November 10-12, 2011 | Red Rock Casino • Resort • Spa | Las Vegas | NVING Investment Management:The CFO’s Role in Managing...
November 10-12, 2011 | Red Rock Casino • Resort • Spa | Las Vegas | NVThe first thing the CFO should do is understand ther...
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ING Investment Management: The CFO’s Role in Managing Pension Fund Risk - Paul Zemsky, ING Investment Management

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Paul Zemsky of ING Investment Management, an asset management firm participating in the upcoming marcus evans CFO Summit XXIII Fall 2011, on why CFOs should understand and manage the risks in their company’s pension fund.

Interview with: Paul Zemsky, Chief Investment Officer, Multi-Asset Strategies, ING Investment Management

Published in: Economy & Finance, Business
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ING Investment Management: The CFO’s Role in Managing Pension Fund Risk - Paul Zemsky, ING Investment Management

  1. 1. November 10-12, 2011 | Red Rock Casino • Resort • Spa | Las Vegas | NVING Investment Management:The CFO’s Role in Managing Pension Fund Risk Paul Zemsky of ING Investment Management, an asset management firm participating in the upcoming marcus evans CFO Summit XXIII Fall 2011, on why CFOs should understand and manage the risks in their company’s pension fund. Interview with: Paul Zemsky, Chief Investment Officer, Multi-Asset Strategies, ING Investment ManagementFOR IMMEDIATE RELEASE“It is always a surprise to Chief Financial Officers (CFOs) and stable. This would reduce the risk of having to come up withthe pension community how correlated the pension fund of a significant money for the pension fund in any one year.company is with its overall business performance,” says PaulZemsky, Chief Investment Officer, Multi-Asset Strategies at Money managers have developed liability-driven investingING Investment Management. This is why it is critical that programs for companies to deal with this. However, theCFOs understand the relationship between the pension fund industry is surprised that very few have adopted these types ofassets and liabilities. policies. When the third quarter results come out, we should see many more pension funds having become seriouslyAt the marcus evans CFO Summit XXIII Fall 2011 in Las underfunded over the summer as falling interest rates resultedVegas, Nevada, November 10-12, Zemsky discusses why CFOs in liabilities growing more than the assets.should monitor pension fund risks and liabilities very closely. From your perspective, what is the CFO’s role in today’s highlyWhy should CFOs pay more attention to pension fund risks? competitive business landscape?Paul Zemsky: CFOs are overlooking the amount of risk being Paul Zemsky: CFOs need to be on top of pension risks. Thetaken between assets and liabilities. Not all CFOs have realized fund is a corporate asset, and the CFO has to minimize thethe impact that pension fund risks can have on their cost of funding it. CFOs do not need to be investment experts,company’s overall success. but they do need to be armed with the information to know what key questions to ask. They must know the surplusLiabilities are very sensitive to interest rates. When rates go volatility, the probability or range of funding status, and thedown, liabilities go up; in fact, the liability can move as much odds of a contribution surprise.as 20 per cent for every one per cent change in the 30-yearTreasury rate. Assets, however, are generally much less It is always a surprise to CFOs and the pension communitysensitive to interest rate fluctuations. Since liabilities change how correlated the pension fund of a company is with itsmuch more quickly than assets, there is a risk of a fund overall business performance. When interest rates and stockbecoming underfunded, resulting in additional expense to the markets fall and the company faces a very underfundedcompany to close a gap that may be relatively large compared pension fund, it is usually when the economy is soft and theto the other operational needs of the business. overall business environment is poor. That is a double whammy for the business.This rolls up into the finance office, which then has to comeup with cash flows to support the fund’s legal obligations. In How can the CFO make sure there is enough revenue for theour view, CFOs are not paying enough attention to this risk pension fund?and could face very unpleasant surprises. Paul Zemsky: We would argue that it is more important toWhat risk management strategies should CFOs look into? make sure that assets keep up with liabilities. This was one mistake that was made in the past. Assets can grow ten perPaul Zemsky: In pension risk management, assets need to be cent in one year and people may think that is a great return.reconfigured to be more sensitive to interest rates and to In the meantime, liabilities could have expanded 20 per cent,follow the changes in the value of the liability more closely, so leaving the plan worse off than the year before.that the differences between the assets and liability are more www.cfosummits.com
  2. 2. November 10-12, 2011 | Red Rock Casino • Resort • Spa | Las Vegas | NVThe first thing the CFO should do is understand therelationship between assets and liabilities, how that can movein different market environments and what the risks are inextreme cases. Once they are comfortable with the risks, theycan then come up with an asset allocation policy that cangrow assets faster than liabilities. Contact: Sarin Kouyoumdjian-Gurunlian, Press Manager, marcus evans, Summits Division Tel: + 357 22 849 313 Email: press@marcusevanscy.com About the CFO Summit XXIII Fall 2011 This unique forum will take place at the Red Rock Casino, Resort & Spa, Las Vegas, Nevada, November 10-12, 2011. Offering much more than any conference, exhibition or trade show, this exclusive meeting will bring together esteemed industry thought leaders and solution providers to a highly focused and interactive networking event. The Summit includes presentations on how innovation can transform finance organizations, the CFO’s role in growth and international expansion, and the 2012 financial landscape. For more information please send an email to info@marcusevanscy.com or visit the event website at www.cfosummits.com marcus evans group - finance/insurance sector portal Complementing our summit format, the Finance Network – marcus evans Summits group delivers peer-to-peer information on strategic matters, professional trends and breakthrough innovations. Please note that the summit is a closed business event and the number of participants strictly limited. About ING Investment Management ING Investment Management U.S. (ING IM U.S.) is a leading active asset management firm. As of June 30, 2011, ING IM U.S. manages approximately $162 billion for both affiliated and external institutions as well as individual investors. ING IM U.S. has the experience and resources to invest responsibly across asset classes, geographies and investment styles. Through our global asset management network, we provide clients with access to domestic, regional and global investment solutions. For more information, visit: www.inginvestment.com About marcus evans Summits marcus evans Summits are high level business forums for the world’s leading decision-makers to meet, learn and discuss strategies and solutions. Held at exclusive locations around the world, these events provide attendees with a unique opportunity to individually tailor their schedules of keynote presentations, think tanks, seminars and one-on-one business meetings. For more information, please visit www.marcusevans.com All rights reserved. The above content may be republished or reproduced – kindly inform us by sending an email to press@marcusevanscy.com www.cfosummits.com

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