This paper provides a framework for assessing nonpublic defined benefit pension plans by examining the key characteristics of pension liabilities, various risks to consider during the asset allocation process, and risk immunization. Exhibits cover pension fund performance, liquidity constraints, liability duration, and a comparison of asset allocation differences between pensions and endowments.
In the fall of 2002, a confluence of factors supported greater risk taking. Today, the same factors suggest that investors focus on risk reduction and diversification.
Is the bear market over? Not likely.
There is no simple explanation for mid caps’ recent outperformance.
The S&P 500, while not exorbitantly expensive as in 2000, remains pricey nonetheless.
With corporations awash in cash, investors should expect (and demand) higher dividends.
Large-cap indices are benefiting from high-quality stocks this year.
Following a period of stellar earnings growth, U.S. equity valuations have improved, but remain high as earnings momentum begins to decelerate.
Investors should seek quality, not necessarily different capitalization sectors.
While most investors believe inflation is set to rise, this is hardly a foregone conclusion; indeed, the threats of high inflation and deflation both remain.