Managing underfunding, reducing risk, seizing opportunity
According to estimates from Citi, total unfunded/underfunded government pensions liabilities worldwide exceed $80 trillion (almost double the published figure for national debt). In addition, DB pensions plans are showing huge deficits. What are the implications?
What can global pension funds to do better manage their risk? And what are the opportunities that this presents for pensions providers and insurers? Here is our list of some of the best, recent papers on these topics:
The Coming Pensions Crisis (Citi, 2016)
In this report, Citi examines the scale of the global pensions problem, and recommends a number of solutions. In particular, the authors identify the opportunities that this situation creates for corporate plan sponsors, asset managers and insurers.
The world's 300 largest pension funds (Willis Towers Watson, Sept 2016)
Over 40% of global assets are now owned by the world's 300 largest pension funds. This 40 page report provides insights into the world's largest pension funds, providing data by region and by type, including details of asset mix.
Hedge Fund-ing the Pension Deficit (Cambridge Associates, 2016)
Cambridge Associates examines the role hedge funds can play in pension portfolios and how they can be helpful to a pension risk management strategy. The authors explore some of the key areas for consideration if plan sponsors are contemplating hedge fund investment.
Corporate Pension Risk Management and Corporate Finance: Theory & Practice
How does a company's pension plan affect the stock price, its credit rating and credit spread? How should a US company manage its pension liabilities in the light of the insurance offered by the PBGC?
UK Pensions De-Risking report 2016 (Willis Towers Watson)
Currently, only £150 billion of an estimated £2 trillion of UK DB pension liabilities have hedged longevity risk. This report by Willis Towers Watson examines the landscape, the de-risking journey, and expectations for the future.
LDI: Taking A Holistic, Practical Approach (Loomis Sayles, Aug 2016)
In this well-written paper, the authors review how to assess and manage the allocation split between liability-hedging assets (LHA) and return-seeking assets, and then examine how to most effectively structure the LHA.
Survey of Large Pension Funds Long-Term Investments (OECD, 2016)
This comprehensive 56-page report by the OECD provides interesting insights into the performance and investment behaviours of the world's biggest institutional investors, examining in depth the trends observed at a national and regional level.
Reducing Pension Risk: 5 Myths Holding Back US Plan Sponsors (Prudential, 2016)
Volatility in the funded status of defined benefit pension plans can place a huge strain on the finances of plan sponsors. In the last 15 years, there have been two episodes where the funding status of US DB plans has deteriorated by over 30%. This report examines five myths which may be preventing large organisations from implementing de-risking and risk transfer strategies,
A question for DB plan sponsors: To LDI or not to LDI (Vanguard, 2016)
This paper briefly compares the experiences of two different DB clients. One client chose LDI and the other, having initially considered LDI, decided not to adopt it.
BREXIT: What is the Impact on UK Pension Schemes? (July 2016)
Currently, there is no consistent view on either how the UK’s trading relationship with the EU will look in the future, nor how long it might take for such trading relationship to be negotiated and agreed.