It has been a pleasure collaborating with Steve and BCP Penbridge on this important topic of pension de-risking and PRT. To echo Steve’s note, independent perspective, free of vested interest is critically important in rendering objective opinions.
As discussed in the article, we believe that mature plans should consider long term plan level funded ratio risk and total cost rather than transitory metrics such as ROA. For plans contemplating PRT in the near future, it is important to design investment strategies that closely track the characteristics of the liabilities. Liability-relative tracking risk, liquidity, and AIK readiness in the event of PRT are all factors to consider when designing investment portfolios. Periodic liability cash flow analysis, LDI benchmark development and revision, and corresponding adjustment in asset portfolios are all integral components of pension plan risk management and de-risking.
Steve and the BCP team have published a large number of articles in pension and PRT. I am very happy to have the opportunity to collaborate on this article and add our independent perspective to this valuable collection.
