The Forgotten 70%: Strategies for Pension Plans Accruing Benefits
Plans with active participants need a holistic, flexible risk budgeting approach—not a simple glide path
Pension Series
MAPping the Future of Pension Funding
On August 8, President Obama signed the Highway and Transportation Funding Act of 2014 (HATFA-14) into law, thereby temporarily maintaining the solvency of the Highway Trust Fund. Approximately two-thirds of the financing for the law came not from transportation-related sources, but rather from an extension of the relief granted in 2012 to single-employer pension funds…
Avoid the Agg Drag
For plan sponsors that wish to de-risk, the Agg is not the solution Some defined benefit pension plan sponsors that have not begun to de-risk are hesitant to shift out of Agg-based fixed income allocations toward longer-duration mandates in the current environment, citing the specter of rising interest rates. Lengthening the duration of the existing…
Constructing a Liability Hedging Portfolio: A Guide to Best Practices for US Pension Plans
Executive Summary To construct an effective liability hedging portfolio, a key first step is to evaluate the variety of ways liabilities can be calculated and discounted and to identify the most relevant liability metric for a plan sponsor’s circumstances. Plan sponsors should also define the acceptable level of surplus risk and carefully consider the appropriate…
Pension De-Risking in a Low-Rate Environment—A Better Solution
After assessing the current environment of extremely low interest rates and its implications for defined benefit plans, we articulate our view on how to develop a flexible de-risking framework that takes into account today’s low yields. We contrast this to the more formulaic and mechanical “glide path” concept advocated by many pension industry participants. Defined…
Pension Risk Management
Asset management and investment banking firms across the globe continue to develop a variety of liability driven investing (LDI)–focused products and solutions for the pension plan community; however, there remains broad confusion over the meaning of LDI. While most of these products and customized solutions attempt to hedge liability-related interest rate and inflation risks, such…