[smoothfunding] [long_term]

Does it even exist? Well, it's a bit like an elephant, which you can recognise when you see it. The essential criterion is whether or not, normally the latter, the liabilities need to be secured with some other entity, with assets needing to be realised. For most pension schemes with contributions continuing to be made, cash flows will be positive for some time to come. So long as the trustees and sponsor are advised that this should be the case for at least say 15 years, then I reckon that gives long enough for the assets to weather equity risks, with returns likely at least to match those on long bonds.

Given the existence of predators, how confident can the trustees and sponsor be about how long they will have? So long as the issue has been discussed, the trustees and sponsor are entitled to take a view and act upon it. In particular, investing in bonds is unlikely to prove a panacea.

It sometimes appears to be argued that it is necessary to focus upon market values in order to target discontinuance funding. However, if there is a long term,  then that stated target is a needless boundary constraint. To a large extent, the argument is circular, with wide solvency swings, essentially caused by mark to market, being taken as a reason for as speedy an exit as possible, implying discontinuance. That circularity needs to be swept away. See here for a bit more on this aspect.

Where the responsible stakeholders agree that it is reasonable to assume that they have the luxury of a long-term, say 15 years or longer, then equities are extremely likely to provide higher returns than bonds. This can be seen from history and likelihood.