With the Fed signaling low interest rates for the foreseeable future, pension funds weigh bigger bets on equities

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Pension funds and endowments have been shifting away from the U.S. stock market for years. Some are now reconsidering that decision.

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Individual investors, including younger traders using apps like Robinhood, have been playing a bigger role in the market lately. They’ve been buying up companies including Tesla Inc., Apple Inc. and other technology shares. Large institutional investors like hedge funds and mutual-fund firms have also been buying, pushing the market higher.

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After reaching a bottom on March 23, the Dow Jones Industrial Average is up 44% while the S&P 500 has added 45%.

But pensions have been largely moving away from stocks in recent years, a shift that has hurt performance. The median public pension fund managing at least $1 billion had 46.6% of its portfolio in equities, as of June 30, with just a 21.3% allocation to U.S. equities, according to data analytics provider InvestmentMetrics LLC. By contrast, in 2013, the oldest data available, these funds had invested 52.7% of their portfolios in stocks, with 32.1% in U.S. shares.

Now that the Federal Reserve has signaled that interest rates likely will remain low for the foreseeable future, some say pensions are looking to boost their bets on equities. Mika Malone, a managing principal at consulting firm Meketa Investment Group who works with large public pension funds and endowments, says she’s having more conversations with clients about moving additional money into stocks.

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