budgeting and monitoring pension fund risk

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1、CHAPTER49BUDGETINGANDMONITORINGPENSIONFUNDRISK∗WilliamF.SharpeThisarticledescribesasetofmeanvarianceproceduresforsettingtargetsfortheriskcharacteristicsofcomponentsofapensionfundportfolioandformonitoringtheportfolioovertimetodetectsignificantdeviationsfromthosetargets.Becauseofthesignificantcorrela

2、tionsofthereturnsprovidedbythemanagersofatypicaldefined-benefitpensionfund,theriskoftheportfoliocannotbecharacterizedassimplythesumoftherisksoftheindividualcomponents.Expectedreturns,however,canbesocharacterized.Ishowthattherelationshipbetweenmarginalrisksandimpliedexpectedexcessreturnsprovidesthee

3、conomicrationalefortheriskbudgetingandmonitoringbeingimplementedbyanum-berofpensionfunds.Ithenshowhowafundsliabilitiescanbetakenintoaccounttomaketheanalysisconsistentwithgoalsassumedinasset/liabilitystudies.Ialsodiscusstheuseoffactormodelsandaggregationanddisaggregationprocedures.Thearticleconclu

4、deswithashortdiscussionofpracticalissuesthatshouldbeaddressedwhenimplementingapensionfundrisk-budgetingand-monitoringsystem.Institutionalinvestmentportfoliosarecomposedofindividualinvestmentvehiclesthataregen-erallyrunbyindividualmanagers.Andtraditionally,eachofthecomponentsofaportfolioisanassetw

5、hosefuturevaluecannotfallbelowzero.Inthisenvironment,thetotalmonetaryvalueoftheportfolioistypicallyconsideredanoverallbudgettobeallocatedamonginvestments.Inaformalportfoliomodel,thedecisionvariablesaretheproportionsoftotalportfoliovalueallocatedtotheavailableinvestments.Forexample,inaportfolio-op

6、timizationprob-lem,the“budgetconstraint”isusuallywrittenas∑Xi=1,(49.1)iwhereXiistheproportionoftotalvalueallocatedtoinvestmenti.∗ReprintedfromtheFinancialAnalystsJournal(September/October2002):74–86.715CH049.indd7158/28/108:52:00PM716PartIII:ManagingRisk—PensionRiskThisapproachdoesnotworkwellforp

7、ortfoliosthatincludeinvestmentsthatcombineequalamountsoflongandshortpositions.Forexample,atradingdeskmaychoosetotakealongpositionof$100millioninonesetofsecuritiesandashortpositionof$100millioninanother.Thenetinvestment