Interview With Susan Mangiero About Pension Risk Management
Photo Source: University of Michigan
Pension risk management has always been important but is arguably receiving more focus now than ever before. The reason for that is straightforward. Lose billions of dollars and people pay attention. In "An Interview With Susan Mangiero" (Journal of Indexes, July/August 2009), I talk about (a) redemptions (b) correlation patterns (c) interest rate impact (d) leverage (e) hard to value investing and so much more. Click to read "An Interview With Susan Mangiero."
The take away points from the interview are several:
- Everyone is a risk manager. There is no escape from reality.
- Effective risk management is an ongoing process. There is no "buy and hold" equivalent.
- Ask questions as to whom is doing what along the service provider food chain because ultimately pension decision-makers are responsible for what is or isn't done.
- Creating an index for a strategy like Liability-Driven Investing requires thought. There is no universally accepted "perfect" way to benchmark manager performance but there are certainly good possibilities from which to choose.
- Life for a plan sponsor is challenging but exciting. What better time to embrace the opportunity to implement a robust and holistic risk management process?
Kudos to those who have already recognized the need to identify, measure and manage the continuum of retirement plan risks. Beware of complacency however. I'm reminded of a recent risk management snafu in my life. In trying to stave off colds, I'd been using zinc swabs. To my nasty surprise, last week's newspapers suggested incremental risks associated with a strategy I took to be prudent.
Bottom line: Be diligent and active when it comes to mitigating risks. Try to plug the leaks in the bucket. Better yet, get a new bucket when you need one. Don't shortcut the future of your plan participants.
