Dynamic Investment Strategies for Corporate Pension Funds in the Presence of Sponsor Risk

The present publication is part of the BNP Paribas Investment Partners research chair at EDHEC-Risk Institute on “ALM and Institutional Investment Management”.

Author(s) :

Lionel Martellini

Professor of finance at EDHEC Business School and scientific director of EDHEC-Risk Institute.

Vincent Milhau

Deputy Scientic Director at EDHEC-Risk Institute

Andrea Tarelli

Research Assistant at EDHEC-Risk Institute

Presentation :

The purpose of the present research publication is to go beyond simple forms of dynamic strategies, and to show that more sophisticated dynamic allocation strategies could usefully be implemented by pension funds. For instance, the paper shows that imposing a cap on the funding ratio, in addition to a floor, has a positive impact on both pensioners and bondholders, while only having a minor negative effect on equity value. The paper also introduces novel forms of dynamic strategies that recognise that pension risk is not only driven by the funding ratio of the pension fund, but also by the financial strength or weakness of the sponsor company. These strategies aim to control sponsor risk by avoiding states of the world where the pension fund is underfunded and the sponsor is unable to make up for the gap.
Pdf
Dynamic Investment Strategies for Corporate Pension Funds in the Presence of Spo...
(5.65 MB)
Type : Publication EDHEC
Date : le 20/02/2012
Extra information : For more information, please contact EDHEC Research and Development Department [ research@drd.edhec.edu ]
Research Cluster : Finance

See Also

OTHERWISE#4 is online !
- 23-03-2017
One of EDHEC’s hallmarks is “being where it is not expected to be” and OTHERWISE...
Support the new generation of students
- 20-03-2017
Support the new generation of students Act for EDHEC! Many Alumni in the UK have...
Emmanuel Metais named new Dean of EDHEC Business School
- 17-03-2017
EDHEC Business School is pleased to announce Emmanuel Métais’s appointment as the new...
MSc in Data Analytics & Digital Business: a new master designed to bridge the gap between data specialists and decision makers
- 13-03-2017
EDHEC Business School is pleased to announce the launch of a new MSc in Data Analytics...