0.58%; 
September 1987 through September 1993: 0.56%; 
October 1993 through October 2001: 1.23%; 
November 2001 through December 2009: 0.69%; 
All (October 1976 through December 2009): 0.71%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: 0.27%; 
1980-1989: 0.33%; 
1990-1999: 0.71%; 
2000-2009: 0.62%; 
September 1976 through August 1987: 0.33%; 
September 1987 through September 1993: 0.43%; 
October 1993 through October 2001: 0.83%; 
November 2001 through December 2009: 0.58%; 
All (October 1976 through December 2009): 0.47%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 0.39%; 
1980-1989: 0.39%; 
1990-1999: 0.85%; 
2000-2009: 0.58%; 
September 1976 through August 1987: 0.42%; 
September 1987 through September 1993: 0.43%; 
October 1993 through October 2001: 0.95%; 
November 2001 through December 2009: 0.59%; 
All (October 1976 through December 2009): 0.53%. 

Dynamic Benchmark; 
October 1976 through December 1979: 0.34%; 
1980-1989: 0.45%; 
1990-1999: 0.94%; 
2000-2009: 0.60%; 
September 1976 through August 1987: 0.47%; 
September 1987 through September 1993: 0.46%; 
October 1993 through October 2001: 1.03%; 
November 2001 through December 2009: 0.61%; 
All (October 1976 through December 2009): 0.58%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: 2.69%; 
2000-2009: 0.60%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: 0.75%; 
November 2001 through December 2009: 0.60%; 
All (October 1976 through December 2009): 0.62%. 

Liability Return; 
October 1976 through December 1979: 0.53%; 
1980-1989: 1.23%; 
1990-1999: 1.40%; 
2000-2009: 1.79%; 
September 1976 through August 1987: 1.00%; 
September 1987 through September 1993: 1.74%; 
October 1993 through October 2001: 1.46%; 
November 2001 through December 2009: 1.65%; 
All (October 1976 through December 2009): 1.35%. 

Skewness, bias corrected: 

S&P 500; 
October 1976 through December 1979: 0.64%; 
1980-1989: -0.62%; 
1990-1999: -0.26%; 
2000-2009: -0.42%; 
September 1976 through August 1987: 0.38%; 
September 1987 through September 1993: -0.83%; 
October 1993 through October 2001: 
-0.70%; 
November 2001 through December 2009: -0.64%; 
All (October 1976 through December 2009): -0.48%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: -0.39%; 
1980-1989: -0.18%; 
1990-1999: 4.35%; 
2000-2009: -1.16%; 
September 1976 through August 1987: 0.79%; 
September 1987 through September 1993: 0.85%; 
October 1993 through October 2001: 0.02%; 
November 2001 through December 2009: -1.00%; 
All (October 1976 through December 2009): 0.36%. 

Wilshire 5000%; 
October 1976 through December 1979: 0.26; 
1980-1989: -0.76%; 
1990-1999: -0.31%; 
2000-2009: -0.48%; 
September 1976 through August 1987: 0.22%; 
September 1987 through September 1993: -0.93%; 
October 1993 through October 2001: -0.88%; 
November 2001 through December 2009: -0.64%; 
All (October 1976 through December 2009): -0.59%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 0.56%; 
1980-1989: -0.28%; 
1990-1999: 2.05%; 
2000-2009: -0.79%; 
September 1976 through August 1987: 0.09%; 
September 1987 through September 1993: 0.20%; 
October 1993 through October 2001: -0.22%; 
November 2001 through December 2009: -0.91%; 
All (October 1976 through December 2009): -0.12%. 

PPA; 
October 1976 through December 1979: 0.55%; 
1980-1989: -0.19%; 
1990-1999: 0.81%; 
2000-2009: -0.52%; 
September 1976 through August 1987: 0.36%; 
September 1987 through September 1993: 0.35%; 
October 1993 through October 2001: -0.50%; 
November 2001 through December 2009: -0.73%; 
All (October 1976 through December 2009): -0.09%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: -0.18%; 
1980-1989: -0.13%; 
1990-1999: 3.80%; 
2000-2009: -1.18%; 
September 1976 through August 1987: 0.61%; 
September 1987 through September 1993: 0.99%; 
October 1993 through October 2001: -0.01%; 
November 2001 through December 2009: -1.11%; 
All (October 1976 through December 2009): 0.38%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 0.52%; 
1980-1989: 0.01%; 
1990-1999: 3.13%; 
2000-2009: -0.94%; 
September 1976 through August 1987: 0.44%; 
September 1987 through September 1993: 1.17%; 
October 1993 through October 2001: -0.16%; 
November 2001 through December 2009: -0.99%; 
All (October 1976 through December 2009): 0.35%. 

Dynamic Benchmark; 
October 1976 through December 1979: 0.02%; 
1980-1989: -0.35%; 
1990-1999: 2.31%; 
2000-2009: -0.75%; 
September 1976 through August 1987: 0.20%; 
September 1987 through September 1993: 0.48%; 
October 1993 through October 2001: -0.19%; 
November 2001 through December 2009: -0.90%; 
All (October 1976 through December 2009): 0.01%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: 0.37%; 
2000-2009: -0.79%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: 0.07%; 
November 2001 through December 2009: -0.91%; 
All (October 1976 through December 2009): -0.80%. 

Liability Return; 
October 1976 through December 1979: -2.98%; 
1980-1989: 0.05%; 
1990-1999: -2.08%; 
2000-2009: 0.32%; 
September 1976 through August 1987: 0.02%; 
September 1987 through September 1993: -2.22%; 
October 1993 through October 2001: -0.09%; 
November 2001 through December 2009: 0.40%; 
All (October 1976 through December 2009): -0.33%. 

Kurtosis, bias corrected: 

S&P 500; 
October 1976 through December 1979: 2.83%; 
1980-1989: 6.16%; 
1990-1999: 5.55%; 
2000-2009: 2.98%; 
September 1976 through August 1987: 3.29%; 
September 1987 through September 1993: 8.04%; 
October 1993 through October 2001: 4.22%; 
November 2001 through December 2009: 3.28%; 
All (October 1976 through December 2009): 4.91%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 7.20%; 
1980-1989: 10.45%; 
1990-1999: 37.44%; 
2000-2009: 9.35%; 
September 1976 through August 1987: 5.16%; 
September 1987 through September 1993: 15.11%; 
October 1993 through October 2001: 2.65%; 
November 2001 through December 2009: 8.44%; 
All (October 1976 through December 2009): 15.80%. 

Wilshire 5000; 
October 1976 through December 1979: 2.55%; 
1980-1989: 6.77%; 
1990-1999: 6.10%; 
2000-2009: 2.97%; 
September 1976 through August 1987: 3.27%; 
September 1987 through September 1993: 8.75%; 
October 1993 through October 2001: 4.63%; 
November 2001 through December 2009: 3.32%; 
All (October 1976 through December 2009): 5.26%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 5.02%; 
1980-1989: 4.45%; 
1990-1999: 19.99%; 
2000-2009: 5.55%; 
September 1976 through August 1987: 3.65%; 
September 1987 through September 1993: 8.93%; 
October 1993 through October 2001: 2.78%; 
November 2001 through December 2009: 5.86%; 
All (October 1976 through December 2009): 8.37%. 

PPA; 
October 1976 through December 1979: 3.18%; 
1980-1989: 4.95%; 
1990-1999: 9.89%; 
2000-2009: 2.89%; 
September 1976 through August 1987: 3.36%; 
September 1987 through September 1993: 7.83%; 
October 1993 through October 2001: 3.42%; 
November 2001 through December 2009: 3.08%; 
All (October 1976 through December 2009): 5.48%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: 6.44%; 
1980-1989: 9.71%; 
1990-1999: 33.53%; 
2000-2009: 9.10%; 
September 1976 through August 1987: 4.62%; 
September 1987 through September 1993: 14.64%; 
October 1993 through October 2001: 2.92%; 
November 2001 through December 2009: 8.47%; 
All (October 1976 through December 2009): 15.08%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 5.67%; 
1980-1989: 6.53%; 
1990-1999: 28.55%; 
2000-2009: 5.80%; 
September 1976 through August 1987: 4.08%; 
September 1987 through September 1993: 12.77%; 
October 1993 through October 2001: 2.72%; 
November 2001 through December 2009: 5.65%; 
All (October 1976 through December 2009): 10.99%. 

Dynamic Benchmark; 
October 1976 through December 1979: 5.83%; 
1980-1989: 5.65%; 
1990-1999: 21.09%; 
2000-2009: 5.15%; 
September 1976 through August 1987: 3.60%; 
September 1987 through September 1993: 9.69%; 
October 1993 through October 2001: 2.97%; 
November 2001 through December 2009: 5.36%; 
All (October 1976 through December 2009): 9.33%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: 0.12%; 
2000-2009: 5.56%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: 2.29%; 
November 2001 through December 2009: 5.87%; 
All (October 1976 through December 2009): 5.60%. 

Liability Return; 
October 1976 through December 1979: 17.74%; 
1980-1989: 4.20%; 
1990-1999: 16.27%; 
2000-2009: 6.39%; 
September 1976 through August 1987: 5.23%; 
September 1987 through September 1993: 14.03%; 
October 1993 through October 2001: 3.19%; 
November 2001 through December 2009: 6.00%; 
All (October 1976 through December 2009): 7.57%. 

Adjusted Sharpe ratio: 

S&P 500; 
October 1976 through December 1979: -0.0076%; 
1980-1989: -0.0137%; 
1990-1999: 0.4818%; 
2000-2009: -0.0168%; 
September 1976 through August 1987: -0.0076%; 
September 1987 through September 1993: -0.0175%; 
October 1993 through October 2001: 0.3753%; 
November 2001 through December 2009: -0.0117%; 
All (October 1976 through December 2009): -0.0061%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: -0.0063%; 
1980-1989: -0.0157%; 
1990-1999: -0.0031%; 
2000-2009: -0.0024%; 
September 1976 through August 1987: -0.0102%; 
September 1987 through September 1993: -0.0124%; 
October 1993 through October 2001: -0.0010%; 
November 2001 through December 2009: -0.0037%; 
All (October 1976 through December 2009): -0.0065%. 

Wilshire 5000; 
October 1976 through December 1979: -0.0016%; 
1980-1989: -0.0146%; 
1990-1999: 0.4092%; 
2000-2009: -0.0157%; 
September 1976 through August 1987: -0.0057%; 
September 1987 through September 1993: -0.0186%; 
October 1993 through October 2001: 0.2957%; 
November 2001 through December 2009: 
-0.0102%; 
All (October 1976 through December 2009): -0.0057%. 

PBGC Total Fund Return; 
October 1976 through December 1979: -0.0050%; 
1980-1989: -0.0221%; 
1990-1999: -0.0005%; 
2000-2009: -0.0041%; 
September 1976 through August 1987: -0.0129%; 
September 1987 through September 1993: -0.0168%; 
October 1993 through October 2001: 0.0083%; 
November 2001 through December 2009: -0.0042%; 
All (October 1976 through December 2009): -0.0073%. 

PPA; 
October 1976 through December 1979: -0.0069%; 
1980-1989: -0.0132%; 
1990-1999: 0.2494%; 
2000-2009: -0.0074%; 
September 1976 through August 1987: -0.0085%; 
September 1987 through September 1993: -0.0131%; 
October 1993 through October 2001: 0.2809%; 
November 2001 through December 2009: -0.0061%; 
All (October 1976 through December 2009): -0.0056%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: -0.0061%; 
1980-1989: -0.0140%; 
1990-1999: -0.0018%; 
2000-2009: -0.0029%; 
September 1976 through August 1987: -0.0092%; 
September 1987 through September 1993: -0.0118%; 
October 1993 through October 2001: -0.0005%; 
November 2001 through December 2009: -0.0036%; 
All (October 1976 through December 2009): -0.0057%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: -0.0060%; 
1980-1989: -0.0146%; 
1990-1999: -0.0011%; 
2000-2009: -0.0047%; 
September 1976 through August 1987: -0.0095%; 
September 1987 through September 1993: -0.0134%; 
October 1993 through October 2001: -0.0002%; 
November 2001 through December 2009: -0.0049%; 
All (October 1976 through December 2009): -0.0062%. 

Dynamic Benchmark; 
October 1976 through December 1979: -0.0057%; 
1980-1989: -0.0152%; 
1990-1999: -0.0004%; 
2000-2009: -0.0046%; 
September 1976 through August 1987: -0.0089%; 
September 1987 through September 1993: -0.0149%; 
October 1993 through October 2001: 0.0400%; 
November 2001 through December 2009: 
-0.0045%; 
All (October 1976 through December 2009): -0.0061%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: -0.0042%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: -0.0042%; 
All (October 1976 through December 2009): [Empty]. 

Liability Return; 
October 1976 through December 1979: -0.0026%; 
1980-1989: 0.2666%; 
1990-1999: 0.3931%; 
2000-2009: 0.6986%; 
September 1976 through August 1987: 0.0037%; 
September 1987 through September 1993: 0.6419%; 
October 1993 through October 2001: 0.5118%; 
November 2001 through December 2009: 0.6009%; 
All (October 1976 through December 2009): 0.3585%. 

Minimum (percentage: 

S&P 500; 
October 1976 through December 1979: -5.25%; 
1980-1989: -23.13%; 
1990-1999: -14.82%; 
2000-2009: -15.34%; 
September 1976 through August 1987: -9.72%; 
September 1987 through September 1993: -23.13%; 
October 1993 through October 2001: -14.82%; 
November 2001 through December 2009: -15.34%; 
All (October 1976 through December 2009): -23.13%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: -5.47%; 
1980-1989: -16.25%; 
1990-1999: -5.78%; 
2000-2009: -9.33%; 
September 1976 through August 1987: -6.06%; 
September 1987 through September 1993: -16.25%; 
October 1993 through October 2001: -3.09%; 
November 2001 through December 2009: -9.33%; 
All (October 1976 through December 2009): -16.25%. 

Wilshire 5000; 
October 1976 through December 1979: -7.29%; 
1980-1989: -24.42%; 
1990-1999: -15.96%; 
2000-2009: -16.13%; 
September 1976 through August 1987: -10.31%; 
September 1987 through September 1993: -24.42%; 
October 1993 through October 2001: -15.96%; 
November 2001 through December 2009: -16.13%; 
All (October 1976 through December 2009): -24.42%. 

PBGC Total Fund Return; 
October 1976 through December 1979: -4.91%; 
1980-1989: -15.34%; 
1990-1999: -8.31%; 
2000-2009: -8.69%; 
September 1976 through August 1987: -9.90%; 
September 1987 through September 1993: -15.34%; 
October 1993 through October 2001: -3.61%; 
November 2001 through December 2009: -8.69%; 
All (October 1976 through December 2009): -15.34%. 

PPA; 
October 1976 through December 1979: -5.29%; 
1980-1989: -12.39%; 
1990-1999: -8.22%; 
2000-2009: -8.42%; 
September 1976 through August 1987: -7.07%; 
September 1987 through September 1993: -12.39%; 
October 1993 through October 2001: 
-8.01%; 
November 2001 through December 2009: -8.42%; 
All (October 1976 through December 2009): -12.39%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: -5.35%; 
1980-1989: -15.09%; 
1990-1999: -6.16%; 
2000-2009: -8.76%; 
September 1976 through August 1987: -6.10%; 
September 1987 through September 1993: -15.09%; 
October 1993 through October 2001: -3.04%; 
November 2001 through December 2009: -8.76%; 
All (October 1976 through December 2009): -15.09%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: -5.21%; 
1980-1989: -13.76%; 
1990-1999: -6.98%; 
2000-2009: -9.05%; 
September 1976 through August 1987: -6.97%; 
September 1987 through September 1993: -13.76%; 
October 1993 through October 2001: -3.19%; 
November 2001 through December 2009: -9.05%; 
All (October 1976 through December 2009): -13.76%. 

Dynamic Benchmark; 
October 1976 through December 1979: -5.29%; 
1980-1989: -13.36%; 
1990-1999: -7.68%; 
2000-2009: -8.74%; 
September 1976 through August 1987: -7.20%; 
September 1987 through September 1993: -13.36%; 
October 1993 through October 2001: -4.56%; 
November 2001 through December 2009: -8.74%; 
All (October 1976 through December 2009): -13.36%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: -0.78%; 
2000-2009: -8.70%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: -3.27%; 
November 2001 through December 2009: -8.70%; 
All (October 1976 through December 2009): -8.70%. 

Liability Return; 
October 1976 through December 1979: -8.78%; 
1980-1989: -8.86%; 
1990-1999: -13.57%; 
2000-2009: -8.14%; 
September 1976 through August 1987: -8.86%; 
September 1987 through September 1993: -13.57%; 
October 1993 through October 2001: -3.62%; 
November 2001 through December 2009: -8.14%; 
All (October 1976 through December 2009): -13.57%. 

Maximum (percentage): 

S&P 500; 
October 1976 through December 1979: 9.72%; 
1980-1989: 13.44%; 
1990-1999: 15.43%; 
2000-2009: 9.80%; 
September 1976 through August 1987: 13.44%; 
September 1987 through September 1993: 15.43%; 
October 1993 through October 2001: 9.45%; 
November 2001 through December 2009: 9.80%; 
All (October 1976 through December 2009): 15.43%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 5.49%; 
1980-1989: 12.17%; 
1990-1999: 17.18%; 
2000-2009: 7.45%; 
September 1976 through August 1987: 8.67%; 
September 1987 through September 1993: 17.18%; 
October 1993 through October 2001: 2.83%; 
November 2001 through December 2009: 7.45%; 
All (October 1976 through December 2009): 17.18%. 

Wilshire 5000; 
October 1976 through December 1979: 8.92%; 
1980-1989: 13.42%; 
1990-1999: 16.54%; 
2000-2009: 9.80%; 
September 1976 through August 1987: 13.42%; 
September 1987 through September 1993: 16.54%; 
October 1993 through October 2001: 8.74%; 
November 2001 through December 2009: 9.80%; 
All (October 1976 through December 2009): 16.54%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 6.90%; 
1980-1989: 11.72%; 
1990-1999: 16.74%; 
2000-2009: 6.32%; 
September 1976 through August 1987: 10.22%; 
September 1987 through September 1993: 16.74%; 
October 1993 through October 2001: 4.16%; 
November 2001 through December 2009: 6.32%; 
All (October 1976 through December 2009): 16.74%. 

PPA; 
October 1976 through December 1979: 6.20%; 
1980-1989: 11.95%; 
1990-1999: 15.90%; 
2000-2009: 6.37%; 
September 1976 through August 1987: 9.59%; 
September 1987 through September 1993: 15.90%; 
October 1993 through October 2001: 6.37%; 
November 2001 through December 2009: 5.45%; 
All (October 1976 through December 2009): 15.90%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: 5.65%; 
1980-1989: 12.06%; 
1990-1999: 16.81%; 
2000-2009: 6.71%; 
September 1976 through August 1987: 7.55%; 
September 1987 through September 1993: 16.81%; 
October 1993 through October 2001: 3.31%; 
November 2001 through December 2009: 6.71%; 
All (October 1976 through December 2009): 16.81%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 6.70%; 
1980-1989: 11.90%; 
1990-1999: 17.23%; 
2000-2009: 6.00%; 
September 1976 through August 1987: 8.53%; 
September 1987 through September 1993: 17.23%; 
October 1993 through October 2001: 3.80%; 
November 2001 through December 2009: 6.00%; 
All (October 1976 through December 2009): 17.23%. 

Dynamic Benchmark; 
October 1976 through December 1979: 5.87%; 
1980-1989: 12.12%; 
1990-1999: 16.72%; 
2000-2009: 6.09%; 
September 1976 through August 1987: 8.01%; 
September 1987 through September 1993: 16.72%; 
October 1993 through October 2001: 4.88%; 
November 2001 through December 2009: 6.09%; 
All (October 1976 through December 2009): 16.72%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: 2.77%; 
2000-2009: 6.31%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: 4.15%; 
November 2001 through December 2009: 6.31%; 
All (October 1976 through December 2009): 6.31%. 

Liability Return; 
October 1976 through December 1979: 2.81%; 
1980-1989: 10.72%; 
1990-1999: 6.71%; 
2000-2009: 9.42%; 
September 1976 through August 1987: 10.72%; 
September 1987 through September 1993: 6.71%; 
October 1993 through October 2001: 5.34%; 
November 2001 through December 2009: 9.42%; 
All (October 1976 through December 2009): 10.72%. 

Range (percentage): 

S&P 500; 
October 1976 through December 1979: 14.97%; 
1980-1989: 36.57%; 
1990-1999: 30.25%; 
2000-2009: 25.14%; 
September 1976 through August 1987: 23.16%; 
September 1987 through September 1993: 38.56%; 
October 1993 through October 2001: 24.26%; 
November 2001 through December 2009: 25.14%; 
All (October 1976 through December 2009): 38.56%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 10.95%; 
1980-1989: 28.42%; 
1990-1999: 22.96%; 
2000-2009: 16.78%; 
September 1976 through August 1987: 14.74%; 
September 1987 through September 1993: 33.43%; 
October 1993 through October 2001: 5.92%; 
November 2001 through December 2009: 16.78%; 
All (October 1976 through December 2009): 33.43%. 

Wilshire 5000; 
October 1976 through December 1979: 16.21%; 
1980-1989: 37.84%; 
1990-1999: 32.50%; 
2000-2009: 25.93%; 
September 1976 through August 1987: 23.73%; 
September 1987 through September 1993: 40.96%; 
October 1993 through October 2001: 24.70%; 
November 2001 through December 2009: 25.93%; 
All (October 1976 through December 2009): 40.96%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 11.81%; 
1980-1989: 27.06%; 
1990-1999: 25.05%; 
2000-2009: 15.01%; 
September 1976 through August 1987: 20.12%; 
September 1987 through September 1993: 32.08%; 
October 1993 through October 2001: 7.77%; 
November 2001 through December 2009: 15.01%; 
All (October 1976 through December 2009): 32.08%. 

PPA; 
October 1976 through December 1979: 11.49%; 
1980-1989: 24.34%; 
1990-1999: 24.12%; 
2000-2009: 14.80%; 
September 1976 through August 1987: 16.66%; 
September 1987 through September 1993: 28.29%; 
October 1993 through October 2001: 14.38%; 
November 2001 through December 2009: 13.88%; 
All (October 1976 through December 2009): 28.29%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: 11.00%; 
1980-1989: 27.16%; 
1990-1999: 22.97%; 
2000-2009: 15.47%; 
September 1976 through August 1987: 13.65%; 
September 1987 through September 1993: 31.90%; 
October 1993 through October 2001: 6.35%; 
November 2001 through December 2009: 15.47%; 
All (October 1976 through December 2009): 31.90%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 11.91%; 
1980-1989: 25.65%; 
1990-1999: 24.20%; 
2000-2009: 15.06%; 
September 1976 through August 1987: 15.51%; 
September 1987 through September 1993: 30.98%; 
October 1993 through October 2001: 6.99%; 
November 2001 through December 2009: 15.06%; 
All (October 1976 through December 2009): 30.98%. 

Dynamic Benchmark; 
October 1976 through December 1979: 11.16%; 
1980-1989: 25.49%; 
1990-1999: 24.40%; 
2000-2009: 14.83%; 
September 1976 through August 1987: 15.22%; 
September 1987 through September 1993: 30.09%; 
October 1993 through October 2001: 9.44%; 
November 2001 through December 2009: 14.83%; 
All (October 1976 through December 2009): 30.09%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: 3.54%; 
2000-2009: 15.00%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: 7.42%; 
November 2001 through December 2009: 15.0%; 
All (October 1976 through December 2009): 15.00%. 

Liability Return; 
October 1976 through December 1979: 11.58%; 
1980-1989: 19.59%; 
1990-1999: 20.28%; 
2000-2009: 17.56%; 
September 1976 through August 1987: 19.59%; 
September 1987 through September 1993: 20.28%; 
October 1993 through October 2001: 8.95%; 
November 2001 through December 2009: 17.56%; 
All (October 1976 through December 2009): 24.30%. 

Correlation with liability return: 

S&P 500; 
October 1976 through December 1979: 0.43%; 
1980-1989: 0.35%; 
1990-1999: 0.29%; 
2000-2009: 0.12%; 
September 1976 through August 1987: 0.46%; 
September 1987 through September 1993: 0.19%; 
October 1993 through October 2001: 0.20%; 
November 2001 through December 2009: 0.14%; 
All (October 1976 through December 2009): 0.27%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 0.80%; 
1980-1989: 0.84%; 
1990-1999: 0.63%; 
2000-2009: 0.72%; 
September 1976 through August 1987: 0.90%; 
September 1987 through September 1993: 0.39%; 
October 1993 through October 2001: 0.83%; 
November 2001 through December 2009: 0.71%; 
All (October 1976 through December 2009): 0.76%. 

Wilshire 5000; 
October 1976 through December 1979: 0.47%; 
1980-1989: 0.35%; 
1990-1999: 0.25%; 
2000-2009: 0.14%; 
September 1976 through August 1987: 0.45%; 
September 1987 through September 1993: 0.17%; 
October 1993 through October 2001: 0.19%; 
November 2001 through December 2009: 0.15%; 
All (October 1976 through December 2009): 0.27%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 0.70%; 
1980-1989: 0.60%; 
1990-1999: 0.53%; 
2000-2009: 0.63%; 
September 1976 through August 1987: 0.73%; 
September 1987 through September 1993: 0.27%; 
October 1993 through October 2001: 0.63%; 
November 2001 through December 2009: 0.67%; 
All (October 1976 through December 2009): 0.59%. 

PPA; 
October 1976 through December 1979: 0.58%; 
1980-1989: 0.63%; 
1990-1999: 0.44%; 
2000-2009: 0.37%; 
September 1976 through August 1987: 0.72%; 
September 1987 through September 1993: 0.27%; 
October 1993 through October 2001: 0.42%; 
November 2001 through December 2009: 0.40%; 
All (October 1976 through December 2009): 0.50%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: 0.78%; 
1980-1989: 0.85%; 
1990-1999: 0.62%; 
2000-2009: 0.71%; 
September 1976 through August 1987: 0.91%; 
September 1987 through September 1993: 0.39%; 
October 1993 through October 2001: 0.80%; 
November 2001 through December 2009: 0.71%; 
All (October 1976 through December 2009): 0.76%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 0.71%; 
1980-1989: 0.80%; 
1990-1999: 0.56%; 
2000-2009: 0.61%; 
September 1976 through August 1987: 0.86%; 
September 1987 through September 1993: 0.36%; 
October 1993 through October 2001: 0.66%; 
November 2001 through December 2009: 0.63%; 
All (October 1976 through December 2009): 0.68%. 

Dynamic Benchmark; 
October 1976 through December 1979: 0.75%; 
1980-1989: 0.71%; 
1990-1999: 0.53%; 
2000-2009: 0.60%; 
September 1976 through August 1987: 0.84%; 
September 1987 through September 1993: 0.27%; 
October 1993 through October 2001: 0.61%; 
November 2001 through December 2009: 0.63%; 
All (October 1976 through December 2009): 0.64%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: 0.63%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: 0.67%; 
All (October 1976 through December 2009): [Empty]. 

Liability Return; 
October 1976 through December 1979: 1.00%; 
1980-1989: 1.00%; 
1990-1999: 1.00%; 
2000-2009: 1.00%; 
September 1976 through August 1987: 1.00%; 
September 1987 through September 1993: 1.00%; 
October 1993 through October 2001: 1.00%; 
November 2001 through December 2009: 1.00%; 
All (October 1976 through December 2009): 1.00%. 

Correlation with liability return scaled by funding ratio; 
October 1976 through December 1979: [Empty]%; 
1980-1989: [Empty]%; 
1990-1999: [Empty]%; 
2000-2009: [Empty]%; 
September 1976 through August 1987: [Empty]%; 
September 1987 through September 1993: [Empty]%; 
October 1993 through October 2001: [Empty]%; 
November 2001 through December 2009: [Empty]%; 
All (October 1976 through December 2009): [Empty]. 

S&P 500; 
October 1976 through December 1979: 0.44%; 
1980-1989: 0.37%; 
1990-1999: 0.26%; 
2000-2009: 0.17%; 
September 1976 through August 1987: 0.48%; 
September 1987 through September 1993: 0.17%; 
October 1993 through October 2001: 0.26%; 
November 2001 through December 2009: 0.18%; 
All (October 1976 through December 2009): 0.29%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 0.82%; 
1980-1989: 0.82%; 
1990-1999: 0.58%; 
2000-2009: 0.67%; 
September 1976 through August 1987: 0.90%; 
September 1987 through September 1993: 0.36%; 
October 1993 through October 2001: 0.84%; 
November 2001 through December 2009: 0.68%; 
All (October 1976 through December 2009): 0.74%. 

Wilshire 5000; 
October 1976 through December 1979: 0.49%; 
1980-1989: 0.37%; 
1990-1999: 0.23%; 
2000-2009: 0.18%; 
September 1976 through August 1987: 0.48%; 
September 1987 through September 1993: 0.16%; 
October 1993 through October 2001: 0.23%; 
November 2001 through December 2009: 0.19%; 
All (October 1976 through December 2009): 0.29%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 0.70%; 
1980-1989: 0.58%; 
1990-1999: 0.49%; 
2000-2009: 0.62%; 
September 1976 through August 1987: 0.72%; 
September 1987 through September 1993: 0.25%; 
October 1993 through October 2001: 0.66%; 
November 2001 through December 2009: 0.67%; 
All (October 1976 through December 2009): 0.57%. 

PPA; 
October 1976 through December 1979: 0.60%; 
1980-1989: 0.62%; 
1990-1999: 0.39%; 
2000-2009: 0.39%; 
September 1976 through August 1987: 0.73%; 
September 1987 through September 1993: 0.25%; 
October 1993 through October 2001: 0.47%; 
November 2001 through December 2009: 0.42%; 
All (October 1976 through December 2009): 0.51%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: 0.80%; 
1980-1989: 0.82%; 
1990-1999: 0.57%; 
2000-2009: 0.68%; 
September 1976 through August 1987: 0.90%; 
September 1987 through September 1993: 0.36%; 
October 1993 through October 2001: 0.82%; 
November 2001 through December 2009: 0.69%; 
All (October 1976 through December 2009): 0.74%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 0.73%; 
1980-1989: 0.77%; 
1990-1999: 0.51%; 
2000-2009: 0.60%; 
September 1976 through August 1987: 0.86%; 
September 1987 through September 1993: 0.33%; 
October 1993 through October 2001: 0.69%; 
November 2001 through December 2009: 0.63%; 
All (October 1976 through December 2009): 0.68%. 

Dynamic Benchmark; 
October 1976 through December 1979: 0.77%; 
1980-1989: 0.69%; 
1990-1999: 0.48%; 
2000-2009: 0.60%; 
September 1976 through August 1987: 0.83%; 
September 1987 through September 1993: 0.25%; 
October 1993 through October 2001: 0.64%; 
November 2001 through December 2009: 0.64%; 
All (October 1976 through December 2009): 0.64%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: 0.62%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: 0.66%; 
All (October 1976 through December 2009): [Empty]. 

VaR (99% confidence level, 1 month horizon) (percentage): 

S&P 500; 
October 1976 through December 1979: 8.45%; 
1980-1989: 11.88%; 
1990-1999: 8.24%; 
2000-2009: 12.23%; 
September 1976 through August 1987: 9.74%; 
September 1987 through September 1993: 12.58%; 
October 1993 through October 2001: 8.96%; 
November 2001 through December 2009: 11.94%; 
All (October 1976 through December 2009): 10.68%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 4.48%; 
1980-1989: 7.76%; 
1990-1999: 4.98%; 
2000-2009: 5.43%; 
September 1976 through August 1987: 5.84%; 
September 1987 through September 1993: 8.99%; 
October 1993 through October 2001: 2.66%; 
November 2001 through December 2009: 5.96%; 
All (October 1976 through December 2009): 5.99%. 

Wilshire 5000; 
October 1976 through December 1979: 8.05%; 
1980-1989: 12.01%; 
1990-1999: 8.65%; 
2000-2009: 12.34%; 
September 1976 through August 1987: 9.71%; 
September 1987 through September 1993: 12.89%; 
October 1993 through October 2001: 9.31%; 
November 2001 through December 2009: 11.97%; 
All (October 1976 through December 2009): 10.82%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 4.91%; 
1980-1989: 10.26%; 
1990-1999: 5.43%; 
2000-2009: 5.63%; 
September 1976 through August 1987: 8.03%; 
September 1987 through September 1993: 10.37%; 
October 1993 through October 2001: 3.63%; 
November 2001 through December 2009: 5.80%; 
All (October 1976 through December 2009): 7.17%. 

PPA; 
October 1976 through December 1979: 6.13%; 
1980-1989: 8.80%; 
1990-1999: 6.01%; 
2000-2009: 7.82%; 
September 1976 through August 1987: 7.11%; 
September 1987 through September 1993: 9.83%; 
October 1993 through October 2001: 5.44%; 
November 2001 through December 2009: 7.79%; 
All (October 1976 through December 2009): 7.48%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: 4.53%; 
1980-1989: 7.43%; 
1990-1999: 4.82%; 
2000-2009: 5.17%; 
September 1976 through August 1987: 5.69%; 
September 1987 through September 1993: 8.71%; 
October 1993 through October 2001: 2.60%; 
November 2001 through December 2009: 5.59%; 
All (October 1976 through December 2009): 5.76%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 4.94%; 
1980-1989: 7.93%; 
1990-1999: 5.05%; 
2000-2009: 5.86%; 
September 1976 through August 1987: 6.28%; 
September 1987 through September 1993: 9.02%; 
October 1993 through October 2001: 3.06%; 
November 2001 through December 2009: 6.18%; 
All (October 1976 through December 2009): 6.23%. 

Dynamic Benchmark; 
October 1976 through December 1979: 4.61%; 
1980-1989: 8.66%; 
1990-1999: 5.26%; 
2000-2009: 5.93%; 
September 1976 through August 1987: 6.41%; 
September 1987 through September 1993: 9.83%; 
October 1993 through October 2001: 3.75%; 
November 2001 through December 2009: 6.09%; 
All (October 1976 through December 2009): 6.56%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: 5.64%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: 5.80%; 
All (October 1976 through December 2009): [Empty]. 

Liability Return; 
October 1976 through December 1979: 4.06%; 
1980-1989: 6.33%; 
1990-1999: 4.56%; 
2000-2009: 5.07%; 
September 1976 through August 1987: 6.26%; 
September 1987 through September 1993: 5.33%; 
October 1993 through October 2001: 3.12%; 
November 2001 through December 2009: 5.54%; 
All (October 1976 through December 2009): 5.26%. 

Expected shortfall (99% confidence level, 1 month horizon) 
(percentage): 

S&P 500; 
October 1976 through December 1979: 9.70%; 
1980-1989: 13.62%; 
1990-1999: 9.58%; 
2000-2009: 13.93%; 
September 1976 through August 1987: 11.19%; 
September 1987 through September 1993: 14.36%; 
October 1993 through October 2001: 10.38%; 
November 2001 through December 2009: 13.62%; 
All (October 1976 through December 2009): 12.26%. 

Barclays Capital Long-Term Government Credit Index; 
October 1976 through December 1979: 5.10%; 
1980-1989: 8.81%; 
1990-1999: 5.71%; 
2000-2009: 6.22%; 
September 1976 through August 1987: 6.64%; 
September 1987 through September 1993: 10.25%; 
October 1993 through October 2001: 3.07%; 
November 2001 through December 2009: 6.80%; 
All (October 1976 through December 2009): 6.84%. 

Wilshire 5000; 
October 1976 through December 1979: 9.29%; 
1980-1989: 13.76%; 
1990-1999: 10.03%; 
2000-2009: 14.06%; 
September 1976 through August 1987: 11.18%; 
September 1987 through September 1993: 14.72%; 
October 1993 through October 2001: 10.78%; 
November 2001 through December 2009: 13.67%; 
All (October 1976 through December 2009): 12.41%. 

PBGC Total Fund Return; 
October 1976 through December 1979: 5.63%; 
1980-1989: 11.67%; 
1990-1999: 6.27%; 
2000-2009: 6.42%; 
September 1976 through August 1987: 9.17%; 
September 1987 through September 1993: 11.81%; 
October 1993 through October 2001: 4.22%; 
November 2001 through December 2009: 6.61%; 
All (October 1976 through December 2009): 8.19%. 

PPA; 
October 1976 through December 1979: 7.02%; 
1980-1989: 10.06%; 
1990-1999: 6.98%; 
2000-2009: 8.91%; 
September 1976 through August 1987: 8.15%; 
September 1987 through September 1993: 11.21%; 
October 1993 through October 2001: 6.32%; 
November 2001 through December 2009: 8.89%; 
All (October 1976 through December 2009): 8.57%. 

Insurance Benchmark (long-term government credit index); 
October 1976 through December 1979: 5.17%; 
1980-1989: 8.45%; 
1990-1999: 5.55%; 
2000-2009: 5.91%; 
September 1976 through August 1987: 6.48%; 
September 1987 through September 1993: 9.93%; 
October 1993 through October 2001: 3.02%; 
November 2001 through December 2009: 6.37%; 
All (October 1976 through December 2009): 6.59%. 

Post Fiscal Year 2002 Benchmark; 
October 1976 through December 1979: 5.64%; 
1980-1989: 9.03%; 
1990-1999: 5.82%; 
2000-2009: 6.68%; 
September 1976 through August 1987: 7.17%; 
September 1987 through September 1993: 10.27%; 
October 1993 through October 2001: 3.56%; 
November 2001 through December 2009: 7.04%; 
All (October 1976 through December 2009): 7.12%. 

Dynamic Benchmark; 
October 1976 through December 1979: 5.27%; 
1980-1989: 9.87%; 
1990-1999: 6.08%; 
2000-2009: 6.76%; 
September 1976 through August 1987: 7.33%; 
September 1987 through September 1993: 11.19%; 
October 1993 through October 2001: 4.35%; 
November 2001 through December 2009: 6.94%; 
All (October 1976 through December 2009): 7.50%. 

PBGC Total Fund Return Net Investment Expenses; 
October 1976 through December 1979: [Empty]; 
1980-1989: [Empty]; 
1990-1999: [Empty]; 
2000-2009: 6.43%; 
September 1976 through August 1987: [Empty]; 
September 1987 through September 1993: [Empty]; 
October 1993 through October 2001: [Empty]; 
November 2001 through December 2009: 6.61%; 
All (October 1976 through December 2009): [Empty]. 

Liability Return; 
October 1976 through December 1979: 4.68; 
1980-1989: 7.39%; 
1990-1999: 5.32%; 
2000-2009: 5.91%; 
September 1976 through August 1987: 7.28%; 
September 1987 through September 1993: 6.25%; 
October 1993 through October 2001: 3.67%; 
November 2001 through December 2009: 6.44%; 
All (October 1976 through December 2009): 6.13%. 

Source: GAO analysis of PBGC data. 

[End of table] 

By examining the correlation of the PPA benchmark, the Life Insurance 
Benchmark, and the Wilshire 5000 returns with the liability return in 
conjunction with the standard deviation values for the returns on 
those three portfolios, one can observe the potential role of the 
correlation in reducing the riskiness of the PPA and Life Insurance 
Benchmark return (net of the liability returns). In particular, the 
correlation of the returns on both the PPA and Life Insurance 
Benchmark portfolios with the liability return are distinctly higher 
than the correlation of the return on the Wilshire 5000 with the 
liability return. As shown in table 7, the correlation of the Wilshire 
5000 return with the scaled liability return is 0.29, but the 
analogous correlation statistic for the PPA benchmark return is 0.51 
(76 percent higher than the Wilshire 5000 correlation statistic) and 
for the Life Insurance Benchmark portfolio is 0.74 (155 percent higher 
than the Wilshire 5000 correlation statistic). Furthermore, it appears 
that, the higher the correlation, the lower the risk, since the 
benchmark portfolio that has returns with the highest correlation with 
the liability return--the Life Insurance Benchmark--has the least 
risk. When considering all eight portfolios being studied (instead of 
only the three portfolios with the strongest risk-adjusted 
performance), the four portfolios with the highest correlations with 
the liability return have the four lowest standard deviations, and the 
four portfolios with the lowest correlations have the four highest 
standard deviation estimates. Also, with the exception of the two 
portfolios with the highest correlation scores and lowest standard 
deviation values, the rankings of the standard deviation values 
matches the rankings of the correlation estimates (in ascending order 
by standard deviation and descending order by correlation). The strong 
relation between extent of correlation with the liability return and 
risk highlights how the relatively strong correlation of the PPA and 
the Life Insurance Benchmark returns with the liability return seems 
to contribute to lowering the riskiness of the returns (net of the 
liability return) of these two portfolios, enhancing their Adjusted 
Sharpe ratio values and risk-adjusted performance (according to the 
Adjusted Sharpe ratio statistic). 

The apparent linkage between the risk-adjusted performance metric and 
the correlation between the actual portfolio return and the liability 
return is most likely a reflection of the effect of the correlation 
between the actual portfolio returns and the liability returns on the 
volatility of the portfolio returns net of the liability return. As 
was discussed in the comparison between the performance of the PBGC 
Total Fund and the Dynamic Benchmark, higher correlation between the 
(actual) portfolio returns and the liability returns implies a greater 
degree of co-movement between the asset returns and the liability 
returns, and greater co-movement between the asset returns and the 
liability returns weakens or lowers the volatility of the portfolio 
returns net of the liability return. One reflection of the lowered 
volatility for the portfolio returns net of the liability return is a 
lowered standard deviation value, and a lower standard deviation value 
helps elevate the Adjusted Sharpe ratio value, implying stronger risk-
adjusted performance. 

The strong relation between the correlation statistic and the Adjusted 
Sharpe measure values provide at least a partial explanation of why 
two out of the three portfolios that have the best risk-adjusted 
performance (as indicated by their Adjusted Sharpe ratio scores) all 
have allocations to the bond asset class sector of 40 percent or more. 
The portfolio of the liabilities consists mostly of annuities and 
annuity-like instruments, all of which are obligations of the PBGC. To 
the extent that annuities are fixed-income contracts, the portfolio of 
liabilities is essentially bond-like in nature. Hence, the fact that 
the asset portfolios that have a significant allocation to bonds have 
return behavior that is more similar to, and thus would have higher 
correlation with, the liability returns is not surprising. 

Among the three portfolios that have the returns with the strongest 
risk-adjusted performance, the returns for the two portfolios that 
have the highest allocation to bonds (the PPA benchmark and the Life 
Insurance Benchmark) also have other desirable characteristics. For 
instance, these two portfolios (as opposed to the Wilshire 5000) have 
returns which, net of the liability return, have higher skewness for 
the overall sample than the Wilshire 5000. The higher skewness of the 
returns for the PPA benchmark and the Life Insurance Benchmark 
portfolios suggests that those portfolios are less likely to have 
months where the return on the asset portfolio falls extremely short 
of the growth in the PBGC liabilities than the Wilshire 5000. 
Minimization of the instances where the asset returns fall extremely 
short of the liability returns would help prevent further growth of 
the already sizeable PBGC funding deficit. 

The desirable implications of the higher skewness can be seen through 
other statistics. Note that the minimum values for the PPA Benchmark 
and the Life Insurance Benchmark portfolios are less extreme. That is, 
they are less negative than for the Wilshire 5000. To get a sense of 
how much "less extreme" they are, note that the minimum monthly net-of-
liability return for the PPA Benchmark is negative 12.39 percent and 
for the Life Insurance Benchmark is negative 15.09 percent in contrast 
to the minimum negative return value for the Wilshire 5000 of negative 
24.42 percent. Because returns on the two highest-performing benchmark 
portfolios with significant allocations to bonds--the PPA Benchmark 
and the Insurance Benchmark portfolios--have less extreme negative 
values, lower semi-standard deviations, and lower standard deviations 
than the returns on Wilshire 5000, there is a strong possibility that 
the probability distributions associated with these returns have 
assign less probability to on extreme negative values than the 
probability distribution associated with the Wilshire 5000 returns, 
characteristics that are consistent with and are associated with the 
PPA and Life Insurance Benchmark portfolio returns having skewness 
statistic estimates that exceed the (negative) skewness statistic for 
the Wilshire 5000 returns. 

The fact that the three best performing portfolios over the 1976 
through 2009 period in this particular analysis were the PPA 
benchmark, the Wilshire 5000, and the Life Insurance Benchmark does 
not necessarily mean that any of these portfolios would be appropriate 
for the PBGC going forward. The results of any particular analysis 
will depend on the performance statistics used and how these 
performance statistics balance risk and reward, and criteria would 
also need to be established for meaningful differences in these 
measurements. Also, as noted earlier, an asset allocation exercise 
would look at multiple possible future scenarios, not one particular 
historical period. High allocation to equities would be a particularly 
controversial matter for the PBGC because of the lower, and 
potentially, negative correlation between equity returns and new 
claims. The various alternative static portfolios used in this report 
were analyzed for the purpose of a "what-if" analysis--a historical 
comparison of alternative investment strategies versus the fluctuating 
asset allocation that the PBGC actually employed; they were not for 
the purpose of recommending a particular static asset allocation going 
forward. 

[End of section] 

Appendix IV: Comments from the Department of Labor: 

Secretary Of Labor: 
Washington, D.C. 20210: 

June 14, 2011: 

Mr. Gene Dodaro: 
Comptroller General: 
United States Government: 
Accountability Office: 
Washington, DC 20548: 

Dear Mr. Dodaro: 

I am responding on behalf of the Pension Benefit Guaranty Corporation 
(PBGC) Board to your request for comments on the Government 
Accountability Office's (GAO) draft report entitled "Pension Benefit 
Guaranty Corporation: Asset Management Needs Better Stewardship" (GAO-
11-271). 

My fellow Board members and I take our governance responsibilities of 
the PBGC and oversight of the investment policy seriously, Following 
more than a year of review, the PBGC Board approved a new Investment 
Policy Statement in May 2011 (Policy). For the first time, a PBGC 
investment policy statement is available to the public on the PBGC web 
site. The Board is working with the PBGC Director and staff to ensure 
the effective implementation of the Policy. 

The Board undertook a comprehensive review of the investment policy, 
including extensive consultation and analysis. During the course of 
this review, the Board sought advice from the PBGC Advisory Committee, 
outside investment advisors and consultants, academicians, the 
business and labor community, and the PBGC Director and staff. The 
PBGC also conducted comprehensive analyses of the impact of a range of 
economic, portfolio and demographic risks on PBGC's liabilities, 
including an analysis by the Corporation's investment consultant. 

The Policy governs the total fund and represents broad consensus among 
the three Board agencies. The Policy includes an investment objective 
to maximize total return within a prudent risk framework that is 
informed by PBGC's fixed obligations and asset composition of 
potential trusteed plans. The elements of the Policy are consistent 
with standards followed by institutional investors and represent a 
systematic approach to documenting objectives, constraints, risk 
tolerance, rebalancing, Board monitoring, and governance mechanisms 
necessary to implement the Policy. 

The Policy requires that the Board Representatives approve target 
allocations and permitted ranges for sub-asset classes. PBGC staff is 
preparing recommendations for the Board Representatives so they can 
discuss options in order to ruin!l this responsibility. Supplemental 
policy guidance regarding sub-asset class allocations and rebalancing 
guidelines will follow, as well as other policy guidance related to 
risk metrics, tolerances and management. In addition, in support of 
the policy objectives we anticipate more frequent analyses of PBGC's 
assets and liabilities. 

Consistent with the Corporation's bylaws, the Board will continue to 
review the investment policy statement at least every two years and 
approve the investment policy statement at least every four years. The 
Policy does not require that a new investment policy be adopted every 
four years or sooner but it does require the Board to consider whether 
the policy should be affirmed or revised. We believe the bylaws set an 
appropriate review schedule and are consistent with prudent governance 
practices. 

We concur with both recommendations in your report. Actions taken by 
this Board are consistent with institutional investor best practices 
and with the two recommendations contained in the report. The Policy 
adopted by the Board in May 2011 carries out the recommendations in 
your report. The Policy establishes clear organizational 
accountabilities governing the various entities that work on behalf of 
the PBGC, and provides well-defined goals and risk management 
parameters. 

With specific regard to our oversight of the investment policy and its 
implementation, the Board has undertaken a number of actions since the 
start of the Administration, including the following activities. 

* In early 2009, the PBGC Office of Inspector General brought to the 
Board's attention serious concerns related to the implementation of 
the investment policy. While these issues were being reviewed, and in 
light of the Board's intent to review the PBGC Investment Policy
Statement, the Board unanimously approved Resolution 2009-06 directing 
the PBGC to cease further activity to implement the 200S investment 
policy. 

* Following our adoption of Resolution 2009-06, the Board 
Representatives, acting in accordance with the authority given to them 
under the PBGC bylaws, provided written guidance in July 2009 to 
implement the Resolution with respect to newly trusteed assets, and 
provided additional temporary investment policy guidance and 
transition guidance in October 2009. 

* The October 2009 temporary investment policy guidance directed PBGC 
to provide a monthly report on the transition to the target 
allocation. These reports and frequent communications with PBGC 
management provided information for the Board to oversee the 
implementation of the Resolution and subsequent guidance. 

We are pleased that your latest report acknowledges that this Board 
and its representatives are meeting more frequently than past Boards, 
although we believe that the report overlooks much of the extensive 
oversight activity undertaken both by the Board directly and by our 
Board Representatives and their staffs. In addition to Board and Board 
Representative meetings with the PBGC Director, staff, and Advisory 
Committee members, the Board exercises its oversight responsibilities 
by providing policy direction through written resolution and through 
our Board Representatives. Other formal oversight mechanisms in place 
include required monthly transition and investment reports and written 
documentation of policy guidance. The Board believes these oversight 
mechanisms and informal guidance and communications are appropriate 
oversight. 

The Board is dedicated to overseeing the management of PBGC's 
investment program and to protecting the pension benefits of the 44 
million Americans covered by the PBGC's insurance program.
We appreciate the opportunity to review and comment on the draft 
report. 

Sincerely, 

Signed by: 

Hilda L. Solis: 
Chair of the Board: 
Pension Benefit Guaranty Corporation: 

[End of section] 

Appendix V: Comments from the Pension Benefit Guaranty Corporation: 

PBGC: 
Pension Benefit Guaranty Corporation
1200 K Street, N.W. 
Washington, D.C. 20005-4026: 

June 15, 2011: 

Barbara D. Bovbjerg, Managing Director: 
Education, Workforce, and Income Security Issues: 
United States Government Accountability Office: 
Washington, DC 20548: 

Dear Ms. Bovbjerg: 

This is in response to your request for comments on the GAO's draft 
report on PBGCs investment policy and practices (GAO-11-271). 

As you know from our many conversations on these subjects, PBGC and 
its Board take our responsibilities as stewards of a substantial 
investment portfolio very seriously. 

In developing both PBGC's investment policy and its investment 
practices, we have consulted widely, reviewed the practices in other 
institutions. both public and private, and developed a policy and 
procedures that we believe are consistent with the high standards that 
you have recommended for PBGC. 

We agree with both of your recommendations and are implementing them. 
As you know, regarding your first recommendation, PBCGC's Board 
recently approved a comprehensive investment policy statement 
following a thorough review of policy options and extensive
consultation and analysis. The Board is responding separately on that 
issue. Management will implement the policy under continued Board 
supervision. 

We agree with your second recommendation -- to develop clear 
investment operating procedures and guidelines -- and are doing so. 
After reviewing the practices of other institutions, PBGC's
Corporate Investment Department has developed and is implementing new 
procedures and guidelines. These cover such areas as transition 
management, cash management, investment procedures, special 
situations, and manager due diligence. Working with our General Counsel,
we also developed a set of ethical guidelines specifically tailored to 
our corporate investment activities. 

We also reviewed GAO's analysis of PB0C's investment performance. 
Given the complexity and technical nature of the analytics used in 
your review, we are sharing our technical comments under separate 
cover. PBGC appreciates GAO's acknowledgment that, "on an asset-only 
basis, PBGC's portfolio achieved better risk-adjusted performance on 
its investments than that achieved by six of the seven benchmark 
portfolios." 

As you know, investment industry practices are evolving continually. 
We are continuing to review both our practices and those of others. We 
look forward to your comments on the procedures we've implemented, and 
view our discussions as part of a continuous improvement process. 

As always, we appreciate the opportunity to review and comment on the 
draft report. We recognize and appreciate GAO's role as an informed 
watchdog of the public interest, and look forward to working with you 
to advance the goals of accountability and retirement security that we 
share. 

Sincerely, 

Signed by: 

Josh Gotbaum: 

cc: PBGC Board of Directors. 

[End of section] 

Appendix VI: GAO Contact and Staff Acknowledgments: 

Contact: 

Barbara Bovbjerg, (202) 512-7215 or bovbjergb@gao.gov: 

Staff Acknowledgments: 

In addition to the above, Orice Williams-Brown, Charles A. Jeszeck, 
Thomas McCool, Frank Todisco, Serena Agoro-Menyang, James Bennett, 
Susan Bernstein, Lawrance Evans Jr., Charles Ford, Kimberley M. 
Granger-Heath, Michael Hoffman, Gene Kuehneman, Sheila McCoy, Michael 
Morris, Christopher Ross, Margie Shields, and Craig Winslow made 
important contributions to this report. 

[End of section] 

Bibliography: 

[End of section] 

Amenc, Noel and Veronique Le Sourd. Portfolio Theory And Performance 
Analysis. New York: John Wiley & Sons, 2003. 

Bacon, Carl R. Practical Portfolio Performance Measurement And 
Attribution. New York: John Wiley & Sons, 2008. 

Brealey, Richard A. and Stewart Myers. Principles Of Corporate 
Finance. New York: McGraw-Hill, Inc. 1981. 

Dowd, Kevin. Measuring Market Risk. New York: John Wiley & Sons, 2005. 

Israelsen, Craig L. "Refining The Sharpe Ratio." The Journal Of 
Performance Measurement. (Spring 2009): 23-27. 

Maginn, John L., Donald Tuttle, Dennis McLeavey, and Jerald Pinto 
(eds.). Managing Investment Portfolios. New York: John Wiley & Sons, 
2007. 

Matlab R2010a Documentation. Natick, MA: Mathworks, Inc., 2010. 

Pearson, Neil D. Risk Budgeting. New York: John Wiley & Sons, 2002. 

Sharpe, William F. "Budgeting And Monitoring Pension Fund Risk." 
Financial Analysts Journal. Vol. 58 (2002): 74-86. 

Sharpe, William F. "Mutual Fund Performance." Journal of Business. 
Vol. 39 (1966): 119-138. 

Sharpe, William F. and Lawrence Tint. "Liabilities--A New Approach." 
Journal of Portfolio Management. Vol. 16 (1990): 5-10. 

Sortino, Frank A. and Price, Lee N. Price, "Performance Measurement in 
a Downside Risk Framework." Journal of Investing. Vol. 3 (1994): 59-64. 

Waring, Barton M. "Liability-Relative Investing II." Journal of 
Portfolio Management. Vol. 31 (2004): 40-53. 

[End of section] 

Footnotes: 

[1] Employee Retirement Income Security Act of 1974, Pub. L. No. 93- 
406, tit. IV, 88 Stat. 829, 1003-35 (codified as amended at 29 U.S.C. 
 1301-1461). 

[2] 29 U.S.C.  1322 and 1322a. 

[3] 29 U.S.C.  1361. 

[4] 29 U.S.C.  1305(b). 

[5] Although ERISA provided for the establishment of seven revolving 
funds (29 U.S.C.  1305), PBGC uses only three such funds in carrying 
out its duties. In this report we refer to them as a single revolving 
fund. 

[6] 29 U.S.C.  1302(d). 

[7] 29 C.F.R.  4002.3(a)(3) (2011). 

[8] 29 C.F.R.  4002.3(a)(4) (2011). 

[9] 29 C.F.R.  4002.3(b) (2011). Each of the board members may also 
designate an official (not below the level of an assistant secretary) 
to serve as an alternative representative. 

[10] 29 U.S.C.  1305(b)(3). By statute, PBGC is restricted to 
investing some revolving funds in U.S. obligations which are fixed- 
income assets. Other revolving funds may be invested as PBGC considers 
appropriate, but current policy is to invest them in U.S. Treasury 
securities. 29 U.S.C.  1305(b)(3) and (f)(3). 

[11] For example, the Pension Protection Act of 2006 included a number 
of provisions aimed at improving plan funding and PBGC finances by 
raising premiums, including variable premiums for plans with low 
reserves. Pub. L. No. 109-280, 120 Stat. 780. It also raised the 
funding requirements defined benefit pension plans must meet for 
Internal Revenue Service qualification. The Worker, Retiree, and 
Employer Recovery Act of 2008 provided plan sponsors with temporary 
further relief from the changes in the Pension Protection Act of 2006 
(Pub. L. No. 110-458, 122 Stat. 2092), as did Internal Revenue Service 
guidance in 2009 concerning interest rates that could be used to value 
plan liabilities in some cases. More recently, the Preservation of 
Access to Care for Medicare Beneficiaries and Pension Relief Act of 
2010 provided relief to private-sector pension sponsors, in part, by 
allowing certain sponsors to elect one of two possible schedules to 
reduce or delay contributions attributable to certain funding 
shortfalls stemming from the economic downturn. Pub. L. No. 111-192, 
124 Stat. 1280 

[12] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-07-310] (Washington, D.C.: January 
2007). 

[13] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-09-271] (Washington, D.C.: January 
2009). 

[14] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-11-278] (Washington, D.C.: February 
2011). 

[15] During relatively conservative investment periods, allocation 
targets were aimed at increasing the proportion of fixed-income 
investments. During relatively aggressive investment periods, 
allocation targets were aimed at increasing the proportion of equity 
investments. 

[16] In 2009, PBGC's investment policy shifted to a more conservative 
strategy but not for the purpose of immunizing against interest rate 
risk. The 2009 interim policy consisted of 26.5 percent in equity 
assets and 73.5 percent in fixed income assets. 

[17] Under its bylaws, the board is required to review its investment 
policy statement at least once every two years and approve it at least 
every four years. 29 C.F.R.  4002.3(a)(4) (2011). 

[18] For example, experts noted that a long-term and disciplined 
policy is needed to prevent market timing, which is the practice of 
buying or selling assets by attempting to predict future market price 
movements. According to experts, this practice can incur significant 
opportunity costs--that is, costs incurred as a result of market 
movements during a transaction. 

[19] 29 U.S.C.  1305(b)(3) and (f)(3). 

[20] 29 U.S.C.  1305(b)(3) and (f)(3). 

[21] According to PBGC, this biennial review was as a result of a PBGC 
Office of the Inspector General recommendation. 

[22] Based on GAO analysis of the New York Stock Exchange Composite 
Index during the period between February 1, 2008, and May 31, 2009. 

[23] The resolution was executed by each board member on different 
dates. The Secretary of Commerce executed the resolution on May 19, 
2009, followed by the Secretary of Labor on May 21, 2009, and the 
Secretary of the Treasury on June 30, 2009. 

[24] This interim policy was a product of a series of specific staff 
inquiries about how to go about transitioning assets until the board 
adopted a new investment policy statement. 

[25] For a diagram of the transitioning of funds to align with PBGC's 
investment policy, see appendix II. 

[26] Because transaction costs vary based on the volume and type of 
assets acquired from newly terminated plans, as well as market 
conditions, it was not possible to isolate the costs attributable to 
implementation of a specific investment policy apart from these other 
factors. 

[27] We use this broad definition of transaction costs in this report. 
One could also define transaction costs more narrowly to refer just to 
the explicit costs of the trade. 

[28] For example, transition managers can provide lower transaction 
costs by "crossing"--that is, moving--securities from one client's 
account to another client's account without incurring costs in the 
open market. 

[29] The costs or gains associated with financial transactions are 
often expressed in terms of basis points, with each basis point equal 
to 1/100th of 1 percent. 

[30] In the course of implementing the 2008 policy, PBGC hired a 
consultant for additional work at a cost of $600,000. 

[31] In a prior report we noted that when PBGC took an asset-only 
approach to guide its new investment policy, an analysis that 
incorporates assets, liabilities, and the funded position should have 
also been conducted. See GAO, PBGC Assets: Implementation of New 
Investment Policy Will Need Stronger Board Oversight, [hyperlink, 
http://www.gao.gov/products/GAO-08-667] (Washington, D.C.: July 17, 
2008). 

[32] PBGC's portfolio for this analysis includes PBGC's investments in 
both the trust fund and the revolving fund combined. 

[33] The exception was the Post Fiscal Year 2002 Benchmark portfolio; 
however, this fixed allocation portfolio is also based upon the PBGC 
total fund since the portfolio weights reflect the PBGC's investment 
portfolio from November 2001 to December 2009. 

[34] The primary driver of the total fund's performance lies in the 
lower volatility of the returns, overall--that is, the returns 
provided lower downside risks or fewer extreme negative returns. 

[35] 29 U.S.C.  1306. While these analyses have limitations and may 
offer an incomplete picture of PBGC's overall performance, asset-only 
and asset-net of liability analyses represent a traditional approach 
to evaluating PBGC's investment performance. Although there are 
different ways of incorporating liabilities into asset allocation 
strategies, our asset-net of liability analysis excludes external cash 
flows in a manner consistent with other practitioners. However, this 
ignores both PBGC's inability to adjust premium rates by judging it 
within a framework that assumes this flexibility. Furthermore, if new 
terminations were included in the measure of liabilities the 
correlation between stock market returns and liability returns would 
likely be lower or even negative, resulting in lower risk adjusted 
performance for portfolios with a heavier weighting toward stock. In 
the approaches we reviewed, practitioners and others have incorporated 
liabilities by including only the existing stock of liabilities when 
calculating liability returns rather than including external cash-
flows of liabilities coming into the fund. It should be noted that 
PBGC's current approach of calculating the liability growth uses 
PBGC's existing stock of liabilities and not incoming cash-flows from 
new plan terminations taken in by PBGC. Given this precedent, we have 
followed this approach but acknowledge that an alternative approach 
including external cash flows may be more appropriate for evaluating 
PBGC's portfolio. External cash-flows would consist of assets and 
liabilities received from terminated plans coming in to the PBGC. For 
additional information, please refer to appendix III. 

[36] While an analysis that focuses solely on investment returns 
provides some useful information on PBGC's portfolio performance, our 
explicit inclusion of the PBGC's liabilities is consistent with the 
type of analysis we noted was necessary in a prior report. GAO-08-667. 

[37] 29 U.S.C.  1306. 

[38] We use an adjusted Sharpe ratio to correct for the excess returns 
net of liabilities for PBGC and the comparison benchmarks being 
negative. 

[39] PBGC's portfolio of assets has a higher allocation to bonds and a 
higher correlation with the liability growth than the PPA portfolio, 
but PPA's higher returns and relatively high correlation with the 
liability growth resulted in better risk-adjusted performance overall. 

[40] These results also differed significantly from those discussed 
earlier in the asset-only context. As we pointed out in our previous 
report (GAO-08-667), our concern with 2008 investment policy was that 
it did not explicitly consider the PBGC's liabilities and may have 
understated the risk inherent in a portfolio tilted toward equity and 
alternative assets. In other words, the policy did not make it clear 
that by striving for greater returns, PBGC would be sacrificing lower 
risk and higher correlation with liabilities. Due to certain 
limitations, these results should be interpreted with caution, 
especially given the manner in which we incorporated liabilities into 
the measures of risk-adjusted performance (see appendix III). Ideally, 
a complete analysis of PBGC's assets net of liabilities would include 
both its existing stock of liabilities, its incoming cash flows from 
newly terminated plans and complete information regarding transitions, 
and transaction costs in order to fully assess PBGC's past performance 
and make a thorough assessment of future investment allocations for 
long-term asset management. A complete approach would also accurately 
reflect PBGC's ability, or inability, to set appropriate premiums 
covering risk. 

[41] S.W. Halpern, Governance of Public Pension Assets, paper 
presented at the World Bank's Symposium on Public Pension Governance 
and Investment Conference, (Indonesia, June 2009). 

[42] We included items identified by at least two of the three bodies 
as important. 

[43] The PBGC has operated without a formal investment policy 
statement since June 2009. 

[44] 29 U.S.C.  1302(f). A presidentially appointed, Senate-confirmed 
director is responsible for administering the agency. 29 U.S.C.  
1302(a). Thus, the board approves policy which then the director 
implements. Further, in order to execute the policy, the agency must 
develop program guidance and implementing procedures. The guidance and 
procedures would include designations of accountability for action and 
reporting results, appropriate performance measures, and requirements 
to document actions and oversight, thus enabling staff to apply the 
policy consistently. 

[45] According to PBGC's by-laws, board representatives may approve 
the investment policy statement as long as the policy is ratified in 
writing by board members. 29 C.F.R.  4002.3(b)(2) (2011). From June 
2009 to present, the board had not ratified a new investment policy 
statement. 

[46] Halpern, Governance of Public Pension Assets. 

[47] Processes for asset allocation include which methodologies are 
utilized, on what data and capital markets assumptions those 
methodologies are based, in light of what factors those methodologies 
are chosen (for example, the relationship between assets and 
liabilities, the need for cash flow and liquidity, and the investment 
horizon), and what procedures are in place for periodically 
rebalancing the portfolio. 

[48] Halpern, Governance of Public Pension Assets. 

[49] These procedures are still in draft form. Until the board, 
through the board representatives, reviews and comments on these 
procedures they will not be final. Additionally, though CID staff may 
believe the procedures are complete, PBGC has not formally submitted 
the procedures to the board for its consideration. 

[50] Halpern, Governance of Public Pension Assets. 

[51] According to PBGC, one of PBGC's transition managers only retains 
records for 7 years. 

[52] Given the emphasis on the PBGC Single-Employer Total Fund in our 
analysis, the phrase "PBGC Total Fund portfolio" will be used for 
brevity for the remainder of this section and should be understood to 
refer to the Single-Employer Total Fund at PBGC. 

[53] Our analysis includes only liabilities from trusteed defined 
benefit plans (instead of all terminated plans, both trusteed and 
pending trusteeship by PBGC) because, according to PBGC, it is 
ultimately liable only for the trusteed plans--not all terminated 
plans. 

[54] For the remainder of this section, the domestic equity class as 
"domestic equities"; the international equity class as "international 
equities"; the domestic and international equity classes combined as 
"equities"; the fixed-income asset class as either "bonds" or "fixed 
income"; and the short maturity fixed-income sector that is free of 
systematic and credit risk as "cash" or the "risk-free" asset class, 
where the return associated with this asset class will be referred to 
as the "riskless" or "risk-free rate of return." Also, where needed, 
we computed the excess return for an asset as the total return for the 
asset minus the risk-free rate of return. 

[55] The Pension Protection Act of 2006 requires PBGC to compare its 
average return performance for its investments to a theoretical 
portfolio consisting of an equity benchmark portfolio and a fixed- 
income benchmark portfolio. No. 109-280,  412, 120 Stat. 780, 936. 

[56] We used the Barclays Capital Long-Term Government Credit Index to 
construct the PPA benchmark instead of the Barclays Capital Aggregate 
Bond Index, which is more customary, in order to achieve greater 
comparability to the Barclays Capital Long-Term Government Credit 
Index listed in item c as a fixed-income benchmark in this report. 
Note that PPA allows for the use of fixed-income indices other than 
the Barclays Capital Aggregate Bond Index in the construction of PPA 
benchmark returns. 

[57] [hyperlink, http://www.gao.gov/products/GAO-08-667], 10-11. 

[58] Given the emphasis on the PBGC Single-Employer Total Fund in our 
analysis, the phrase "PBGC Total Fund portfolio" will be used for 
brevity for the remainder of this section and should be understood to 
refer to the Single-Employer Total Fund at PBGC. 

[59] Our analysis includes only liabilities from trusteed defined 
benefit plans (instead of all terminated plans, both trusteed and 
pending trusteeship by PBGC) because, according to PBGC, it is 
ultimately liable only for the trusteed plans--not all terminated 
plans. 

[60] We use this definition of the asset return net of the liability 
return because research shows that this is equivalent to maximizing 
the end-of-month surplus (the end-of-month difference between 
aggregate assets and liabilities) relative to the aggregate asset 
value at the beginning of the month. William F. Sharpe, "Budgeting and 
Monitoring Pension Fund Risk," Financial Analysts Journal, Vol. 58 
(2002), 74-86; and William F. Sharpe and Lawrence Tint, "Liabilities--
A New Approach," Journal of Portfolio Management, Vol. 16 (1990), 5-10. 

[61] These rates effectively form a yield curve where cash flows that 
occur during the initial period are discounted by the "select" 
interest rate and those occurring after the initial period are 
discounted by the "ultimate" interest rate. For more on these rates 
see [hyperlink, http://www.pbgc.gov/prac/interest.html]. 

[62] Implicitly it assumed that these liabilities are best dealt with 
via the setting of premiums as opposed to being covered by the 
investment portfolio. 

[63] For the end of any month for which an observation was not 
directly available, we estimated the value using the last available 
total fund asset portfolio value preceding that month and the gross 
liability return over the period corresponding to the missing data. 

[64] Richard A Brealey and Stewart Myers, Principles of Corporate 
Finance, (New York: McGraw-Hill, Inc., 1981). John L. Maginn, Dennis 
McLeavey, Jerald Pinto, and Donald Tuttle, (eds.) Managing Investment 
Portfolios, (New York: John Wiley & Sons, 2007). 

[65] Another element of an analysis of this type is the length of the 
time horizon and, if applicable, the particular calendar years 
studied. Our analysis looks at the single historical period, from 1976 
through 2009, since the purpose of the analysis was performance 
assessment, not asset allocation recommendations. Typically, analyses 
for the purpose of asset allocation would project forward over 
multiple potential future economic scenarios in order to more fully 
assess potential risk and reward. 

[66] Sources for semi-standard deviation equation: Amenc and LeSourd 
(2003), 54 and 116; Sortino and Price (1994). 

[67] Source for VaR equation: Pearson (2002), 4 and 10-11. 

[68] The notion of the confidence level is similar to but not to be 
confused with the concepts of significance level and confidence 
intervals from statistics. (Pearson (2002), 10-11). 

[69] Source for expected shortfall equation: Dowd (2005), 154. 

[70] Sources for Sharpe ratio: Sharpe (1966); Amenc and LeSourd 
(2003), 109. 

[71] Sources for Sortino ratio: Amenc and LeSourd (2003), 54 and 116; 
Sortino and Price (1994). 

[72] Source for Omega ration: Bacon (2008), 94. 

[73] Source for Adjusted Sharpe ratio: Israelsen (2009). 

[74] Sources for skewness equation: Bacon (2008), 83-84; Matlab R2010a 
Documentation. 

[75] Sources for kurtosis equation: Bacon (2008), 85-86; Matlab R2010a 
Documentation. 

[76] For the remainder of this section, the domestic equity class as 
"domestic equities"; the international equity class as "international 
equities"; the domestic and international equity classes combined as 
"equities"; the fixed-income asset class as either "bonds" or "fixed 
income"; and the short maturity fixed-income sector that is free of 
systematic and credit risk as "cash" or the "risk-free" asset class, 
where the return associated with this asset class will be referred to 
as the "riskless" or "risk-free rate of return." Also, where needed, 
we computed the excess return for an asset as the total return for the 
asset minus the risk-free rate of return. 

[77] PPA requires PBGC to compare its average return performance for 
its investments to a theoretical portfolio consisting of an equity 
benchmark portfolio and a fixed-income benchmark portfolio. Pub. L. 
No. 109-280,  412, 120 Stat. 780, 936. 

[78] We used the Barclays Capital Long-Term Government Credit Index to 
construct the PPA benchmark instead of the Barclays Capital Aggregate 
Bond Index (which is more customary) in order to achieve greater 
comparability to the Barclays Capital Long-Term Government Credit 
Index listed in item c as a fixed-income benchmark in this report. 
Note that PPA allows for the use of fixed-income indices other than 
the Barclays Capital Aggregate Bond Index in the construction of PPA 
benchmark returns. 

[79] [hyperlink, http://www.gao.gov/products/GAO-08-667], 10-11. 

[80] These qualifiers apply to all the results presented in this 
section. 

[81] One factor that complicates the analyses in this section and the 
interpretation of the traditional Sharpe ratio is that all of the 
portfolios exhibit negative mean excess returns and hence negative 
Sharpe ratios for the overall time period and many subperiods. As 
mentioned in the performance statistics section, this renders the 
interpretation of the Sharpe ratio unclear. Thus, in executing 
portfolio performance comparison on a net-of-liability returns basis, 
greater emphasis is placed on the Adjusted Sharpe ratio, which is 
specifically designed to address this problem and provide logically 
consistent ranks to portfolios in a fashion that appropriately 
reflects the impact of risk aversion on portfolio choice and asset 
allocation decisions. 

[82] For example, this finding should not be interpreted as equity 
causing the underperformance. 

[End of section] 

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