Pension Fund Strategy

The Global Pension Fund Crisis has placed a question mark over traditional investment theories and strategies that hitherto were considered unchallengeable. This unique programme takes a holistic approach to the complex subject of pensions ranging from pensions fund basis and the different types of pension scheme to more complex issues encompassing pension funding issues, asset/liability management and pension fund investment and portfolio optimisation. New, dynamic approaches and strategies to the pension fund investment challenge will be covered. Featuring: Understanding the global pensions crisis The challenge to the cult of the equity The role and purpose of pension funds The different types of pension scheme Measuring and modelling a pension liability Impact of liabilities on investment strategy Pension funding policies Asset/liability management tools Pension fund investment strategies Dynamic approaches Benchmark timing and tactical asset allocation Who should attend? The course will be of value to professionals in the following areas: Fund Managers Portfolio Managers Pension Fund Managers Pension Fund Administrations Pension Fund Trustees Pension Fund Advisors Treasurers Pension Fund Sponsors Equity and Fixed Income Specialists Asset Allocation specialists Asset/Liability Consultants Investment Advisors Private Bankers
Day 1 The fundamentals of pension funds The controversy surrounding pension funds The global pensions crisis – European, U.K. and American perspectives The pension fund as a financial business The link between asset allocation, capital structure and financial risk The challenge to the cult of the equity The rising costs of funding pension schemes Case study: The pension fund crisis Pension fund basics The role and purpose of pension funds The role and function of the various parties – trustees, sponsors, consultants and investment managers The pension fund as financial businesses and as part of the company The importance of the pension fund to corporate balance sheets Sources of wealth in a pension fund The fundamental pension equation The pension fund map and organisational structure The pension fund balance sheet Creating value in pension funds Case study: A multiple choice test on the basics of the pension fund business and pension fund terminology The different types of pension scheme The principles to be followed in developing scheme’s approach : Tailoring an investment strategy The risk tolerance of the sponsor Which risks to be managed Factors influencing investment strategy : Risk attitude Current solvency Impact on sponsoring company Age profile of scheme members Views on financial markets Defined benefit pension schemes Defined contribution pension schemes Day 2 Pension fund assets and liabilities Pension fund liabilities Measuring and modelling a pension liability The actuarial value of liabilities The liability return as a hurdle rate Impact of liabilities on investment strategy Liabilities and funding policy Risk management and liabilities The risk-adjusted change in surplus Surplus risk and the risk adjusted change in surplus Funding probabilities Case study: Pension fund liability study Pension funding policies The funding target The pace at which the target is attained Overall fund risk The lack of symmetry in the treatment of surplus and deficit The relationship between pension assets and liabilities Case study: The funding status of a pension fund Asset / liability management tools Current issues in asset/liability modelling Static portfolio analysis for asset allocation Dynamic portfolio analysis with assets and liabilities Dynamic models for asset liability management for defined benefit pension funds Developing a strategic benchmark in an asset / liability framework Integrated asset/liability management Case study: Asset / liability management Day 3 Pension fund investment strategies Portfolio optimisation Portfolio optimisation with drawdown constraints Asset & liability management for long term investors The importance of the strategic asset allocation decision Dynamic portfolio models for asset allocation Global equity and bond investing for pension funds Currency hedging and modelling techniques Case study: Portfolio optimisation Strategic asset allocation A brief history of risk and return Review of the characteristics of the major asset classes “There is no free lunch” Portfolio diversification – the importance of correlation The efficient frontier, efficient portfolios and optimal portfolios The absolute vs. relative return decision for the pension fund What is asset allocation and why do it The importance of strategic asset allocation A comparison of the different approaches to asset allocation Benchmarks and benchmarking Case study: Boots PLC – pension fund : strategic asset allocation and selection of external fund managers Benchmark timing and tactical asset allocation What is tactical asset allocation and why would a pension fund do it Defining the dimensions of a tactical framework for pension funds Core/Satellite approaches The macroeconomic approach to tactical asset allocation The valuation approach to tactical asset allocation Tactical style and sector rotation Case study: Tactical asset allocation Dynamic approaches Liability matching strategies – duration matching and cashflow matching Strategies with upside – dynamic contingent optimisation and portable alpha Limiting the sponsor risk – absolute return and liability hedging Generating real returns – new asset classes and real alpha Course summary and close