The Road Ahead: Rethinking the Investment Policy Roadmap

Abstract

Poor recent investment returns have often been seen as one of the main culprits in the current public pension funding crisis in the United States. Yet scant attention is paid to the investment risks, return assumptions, and investment decision-making processes underpinning these results. This article lays out a framework proposed in the City of New York to address the three shared investment challenges faced by many public funds across the United States: first, create a new starting point for investment planning based on understanding risks; second, draw an investment policy roadmap with clear steps to get to a long-term balanced policy portfolio; and, finally, get governance right. The solutions to some of the most difficult problems of pension stewardship are visibly within the grasp of everyone involved.

Keywords: Investment Policy, Pension Fund, Pension Governance, Pension Risk Management