Strategic Asset Allocation Concerns for Defined Benefit Plans

The investment choices of defined benefit plans are often constrained by regulations. In addition, the plan must maintain sufficient liquidity to fund the current benefits.

Plans using asset-only management attempt to minimize standard deviation relative to the required return.

Plans using an asset/liability management approach attempt to control:

  • Shortfall risk (the risk of falling below a given level of assets)
  • The volatility of the pension surplus
  • The volatility of contributions to the plan
For more information, see all articles on: Asset Allocation, FInancial Planning, Investment Returns, Portfolio Management

See also:
  • Pensions: Defined Benefit versus Defined Contribution
  • Hybrid Retirement Plans and Other Employee Benefit Plans
  • Defined Benefit versus Defined Contribution Plans
  • Portfolio Monitoring and Rebalancing
  • Steps to Forming a Strategic Asset Allocation
  • Technical Analysis Explained : The Successful Investor's Guide to Spotting Investment Trends and Turning Points

    The Intelligent Investor: The Classic Text on Value Investing

    Financial Statement Analysis: A Practitioner's Guide, 3rd Edition

    Managing Investment Portfolios: A Dynamic Process (CFA Institute Investment Series)

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