Background:

The Pension Benefit Guaranty Corporation (PBGC) is a U.S. Government agency created under the Employee Retirement Income Security Act of 1974. The Corporation guarantees defined pension benefits for participants and beneficiaries of insolvent companies with underfunded plans. Liabilities and losses assumed by PBGC are unpredictable and are influenced by economic conditions, interest rates, and securities markets.

Investment Profile:

As of September 30, 2009, the value of PBGC's total investments in its two insurance programs, including cash and investment income receivable but not securities lending collateral, was approximately $63.91 billion. PBGC's assets are generated from premium receipts and assets from terminated trusteed plans and their sponsors. The Corporation's assets are segregated into two funds.

The Revolving Funds (valued at approximately $15.86 billion as of September 30, 2009) receive all premium payments and are required by statute or policy to be invested in fixed-income securities. The Trust Funds (valued at approximately $48.05 billion as of September 30, 2009) receive assets from terminated plans. Trust Fund assets can be invested more flexibly than Revolving Fund assets.

Overall investment policy is set by the Corporation's Board of Directors, which consists of the Secretary of Labor (Chair), the Secretary of the Treasury, and the Secretary of Commerce. In addition, the PBGC Advisory Committee, appointed by the President, advises PBGC's Director on investment activities. PBGC uses institutional investment management firms to invest its assets subject to PBGC oversight. PBGC, with the advice of its Advisory Committee, continually reviews its investment strategy to ensure that it maintains an investment structure that is consistent with its long-term objectives and responsibilities.

In compliance with a May 2009 Board directive, PBGC ceased all further activity to implement the Investment Policy Statement approved in February 2008. A Temporary Investment Policy Guidance and Transition Plan, approved on October 14, 2009, directs PBGC to prudently rebalance the PBGC portfolio and reduce PBGC's investment in public equities. PBGC will announce any new investment policy when it is adopted by the Board.

Investment Results:

During fiscal year 2009, the Corporation generated a 13.2% return on total invested funds.  For the year, PBGC reported investment income of about $4.7 billion from fixed-income investments and $1.8 billion from equity investments. Other investments, including real estate and insurance contracts, produced a loss of $34 million, for total investment income of about $6.45 billion.