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Feature: pension fund risk hedging
14 July 2010
Pension funds need more comprehensive pension cashflow information to execute more efficient hedging strategies
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[Pension funds]
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For pension funds to execute more efficient hedging strategies, they need more comprehensive pension cashflow information, says Matthew Bale, Vice President of Client Solutions at PensionsFirst Analytics
Managers and trustees of defined benefit (DB) pension schemes have always kept a close eye on the investment risks associated with their asset portfolio. In recent times, however, they have begun to look more carefully at the risks associated with their scheme’s liabilities, or what will impact the value of benefits owed to scheme members in the future. To the majority of DB pension schemes the most significant of these liability risks are those associated with interest rates, inflation and longevity. Certainly, changes in any of these aspects can have a significant impact on a pension plan’s funded status and, by association, on an employer’s balance sheet, cashflow, and income statement.
Such risks make liability risk mitigation vital...
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