Funding Status as an Investment Objective
What within an Investment Policy Statement guides a plan's fiduciaries to add or remove risk from the portfolio?
Looking through Investment Policy Statements you see preservation of principal as being a guiding factor for fiduciaries in considering the level of risk to take with the plan's assets. However, there are few mechanisms for quantifying when fiduciaries should change their asset allocation to favor a preservation of principal.
We believe that Funding Status should be identified as a central investment objective and incorporated into Investment Policy Statements. Looking back at Funding Status levels since the late 1990's, fiduciaries may have experienced points at which their plan had a funding surplus or was nearly fully funded. Unfortunately, Investment Policy Statements then and now have not identified funding status as a central investment objective and you have seen plans experience funding status declines from continuing to take risk within aggressive asset allocation strategies irrespective of their current ability to meet obligations.
What within an Investment Policy Statement guides a plan's fiduciaries to add or remove risk from the portfolio?
Looking through Investment Policy Statements you see preservation of principal as being a guiding factor for fiduciaries in considering the level of risk to take with the plan's assets. However, there are few mechanisms for quantifying when fiduciaries should change their asset allocation to favor a preservation of principal.
We believe that Funding Status should be identified as a central investment objective and incorporated into Investment Policy Statements. Looking back at Funding Status levels since the late 1990's, fiduciaries may have experienced points at which their plan had a funding surplus or was nearly fully funded. Unfortunately, Investment Policy Statements then and now have not identified funding status as a central investment objective and you have seen plans experience funding status declines from continuing to take risk within aggressive asset allocation strategies irrespective of their current ability to meet obligations.