developing and implementing a risk budgeting system

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1、CHAPTER52DEVELOPINGANDIMPLEMENTINGARISK-BUDGETINGSYSTEM∗LeoJ.deBeverSponsorsneedabetterunderstandingoffundingriskbecausetheirbehaviorcancompletelyundoasset/liabilitymanagement.Safepensionfundingstrategiesareinherentlyexpensive,andactuarialvaluationsurplusesarenotmoneyinthebank.Unlessinterestra

2、tesmoveupsharplyandmarketindexesbeattheirmediocreoutlook,returntofullfundingwillbesomeyearsaway.Managerscanhelpbybetterallocatingriskandreturnacrossallactiveandpassivestrategies.TheOntarioTeachersPensionPlan(OTPP)isstructuredasapartnershipbetweenthe250,000OntarioteacherscoveredbytheplanandtheO

3、ntarioGovernment.Eachpartnerislegallyresponsiblefor50percentofanyfundingdeficiency.Planbenefitsareindexedtoconsumerpriceindex(CPI)inflation.OTPPhasroughlya50/50stock/bondsplit,and60percentofitsassetsareinvestedinCanada.Veryearlyinitshistory,OTPPstartedusingderivativesextensivelytomodifytheassetmi

4、x.Likemanypensionfunds,OTPPsufferedintheboom/bustcycleofthe1990s,forreasonsunrelatedtoinvestmentpolicy.Theissuewassomethingpensionmanagersrarelyworryabout:sponsorpolicyaroundbenefitsandcontributions.Iwillbeginthispresenta-tionbyfocusingonsponsorbehaviorbecauseIthinkitisthebiggestriskinanypensio

5、nfund.ROLEOFTHESPONSORSponsorsgenerallylackagoodunderstandingofthevolatilityoffinancialmarkets.Theyespe-ciallyneedabetterunderstandingoffundingrisk.Partoftheproblemisamismatchbetweenfinanceandactuarialpracticeonhowtotreatliabilities.Actuarialvaluationsdonotincorporate∗ReprintedfromAIMRConference

6、Proceedings:ImprovingtheInvestmentProcessthroughRiskManagement(November2003):6272.755CH052.indd7558/28/108:53:40PM756PartIII:ManagingRiskPensionRisktheconceptofrisk.Theytendtopriceliabilitiesbasedontheexpectedreturnontheassetsandfuturecontributionsthatarefundingthoseliabilities.Thatapproachisf

7、undamentallywrong.Financetheorysaysthatariskierwayofinvestingpensioncontributionsimpliesapensionben-efitthatislesssecureandlessvaluablethanonefundedwithmore-secureassets.Theroadbacktofullfundingcouldbeverylongunlessrealinterestratesmoveu