Course Description

Course Overview

Falling interest rates and stagnant stock markets are having a dramatic impact on pension schemes’ ability to fund future liabilities. Ensuring sufficient resources for retirement today encompasses a complex set of decisions involving assumptions on asset returns, interest rates, inflation rates, longevity and future salary growth.

With inflation potentially rising in many economies, pension funds are increasingly looking to invest in real assets like infrastructure and real estate to hedge against the threat of rising prices. This negative backdrop is being played out against an environment where the corporate governance responsibilities of institutional investors and pension funds are being questioned and challenged.

This comprehensive Pension Fund Strategies programme addresses many of the current pension issues from both the asset and liability perspectives to give you a holistic appreciation of the complex issues involved

Course Objective

By the end of the course, Participants will understand the complex world of Pension Investment Strategy across a number of areas including:

• 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
• Actuarial calculations and assumptions
• The annuity market
• Pension risk management, pension reporting and governance

Course Content

The Fundamentals of Pension Funds, the Controversy Surrounding Pension Funds – a Global Perspective

• The global pensions crisis – European, U.K. and American perspectives
• The rising costs of funding pension schemes
• Pension fund deficits, sovereign debt and sovereign default risk
• Rising longevity and rising dependency ratios
• Falling real and nominal returns
• Ruptures in the investment value chain
• Gaps in governance structures
• Do Asia Pacific pension funds suffer the same problems?
• The growing importance of Asia Pacific pension funds in global financial markets
• Characteristics of the Australian and New Zealand pension markets
• Overview of Sovereign Reserve Pension Funds

 Pension Fund Asset-Liability Management Pension Fund Liabilities

• Measuring and modelling a pension liability
• Selecting the appropriate discount rate
• 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
• Theory of surplus returns and surplus asset allocation
• Surplus risk and the risk-adjusted change in surplus
• Funding probabilities

 Pension Fund Investment Strategies, Strategic Asset Allocation and Portfolio Optimization – Setting Objectives

• The optimal asset allocation of a pension fund – factors to consider
• The fund manager’s relationship with the trustees
• Deciding on the appropriate portfolio structure and benchmark
• Portfolio optimization with drawdown constraints
• Strategic asset allocation in the presence of liabilities
• Portfolio diversification – the importance of correlation
• The target return and minimum acceptable return
• The return orientation of the Pension Fund – relative, absolute, unconstrained
• Core/explore/satellite approaches
• The importance of alternative assets
• The importance of inflation-hedging asset

Pension Risk Management, Pension Reporting and Governance

• Defining pension fund risk
• Different types of risk and what they mean for a pension fund
• Asset-liability risk, tactical risk and manager selection risk
• Funding risk
• Solvency risk
• Surplus risk and contribution risk
• Counterparty credit risk
• Interest rate mismatch risk
• Tracking error, VaR and downside risk measures

Target Audience

• Pension reporting staff
• Pension investment consultants
• Pension fund managers
• Trustees
• Finance staff
• Actuarial staff
• Asset/Liability consultants
• DC scheme designers
• Pension product developers
• Asset allocators/investment strategists
• Insurance company staff
• Regulators
• Pension governance specialists
• Pension risk specialists

Delivery method: This will include combine lectures, discussions, group exercises and illustrations. Participants will also understand the theoretical and practical knowledge of the topic.

Venue:  

Fee:  

Duration: 1 week

Course Date: April 3rd – 7th 2023