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Pension Hub

Strapped for Cash:

How Equity Investments Can Weaken the Finances of Pension Plan Sponsors During CV19-type Crises

The research objective of this project is to better understand how a pension plan’s equity investments impact the financial situation of the plan’s sponsor entity during severe economic crises such as COVID-19. The analysis will address three main questions:

  1. How much did the increase in pension shortfall resulting from the stock market crash contribute to the increase in municipal bond yields during this period?
  2. Did states and cities with high pre-existing pension shortfall experience a disproportionately large increase in yields?
  • Was the impact of the pension shortfall on bond yields in March 2020 more or less severe than that in the last quarter of 2008, and how much of this differential effect was driven by the change in the pension shortfall over the past decade?

The methodology follows the seminal work of Novy-Marx and Rauh (2011), exploring the impact of public pension shortfalls on municipal bond yields in both the 2020 COVID-19 crisis and the Great Recession of 2008.


McGill University


Sebastien Betermier




Sebastien Betermier

Sebastien Betermier is an Associate Professor of Finance at the Desautels Faculty of Management at McGill University. His research seeks to understand the relationships between risk and return and how these drive investors in their investment decisions, and contribute to the development of sustainable pension systems. His work appears in top finance journals and has received several distinctions, including lead article in the Journal of Finance in 2017. Professor Betermier teaches Investment Management, Applied Investments, and Pension Investing at both the undergraduate and graduate levels. He has been recognized repeatedly through nominations for teaching excellence which includes receiving the Desautels Distinguished Teaching Award in 2016 and 2020 and coaching the winning team of the PRMIA international risk management challenge in 2016, 2017, and 2019. He was named one of the World's Best 40 under 40 Business School Professors by Poets and Quants in 2017. Professor Betermier holds a PhD in Finance from the Haas School of Business at the University of California at Berkeley. He was born in France and grew up in Paris and San Francisco.