I once heard someone say, “You can’t pay pension benefits with unrealized gains.” But the current market’s focus on benchmarking and, by extension, time-weighted returns may be driving attention to unrealized gains when it would be better to focus on cash to pay benefits.

For an extended period of time, U.S. public and corporate pension funds enjoyed an expanding economy and expanding employment base that meant there were more contributors to pension plans than there were beneficiaries. And the ratio of years in retirement (i.e., collecting pension benefits) to years working (i.e., contributing to a pension plan) was relatively low. That is to say, people are living longer these days.

This dynamic created a situation where a pension fund CIO’s biggest challenge on Monday morning was figuring out where to invest all the net cash flow that came into the fund over the weekend. Interest and dividend income only exacerbated this “problem.”

But just abou