The stock market has been a robust vehicle for investments, but that will have little effect on Wilton’s bottom line.
Stock market analysts expect an average earnings growth of 8%-10% in 2015 for companies in the S&P 500, according to Anne Kates Smith’s article in the January 2015 issue of Kiplinger’s Personal Finance magazine.
“Broad U.S. stock market indexes are expected to rise by high-single-digit percentages,” Ms. Smith wrote.
According to Board of Finance Chair Warren Serenbetz, Wilton’s pension and OPEB trusts are the only town assets with investments in the stock market.
“The town has a pension plan for its employees and it’s funded with a combination of stocks, bonds and some other investments,” said Bob Kelso, chair of the Investment Committee for the pension trust.
“The town has a liability, in the form of pension payments, to its employees, so the stock is part of the investment pool that goes towards paying those pensions.”
For as long as the town has had pension liability — which Mr. Kelso said “goes back quite a few years” — the town has “generally” invested in funds rather than “specific stocks.”
Mr. Serenbetz said each trust has an investment policy dictating “how much money can be in what kind of investment, including stocks.”
“Since these trusts are for the ‘long haul,’ the day-to-day movement in the stock market isn’t really a factor,” said Mr. Serenbetz.
“In fact, Hooker Holcomb, the actuary for the trusts, uses 20-year smoothing to calculate the impact of movement in the value of investments on the value of the trusts.”
Mr. Kelso said the town’s investment portfolio is “conservatively invested in a diverse group of assets consisting of equities, fixed income and other assets,” with equities constituting approximately 60% of the portfolio.
“When the stock market goes up, the valuation of the equity portion of the portfolio goes up, and vice versa,” said Mr. Kelso. “While the stock market valuation has taken many twists and turns over the years, the market, as measured by the S&P 500, has increased by about 8% per year over the last 10 years.”
While last year was “a good year” for the stock market, said Mr. Kelso, “it’s hard to come up with a simplistic answer” as to how the market affected — or will affect — town investments.
“Business went up, in simple terms, but we’re talking about $100-billion funds, so one stock is a very small part of the total picture,” he said.