October 2022
14Oct

Herd Behaviour of Pension Funds by Asset Class

By Jacob Antoon Bikker & Ian Koetsier This study investigates asset herd behaviour for Dutch pension funds from 1999 to 2014 using quarterly data. We find herd behaviour for investments in twenty asset classes including non-traditional asset classes, and to both purchasing and selling. Pension funds’ herd behaviour is particularly high in alternative investments, which might increase herding in general, as pension funds move their portfolio towards these assets in recent years. Herding intensity is higher during stock market crises,...

October 14, 2022
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14Oct

Liability Driven Investment and Asset Allocation inspired by JPM LTCMA

By Eddy H. Verbiest A white-box deterministic system simulates long-term LDI cashflows using as input J.P.Morgan Long Term Capital Market Assumptions adapted to make them interest rate dependent. Trading, coupons and dividends provide cashflows to pay liabilities and extract excess cash to stakeholders while maintaining the allocation weights and target lifes. Performance is measured by FixPct: the annually extractable Fixed Percentage of remaining liabilities to run-off to zero. This measure summarizes the interplay of drivers over many decades and allows...

October 14, 2022
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14Oct

UK. Pension watchdog examining LDI data amid gilts crisis

The watchdog overseeing U.K. retirement plans is conducting new analysis and reviewing information it already has from previous work with pension funds in efforts to build on its understanding of the liability-driven investment landscape. Charles Counsell, CEO at The Pensions Regulator, wrote in a letter to the government's Work and Pensions Committee on Wednesday that the regulator's investment consultants and actuaries are conducting the new analysis, which includes requesting data from a number of pension funds. The supervision team is...

October 14, 2022
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12Oct

Reforma Previsional en Chile: una demanda pendiente

Las AFP, o Administradoras de Fondos de Pensiones, cumplieron 42 años de funcionamiento. Antes existía en nuestro país un sistema de pensiones de reparto (sistema que se financia con los aportes que realizan los trabajadores activos y el Estado, por lo tanto el dinero aportado va a un fondo común con el cual se pagan las prestaciones; este sistema se concibe bajo los principios de solidaridad intergeneracional e intrageneracional), que agrupaba a un conjunto de cajas previsionales. Existía un consenso,...

October 12, 2022
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12Oct

Global financial instability risk hits new heights – IMF

A series of "cascading shocks" have raised the risk of global financial instability to new levels, officials with the International Monetary Fund said Tuesday. "It's difficult to think of a time where uncertainty was so high," Tobias Adrian, director of the IMF's monetary and capital markets department, said at a press briefing on the IMF's October 2022 Global Financial Stability Report. "The kind of risk we are flagging is the highest, outside of acute crisis," Antonio Garcia Pascual, deputy division chief...

October 12, 2022
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12Oct

US. N.J. pension fund would stop investing in fossil fuels under bill moved Thursday

The movement to divest pension funds from fossil fuel companies is gaining steam in New Jersey after lawmakers advanced a long-stalled bill Thursday. "What's proposed here is sending a signal to the fossil fuel world and industry that we've gotta find different ways to live - and you, the companies that produce these fuels, you've got to help us," said Sen. Bob Smith (D-Middlesex), a prime sponsor of the bill and chair of the Senate Energy Committee. The measure (S416) would...

October 12, 2022
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11Oct

Impact funds grow 40% over last two years, hitting $1 trillion

Impact investing has soared 40% over the past two years, according to a fresh analysis, as more money flows into strategies that actively seek to save the planet and its people. Investor allocations to impact investing, which targets specific environmental, social or governance outcomes instead of just screening for ESG risks, now stands at more than $1 trillion, according to the Global Impact Investing Network. That growth feeds into a maelstrom of discordant views around ESG that have plunged the once...

October 11, 2022
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05Oct

UK. Renewed focus on pension fund investment strategy following Bank of England’s intervention in gilt market

The ramifications of the Bank of England's urgent purchasing of government bonds are being felt by pension funds and some insurance firms. The upheaval in gilt (UK government bond) markets that led to last week's spectacular intervention from the Bank of England continues to reverberate. The Bank was obliged to buy long-dated gilts - those with a maturity of 20 or 30 years - on Wednesday last week following a wave of forced selling by pension funds. Those pension funds had been...

October 5, 2022
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05Oct

The Depth & Breadth of Sustainable Finance Regulatory Initiatives: Global Developments in 2022

By Lydia Sandner & Noam Cherki The scope and pace of global sustainable finance regulation has accelerated in 2022 across an array of regulatory areas (taxonomies, ESG and climate risk management and disclosures, product requirements, ESG in stewardship, and green bond frameworks). ▪ Regulatory efforts continue to prioritize management of climate-related financial risk as well as preventing greenwashing, although the agenda is beginning to expand to naturerelated risks and social issues as well. ▪ The European Union continues to be the leading...

October 5, 2022
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03Oct

Denominator effect causes plans to rethink allocations

A major reason pension funds are rethinking their asset allocations is an increased exposure to private assets — due, largely, to the denominator effect. Pension plans with private investments have seen that part of the portfolio "hold up pretty well vs. public equities and bonds that are down double digits this year," said Sona Menon, Boston-based head of North American pension practice at Cambridge Associates LLC. "This is a combination of what we call the denominator effect — because the...

October 3, 2022
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