Course dates
Course Background
The Global Economic crisis has resulted in large losses and shortfalls in pension and retirement schemes, which, has placed huge pressures 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.
With inflation rising in many economies, pension funds are increasingly looking to invest in real assets like infrastructure and real estate to hedge against the threat of rising inflation.
This comprehensive course addresses many of the pension issues from both the asset and liability perspectives to give you a holistic appreciation of the complex issues involved.
At the end of the course, delegates will be able to:
- Understand the global pensions crisis
- Examine the Asian pension and retirement marketplace
- Differentiate between the different types of pension scheme
- Measure and model a pension liability
- Understand the impact of pension liabilities on investment strategy
- Implement suitable pension funding policies
- Understand asset/liability management tools
- Implement pension fund investment strategies
- Appreciate dynamic approaches to managing a pension fund
- Select suitable alternative assets to enhance returns
- Understand the future challenges facing the Pension Fund marketplace
Who should attend?
- Pension fund managers
- Pension fund sponsors
- Pension fund benefit administrators
- Pension fund trustees
- Pension fund consultants and advisors
- Employee provident funds
- Asset/liability consultants
- Asset allocation specialists
- Portfolio strategists
- Product development specialists
- Sovereign wealth specialists
- Government pension advisors
- Investment bankers
- Insurance specialists
- Retirement specialists
Supporting publication
Day 1: The fundamentals of pension funds
The controversy surrounding pension funds
- The global pensions crisis – European, UK 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
The pension fund landscape in Asia Pacific
- Do Asia Pacific pension funds suffer the same problems?
- Characteristics of the Australian and New Zealand pension markets
- Regional differences amongst Asia Pacific pension schemes
- The growing importance of Asia Pacific pension funds in global financial markets
- Asia Pacific sovereign pension reserve funds
- The strategic reorientation of Asia Pacific pension funds – domestic vs. international exposures, traditional vs. alternative assets
- Changing investment policies in managing Asia Pacific pension fund assets
- Changes in the governance structures of Asia Pacific pension funds
- The trend to outsourcing to external asset managers
Case study: Pension fund capitalism
Delegates will assess the outlook for pension funds in the Asia Pacific region against those in the
US, UK 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-yougo schemes
- The changing role of private pensions
- Plans for reforming state social pensions
- Public-private, DB-DC, mandatoryvoluntary, 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.
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
- 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
- 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 (ALM) tools
- Current issues in asset-liability modelling
- Static portfolio analysis for asset allocation
- Dynamic portfolio analysis with assets and liabilities
- Dynamic models for ALM in defined benefit pension funds
- Developing a strategic benchmark in an asset-liability framework
- Integrated ALM
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.
Hedging pension liabilities with longevity-linked securities and derivatives
- What is longevity risk?
- 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 mortality catastrophe bonds
- Mortality swaps and forwards
- Longevity swaps, futures and options
- Hedging pension liabilities with mortality-linked securities and derivatives
Case study: Managing longevity risk
Delegates will assess some high profile moves by pension funds to manage their longevity risks.
Day 3: Pension fund investment and risk management issues
Strategic asset allocation and portfolio optimisation
- 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 insured
- Alpha, 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.
Pension funds and risk management
- Different types of risk and what they mean for a pension fund
- Tracking error, VaR, downside risk, shortfall risk and probability
- The total level of active risk in a portfolio
- Active risk and active risk budgeting
- Allocating active risk across variousasset classes
Course conclusion
Hilton Hotel Singapore, Singapore, Singapore
This programme takes place on a non-residential basis at Hilton Hotel Singapore. Non-residential course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation, however, a list of convenient hotels (many at specially negotiated rates) is available upon registration.
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Bernard Duffy
Bernard Duffy is a dedicated training solutions provider to the Global Wealth Management and Fund Management industries. His consultancy specialises in the design and delivery of training programmes across the full spectrum of products and asset classes, both traditional and alternative. He is highly respected for his ability to integrate selling skills training with complex product training in an informative and entertaining style.
Bernard 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 the single premium bond market. He joined County Bank at the end of 1986 as Research and Development executive in the unit trust division. In 1987 he transferred to the pension fund department, assuming responsibility for the management and performance of Canadian equity investments. In 1991, he was seconded to the European equity desk to manage a research project on smaller European companies. At the end of 1992, he was appointed head of the North American equity desk.
Bernard has a B.A.(Hons) in Economics and Politics, an M.A. in Development Economics and an M.B.A. in Finance from City University Business School in London. Bernard is the course director and lead trainer on a number of Euromoney training programmes. He has undertaken numerous training assignments throughout Europe, Asia and the U.S.A. for leading private banks and asset managers. In 2007, Bernard founded a boutique asset manager focused on researching and investing in a broad range of emotional assets from fine art and rare stamps to diamonds and classic cars.
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