Pension Fund Strategies

Euromoney Learning Solutions

How long?

  • 5 days
  • in person

What are the topics?

Euromoney Learning Solutions


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Who should attend

  • Pension scheme administrators
  • Pension accounting staff
  • 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

About the course

Explore pensions fund basis & the different types of pension schemes

Low interest rates and volatile stock markets are having a dramatic impact on pension schemes’ ability to fund future liabilities. The sovereign debt and global economic crises have resulted in major shortfalls in pension and retirement schemes, placing a huge amount of pressure on Corporate and Government balance sheets. Several countries have a significant share of savings earmarked for retirement either through private individual savings plans or via Government pension funds. But despite rising savings rates, numerous gaps exist in private and public retirement plans and finances.

Furthermore, ageing populations in many countries are creating a significant pension burden that will require innovative and radical asset/liability management strategies for years to come.

Why a Pension Fund Strategy Course

Ensuring sufficient resources for retirement encompasses a complex set of decisions involving assumptions on asset returns, interest rates, inflation rates, longevity and future salary growth.

This comprehensive programme addresses many of the current pension issues from both the asset and liability perspectives to give the delegate a holistic appreciation of the complex issues involved.


Day 1

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

Trainer Led Discussion: Pension Fund Capitalism Delegates will assess the outlook for pension funds in the Asia-Pacific region against those in the developed markets of the U.S., U.K. and Europe

Pension Fund Basics

  • The role and purpose of pension funds
  • The role and function of the various parties – trustees, sponsors, actuaries, consultants and investment managers
  • The link between asset allocation, capital structure and financial risk
  • The pension fund as a financial business and as part of the company
  • Sources of wealth in a pension fund
  • The fundamental pension equation
  • The pension fund map and organisational structure – know your stakeholders
  • Creating value in pension funds

Exercise: A multiple choice exercise on the basics of pension finance

The Different Types of Pension Scheme

  • An overview of social security and state pension schemes
  • General characteristics of pay-as-you-go schemes
  • The changing role of private pensions
  • Plans for reforming state social pensions
  • Public-private, DB-DC, mandatory-voluntary, means tested-non means tested
  • Defined benefit pension schemes
  • Defined contribution pension schemes
  • Hybrid defined benefit, defined contribution schemes
  • Should DB pension schemes be career average or final salary?

Case Study: Defined Benefit Vs Defined Contribution Pension Schemes Delegates will design a checklist on the factors to consider in designing a DB scheme and a DC scheme

Guest Speaker Presentation: Investing in the Age of Volatility

  • Why will markets remain volatile for the next 5 years
  • How can pension plans convert volatility into an investment opportunity
  • As old style diversification no longer works, what will the new style look like
  • Where will the return come from
  • What do pension funds need to do to ensure that investing is not a loser’s game for them

Led by Amin Rajan, CEO, Centre for Research in Employment and Technology in Europe (CREATE)

Day 2

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

Case Study: Pension Fund Liability Study Delegates will analyse a pension fund with an asset-liability mismatch and an inappropriate asset allocation policy. They will be required to make a number of important policy decisions for the fund

Pension Funding Policies

  • Pension funding policies
  • Determination of the required funding contribution
  • The funding target
  • The pace at which the target is attained
  • Funding policies and benefit policies
  • Building and accumulating reserves in the fund
  • The lack of symmetry in the treatment of surplus and deficit
  • The relationship between pension assets and liabilities

Case Study: Pension Funding Policy Delegates will select the fund’s appropriate contribution rate and strategic asset allocation that minimises a weighted sum of surplus risk and contribution risk

Asset-Liability Management Tools

  • Static portfolio analysis for asset allocation
  • Dynamic portfolio analysis with assets and liabilities
  • Dynamic models for asset-liability management in defined benefit pension funds
  • Minimising surplus risk and contribution risk
  • Contribution and benefit policies for underfunded schemes
  • Developing a strategic benchmark in an asset-liability framework
  • Integrated asset-liability management
  • Case Study: Asset-Liability Management for a Pension Fund
  • Delegates will examine how an asset-liability study might be conducted and how strategic asset allocation decisions can affect a number of important asset-liability variables

Asset-Liability Modelling

  • What is asset-liability modelling and why do it?
  • What can an asset-liability study realistically achieve?
  • Current issues in asset-liability modelling
  • The liability matching asset portfolio - LMAP
  • Can asset-liability modelling generate a LMAP?
  • The actuary’s confidence in the economic/demographic projections and correlation assumptions

Case Study: Asset-Liability Modelling Delegates will review the results of an asset-liability study and design an appropriate investment strategy to match accordingly

Day 3

Pension Fund Investment Strategies

Strategic Asset Allocation and Portfolio Optimisation – 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 optimisation 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 assets
  • Case Study: Strategic Asset Allocation for a Pension Fund
  • Delegates will devise an appropriate portfolio structure and relevant benchmark for a pension fund facing shortfall risk

Tactical Asset Allocation and Benchmark Timing

  • The move away from static benchmarks
  • Dynamic approaches to asset allocation – tactical, integrated and insuredAlpha, beta and market timing
  • Market cycle analysis
  • Factors affecting asset prices in different phases
  • The equity cycle and how it interacts with the interest rate and credit cycles
  • Sector and style allocation at each phase of the cycle

Case Study: Tactical Asset Allocation through the Economic Cycle

Delegates will devise a tactical asset allocation framework for a pension fund. Emphasis will be placed on important retirement considerations like target retirement date and lifecycle issues

Dynamic Approaches to Pension Fund Management

  • Liability-matching strategies – LDI investing, duration matching and cashflow matching
  • Strategies with upside – unconstrained investing, portable alpha and dynamic contingent immunisation
  • Limiting the sponsor risk – absolute return and liability hedging
  • Generating real returns – new asset classes and structural alpha
  • Target date investing and target date funds
  • Lifecycle investing and lifecycle funds

Case Study: Dynamic Investment Approaches Given a choice of dynamic investment approaches, delegates will be required to choose the approach that best matches the needs and profile of the fund

Guest Speaker Presentation: Plotting a Path to Full Funding

  • Setting an objective for full funding
  • Defining a plan to achieve it
  • Liability issues to address before implementing
  • The mechanics of how to make the plan successful
  • Governance options
  • The end game

Led by Bobby Riddaway, Head of Investment Consulting, Capita Employee Benefits

*Day 4 *

Actuarial Considerations, Scheme Design and the Annuity Market

Role and Responsibilities of the Actuary

  • The role of the pensions actuary
  • The actuaries’ contribution to the existence of pensions
  • How the role of the actuary is changing
  • Advocate or broker; calculator or auditor
  • Conventional pension accounting and actuarial standards
  • How useful are conventional actuarial and accounting methodologies

Case Study: The Role of the Actuary

Actuarial Calculations and Assumptions

  • The actuary’s choice of discount rate
  • Why the confusion and controversy surrounding the choice of discount rate
  • Lessons from financial economics and modern portfolio theory
  • Demographic and economic/financial assumtions
  • Actuarial value of assets
  • Actuarial value of liabilities
  • Moving to an economic accounting system for pensions
  • Risk does not diminish with time, it accumulates

Case Study: Synchronising Asset Allocation and Funding Recommendations with the Actuary’s Recommendations

Scheme Design Considerations – DC Plans

  • DC scheme design in the accumulation phase
  • Risks confronting the DC member
  • Risk and control variables in stochastic pension modelling
  • Charges attached to DC schemes
  • The distribution phase of DC pension schemes
  • Optimal design of DC schemes during the distribution phase
  • The annuitisation decision

Case Study: DC Scheme Design in the Accumulation Phase


  • Overview of the annuity markets
  • Different types of annuity – purchase arrangements, coverage, variations, payment terms
  • ILRIPs – Investment-linked Retirement Income Programmes
  • Decomposition of annuity charges
  • Designing and stress-testing the various ILRIPs

Case Study: The Annuity Market

Guest Speaker Presentation: Infrastructure Investing for Pension Funds

  • Risks and rewards of infrastructure as an asset class
  • What are the characteristics of infrastructure investing that appeal to pension funds
  • The unique characteristics of infrastructure
  • Opportunities and pitfalls of infrastructure investing for pension funds
  • What is required for successful infrastructure investing

Led by Georg Inderst, Independent Adviser, Inderst Advisory

*Day 5 *

Pension Risk Management, Pension Reporting and Governance

Pension Risk Management

  • Defining pension fund risks
  • 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

Case Study: Pension Risk Management Applying a number of statistical risk measures in analysing and managing the risk in a pension fund

Longevity Risk Hedging and Transfers

  • What exactly is longevity risk
  • De-risking a pension fund
  • The potential impact of ageing populations on asset returns
  • Longevity risk transfers and pension buy-outs and pension buy-ins
  • The development of mortality-linked securities and derivatives
  • Longevity bonds and longevity swaps
  • Hedging pension liabilities with longevity-linked securities and derivatives

Case Study: Managing Longevity Risk Delegates will assess some high profile moves by pension funds to manage their longevity risks

Pension Scheme Reporting

  • Key issues in pension scheme reporting
  • Developing appropriate reporting mechanisms
  • Reporting on funding status
  • Trustee reporting
  • Performance and attribution reporting
  • Risk management reporting

Case Study: Pension Scheme Reporting

Pension Governance and Organisation Structure

  • The pension mission statement
  • Best practice governance of pension schemes
  • Trustee board effectiveness
  • Legal and governance structure of pension funds
  • Codes of governance for pension funds
  • Ways to improve pension fund governance
  • Lessons from the Netherlands and Australia

Trainer Led Discussion: Pension Fund Governance

Course summary and close


Bernard Duffy

Bernard Duffy began his investment management career with Abbey Life in Dublin before moving to London in 1985 to work for Irish Life Assurance Plc. At Irish Life, he was responsible for investment product marketing and new fund launches and was responsible for the company’s successful entry into...

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Pension Fund Strategies at Euromoney Learning Solutions

From  GBP 4 895$6,865
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