In an effort to reduce growing pension liabilities in the United States, a top Republican senator has proposed a plan that would allow state and municipal governments to transfer pension management to insurance companies.
The financial turbulence of the last decade didn’t just damage portfolio performance; it dealt a blow to longstanding approaches about how to manage it, forcing a re-evaluation of traditional approaches to asset allocation and risk management. Institutional investors have entered a new world of higher volatility, higher correlations and rock-bottom yields, with danger looming when rates finally do rise.
Today, most Canadian single employer DB pension plans have large solvency deficits, and there continues to be significant focus on the large minimum contributions required to fund these deficits. What has received little attention in recent years is that there is also a cap, prescribed in the Income Tax Act, on contributions that can be […]
The Canadian Wheat Board has purchased a $150-million annuity policy from Sun Life Financial that transfers investment and longevity risk from its DB plan to the insurer.
A new research study by the Canadian Financial Executives Research Foundation—the research arm of Financial Executives International Canada (FEI)—indicates that almost 60% of pension plan sponsors say their plan poses either a moderate or substantial risk to their business.
Historically, Canadian pension accounting standards were viewed as one of the barriers encountered by employers wishing to reduce pension risk. These barriers included the ability to defer and amortize experience gains and losses, the inclusion of expected additional returns from risky assets in the expected return on assets (EROA) calculation, and the ability to use a smoothed value of assets to calculate the EROA.
Originally from our sister publication, Investmentreview.com. Interest rate risk and liability driven investment (LDI) have made headlines in the last few years. There is even talk now of versions 2.0 or 3.0 of LDI strategies. Implementation of such strategies has certainly been delayed in the current low-interest rate environment. However, it is believable that, at […]
How to manage the risks of de-risking.
The ancient Romans are widely considered to have been master engineers and builders. One of their many innovations was the design and construction of a massive network of roads spanning across what would encompass much of continental Europe. Since Rome was the centre of the Roman Empire, the system of roads was created to facilitate the flow of people, goods and weaponry to and from the Roman capital—hence the idiom “all roads lead to Rome.”
Since the global credit crisis, investors have become more attuned to risk in general and to portfolio volatility in particular. The investment industry has responded with a dizzying array of products and strategies designed to help manage volatility. A clearer understanding of these sources of volatility reduction can mean that investors are better placed to make informed assessments of their relative attractiveness.