How Pension Funds Manage Investment Risks: A Global Survey

10 Pages Posted: 6 Oct 2010

See all articles by Sandy Halim

Sandy Halim

CEM Benchmarking Inc.

Terrie Miller

CEM Benchmarking Inc.

David C. Dupont

CEM Benchmarking Inc.

Abstract

This 2009 survey-based study describes how large global funds manage investment risk from strategy to implementation. In total, fifty-eight funds with assets aggregating to almost U$2 trillion participated in the survey. Almost all large funds (over U$25 billion) use some form of risk budgeting, whereas smaller funds are less likely to do so. Most funds (88%) manage active management risk (usually through controlling tracking error), whereas only 48% of funds manage balance sheet (surplus) risk. The sample size is perhaps too small to draw firm conclusions, but preliminary indications suggest that funds that believe in managing both active and surplus risk have generated better risk/reward tradeoffs. Per dollar invested, American corporate and public funds have the lowest average number of staff dedicated to risk management, whereas Australia / New Zealand and Canada have the highest.

Keywords: Governance, Liability, Pension Fund, Risk, Surplus, Tracking Error

Suggested Citation

Halim, Sandy and Miller, Terrie and Dupont, David C., How Pension Funds Manage Investment Risks: A Global Survey. Rotman International Journal of Pension Management, Vol. 3, No. 2, p. 30, Fall 2010, Available at SSRN: https://ssrn.com/abstract=1687774

Sandy Halim

CEM Benchmarking Inc. ( email )

80 Richmond Street West, Suite 1300
Toronto ON, M5H 2A4
Canada

Terrie Miller (Contact Author)

CEM Benchmarking Inc. ( email )

80 Richmond Street West, Suite 1300
Toronto ON, M5H 2A4
Canada

David C. Dupont

CEM Benchmarking Inc. ( email )

80 Richmond Street West, Suite 1300
Toronto ON, M5H 2A4
Canada

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