Pension Risk Management and Related Themes

Top Pension Papers and Upcoming Conferences

Should pension plans be explicitly hedging their interest rate risk exposures, increasing allocations to inflation-protected assets, or optimising portfolio allocations in other ways? The below papers provide clarity on some of the key themes for pension trustees, plan sponsors, and plan participants to consider in 2021. 

Like last quarter, we have also included the details for several noteworthy pension-related virtual conferences hosted by PLSA and PMI (the latter beginning on 21 April).

PENSION PAPERS

UK Retirement Landscape 2021 (MFS IM)

As MFS explains, the ripple effects stemming from the COVID-19 pandemic will continue to impact retirement outcomes for many years to come.

Key Themes for U.S. Corporate Pension Plans in 2021 (BlackRock, 2021)

For compliance reasons, this paper is only accessible in the United States

BlackRock suggests four key themes for plan sponsors to be mindful of in 2021: seizing the opportunity to invest sustainably, hedging interest rate risk, allocating to growth assets, and locking in their funded ratio gains.

To Hedge or Not to Hedge Interest-Rate Risk (PGIM Fixed Income, Mar 2021)

PGIM Fixed Income suggests that plan sponsors consider increasing their hedge ratio to lock in some of the present-day U.S. treasury curve steepness, and help reduce ongoing volatility in funded status levels.

Widening the Field for Yield (LGIM, Mar 2021)

For compliance reasons, this paper is not accessible in the United States & Canada

LGIM elaborates on why defined benefit pension schemes may wish to consider increasing their portfolio allocations to emerging market debt.

Pension Plans’ Top Priority: Optimising portfolio construction (Nuveen, 2021)

A factors-first approach to portfolio construction may be a more optimal approach for many corporate pension plans, regardless of funding level. Here, Nuveen elaborates on this approach and identifies the relevant factors.

Portfolio Protection – One size fits none (Janus Henderson, Mar 2021)

For compliance reasons, this paper is only accessible in certain geographies

Janus Henderson notes the upsurge in investor interest in protection strategies since the pandemic-induced market volatility. This is despite many research papers suggesting that the negative carry cost outweighs the benefits.

The Rise of the Superannuation Mega Fund (State Street, 2021)

State Street examines the consolidation trend within Australia's superannuation industry, the forces that are driving funds towards consolidation, and the changes occurring within the industry as a result.

Pensions Aspects Magazine: On the rise – The impending impact of inflation (PMI, Apr 2021)

For compliance reasons, this paper is only accessible in the UK

This latest installment of PMI’s magazine covers cybersecurity, responsible investing, and top tips for managing risk.

Navigating the Key Issues Facing Schemes in 2021 (PMI)

For compliance reasons, this paper is only accessible in the UK

In conjunction with River and Mercantile Solutions, the Pensions Management Institute presents the first issue of their UK Fiduciary Management Survey, which contains guidance for pension trustees on potential key themes for the upcoming year.

LIBOR Cessation: Impact on UK pension schemes (Insight Investment, 2021)

The LIBOR transition is underway. This quick primer provides information about the implications of LIBOR's cessation for UK pension schemes.

Automatic Enrollment: The power of the default (Vanguard, 2021)

Vanguard discusses automatic enrollment policies and participation rates for defined contribution pension plans in the United States.

The Purple Book 2020: UK DB pensions universe risk profile (PPF)

For compliance reasons, this paper is only accessible in the UK

At 83 pages, the Purple Book provides a wealth of information about the universe of private sector UK defined benefit pension schemes.

UK Pension Trends Survey 2020 (ACA)

The ACA’s 40-page survey includes 281 responses from UK employers, consisting of data on auto-enrolment, defined benefit pension consolidation, regulation, and climate change.

Fintech and the Global Pensions Savings System (Society of Actuaries, 2021)

How can fintech improve the overall pension experience? The authors examine potential improvements for participants and their interactions with plans, as well as new types of data for advisors, AI, and other applications of financial technology.

UPCOMING PENSION VIRTUAL CONFERENCES

PMI Investment Forum Apr 2021

This two-day virtual event hosted by the Pensions Management Institute covers regulatory issues and an update on the landscape for UK pension schemes.

Upcoming PLSA Virtual Conferences

This link leads to a list of upcoming virtual events and conferences hosted by PLSA. There are two events in Q2, the first of which is on local authority pension schemes and the second relates to ESG issues that are specific to UK pensions.

ABOUT THE AUTHOR

Andrew Perrins is a former Actuary and Asset Allocator. After qualifying as an Actuary, he worked for 15 years in investment management, serving as Director of Asset Allocation for Abbey Life and for Chase Manhattan, before setting out on a more entrepreneurial path.

To contact him, email [email protected]