A GlobeRisk Perspective on Pension Funds
In the first 7 years of the 21st century the typical UK defined benefit pension scheme has responded to improving longevity and poor stock market returns by closing to new members.
Valuation deficits are rather lower than they were in 2003, but they still represent a strategic consideration for most funds.
Funds now hold the smallest proportion of domestic equities for twenty years, with reallocation towards commercial property, fixed income and, to a lesser extent, foreign equities.
In addition to seeking sponsor support to reduce deficits quickly, key Pension fund themes at present are:
- Liability Driven Investment (LDI) techniques
- Considering equity allocations in the context that most efficient frontier algorithms would output nil equity allocations
In our view pension funds are too focussed on defensive matters. We suggest that most rational forwarding looking risk/reward analyses of financial markets make equities look very attractive in relation to fixed income trading at record low spreads
GlobeRisk consultancy services to pension funds
In 2007 GlobeRisk can offer the following services
- Review of investment manager performance (with particular reference to risk adjusted performance)
- Liability Driven Investment(LDI) strategy
- Design of portfolio investment policy
- Design of risk management framework