Investment Policies of Property-Liability Insurers and Pension Plans: A Lesson from Ben Graham

The investment returns of property-liability insurers and pension plans are of increasing importance to the American public. This article examines a publicly available investment strategy, formulated by Benjamin Graham, which, seemingly, is ideally suited to the goals and constraints faced by property-liability insurers and pension plans. Simulations of this strategy over the 1955-1976 period revealed both after-cost risk-adjusted performance and average annual return greater than an appropriate market benchmark. This strategy, therefore, provides a reasonable alternative to both the active strategies utilized by many institutional portfolio managers and to passive index funds.