Pitt retirement funds seeing little impact from bank turmoil, advisers say

By SUSAN JONES

Representatives from CAPTRUST, which independently oversees TIAA and Vanguard funds for Pitt, told the Senate Benefits & Welfare committee on March 27 that the funds’ exposure to the recent turmoil in the banking industry is extremely limited.

Tim Irvin, a senior investment advisor with CAPTRUST, said that “2022 was the first time in many, many years that both equity and fixed income underperformed. So it created a really, really difficult retirement savings market. And now we had everything with SVB (Silicon Valley Bank). And so it’s just creating quite a bit of uncertainty.”

The message Irvin and investment analyst James Duffy are trying to get out is that the exposure to SVB and other banks is limited. “The two primary avenues for investment are annuities and mutual funds. And so by virtue, you tend to be really, really diversified.” And because of that diversity, they urged those invested in Pitt’s retirement accounts to “stay the course.”

Duffy said the direct exposure for any type of debt that was issued by Silicon Valley Bank is only 0.012 percent for all of the investments within the four different Pitt retirement plans.

Beyond the direct impact on these accounts, Duffy said many people are looking at the widespread, longer-lasting impact of these bank failures.

“With interest rates continuously increasing over the last year and a half — due to the Fed’s fight against persistently high inflation — a lot of banks simply didn’t adapt quickly enough, even though the Fed really did give pretty good warning on the direction of interest rate hikes and the path that our economy would be heading in,” he said. “Many banks were in these very long-duration investments, and they simply were hoping that we weren’t going to be in an environment where things were quite this high. And obviously, that’s not what happened.”

Silicon Valley Bank is one of the institutions that did not properly protect itself in this type of environment and did not protect against this type of risk, Duffy said.

This volatility is different from the 2008 financial crisis, Duffy said, because the banks being impacted are smaller, regional institutions. “Those banks have a lot more volatility because the requirements for them in terms of how they manage their risk is not as stringent as the bigger banks, the banks that were the big focus during the 2008 financial crisis,” he said.

The money exiting the smaller banks is just being put into the larger, more stable institutions.

Asked if he thought there would be more bank failures, Duffy said, “As of right now, the Fed has identified the issue with Silicon Valley Bank and they put a system in place where they’re allowing these smaller banks to essentially put a pause on needing to sell out of those positions that are very much undervalued, which is what led to Silicon Valley Bank’s failing. The Fed has pretty much come in and said instead of needing to sell out of that bond, … we will take it off your books for one year, but then you have to take it back. So that should hopefully prevent more banks from failing.”

Susan Jones is editor of the University Times. Reach her at suejones@pitt.edu or 724-244-4042.

 

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