8:00 – 9:30Breakfast Workshop – Risk Budgeting for LDI

Creating An Effective Risk Modeling Framework For Greater Control Over Your Assets And Liabilities

The financial crisis has crystallized attention on the desirability of LDI. Those that transitioned to LDI before the crisis have certainly emerged from it with fewer cuts and scratches – but for those yet to make the transition, tough decisions need to made. One of the hardest things to get right is the question of the risk budget – specifically, how big should it be, which risks should it encompass, and what hedging strategies should be built around it? This unmissable breakfast workshop session will be led by Mick Moloney, Global Leader of Mercer’s Financial Strategies Group and one of the world’s leading authorities on liability-driven investing strategies.

What you will learn:

• Does size matter? Determining your optimal risk budget from a detailed analysis of characteristics of your assets and liabilities
• Determining which risks are being targeted for hedging: Inflation, nominal rates, real rates, longevity, etc.
• Incorporating tail events into your risk budgeting process
• Identifying the most effective risk assessment methodologies, e.g., VAR and scenario analysis
• Establishing your tolerance for surplus volatility, and creating transparent de-risking procedures when volatility levels exceed a certain threshold
• Identifying appropriate hedging instruments: ILBs, nominal government or corporate bonds, swaps, inflation swaps
• Determining the size and availability of hedging products
• Making the decision about whether to re-allocate freed-up risk to returngenerating activities?

How you will benefit

• Find the perfect risk level for your investment portfolio
• Create a truly comprehensive risk management strategy
• Hedge effectively without compromising returns

9:45 Chairman’s Opening Remarks

10:00 The Financial Crisis And The New Paradigm For Pension Plan Risk Management: How Can We Avoid Being Here Again?

• Assessing the damage caused to US pension plans by the 2008 financial crisis
• Distinguishing the winners from the losers: Examining the investment strategies of the funds that suffered least from last year’s market meltdown
• Understanding the role of alternative investments in risk-reduced asset allocation strategies
• To what extent has the financial crisis changed – if at all – the way pension plans measure, and manage, their risk?
• Looking at the clouds on the horizon: What kinds of future risk should US pension plans be most wary of?
• Determining the most effective asset allocation strategies for dealing with future financial challenges

10:45 Panel Discussion: Is LDI The Answer? Considerations On When And How To Make The Transition To A Liability-Driven Investing Model

• Examining the characteristics of a liability-driven investing strategy
• Evaluating the benefits of matching asset allocation with plan liabilities
• Comparing your execution options:
• Examining the advantages and disadvantages of executing with physicals and swaps
• Evaluating the benefits of a phased approach to LDI
• Timing the transition: Considerations for determining whether to make the switch now, and miss out on future equity gains, or delaying the transition to enhance affordability
• Is LDI too narrow?

12:00 Asset Class Spotlight:
Interactive Roundtables Discussions On Portfolio Diversifiers

With the meltdown in the equity markets responsible for a net pension fund loss of more than $5trillion globally, many in the pension fund community are displaying an increased interest in alternative asset classes that may be uncorrelated with global stock prices, or exhibit favorable growth dynamics. The Pension Plan De-Risking Summit’s Asset Class Spotlight is a great opportunity for you – the plan sponsor – to get a better handle on some of the alternative asset classes that may be of interest to you. Each roundtable discussion lasts an hour, and is led by an expert in that particular field. The uniquely informal, offline format of the spotlight session enables you to brainstorm with your peers regarding the suitability of that particular asset class for your investment portfolio. Alternative asset classes under the spotlight include:

2:00 Panel Discussion: Does Inflation Vs. Deflation Pose A Greater Threat To Pension Plans? Determining The Most Effective Asset Allocation Strategies For Guarding Against Each Eventuality

• Identifying the inflationary forces in today’s economy…
• Fiscal stimulus
• Expanded monetary supply …and deflationary forces:
• Reduced lending
• Increased bankruptcies
• Does inflation or deflation pose a greater threat to today’s pension plans?
• Examining the most effective asset classes for hedging against inflation, and the most effective investment strategies for weathering a period of deflation
• Can both inflationary and deflationary possibilities be reflected in the same asset allocation strategy?

2:45 The Secondary Market In Life Insurance: Understanding The Role That Life Settlements Can Play Within An Institutional Portfolio

• An introduction to the secondary market in life insurance
• Understanding the dynamics of longevity-based investments
• Determining the most effective use of life settlements within an institutional portfolio
• Investment diversification or liability exacerbation? Considerations on the role of longevity investments in the asset-liability framework
• Examining the major risks associated with investments in life settlements

4.00 Asset-Liability Studies As A Risk Management Tool

As the rules governing pension plans continue to evolve, more sophisticated investment choices become available, and pension plan risk becomes more and more significant for many corporations, the asset-liability study has grown in importance. It is a key component in the risk management process for both the plan and the plan sponsor. In this session, Jim Gannon will provide an overview of how these studies are conducted today, of the risk measures that lie behind them, and how new developments such as liability-responsive asset allocation allow even finer tuning of asset allocations. He will also highlight how plan size affects the process and the available choices.

Jim Gannon Manager, Investment Strategy & Consulting Americas Institutional, Russell Investments

4:45 The Role Of Asset Liability Studies In Risk Budgeting For Smaller Plans

Small pension plans tend to focus on relative return performance without an awareness of their equity and interest rate risk. By utilizing a simple risk budgeting approach smaller plans can assess portfolio risk and achieve a better understanding on the returns and volatility of the total portfolio and, their fund managers and asset classes. This session will look at the role that asset liability study plays in identifying the relationships between the assets and liabilities in defined benefit pension plan and its role in establishing a basic risk budget.

• Asset-liability studies – a common but misunderstood tool
• Identifying the key asset-liability study assumptions
• Benchmarks and reports that highlight the impact of volatility in a portfolio
• A risk framework for adding or removing managers
• Overcoming the limitations and pitfalls of risk budgeting