Risk Budgeting in Pension Investment

R.C. Urwin, S.J. Breban, T.M. Hodgson and A. Hunt

British Actuarial Journal, 2001, vol. 7, issue 3, 319-347

Abstract: This paper extends the concept of investment efficiency from investment management structures to include strategic asset allocation and liability related issues. The concept of risk budgeting is developed. It represents a valuable way of incorporating risk and return information to produce more efficient investment decisions. Information ratio is a key measurement in the process, and it is concluded that the risk budget should be allocated based upon the marginal contribution to it for different sources of risk. Non-financial risk is also considered in terms of both governance and risk.

Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:cup:bracjl:v:7:y:2001:i:03:p:319-347_00

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