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(Revised from original 2005 version)
General Motors U.S. Pension Funds
In June 2003, General Motors Corp. (GM) successfully marketed the largest corporate debt offering in U.S. history, worth $17.6 billion. The offering included $13.6 billion worth of debt denominated in dollars, euros, and pounds and $4 billion dollars denominated in convertibles. GM announced that it would use the majority of these proceeds to shore up its heavily underfunded U.S.-defined pension plans. GM considered investing the entire contribution to its U.S. pension funds coming from the debt offering not in traditional investment grade bonds or stocks, but in a broad category GM called "alpha." GMAM believed this would help meet its new target annual return of 9%, reduce the probability of a negative return in any given year from 20% to 10%, and reduce the volatility of plan assets by 40%.
Keywords: Strategic Planning;
Borrowing and Debt;
Viceira, Luis M., and Helen Tung. "General Motors U.S. Pension Funds." Harvard Business School Case 206-001, December 2005. (Revised from original July 2005 version.)