Eight issues of Catalyst were produced during September 2009 and 2010. Each one investigates a timely investment topic, offering practical solutions for complex challenges.
Journey Management, Part II Goal-focused, dynamic risk budgeting
Plan sponsors face a grueling economic environment: volatile liabilities, lower investment returns, and tighter contribution requirements. They need a framework for managing risk that is responsive to these challenges. In this follow-up article on Journey Management, Andy Hunt and Juan Acevedo explain how the approach helps plan sponsors meet their investment objectives. A case study demonstrates how Journey Management could be implemented for a typical pension plan.
Deficits, Rates, and Multiples: Why higher deficits will eventually hurt both bond and equity investors
Should investors adjust their asset allocation, as market projections change because of growing federal debt? Which markets look more favorable given the current fiscal situation in the US? Russ Koesterich considers the potential impact of record levels of government debt on both stock and bond investors.
Journey Management: A new approach to strategic asset allocation
Volatility may be an unavoidable hurdle in investing, but that doesn't mean it must go unmanaged. Cai Rees and Stuart Jarvis explain how plan sponsors can significantly increase the probability of meeting their investment goal, regardless of market conditions, by incorporating a dynamic approach to managing funding risk.
Deleveraging the US consumer: How lower debt levels could impact your portfolio
Consumer debt was the driving force behind global economic growth for years, particularly in the US. But as consumers are forced to cut back spending, Russ Koesterich asks: How much debt is too much, and how will lower debt levels affect investors?
Credit spreads: Reducing the threat, boosting the opportunity
With credit spreads near historic highs, any narrowing of the spread could damage a pension plan's funding ratio or it could provide an investment opportunity. Jim Gilliland and Tom Parker consider which credit markets offer attractive risk/return opportunities and the challenges of investing.
Is Diversification Dead?
The purpose of creating diversified portfolios is to lower downside risk. So why has diversification failed to protect investors during the credit crisis? Vincent de Martel and Kevin Kneafsey explain the forces behind the relative performance of various asset classes and the disruption of diversification.
The Greatest Interest Rate Call
Plan sponsors who focus their risk management efforts on asset allocation decisions may be neglecting the most significant risk of their pension plan—the liability. Kevin Kneafsey considers the interest rate risk exposure of pension plans, and provides a simple decision tree for whether plan sponsors should hedge their liabilities.
The Second Perfect Storm: Category 3 but strengthening?
As pension plan assets have dropped, falling Treasury yields and soaring credit spreads have had a devastating effect on plan funding rates. Andy Hunt details several actions that plan sponsors can take to better manage interest rate risk and credit risk, despite the recent damage done to pension funding levels.