According to results of Callan Associates’ 2013 Risk Management Survey, more than half of fund sponsors (55%) say their risk management tools are effective at mitigating investment risk, but 14% see them as simply a means to improve risk identification and monitoring. One-third of respondents indicated they do not know yet the effectiveness of their risk management tools because they are new and untested in a true market crisis.
The survey found formal risk management processes are most prevalent at large funds. Half of the medium and small funds have adopted a risk management process or are doing so in 2013. Forty-two percent of respondents employ proprietary and/or third-party risk measurement tools, such as software or data services. Usage of third-party tools is most prevalent at public funds, while endowments and foundations more often use in-house (proprietary) tools.
Corporate and public funds are embracing policy-level approaches to risk management more so than endowments and foundations. Public funds have implemented economic regime asset allocations, risk parity, and risk factor-based asset allocations, while corporate funds favor liability-driven investing and funded status-based glide path de-risking.
Strategy-level approaches to mitigate risk are easier to implement than those that alter the fund’s overall investment policy, and Callan observed higher levels of adoption of strategy changes across fund types. Public funds and foundations and endowments are most heavily implementing or considering real assets, opportunistic fixed income, absolute return and long/short equity. Corporate funds are also embracing absolute return, but long duration is the most favored strategy-level approach used to address risk.
Many fund sponsors wrestle with whether or not to tactically manage plan risk. Only 30% of sponsors have made rebalancing decisions based on risk management findings. Of those that have not done so, 82% do not plan to in the future.Public (31%) and large (25%) funds are the most likely to use tactical implementations going forward.
According to the survey, most funds (94%) do not have a formal risk budget, but explicitly address risk management in their plan governance via asset allocation, investment objectives and disciplined rebalancing.
The investment committee is the body most regularly tasked with deciding when to take action based on the findings of risk management tools. The most common actions taken were asset allocation changes (64% of respondents), manager due diligence/search (56%) and increased manager monitoring (52%). Twenty percent of respondents had not yet taken any actions based on risk management findings.
The survey was conducted in November 2012 and includes responses from 53 fund sponsors representing $576 billion in assets.
The Outsourced Chief Investment Officer Model: One Size Does Not Fit AllCallan
As investors reach for returns in a sometimes bruising market, they are adding private equity, hedge funds,
and other alternatives, leading to increasingly sophisticated—and complicated—portfolio monitoring and
management. Heightened regulatory and compliance requirements have further increased the time and
resources required to meet fiduciary responsibilities. This has led some investors to consider delegating
investment oversight, monitoring, and management duties.
The industry press regularly reports on a large and rapidly growing outsourced chief investment officer
(OCIO) market, and some fund sponsors wonder if this model would serve them better than the traditional consulting model. Funds managed through an OCIO are beholden to the same challenging market environment and regulatory atmosphere, but the burden of balancing these challenges can be largely shifted from the investment committee to the OCIO provider. Some funds find this solution meets their needs.
In the outsourced chief investment officer (OCIO) model (also known as “implemented consulting,”
“discretionary consulting,” or “delegated consulting”), an institution shifts discretionary authority to an
advisory firm to manage some or all of the investment functions typically performed by the investment committee. The precise definition of this model varies as much as the name, making the size and scope of the marketplace difficult to pin down.
The increasing popularity of this model is in part a response to the frustration investment committees
have felt amid a shifting environment in which portfolio management requires more resources. While an OCIO offers an elegant solution, it is not a panacea for all the issues facing institutional investors, and relinquishing all fiduciary oversight is not an option.
In this paper we describe the OCIO market and Callan’s approach, which acknowledges that each investor faces unique challenges that require custom solutions. We offer two case studies and a series of questions that might assist fund sponsors in weighing the appropriateness of the OCIO model for their fund.
A recent behavioral finance webinar from Unified Trust delivered by Dr. Gregory Kasten. Link to the replay can be found below.
http://bit.ly/BehavioralFinanceWebinar
This report touches upon themes such as increasing complex reporting requirements, growing demand for transparency, the adoption of big data technology solutions, the management of environmental, social and governance (ESG) factors in private equity portfolio companies as well as the growing popularity of various private equity fund structures, and how this is set to change over the next 12 to 24 months.
Institutional investors are always looking for better ways to increase returns, reduce risk and achieve specific investment goals. Particularly in the wake of the financial crisis, investors have been seeking more robust ways to diversify and reduce risk.
The results suggest that there is a real opportunity to improve the investment process so nonprofits can better protect the capital they’ve worked so hard to raise. I hope you find the results as interesting as I did. Please feel free to reach out to me directly if you have questions.
Shareholders Are Dissatisfied with CEO Compensation and Disclosure--Proxies Are Too Long, Difficult to Read.
Only 38 percent of institutional investors believe that corporate disclosure about executive compensation is clear and easy to understand. “Shareholders want to know that the size, structure, and performance targets used in executive compensation contracts are appropriate,” says Professor David F. Larcker of the Stanford Graduate School of Business. “Our research shows that, across the board, they are dissatisfied with the quality and clarity of the information they receive about compensation in the corporate proxy. Even the largest, most sophisticated investors are unhappy.”
“With new pressure from activist investors and annual ‘Say on Pay’ (SOP) votes, it is more important than ever that companies explain to their shareholder base why the compensation packages they offer are appropriate in size and structure,” says Aaron Boyd, director of Governance Research at Equilar. “Investors are noticing the wide range in quality and clarity among various companies’ proxies. They want companies to communicate and explain, rather than simply disclose,” adds Ron Schneider, director of Corporate Governance Services at RR Donnelley Financial Services. “This represents a significant opportunity for many companies to improve the clarity of their proxies.”
In the fall of 2014, RR Donnelley, Equilar, and the Rock Center for Corporate Governance at Stanford University surveyed 64 asset managers and owners with a combined $17 trillion in assets to understand how institutional investors use the information in corporate proxies.
The Outsourced Chief Investment Officer Model: One Size Does Not Fit AllCallan
As investors reach for returns in a sometimes bruising market, they are adding private equity, hedge funds,
and other alternatives, leading to increasingly sophisticated—and complicated—portfolio monitoring and
management. Heightened regulatory and compliance requirements have further increased the time and
resources required to meet fiduciary responsibilities. This has led some investors to consider delegating
investment oversight, monitoring, and management duties.
The industry press regularly reports on a large and rapidly growing outsourced chief investment officer
(OCIO) market, and some fund sponsors wonder if this model would serve them better than the traditional consulting model. Funds managed through an OCIO are beholden to the same challenging market environment and regulatory atmosphere, but the burden of balancing these challenges can be largely shifted from the investment committee to the OCIO provider. Some funds find this solution meets their needs.
In the outsourced chief investment officer (OCIO) model (also known as “implemented consulting,”
“discretionary consulting,” or “delegated consulting”), an institution shifts discretionary authority to an
advisory firm to manage some or all of the investment functions typically performed by the investment committee. The precise definition of this model varies as much as the name, making the size and scope of the marketplace difficult to pin down.
The increasing popularity of this model is in part a response to the frustration investment committees
have felt amid a shifting environment in which portfolio management requires more resources. While an OCIO offers an elegant solution, it is not a panacea for all the issues facing institutional investors, and relinquishing all fiduciary oversight is not an option.
In this paper we describe the OCIO market and Callan’s approach, which acknowledges that each investor faces unique challenges that require custom solutions. We offer two case studies and a series of questions that might assist fund sponsors in weighing the appropriateness of the OCIO model for their fund.
A recent behavioral finance webinar from Unified Trust delivered by Dr. Gregory Kasten. Link to the replay can be found below.
http://bit.ly/BehavioralFinanceWebinar
This report touches upon themes such as increasing complex reporting requirements, growing demand for transparency, the adoption of big data technology solutions, the management of environmental, social and governance (ESG) factors in private equity portfolio companies as well as the growing popularity of various private equity fund structures, and how this is set to change over the next 12 to 24 months.
Institutional investors are always looking for better ways to increase returns, reduce risk and achieve specific investment goals. Particularly in the wake of the financial crisis, investors have been seeking more robust ways to diversify and reduce risk.
The results suggest that there is a real opportunity to improve the investment process so nonprofits can better protect the capital they’ve worked so hard to raise. I hope you find the results as interesting as I did. Please feel free to reach out to me directly if you have questions.
Shareholders Are Dissatisfied with CEO Compensation and Disclosure--Proxies Are Too Long, Difficult to Read.
Only 38 percent of institutional investors believe that corporate disclosure about executive compensation is clear and easy to understand. “Shareholders want to know that the size, structure, and performance targets used in executive compensation contracts are appropriate,” says Professor David F. Larcker of the Stanford Graduate School of Business. “Our research shows that, across the board, they are dissatisfied with the quality and clarity of the information they receive about compensation in the corporate proxy. Even the largest, most sophisticated investors are unhappy.”
“With new pressure from activist investors and annual ‘Say on Pay’ (SOP) votes, it is more important than ever that companies explain to their shareholder base why the compensation packages they offer are appropriate in size and structure,” says Aaron Boyd, director of Governance Research at Equilar. “Investors are noticing the wide range in quality and clarity among various companies’ proxies. They want companies to communicate and explain, rather than simply disclose,” adds Ron Schneider, director of Corporate Governance Services at RR Donnelley Financial Services. “This represents a significant opportunity for many companies to improve the clarity of their proxies.”
In the fall of 2014, RR Donnelley, Equilar, and the Rock Center for Corporate Governance at Stanford University surveyed 64 asset managers and owners with a combined $17 trillion in assets to understand how institutional investors use the information in corporate proxies.
Can Traditional Active Management Be Saved?Clare Levy
Active managers need to start incorporating the lessons of behavioural science if they have a chance of reversing the flow of assets into passive investment vehicles. Eric Rovick highlights some of the areas of cognitive risk evident in active investment management and provides a managerial and operational framework for addressing them.
Around the world, many investors are turning to alternative assets to increase yield in the current low―or even negative―interest-rate environment. The Economist Intelligence Unit (EIU), sponsored by Northern Trust, sought to ascertain the importance of various factors to investors’ and investment managers’ alternative investment decision making. In February 2017, the EIU surveyed 200 senior asset management and institutional investor executives employed by several different types of organisations—ranging from private equity firms and hedge funds to corporations, non-profits and insurance companies.
Risk Rating Improvements for the ALLL in Banks and Credit UnionsLibby Bierman
Risk Ratings will play a pivotal role under CECL at banks and credit unions. In this presentation, find out how to improve risk rating systems, including PD/LGD or Probability of Default as well as internal matrices.
Matthew Gaude • FSC Securities
- Gaining the peer-to-peer advantage: The 2015 NAAIM annual conference highlighted the importance of collaboration by Linda Ferentchak
- Debate over valuations heats up
- Fundamentalists vs. technical analysts by Martha Stokes, CMT
- Marketing the unrealized potential of 403(b) plans (Ryan Finnell, Retirement Tax Advisory Group)
John McGonagle • EPI Advisors, LLC
- Understanding the relevance of risk-adjusted returns by Dave Walton
- Strongest jobs gain since 2012 surprises markets
- Building stronger visibility for an advisory firm (Rodger Sprouse, Titan Securities)
Member Business Lending: Growth and Risk ManagementLibby Bierman
Sageworks and Ancin Cooley, founder and principal of Synergy Credit Union Consulting, presented a webinar (access recording http://web.sageworks.com/risk-in-mbl-cooley/) reviewing how credit unions can develop and grow member business lending programs for their commercial members. Review to find out the risks inherent in MBL as well as benefits to this concentration.
Mike Jones • ProEquities, Inc.
- Bucket investing with risk-managed portfolios by David Varadi, Jerry Wagner, J.D., George Yang, Ph.D. & CFA
- Employment increases set new record
- Referrals fueled by process management (James Franke • Harbour Investments, Inc.)
Regulatory scrutiny has significantly increased and has prompted banks to develop complex models at the lowest level of granularity to capture the impact of economic cycles. Segmentation is one of the first steps in establishing a quantitative basis for the enterprisewide scenario analysis of stress testing.
Managing Defined Contribution Plan Investments: A Fiduciary HandbookCallan
Employee Retirement Income Security Act (ERISA) fiduciaries face a challenging task: They must familiarize themselves with ERISA's complicated rules of fiduciary conduct. They must understand and evaluate the performance of plan investments, and in doing so, they are subject to ERISA's prudent expert and exclusive purpose standards. In this handbook we focus on defined contribution (DC) plan investment fiduciaries and some of the key issues they face.
The Rise and Risks of Lending to Non-Depository Financial InstitutionsColleen Beck-Domanico
This excerpt from the RMA Credit Risk Council's “2017 Industry Insights: Perspectives from the Front Line” talks about the risks of lending to non-depository financial institutions. Those credit risks can be substantial and can arise from various factors.
CCAR & DFAST: How to incorporate stress testing into banking operations + str...Grant Thornton LLP
Banks are integrating elements of regulatory stress testing into their everyday business processes and strategic planning exercises, and optimizing enterprise risk management in the process. What does enterprise wide stress testing mean for a financial institution? What are the impacts and implications to a financial institution?
Can Traditional Active Management Be Saved?Clare Levy
Active managers need to start incorporating the lessons of behavioural science if they have a chance of reversing the flow of assets into passive investment vehicles. Eric Rovick highlights some of the areas of cognitive risk evident in active investment management and provides a managerial and operational framework for addressing them.
Around the world, many investors are turning to alternative assets to increase yield in the current low―or even negative―interest-rate environment. The Economist Intelligence Unit (EIU), sponsored by Northern Trust, sought to ascertain the importance of various factors to investors’ and investment managers’ alternative investment decision making. In February 2017, the EIU surveyed 200 senior asset management and institutional investor executives employed by several different types of organisations—ranging from private equity firms and hedge funds to corporations, non-profits and insurance companies.
Risk Rating Improvements for the ALLL in Banks and Credit UnionsLibby Bierman
Risk Ratings will play a pivotal role under CECL at banks and credit unions. In this presentation, find out how to improve risk rating systems, including PD/LGD or Probability of Default as well as internal matrices.
Matthew Gaude • FSC Securities
- Gaining the peer-to-peer advantage: The 2015 NAAIM annual conference highlighted the importance of collaboration by Linda Ferentchak
- Debate over valuations heats up
- Fundamentalists vs. technical analysts by Martha Stokes, CMT
- Marketing the unrealized potential of 403(b) plans (Ryan Finnell, Retirement Tax Advisory Group)
John McGonagle • EPI Advisors, LLC
- Understanding the relevance of risk-adjusted returns by Dave Walton
- Strongest jobs gain since 2012 surprises markets
- Building stronger visibility for an advisory firm (Rodger Sprouse, Titan Securities)
Member Business Lending: Growth and Risk ManagementLibby Bierman
Sageworks and Ancin Cooley, founder and principal of Synergy Credit Union Consulting, presented a webinar (access recording http://web.sageworks.com/risk-in-mbl-cooley/) reviewing how credit unions can develop and grow member business lending programs for their commercial members. Review to find out the risks inherent in MBL as well as benefits to this concentration.
Mike Jones • ProEquities, Inc.
- Bucket investing with risk-managed portfolios by David Varadi, Jerry Wagner, J.D., George Yang, Ph.D. & CFA
- Employment increases set new record
- Referrals fueled by process management (James Franke • Harbour Investments, Inc.)
Regulatory scrutiny has significantly increased and has prompted banks to develop complex models at the lowest level of granularity to capture the impact of economic cycles. Segmentation is one of the first steps in establishing a quantitative basis for the enterprisewide scenario analysis of stress testing.
Managing Defined Contribution Plan Investments: A Fiduciary HandbookCallan
Employee Retirement Income Security Act (ERISA) fiduciaries face a challenging task: They must familiarize themselves with ERISA's complicated rules of fiduciary conduct. They must understand and evaluate the performance of plan investments, and in doing so, they are subject to ERISA's prudent expert and exclusive purpose standards. In this handbook we focus on defined contribution (DC) plan investment fiduciaries and some of the key issues they face.
The Rise and Risks of Lending to Non-Depository Financial InstitutionsColleen Beck-Domanico
This excerpt from the RMA Credit Risk Council's “2017 Industry Insights: Perspectives from the Front Line” talks about the risks of lending to non-depository financial institutions. Those credit risks can be substantial and can arise from various factors.
CCAR & DFAST: How to incorporate stress testing into banking operations + str...Grant Thornton LLP
Banks are integrating elements of regulatory stress testing into their everyday business processes and strategic planning exercises, and optimizing enterprise risk management in the process. What does enterprise wide stress testing mean for a financial institution? What are the impacts and implications to a financial institution?
Articles published as sponsored content in the Risk & Compliance Journal from The Wall Street Journal from August 2017 to August 2018. https://deloi.tt/2CMG6lI
Since the onset of the global financial crisis in 2008, businesses around the world have faced a barrage of new risk-related challenges.
The macroeconomic environment of recent years, marked by the global financial crisis, fiscal uncertainty in the US and sovereign debt problems in Europe, has also helped to make companies more riskaverse, leading them to swap bold investment decisions for more cautious behaviour and cash hoarding. The tide is turning, however, with most expecting 2014 to mark a return to growth...
Student 1 The main intention of this framework is to support .docxcpatriciarpatricia
Student 1:
The main intention of this framework is to support large corporate organizations with their portfolio management and process of the risk management. The framework is able to handle insurance risk and non-insurance risk. It is suggested to use the framework within the recognized enterprise risk management correction. James Lam has defined four benefits to risk management which are as follows: handling risk is managements’ job; the instability of the earnings will be reduced by the managing risk; the shareholders’ value can be maximized with the help of managing risk; financial security and job security are promoted by the risk management (Zhou & Xu, 2018)
Handling risk is managements’ job–the duty of the management is to use the critical information of the business to manage the risk. This will lead to give transparency in managing costs and improves the understanding of the risk.
The instability of the earnings will be reduced by the managing risk–with the help of the activities of the risk management, the top companies will able to manage their earnings instability in a better way.
The shareholders’ value can be maximized with the help of managing risk–the companies can be able to increase their shareholders’ value with maximum percentage and also can be able to identify the opportunities for business optimization and risk management by using the risk based program. Volatility can be managed well and business model performance can be extended with correct information that is spread across the organization (Liang et al., 2017)
The efficient frontier will be send to the business leaders directly and they will become the holders of the risks for their respective areas of influence. The efficient frontier has to learn the language of the risk. It is fundamentally assumed that the risk transfer and lines of insurance will be modelled properly. This is significant assumption, as plain modelling foibles, internal disputes, information asymmetry and data limitations will be easily disturb the best intentions of the framework. It is very necessary to test any kind of model and if possible back test the model and involvement of different business leaders is also important to examine the results of the model. It is important to involve independent experts to question and examine the assumptions of the model (Tajani & Morano, 2017)
References
Liang, J., Zhong, M., Zeng, G., Chen, G., Hua, S., & Li, X. et al. (2017). Risk management for optimal land use planning integrating ecosystem services values: A case study in Changsha, Middle China. Science Of The Total Environment, 579(2), 1675-1682.
Tajani, F., & Morano, P. (2017). Evaluation of vacant and redundant public properties and risk control. Journal Of Property Investment & Finance, 35(1), 75-100.
Zhou, W., & Xu, Z. (2018). Portfolio selection and risk investment under the hesitant fuzzy environment. Knowledge-Based Systems, 144(2), 21-31.
Student 2:
Uses of Efficient Frontier Analysis.
Deloitte survey reveals how global business executives understanding of strat...David Graham
A strategic risk management survey was conducted by Forbes Insights - on behalf of Deloitte - at more than 300 major companies globally. In the survey, Deloitte wanted to understand how businesses can manage strategic risk more effectively – both now and in the future. In this publication, global insights gathered from the survey have been enhanced by a South African survey which received insights from a further 230 respondents
Third-party Governance and Risk Management - 2018Deloitte UK
This report shows how Third-party Risk Management had continued to benefit from greater executive awareness in 2017 which have allowed organisations to tackle the topic with a renewed focus and investment. This is even more important due to amid prevalent threats of high profile business failure, illegal third-party actions, or regulatory action with punitive fines.
2013 Callan Cost of Doing Business Survey: U.S. Funds and TrustsCallan
Monitoring and controlling costs is a primary fiduciary responsibility for all funds and trusts. In this survey, Callan compares the costs of administering and operating funds and trusts across all types of tax-exempt and tax-qualified organizations in the U.S.
We identify practices and trends to help institutional investors manage expenses.
We fielded this survey in April and May of 2013. The results incorporate responses from 49 fund sponsors representing $219 billion in assets. In this report, we include comparisons with four similar surveys Callan conducted over the past 15 years to identify enduring, long-term trends in fund/trust management and expenses.
Major long-term trends identified include rising external investment management fees and non-investment management external advisor fees, alongside falling custody costs. Allocations have steadily shifted out of U.S. equity and into non-U.S. and global equities, real estate, hedge funds, and private equity since 1998. Other key findings include:
• In 2012, funds spent an average of 54 basis points of total assets to operate their funds. Average total fund expenses have climbed more than 50% since 1998, when Callan first collected this data.
• External investment management fees represent the lion’s share of total fund expenses at 90%. This figure has grown steadily over time, from 83% in 1998. The increase can largely be attributed to growing allocations to more expensive alternative
asset classes, namely hedge funds and private equity.
• More assets flowed to hedge funds and private equity, as the percentage of funds invested in and the average allocations to these asset classes grew. Hedge fund and private equity fees saw modest declines at the median over the last four years, while averages were fairly static. Real estate fees saw little change and the average allocation remained around 6%.
• Not surprisingly, smaller funds—defined as those with less than $1 billion in total assets—pay a premium (65 basis points, on average) to administer their funds relative to mid-sized and larger funds. Conversely, there is little difference between total expenses for the medium (47 basis points) and large funds (48.5 basis points) that responded to our survey. This can
be attributed to differences in asset allocation, as large funds tend to invest in more expensive strategies.
• External investment management fees are the primary driver of total fund expenses. These fees have risen 55% over 15 years. Non-investment management external advisor fees,1 which are the second largest average expense for U.S.
funds, have increased 115% since 1998. However, at 5% of total fund expenses, changes in this area have a more modest impact than external investment management fees.
The State of Enterprise Resilience - Resilience Survey 2015Julian R
A survey of how companies monitor and analyse the risk landscape, organisational risk governance, and the gap between theoretical understanding and practical application.
Accenture 2015 Global Risk Management Study: Banking Report Key Findings and ...accenture
Accenture’s 2015 Global Risk Management Study: Banking Report provides the insights of 150 banking executives involved in the risk function. See the attached presentation for details of how the risk function in banking is repositioning itself to be a collaborative business partner. Visit www.accenture.com/riskstudy2015 to learn more.
Representing life, property & casualty and reinsurance, some 150 insurance risk leaders participated in Accenture’s 2015 Global Risk Management Study: Insurance Report. See how these leaders are working to systematically operationalize risk management.
Callan research that found investors over the last 20 years have had to take on three times as much risk to earn the same return electrified the institutional investing community. The Published Research Group interviewed Jay Kloepfer and Julia Moriarty about how the research was done and its implications.
Callan's director of Hedge Fund Research, Jim McKee, explores the advantages of momentum-based investing strategies, which profit from market trends in whichever direction. He discusses the rationale behind them, how they are defined and harnessed for different diversification needs, and whether they are appropriate for fund sponsors.
The Renaissance of Stable Value: Capital Preservation in Defined ContributionCallan
*Stable value funds are low-risk investment options in participant directed plans that mix capital preservation with return generation. They invest in high-quality, short- and intermediate-duration fixed income securities, and utilize wrap contracts to insulate individual plan participants from market value fluctuations.
*Stable value funds serve as an alternative to more volatile or risky asset classes and are a direct substitute for a money market fund. They typically offer a more attractive yield than money market funds, except during periods when short-term rates are rising rapidly.
*This paper describes how the underlying mix of securities and issuer characteristics have evolved since the financial crisis, and why Callan sees stable value as a healthy and important part of the U.S. retirement plan marketplace.
Introduction
In this paper, we seek to answer questions defined contribution (DC) plan sponsors and their participants may have about stable value funds, including mechanics, instruments, liquidity, and implementation considerations. We also look at risk and performance, address benchmarking issues, cover recent trends, and provide key takeaways for DC plan sponsors.
Stable value funds are popular with DC plans and 529 college saving investors. According to Callan’s DC Index™, 65% of DC plans offer a stable value fund, and typically 14% of total plan assets are in such funds when offered.
We believe stable value can be an effective investment option for DC plan participants seeking capital preservation.
Grading the Pensions Protection Act, 10 Years LaterCallan
Do you remember the Pension Protection Act (PPA)? More than 900 pages of legislation touching seemingly every part of the retirement system. It presented challenges for defined benefits plans. Defined contribution (DC) plans instead saw beneficial provisions, including the permanence of certain provisions of the 2001 Economic Growth Tax Relief Reconciliation Act (EGTRRA) and the creation of safe harbors for using target date funds as defaults and for implementing automatic enrollment.
The PPA heralded a new era for DC plans with the potential to greatly increase workers’ access to retirement income security. But looking at the PPA’s report card, we do not see “straight As” over the last decade.
Many of the provisions took years to enact, and plan sponsors still seem to struggle with them. As the PPA celebrates 10 years, we ask: Was it successful? Did it transform DC plans in the way the industry had hoped? How can we do better?
Callan gives a grade to the performance of nine key PPA provisions over the past decade. We start with the least effective.
What’s on the minds of larger defined contribution (DC) plan sponsors? According to a recently released Callan Associates study conducted in late 2015 with almost 150 employers, fees, investments and compliance top the list. With more resources devoted to running this DC plan, what happens in the larger market usually trickles down market.
Though the number one action taken to reduce fiduciary liability was updating or reviewing their investment policy statement, followed by reviewing fees, the number one priority in 2016 will be compliance.
Other key findings from the Callan DC study include:
*61% use auto-enrollment with 1 in 5 employing re-enrollment for current employees
*88% of plans offer financial advice to employees
*75% benchmark their fees as part of fee calculation and 53% rebate revenue sharing
*86% use TDFs (target date funds) as their default option of QDIA – usage of the proprietary funds of the record keeper as their QDIA is down to 32% from 70% in 2011
*15% of plans increased the number of funds while 11% decreased the number
The DOL’s 2012 fee disclosure regs and the 2006 Pension Protection Act (PPA) were cited as the most important events affecting DC plans showing that fees and auto features paved by the PPA are keys drivers for lawmakers and plan sponsors.
Though there is a lot of noise about the pending DOL conflict of interest rule aimed at increasing oversight of DC plans as well as IRAs, most affected will be advisors, especially those selling proprietary products, and broker dealers that will have to impose greater scrutiny over their advisors that manage DC plans and IRAs.
The DOL rule could limit plan participants access to advisors and advice as well as education especially when they separate from employment but will have little impact on employers running their plan.
Target Date Funds - Finding the Right Vehicle for the Road to RetirementCallan
There seems to be no stopping target date fund (TDF) strategies, which are growing both in use within defined contribution (DC) plans and in products available. Each TDF manager differs in their underlying philosophy, which shapes construction and implementation.
The wide variety of options represents both a benefit and a challenge. As plan sponsors examine and monitor TDF options they must be aware of the differences and how these differences can ultimately affect participant outcomes.
This paper draws on Callan’s comprehensive data on TDFs and DC plans, which is gathered and analyzed annually.
We present key findings and highlight questions plan sponsors may want to consider when evaluating their TDF options.
***
Just as people rely on cars to get them where they need to go, Americans increasingly depend on TDFs to help them achieve their retirement goals. For the first time since the inception of the Callan DC Index™ in 2006, TDFs (25%) recently beat out U.S. large cap equity (24%) as the largest portfolio allocation in DC plans.
As part of Callan’s annual DC Trends Survey, more than 140 DC plan sponsors were asked about their use of TDFs. Callan also annually collects qualitative and quantitative data from target date managers representing both mutual funds and collective trusts. This paper leverages this combined data to examine the current state of the TDF universe and the differentiating characteristics that help drive outcomes.
Defined Contribution Plans and Fee Lawsuits: Stuck in the Mud or the Road to ...Callan
The message is clear for defined contribution (DC) plan sponsors: follow best practices established for plan fees or risk getting stuck in a costly and time-consuming lawsuit.
Nearly 40 401(k) fee lawsuits have been filed since 2006. The first generation of lawsuits focused on revenue-sharing violations, failure to understand specific costs, and use of retail mutual funds in 401(k) lineups. Over time these lawsuits have expanded in scope, covering everything from the prudence of offering certain stable value funds to adherence to investment policy statements.
In addition to monetary payments, settlements have typically included
requirements to:
• Competitively bid plan recordkeeping services
• Engage an outside consultant
• Utilize institutional or retirement-share classes where possible
• Add passively managed funds to the lineup
• Comply with the Department of Labor’s participant disclosure regulation
In this infographic, Callan describes select DC fee lawsuits. We suggest best practices to help plan sponsors keep their plan on the path to success.
Strategies with high active share have garnered much attention from institutional investors following the release of Martijn Cremers and Antti Petajisto’s research paper that introduced the concept.
In this paper we isolate the impact of active share on performance by focusing on “product pairs,” which are two portfolios that share many characteristics (same management team, basic philosophy, research platform, etc.) but have different degrees of concentration (concentrated vs. diversified), which translates fairly directly to a difference in active share.
We ran several analyses using product pairs identified in Callan’s database in order to better understand— and quantify—the performance differences between concentrated and diversified products managed by the same team. Our analysis reveals the inherent difficulty of identifying reliable predictors of excess return across strategies and over time. High active share may be worthy of consideration as a screening variable, but it is clearly only one of potentially dozens of factors that might influence the magnitude and direction of the excess return for any given strategy over time.
Author Gregory C. Allen is Callan’s President and Director of Research. He oversees Callan’s Fund Sponsor Consulting, Trust Advisory, and multiple other firm-wide research groups.
Greg is a member of Callan’s Management, Alternatives Review, and Client Policy Review Committees. He is also a member of the Investment Committee, which has oversight responsibility for all of Callan’s discretionary multi-manager solutions.
Emerging Managers: Small Firms with Big IdeasCallan
Everybody has to start somewhere, including investment managers. Even the largest firms with broad name recognition and substantial assets were once emerging firms.
Emerging managers generally include smaller and newer investment managers, potentially
with atypical ownership structures. While smaller asset pools can work against them in some cases, it can also work in their favor, enabling them to access opportunities that larger, more established investment managers cannot.
Many U.S. institutional investors have long track records of dedicated investments with emerging managers while others are just starting to examine the space.
Emerging manager programs are becoming more commonplace, particularly at public pension funds, as investors recognize the potential portfolio gains that can be achieved through investing with the diverse and entrepreneurial investment managers that make up the emerging manager space.
Callan has long recognized the value that diversity of professionals and firm size can bring to investment outcomes. Our founder Ed Callan was instrumental in launching Progress Investment Management more than two decades ago. In 2010, we launched Callan Connects to expand our universe of emerging manager and minority, women, and disabled owned firms.
In this interview, Uvan Tseng talks with Lauren Mathias, who oversees Callan Connects, about trends and issues in the emerging manager arena.
What do Money Market Reforms Mean for Investors? A Roundtable Discussion with...Callan
Money market funds are an important source of liquidity and are critical to our financial markets.
Following the financial crisis of 2008, some money market funds “broke the buck,” with net asset values (NAVs) falling below $1 per share. The chaotic scene that ensued surprised investors, and regulators have responded by updating laws to prevent a repeat of that difficult time.
On July 23, 2014, the Securities and Exchange Commission adopted amendments to the rules that govern
money market mutual funds. The amendments address the risks of an investor run on money market funds,
while seeking to preserve the benefits of these funds. The new rules—the second wave of reforms since 2008—are effective October 14, 2014, but have a long compliance period (two years or more) to ease the transition.
New requirements include:
Institutional prime money market funds will have a floating NAV.
Portfolios must value securities according to their current market value and redeem shares based on the floating NAV.
Non-government money market fund boards will now be able to impose liquidity fees and redemption gates to address investor runs.
The 2014 changes further tighten disclosure requirements (e.g., the requirement to disclose a fund’s level
of daily and weekly liquid assets, net flows, and market-based NAV on a website) and define enhanced
diversification requirements and stress testing.
The ruling impacts many institutional investors, including sponsors of defined benefit and defined contribution plans. We assembled a group of Callan experts to highlight key provisions and their potential impacts on investors. Jim Callahan, CFA, manager of Callan’s Fund Sponsor Consulting group, sat down with his colleagues to discuss the latest money market reforms.
Roundtable participants included Bo Abesamis, Steve Center, CFA, and Jimmy Veneruso, CFA, CAIA, from Callan’s Trust and Custody, Fund Sponsor, and Defined Contribution groups.
Callan’s 2014 Investment Management Fee Survey provides a current report on institutional investment management fee payment practices and trends. To collect this information, Callan sent an electronic questionnaire to a broad sample of U.S.-based institutional fund sponsors and investment management organizations. Respondents provided fee information for calendar year 2013 (specific dates varied by organization, but the majority were as of December 31, 2013), and perspective on fee practices and perspectives for 2014. We supplemented this data with information from Callan’s proprietary databases to establish the trends observed in this report.
Callan conducted similar surveys in 2004, 2006, 2009, and 2011. We offer commentary regarding differences, where relevant, between historical survey results and the 2014 findings, along with observations reflecting both long- and short-term trends.
Seventy-two fund sponsors representing $859 billion in assets, and 211 investment management organizations with $15 trillion in assets under management, provided detailed fee practices and data on 15 asset classes. Results were supplemented by actual and published fee information sourced from Callan’s fund sponsor and investment manager databases, as well as other industry sources.
Key Findings:
*Investment management fees represent 46 basis points (bps), on average, of fund sponsors’ total assets, up from 37 bps in
2009. The difference between the median and average has climbed over this time period. Other data in Callan’s fee survey also reveals a divergence between the funds that pay the most and those that pay the least in investment management fees.
*The range between funds that paid the most (10th percentile) and those that paid the least (90th percentile) increased dramatically:
from 56 bps in 2009 to 73 bps in 2013. Differences in investment policy, and notably asset allocation, can lead to
substantial disparity in fees. While some funds are increasingly looking to low-cost, public market index strategies, others are
investing a greater portion of their portfolio in high-cost alternative assets. Other key survey findings include:
Alternatives, which are consistently the most expensive asset class, are facing fee compression: the median total asset class fee declined from 134 bps in 2009 to 99 bps in 2013, and the 90th percentile fell from 174 bps to 152 bps. Large allocations to alternatives can greatly increase overall investment management fees.
Correlations between percentage of total portfolio allocated to alternatives and fees paid (in bps) were strong in 2013 (+0.70).
Total U.S. and non-U.S. equity fees paid increased marginally from 2009 to 2011, but declined from 2011 to 2013. Median U.S. equity fees run about 60% of their non-U.S. counterparts. Non-U.S. fees are typically higher in part due to research expenses. Fixed income median expenses were flat from 2009 to 2013.
Are Defined Contribution Plans Ready for Alternative Investments?Callan
Amid the growing popularity of the defined contribution (DC) model, the DC industry continues to look for ways to optimize performance.
The outperformance of defined benefit (DB) plans, and the increasing cross-pollination of DB and DC investment staff, has led some DC plans to take a closer look at alternative investments.
We examine three broad areas of alternative investments in relation to the DC market: real estate, hedge funds, and private equity.
Authors: Sally Haskins, Gary Robertson, Jimmy Veneruso
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Vighnesh Shashtri
In India, financial inclusion remains a critical challenge, with a significant portion of the population still unbanked. Non-Banking Financial Companies (NBFCs) have emerged as key players in bridging this gap by providing financial services to those often overlooked by traditional banking institutions. This article delves into how NBFCs are fostering financial inclusion and empowering the unbanked.
what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
how to sell pi coins at high rate quickly.DOT TECH
Where can I sell my pi coins at a high rate.
Pi is not launched yet on any exchange. But one can easily sell his or her pi coins to investors who want to hold pi till mainnet launch.
This means crypto whales want to hold pi. And you can get a good rate for selling pi to them. I will leave the telegram contact of my personal pi vendor below.
A vendor is someone who buys from a miner and resell it to a holder or crypto whale.
Here is the telegram contact of my vendor:
@Pi_vendor_247
Exploring Abhay Bhutada’s Views After Poonawalla Fincorp’s Collaboration With...beulahfernandes8
The financial landscape in India has witnessed a significant development with the recent collaboration between Poonawalla Fincorp and IndusInd Bank.
The launch of the co-branded credit card, the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card, marks a major milestone for both entities.
This strategic move aims to redefine and elevate the banking experience for customers.
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
4. 2013 Risk Management Survey 2Knowledge. Experience. Integrity.
The 2008 market crisis put risk in the spotlight and prompted fund fiduciaries to look at risk management in a new light. Callan
fielded this survey in November 2012, and the results incorporate responses from 53 fund sponsors representing $576 billion
in assets. The vast majority of this group has taken concrete steps in the past five years to address investment risks. More
than half (55%) believe their risk management tools are effective at mitigating investment risk, but 14% see these systems as
simply a means to improve risk identification and monitoring. The jury is still out for one-third of respondents, as their tools are
relatively new and untested in a true market crisis. Other key findings of our survey include:
• Public and corporate funds are embracing policy-level approaches to risk management more so than endowments/
foundations. Public funds have implemented economic regime asset allocations, risk parity, and risk factor-based asset
allocation, while corporate funds favor liability-driven investing and funded status-based glide path de-risking.
• Strategy-level approaches to mitigate risk are easier to implement than those that alter the fund’s overall investment
policy, and we observed higher levels of adoption for strategy changes across fund types. Public funds and endowments/
foundations are most heavily implementing or considering real assets, opportunistic fixed income, absolute return, and
long/short equity. Corporate funds are also embracing absolute return, but long duration is the most favored strategy-level
approach used to address risk.
• Most funds (94%) do not have a formal risk budget, but rather explicitly address risk management in their plan governance
via asset allocation, investment objectives, and disciplined rebalancing.
• Formal risk management processes are most prevalent at large funds, although around half of medium and small funds have
adopted one or are considering doing so this year. Funds implementing a formal risk management process generally aim to
gain a better understanding of the risks taken, monitor them, and document them.
• Forty-two percent of all respondents employ proprietary and/or third-party risk measurement tools, such as software or
data services. Usage of third-party tools is most prevalent at public funds, while endowments/foundations are the greatest
adopters of in-house (proprietary) tools.
• The investment committee is the body most regularly tasked with deciding when to take action based on the findings of risk
management tools. The most common actions taken were asset allocation changes (64% of respondents), manager due
diligence/search (56%), and increased manager monitoring (52%). A full 20% of respondents had not yet taken any actions
based on risk management findings.
• Many fund sponsors wrestle with whether or not to tactically manage plan risk. Only 30% of sponsors have made
rebalancing decisions (including but not limited to tactical rebalancing) based on risk management findings. Of those that
have not done so, most (82%) do not plan to in the future. Public (31%) and large (25%) funds are most likely to use tactical
implementations going forward.
Executive Summary
5. 2013 Risk Management Survey 3Knowledge. Experience. Integrity.
Callan conducted the Risk Management survey in Novem-
ber 2012. Results incorporate responses from 53 fund spon-
sor organizations representing $576 billion in assets (as of
June 30, 2012). Of those that measure funded status (79%
of respondents), the average funded status was 75% within
a range of 28% to 100%. More than one-third of respondents
(37%) were Callan clients at the time they responded.
The majority of respondents (51%) are public funds, and cor-
porate funds make up 21%. The remaining respondents are
endowments/foundations (17%), Taft-Hartley plans (5%), or
other types of organizations (including charitable trusts and
other types of tax-exempt plans).
The respondent pool is split by fund size into roughly three
parts: small funds (less than $1 billion in assets) make up
30%, medium funds (between $1 and $5 billion) make up
32%, and the remaining 38% are large funds (greater than
$5 billion).
Respondent Characteristics
Respondents by Fund Type
Respondents by Fund Size
Public
51%
Corporate
21%
Other 6%
Endowment/
Foundation 17%
Taft-Hartley 5%
>$15 billion 21% <$500 million 19%
$5 billion
to $15 billion 17%
$1 billion
to $5 billion 32%
$500 million
to $1 billion 11%
Small Funds Medium Funds Large Funds
6. 2013 Risk Management Survey 4Knowledge. Experience. Integrity.
More than half of fund sponsors (55%) feel that risk manage-
ment tools and systems have had a positive overall impact
on their fund. One-third of respondents are unsure how ef-
fective these tools are, but will be able to better assess these
systems after they have been tested in a future market crisis.
Fourteen percent of asset owners do not see these tools as
effective.
Yes
• “It has changed the staff, investment committee, and board focus from alpha to asset allocation. Thus, we have been able
to build a more balanced portfolio together over the past year.”
• “It allows us to look at the portfolio from a number of different ways that we haven’t considered in the past.”
• “The fund is more diversified and has increased hedges.”
No (or Not Yet)
• “We have not yet used them to their fullest extent. We are continuing to learn how these can benefit managing our
investments.”
• “Not really. We monitor risk, but do not manage it. The only formal risk management we do is in our strategic asset
allocation and rebalancing to targets.”
• “Not used to mitigate risk—mostly to identify and understand sources of risk. Used more for monitoring than mitigation
to date.”
Note: Throughout this survey, charts may not sum to 100% due to rounding.
Are Risk Management Tools Effective?
Have risk management tools/systems been effective at
mitigating your fund’s investment risk?
Select survey respondent quotes:
Yes 55%
No
14%
Unsure/
too soon
to know
32%
7. 2013 Risk Management Survey 5Knowledge. Experience. Integrity.
Over the past decade, asset owners have begun to intensely
focus on risk while taking a step back from “reaching for re-
turns.” External factors have certainly played a role in shap-
ing how investors view risk. We asked respondents to score
the degree to which various factors have influenced their
organizations.
Asset/liability considerations top fund sponsors’ list of influ-
encing factors, which is not surprising given the plunging
funded ratios witnessed in the recent past. Future market
outlook and recent market events rank second and third,
revealing enduring uncertainties stemming from the 2008
financial crisis.
Liquidity/cash flow concerns rank fourth. Many funds faced
unexpectedly large drawdowns despite their highly diversi-
fied allocations, alongside significant liquidity and rebalanc-
ing issues caused in part by their large, illiquid private market
programs. Peer influence registers low on the scale.
External Influences
What external factors have influenced how your
organization addresses risk management?
0 1 2 3 4 5
Actions/results of peer funds
Other regulatory/political issues
Stakeholder/public scrutiny
Projected future inflation
Liquidity/cash flow concerns
Recent market events
(e.g., increased volatility, effectiveness of diversification, etc.)
Future market outlook
(e.g., low returns, high volatility, etc.)
Asset/liability considerations
(e.g., funded status volatility, contribution volatility, etc.)
2.1
3.3
3.0
2.7
2.4
2.2
3.5
1.8
Weighted Average Score (0=Least Important, 5=Most Important)
8. 2013 Risk Management Survey 6Knowledge. Experience. Integrity.
The 2008 market crisis caused asset owners substantial
stress, and continues to impact decision making. Significant
changes are occurring at many fund sponsor organizations,
frequently driven by a renewed focus on risk. The majority of
fund sponsors (81%) reveal increased concern about invest-
ment risk at their organization following the market crisis.
The focus on risk has impacted both the types of investments
asset owners consider and the entire structure of their in-
vestment policy. Sixty-two percent report that their strategic
asset allocation changed; 47% of respondents significantly
increased allocations to alternatives, which can offer diversi-
fication benefits relative to traditional asset classes. Approxi-
mately half of respondents lowered their return target.
Just one respondent indicated no changes have occurred
since 2008.
Reactions to the 2008 Market Crisis
What changes have occurred at your organization since the 2008 market crisis?
0% 20% 40% 60% 80% 100%
No changes
Adoption of explicit risk target
Other
Investment time horizon shortened
More tactical in asset allocation
(defensive to lower risk)
Changed rebalancing policies
(increased flexibility)
Appetite for return and the necessary
risk to achieve it declined
Increased resources (people, tools, budgets, etc.)
in risk measurement and management
Risk focus changed from asset to
funded status volatility
More opportunistic in asset allocation
(aggressive to increase return)
Significantly increased allocation to alternatives
(increased diversification)
Return target declined
Strategic asset allocation changed
Concern about investment risk increased
21%
2%
4%
8%
11%
21%
28%
26%
25%
32%
47%
51%
62%
81%
9. 2013 Risk Management Survey 7Knowledge. Experience. Integrity.
To assess how discussions and actions around policy-level
approaches—or those that impact the entire fund struc-
ture—are developing, we asked respondents to indicate
their organization’s status across six different strategies.
Stages range across a spectrum, from Education (first
stage) to Implemented. It is implied that those that selected
an advanced stage had already completed all the previ-
ous stages, and might have ended there. Alternately, some
funds at earlier stages may still be considering moves to
more advanced stages.
We dissect responses by fund type, as clear differences
arise in approaches between publics, corporates, and en-
dowments/foundations. For example, 73% of corporate
funds have considered risk factor-based asset allocation;
9% of those made it all the way to implementation while 36%
pursued education but had taken no further action as of the
survey response date.
Risk parity appears to have gained the most traction with
public funds at the policy level. However, the 75% figure may
be artificially high due to respondents mistakenly noting it
here when they in fact implemented this approach at the
strategy level (as detailed on the following page).
Around one-fifth of public funds have implemented risk factor-
based asset allocation, while another one-third or more have
had staff consider the policy, but have taken no further action.
Policy-Level Considerations by Fund Type
Indicate which policy-level, “risk-centric” approaches you have considered or
implemented in your investment program.
0% 25% 50% 75% 100%
Funded status-based
de-risking glide path
LDI
Tail risk hedging
Economic regime
asset allocations
Risk parity
Risk factor-based
asset allocation
0% 25% 50% 75% 100%0% 25% 50% 75% 100%
Education Staff Consideration Presented to Committee Board Approved Implemented
CorporateEndowment/FoundationPublic
Note: All bars do not sum to 100% as respondents could also select “N/A” or “Unsure”.
64%
73%
73%18% 18% 9% 27%
27%
27% 27% 9%
45% 18%
36% 27%
36% 27% 9%
55%9%9%
64%
100%
64%
56%
67%
11%
22% 11%
11% 44%
22% 33%
44% 11%
11%
11% 44% 11%
67%
33%
56%
75%
71%
42%17%17%
13% 29%
17% 29% 17%
33% 8% 25%
13% 33%
4%4%
4%4% 4%
4%
8% 21%
38% 21%
67%
42%
67%
10. 2013 Risk Management Survey 8Knowledge. Experience. Integrity.
To assess how discussions and actions around strategy-
level approaches—or the adoption of individual strategies
within the fund’s existing structure—were developing, we
asked respondents to indicate their organization’s status
across 11 different approaches. Stages range across a
spectrum, from Education (first stage) to Implemented. It
is implied that those that selected an advanced stage had
already completed all the previous stages, and might have
ended there. Alternately, some funds at earlier stages may
still be considering moves to more advanced stages.
We dissect responses by fund type, revealing substantial
differences between publics, corporates, and endowments/
foundations. For example, long duration is on the radar for
more than 90% of corporate funds, likely as part of discus-
sions around LDI, and 73% have implemented a long dura-
tion strategy. Conversely, less than half of public funds and
endowments/foundations have considered this approach
and only around 10% have implemented it.
Approaches that generate return while adding to portfolio di-
versification have gained the most traction with public funds
and endowments/foundations, including opportunistic fixed
income, absolute return, long/short equity, and real assets.
Strategy-Level Considerations by Fund Type
Indicate which strategy-level, “risk-centric” approaches you have considered or
implemented in your investment program
0% 25% 50% 75% 100%
56%
56%
67%
67%
78%
89%
100%
56%
44%
56%
67%
Education Staff Consideration Presented to Committee Board Approved Implemented
55%
45%
55%
64%
73%
64%
73%
45%
18%
27%
27% 27%
27%
27%
27%
27%
45%
36%
36%
36%
36%
73%
18%
18%
18% 18%
9%9%
9%9%
9%
9%
9%
9%
9%
91%
36%
27%
CorporateEndowment/Foundation
Note: All bars do not sum to 100% as respondents could also select “N/A” or “Unsure”.
0% 25% 50% 75% 100%0% 25% 50% 75% 100%
Yield equity
Short duration/floating
rate fixed income
Currency hedging
Long duration
Risk parity
Risk factor
strategies
Low volatility equity
Opportunistic fixed
income
Absolute return
Long/short equity
Real assets
11%
11%11%11%
11%11%
11%
11%
11%
11%
11%
11%
44%
44%
44%
56%
56%
56%
56%
33%
33%
22%
22%
22%
22%
22%
22% 22%
22%
54%
58%
63%
83%
75%
79%
88%
54%
38%
50%
63%
Public
8% 33%
29%
29%
8%
4% 4%
4%
8%4%
4%
4%
4%
4%
8%
8%
8%
8%
8%
8%8%
8%
8%
17%
17%
17% 21%
33%
42%
38%
33%
38%
46%
17%
17%
17%
13%
13%
13%
13%
13%
13%
13%
17%
11. 2013 Risk Management Survey 9Knowledge. Experience. Integrity.
Risk management is interwoven with plan governance. We
assessed the popularity of more than a dozen options for ex-
plicitly addressing risk in plan governance, and found three
methods that are used by at least 50% of all fund types:
1. Strategic asset allocation,
2. Investment objectives, and
3. Disciplined rebalancing.
Performance and risk monitoring, liquidity needs, and peer
comparisons all registered highly for public funds, and to a
lesser degree for endowments/foundations and corporate
funds.
Other tactics, such as asset/liability matching targets, were
clearly popular with corporate funds (64%) but not with other
fund types. Conversely, only public funds have adopted ex-
plicit risk budgeting, and traction is low even within this group.
Similarly, the majority (94%) of respondents do not have a for-
malized risk budget.
Formally Addressing Risk Management
How is risk management explicitly
addressed in plan governance?
Does your organization have a
formal risk budget?
0% 25% 50% 75% 100%
Risk budgeting
Valuation methodology
Regulatory constraints
Leverage of fund
and investments
Use/monitoring
of derivatives
Asset/liability
matching targets
Counterparty risk
Funded status/
spending targets
Peer comparisons
(asset allocation, risk, return)
Liquidity needs
Performance and risk
monitoring for
all levels of fund
Disciplined rebalancing
Investment objectives
(performance and risk)
Asset allocation/
diversification 73%
96%
89%
64%
79%
89%
64%
36%
71%
67%
75%
44%
9%
71%
56%
56%
18%
25%
71%
45%
44%
9%
44%
42%
64%
17%
18%
29%
11%
8%
9%
21%
0%
0%
0%
44%
25%
33%
0%
0%
29%
11%
Public Endowment/Foundation Corporate Yes 6%
No 94%
12. 2013 Risk Management Survey 10Knowledge. Experience. Integrity.
While the vast majority of funds do not formally budget risk,
more than one quarter (27%) have a formal risk management
process in place that extends beyond strategic asset alloca-
tion and rebalancing. Interestingly, an additional 31% are con-
sidering implementing one in 2013.
Large funds are best equipped to implement a formal risk
management process given the resources this entails. Ac-
cordingly, a greater percentage of large funds have already
implemented a formal risk management process (33%) than
medium or small funds (25%), and another 44% of large funds
are considering doing so in 2013.
Results vary less by fund type than by fund size. Endow-
ments/foundations are least likely to implement or consider a
risk management process.
For organizations that have a formal risk management pro-
cess, understanding and documenting risks is the top prior-
ity. Other goals that rank highly indicate a focus on improv-
ing traditional fiduciary management practices. For example,
“changing the mix of necessary and reasonable risks” and
“lowering medium- to long-term total risk” are goals that are
incorporated into most prudent, long-term asset allocations.
Conversely, two goals that reflect more tactical thinking reg-
istered on the low end of the scale. Hedging specific risks
and lowering short-term, downside risk are less traditional
approaches that are typically more aggressive with a short-
term focus. Few survey respondents prioritize these goals,
as would be expected within a long-term, strategic asset al-
location structure.
Formally Addressing Risk Management (continued)
What formal risk management process goals are most important to your organization?
0 1 2 3 4 5
Tactically lower short-term, downside risk
Specifically hedge certain risks
(e.g., inflation, tail risk)
Lower/minimize medium-
to long-term total risk
Change mix of necessary
and reasonable risks
Improve the risk/return trade-off
Lower funded status volatility
Better understand risks
taken and document them
3.0
2.9
2.8
2.8
2.5
3.4
2.4
Weighted Average Score (0=Least Important, 5=Most Important)
Does your organization have a formal risk management process?
Yes No, but considering for 2013 No, not considering for 2013
0% 20% 40% 60% 80% 100%
Corporate
Endowment/Foundation
Public
Small
Medium
Large
All 27% 31% 41%
50%25%25%
33% 44% 22%
56%19%25%
22% 33% 44%
36%36%28%
27% 36% 36%
13. 2013 Risk Management Survey 11Knowledge. Experience. Integrity.
Bottom up 21%
Risk Measured
Both
43%
Top down
36%
Bottom up 0%
Both
57%
Top down
43%
Risk Managed
Risk Measured
Both
50%
Relative risk
(tracking error) 7%
Relative risk
(tracking error)
29%
Both
43%
Absolute
risk
(volatility)
50%
Absolute risk
(volatility)
21%
Risk Managed
0% 20% 40% 60% 80% 100%
Yes
36%
No
64%
0% 20% 40% 60% 80% 100%
Yes
29%
No
71%
For organizations that have a formal risk management pro-
cess, approaches to risk management are split between
managing risk from both top down and bottom up (57%) and
from top down exclusively (43%). Risk measurement tactics
are more varied, with more than one-fifth (21%) that mea-
sure risk from the bottom up exclusively. A combination of
both methods is the most popular means of measuring risk,
as well, at 43%.
Comparing absolute and relative risk, absolute risk appears
to be the priority, with 50% of respondents relying solely on
this measure to manage risk, and another 43% including it
alongside relative risk. The tables turn when it comes to risk
measurement: a slightly greater percentage of funds rely ex-
clusively on relative risk (29%) than absolute risk (21%), al-
though a majority (50%) uses both.
Explicit risk hedging is utilized by a minority of funds. Just
36% of those with a formal risk management process are al-
lowed to explicitly hedge particular risks. Of those only 29%
are currently hedging any risks, including currency, interest
rates, inflation, and funded status.
Formally Addressing Risk Management (continued)
What is your risk management structure approach?
Absolute risk or relative risk?
Do your guidelines allow you to
explicitly hedge particular risks?
Are you currently hedging any
particular risks?
14. 2013 Risk Management Survey 12Knowledge. Experience. Integrity.
Although risk is clearly a priority for fund sponsors, the
majority (84%) do not employ a chief risk officer (CRO) or
other individual who is primarily focused on managing fund
risk. However, results vary quite a bit by fund type and size.
None of the endowments/foundations surveyed employ a
CRO, while more than one-third of corporate funds have
this position. Public funds strike a middle ground, with 16%
employing a CRO and another 16% considering hiring one.
Results are unsurprising by fund size in that the large funds
are much more likely than small funds to have, or consider
hiring, an in-house individual who is tasked with managing
risks. This is probably a matter of having the resources avail-
able to dedicate an individual to these responsibilities rather
than incorporating them into an existing position.
Risk Management Staffing
Does your organization have a Chief Risk Officer (CRO) or similar assigned role?
Yes No, but might hire one No, will not hire one
0% 20% 40% 60% 80% 100%
Small
Medium
Large
Corporate
Endowment/Foundation
Public
All 16% 8% 76%
100%
16% 16% 68%
64%36%
19% 81%
56%22%22%
6% 94%
15. 2013 Risk Management Survey 13Knowledge. Experience. Integrity.
General investment consultants are the most common
source of risk management services, and the usage of dedi-
cated risk management service providers is low.
The majority of respondents (94%) employ a general invest-
ment consultant,1
though only about half of those receive
explicit risk management services from that consultant.
All of the asset owners that employ a separate risk manage-
ment firm also have a general investment consultant. Large
asset owners, which dedicate more resources to this area,
are three times as likely to use a separate risk management
provider as their small and medium fund counterparts.
Consultants
Does your organization employ a
general investment consultant?
Does your fund employ a separate risk management consultant/advisor/provider(s)?
If yes, does your consultant provide
explicit risk management services?
No 6%
Yes
94%
Unsure 5%
Limited services 7%
Yes
46%
No
42%
Yes No
0% 20% 40% 60% 80% 100%
Small
Medium
Large
Corporate
Endowment/Foundation
Public
All 12% 88%
100%
17% 83%
91%9%
6% 94%
78%22%
7% 93%
1 37% of total respondents were Callan clients at the time they
completed the survey.
16. 2013 Risk Management Survey 14Knowledge. Experience. Integrity.
The adoption of risk management tools is greater than risk
management consultants. Around one-third of respondents
use third-party resources; 10% use these tools in conjunc-
tion with in-house tools.
Whereas none of the endowments/foundations surveyed uti-
lize a dedicated risk management consultant (see page 13),
these organizations were the greatest adopters of risk man-
agement tools, with an emphasis on proprietary methods
(22%). An additional 22% of endowments/foundations use
third-party tools, either exclusively or alongside in-house
software.
In step with other survey findings, large funds have the
most resources to dedicate to risk management and are the
most likely to purchase risk management tools from outside
vendors (61%).
Most funds (87%) monitor risk, but the levels of granularity in
these assessments vary. Top-down analysis of the total fund
is the most common approach used by funds that have risk
measurement systems; it is more prevalent at large (82%)
and medium (80%) funds than small funds (67%).
Large funds generally look at more levels than their smaller
counterparts. Factor level analysis is now only common at
large funds (47%). Very few asset owners (10%) analyze risk
at the security level.
Risk Measurement
Does your fund use proprietary or
third-party tools, such as software
or data vendors, for risk management?
0% 20% 40% 60% 80% 100%
Small
Medium
Large
Corporate
Endowment/
Foundation
Public
All 22%10%10% 16% 42%
22% 33%11% 22% 11%
4%8% 13% 42%33%
9% 27% 45%18%
13% 25% 63%
50% 11% 22%11%6%
13% 13% 13% 13% 47%
Yes, we use both proprietary
and third-party tools
Yes, we use in-house/proprietary tools
Yes, we use third-party tools
No, but considering investing
No, will not invest in them
At what fund level(s) do you use your
risk monitoring system?
0% 20% 40% 60% 80% 100%
My fund does
not have a risk
monitoring or
reporting system
Analysis at the
security level
Analysis at the
factor level
Analysis at the
manager level
Analysis at the
asset class level
Top-down analysis
of total fund
All Large Medium Small
71%
80%
67%
82%
65%
76%
67%
67%
62%
60%
67%
71%
29%
27%
13%
47%
13%
20%
13%
12%
10%
13%
7%
12%
17. 2013 Risk Management Survey 15Knowledge. Experience. Integrity.
One can define and therefore measure risk in many differ-
ent ways: experienced vs. forecasted, absolute vs. relative,
short vs. long time horizons. We posed two questions to
gauge which metrics are most valuable in measuring risk.
We observe that traditional risk metrics such as tracking error
and volatility are being supplemented with downside risk and
drawdown, particularly by public funds. Corporate funds are
embracing surplus volatility, while public funds are the largest
adopters of value at risk and conditional value at risk to better
understand their tail risks.
Nearly three-quarters (72%) of respondents measure actual
experienced risk. Twenty percent measure both actual and
forecasted risk, and an additional 20% measure forecasted
risk over multiple time periods. Endowments/foundations
generally focus on a longer time frame when assessing fu-
ture risk, with 60% looking forward three to five years and
20% looking out further than five years. Conversely, public
funds are most likely to project shorter time frames of one
year or less (74%), potentially indicating a focus on tail risks.
Risk Measurement (continued)
What key outputs do you use to
measure risk? What type(s) of risk do you measure?
0% 25% 50% 75% 100%
Surplus volatility
Conditional Value
at Risk
Value at Risk
Absolute drawdown
(peak to trough)
Downside risk
Absolute volatility
Tracking error
65%
70%
44%
60%
63%
61%
56%
50%
48%
57%
33%
30%
33%
43%
11%
10%
30%
43%
22%
10%
13%
26%
0%
0%
13%
9%
0%
40%
0% 25% 50% 75% 100%
More than
5 years forward
Forecasted
(future) risk
3 to 5 years
forward
Forecasted
(future) risk
1 year forward
Forecasted
(future) risk
Less than
1 year forward
Forecasted
(future) risk
Actual
experienced
risk
All Public Endowment/Foundation Corporate
72%
74%
60%
71%
25%
42%
0%
14%
25%
21%
60%
14%
17%
32%
0%
0%
14%
16%
20%
14%
18. 2013 Risk Management Survey 16Knowledge. Experience. Integrity.
More than half of respondents with risk analysis tools can
simulate economic scenarios, in essence enabling them to
stress test their portfolios. This exercise can be especially
useful in building consensus among fiduciaries on how to
position the fund in a manner that reflects its true risk appe-
tite, as it helps in clarifying and understanding tail risks and
exposures to various market scenarios.
Of those that have risk measurement tools, public funds
(77%) use simulations more frequently than their endow-
ment/foundation (44%) and corporate (40%) counterparts.
By fund size, large funds (71%) lead the charge, although
more than half of small funds (64%) also have this capability.
Most funds find it useful to simulate both historical and po-
tential scenarios. For example, one might simulate how their
portfolio would have fared in the tech bubble crash, the 2008
financial crisis, or the 1987 market crash. Future-looking sce-
narios often hinge on events that could occur, such as the
breakup of the euro or various fiscal cliff scenarios.
Only 4% of respondents indicate that these simulations are
not useful.
Risk Measurement: Market Simulations
Do your risk analysis tools utilize capital market and/or economic simulations?
If yes, do you find it useful to simulate:
Yes No
0% 20% 40% 60% 80% 100%
Small
Medium
Large
Corporate
Endowment/Foundation
Public
All 57% 43%
56%44%
77% 23%
60%40%
40% 60%
29%71%
64% 36%
0% 10% 20% 30% 40% 50% 60% 70%
Neither
Customized future
scenarios
Actual historical
scenarios
Both 58%
31%
8%
4%
19. 2013 Risk Management Survey 17Knowledge. Experience. Integrity.
Less than one-third of funds (31%) regularly generate a formal
risk management report. This figure jumps to 71% for large
funds and 39% for public funds. Large funds are more likely to
have dedicated staff to generate and review this type of report.
The chief investment officer (85%) most frequently reviews
this report, followed by investment staff (77%). The chief
risk officer is rarely the primary audience for a risk report,
largely because few respondents (16%) have a dedicated
individual in this function.
Risk Management Reports
Is there a formal risk management report that is generated regularly?
What group(s) are the primary audience for risk management reports?
Yes No
0% 20% 40% 60% 80% 100%
Small
Medium
Large
Corporate
Endowment/Foundation
Public
All 31% 69%
56%22%
39% 61%
60%18%
40% 60%
29%71%
20% 80%
0% 20% 40% 60% 80% 100%
Chief risk officer
Board
Investment committee
Staff
Chief investment officer 85%
77%
62%
46%
8%
20. 2013 Risk Management Survey 18Knowledge. Experience. Integrity.
Investment staff (including the chief risk officer, where ap-
plicable) generally review risk management data quarterly
(49%) or monthly (31%), with a handful looking at it on a
weekly basis (4%). The 7% of respondents that never re-
view risk management data do not have a formal process in
place to assess or report on this type of information.
Two-thirds of investment committees and boards review
this material quarterly, likely in conjunction with committee/
board meetings. Those that never review this information
(12%) have informal, if any, risk management and measure-
ment processes, and include the funds whose staff do not
review this information.
Risk management information is typically communicated to
other stakeholders quarterly (40%) or annually (24%), if at all.
Reviewing and Communicating Risk Management Findings
How often do you review the findings of risk management tools?
How often do you communicate risk management findings to other stakeholders?
Annually 10%Never 12%
As needed 7%
Monthly 5%
Never 7%
As needed 9%
Weekly 4%
Quarterly 67%
Monthly
31%
Quarterly
49%
Staff/CRO Investment committee/board
As needed 5%
Monthly 2%
Annually
24%
N/A
29%
Quarterly
40%
21. 2013 Risk Management Survey 19Knowledge. Experience. Integrity.
Risk management involves a substantial amount of mea-
surement and data analysis overlaid with prudent judgment.
The investment committee (45%) is the body most frequent-
ly tasked with responding to the findings of risk manage-
ment tools, followed by investment staff (24%). However,
one-fifth of respondents indicate they have not yet taken ac-
tion based on risk assessments.
Endowments/foundations and corporate funds rely most
heavily on the investment committee to take action, while the
staff at public funds have more responsibility in this respect.
For those that have taken action, asset allocation changes are
most prevalent with public and corporate funds. Endowments/
foundations have focused on their investment managers,
most frequently making changes to manager due diligence/
search and manager review/termination. We note that while
discussions of tail risk hedging have been lively in the insti-
tutional investor community, few funds have taken concrete
actions to implement such a hedge.
Taking Action
How does your fund decide when it is
appropriate to take action based on risk
management tools?
Indicate what types of actions your
organization has taken based on risk
management findings.
N/A – we have not yet taken action
based on any risk assessments
Staff/CRO decides
Investment committee decides
Board decides
0%
20%
40%
60%
80%
100%
CorporateEndowment/
Foundation
PublicAll
21%
24%
45%
10%
17%
39%
28%
17%
25%
13%
63%
30%
20%
50%
0% 25% 50% 75% 100%
No actions taken
Tail risk hedging or
other structured programs
Allow managers
increased flexibility in
mandates and/or the use
of derivative instruments
Benchmark changes
Rebalancing decisions
(e.g., implemented tactical rebalancing)
Manager
review/termination
Asset class
“structuring” decisions
Manager monitoring
Manager due
diligence/search
Asset allocation changes
(e.g., diversified assets, pursued LDI)
64%
77%
33%
70%
56%
73%
56%
30%
52%
64%
44%
50%
50%
50%
64%
64%
33%
30%
50%
56%
30%
45%
30%
22%
26%
36%
10%
10%
11%
5%
6%
10%
0%
32%
16%
22%
20%
18%
22%
30%
All Public
Endowment/Foundation Corporate
22. 2013 Risk Management Survey 20Knowledge. Experience. Integrity.
One goal of examining portfolio risk is to help prepare the
fund for the impact of market volatility, and to be more aware
of potential scenarios. Looking down the road to the next
true market crisis, many funds wish to be better prepared
to avoid the worst potential outcomes. While these issues
should be addressed in a strategic, long-term investment
plan, some funds are also considering tactical moves as a
means to this end.
Many fund sponsors wrestle with whether or not to tactically
manage plan risk. Sponsors that do implement tactically must
be willing to accept the risks involved. In fact, only 30% of
sponsors have made rebalancing decisions (including but not
limited to tactical rebalancing) based on risk management
findings. Of those that have not done so, most (82%) do not
plan to in the future. Public (31%) and large (25%) funds are
most likely to use tactical implementations going forward.
Funds that have not used risk management findings as a
tactical allocation tool identify implementation challenges
as the top structural limitation, particularly for endowments/
foundations. Corporate funds identified the frequency of
committee meetings and the ability to develop a consensus
view as the biggest challenges.
Risk-Based Tactical Moves
If you have not decided to use the risk
management findings as a tactical asset
allocation tool, do you plan to in the future?
What structural limitations do you
foresee to implementing a tactical
strategy to mitigate risk?
Yes No
0% 20% 40% 60% 80% 100%
Small
Medium
Large
Corporate
Endowment/
Foundation
Public
All 18% 82%
83%
31% 69%
100%
17%
17% 83%
75%25%
11% 89%
0% 20% 40% 60% 80% 100%
Other
Ability to develop a
consensus view
Accountability for
the view developed
Frequency of
investment committee
meetings
Implementation
challenges
61%
65%
78%
40%
41%
35%
33%
50%
35%
40%
33%
40%
35%
40%
11%
50%
22%
30%
22%
10%
All Public
Endowment/Foundation Corporate
24. Corporate Headquarters
Callan Associates
101 California Street
Suite 3500
San Francisco, CA 94111
800.227.3288
415.974.5060
www.callan.com
Regional Offices
Atlanta
800.522.9782
Chicago
800.999.3536
Denver
855.864.3377
New Jersey
800.274.5878