Improving investment performance for pension plans

John M Mulvey (), Koray D Simsek and Zhuojuan Zhang
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John M Mulvey: Bendheim Center for Finance, Princeton University
Koray D Simsek: Bendheim Center for Finance, Princeton University
Zhuojuan Zhang: Bendheim Center for Finance, Princeton University

Journal of Asset Management, 2006, vol. 7, issue 2, No 3, 93-108

Abstract: Abstract Over the past half-decade, pension plans in the US have seen their ample surpluses turn into massive deficits. Many pension trusts in early 2006 possess funding ratios below 75 per cent. This paper suggests that multi-period investment models can increase performance for long-term investors including pension plans, family offices and university endowments. The framework improves the investor's understanding of risks and rewards in a temporal setting. Contribution and saving strategies can be integrated with asset allocation decisions to enhance the sponsoring company's shareholder value via the pension trust. Applying an overlay strategy further improves performance. Advantages are illustrated via several examples, including the slow-growing telecommunication sector and the under-funded pension plan of a car company.

Keywords: pension planning; asset-liability management; financial optimisation; asset allocation; commodity trading (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1057/palgrave.jam.2240206

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