Investment Blogger at Work


A few weeks ago, I promised to get back in the swing of things regarding more regular blogging. It is a promise I intend to keep. There is SO MUCH to say about the state of investment governance. Alas, our team has been working around the clock on "best practices" initiatives. We'll be saying more about our progress in short order. Many thanks for your patience. 

We'd love to get additional feedback about topics of interest. Please send an email with your suggestions. 

Dr. Susan Mangiero to Speak at Dow Jones Private Equity Analyst Conference 2009

 I am delighted to have an opportunity to speak at the upcoming Private Equity Analyst Conference 2009, to be held at the Waldorf Astoria from September 16-17, 2009. With so much focus now on ethics, conflicts of interest and transparency, the panel topic I've been asked to address is near and dear to my heart.

I've reprinted the session description below. Click here to learn more information about the conference in its entirety.

Title: "Avoiding Major Trouble: Why Private Equity Firms Must Spend More Time On Ethics"

Description: Ethics has become one of the key words over the past year, especially given the fallout on Wall Street. And regulations, both in the U.S. and overseas, now place strict curbs on many established business practices in an effort to stem corruption. The consequences for companies, both in fines and damage to reputation, can be significant, which means investors need to pay attention. But as the disclosures earlier this year in New York make clear firms are not doing as good a job as they can adhering to such policies. So what should firms be doing to ensure that they themselves as well as their portfolio companies stay compliant with not only various regulatory codes, but also just doing good business? What is the message that firms can drive home to their partners and their portfolio companies? Our panel provides their thoughts.


  • Barry Gonder, General Partner, Grove Street Advisors
  • Pascal Levensohn, Founder & Managing Partner, Levensohn Venture Partners
  • Susan M. Mangiero, Founder & President, Pension Governance
  • Raymond Svider, Co-Chairman & Managing Partner, BC Partners.

Pension Governance Sponsorship of Major ERISA Event

Pension Governance, Incorporated is pleased to announce its sponsorship of what looks to be a collection of best in class legal minds. Developed by the American Conference Institute, "Defending and Managing ERISA Litigation" will address the importance of written procedures and prudence process and much more. Both plaintiffs and defendants can no doubt benefit from listening to the many in-house attorneys and judges who are scheduled to speak. Readers of this blog can enjoy a $700 registration discount by typing ERISA PENSION when prompted for a code if they complete registration by July 17, 2009. Click here to download the full agenda.

As an owner of, we believe that plan decision-makers can learn a lot by examining case precedent, especially given the evolving nature of ERISA litigation activity. If you missed it when posted in April 2009, enjoy our complimentary debut white paper about pension lawsuit statistics. Click to read "ERISA Litigation Study," dated April 15, 2009.

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.

Does Your Plan Have an Effective Travel Policy?


According to "Detroit pension trustees take flight on funds' tab" (June 14, 2009), Detroit Free Press journalist Jennifer Dixon ponders how much is too much when it comes to trustee travel. I agreed to speak on the record about general best practices and want to add that I am not familiar with the situation in Detroit. I have excerpted my comments below:

"Susan Mangiero, president of Pension Governance Inc., an independent research, analysis and training company in Trumbull, Conn., said public pension plans need 'a clear policy about travel...It's public money, and taxpayers and plan participants would like to know the money is being properly spent.'"

I further suggested that an effective policy should address whether vendors are allowed to pay for trips, adding that "It's important to have policies on what is deemed to be a legitimate and reasonable expense, from a governance aspect and budget aspect."

Given the current environment of cutbacks and layoffs, a review of what constitutes prudent and necessary travel is a no brainer. An effective policy should also lay out rules for travel, conference attendance and so on when the fund has hired an outside consultant or fund of funds manager who is supposed to be doing some of the legwork along the way.

We've heard anecdotally that many pension decision-makers are being discouraged if not outright banned from taking trips right now, urged to fly coach, share hotel rooms and/or otherwise drastically reduce cash outlays.

For those who have yet to adopt a comprehensive travel policy for investment fiduciaries, bon voyage!


I'm Back and Raring to Blog


According to "Blogs Falling in an Empty Forest" by Douglas Quenqua (New York Times, June 5, 2009), statistics suggest that blogging might be considered a passing fancy for many individuals. Citing a 2008 survey, put out by Technorati, "only 7.4 million out of the 133 million blogs the company tracks had been updated in the past 120 days." 

Lest you think that I am one of the soon to be defunct bloggers, let me disabuse you of that notion. Our team has been busily builidng what we think are superb tools for pension decision-makers and their service providers. Look for more news in the coming weeks.

In the meantime, I'll try to get back to my regular pattern of posting. Writing is a passion and I thank all of you who have sent so many terrific comments and suggestions. Please keep them coming.


Pension Plans as Plaintiffs - 800 Pound Gorilla of Litigation

Just a reminder that our webinar entitled "Pension Plans as Plaintiffs - 800 Pound Gorilla of Litigation" will be held on May 12, 2009 from 2:00 PM EST to 3:30 PM EST. Our esteemed speaker panel includes:
  • Dr. Susan Mangiero, AIFA, AVA, CFA, FRM - Moderator and President, Pension Governance, Incorporated
  • Attorney James Baker - Speaker and Partner, Jones Day
  • Attorney Daniel Berger - Speaker and Partner, The Pomerantz Law Firm
  • Attorney Jay McElligott - Speaker and Partner, McGuire Woods LLP.

Since the passage of the Private Securities Litigation Reform Act of 1995, pension plans in the U.S. and abroad continue to play the role of lead plaintiff. Empirical evidence suggests that their presence can often impact litigation terms such as settlement amunt and timing. Hear experts talk about (a) when, and on what basis, pensions are likely to serve as lead plaintiff (b) what happens when a pension plan opts out of settlement (c) trend in sequential lawsuits (ERISA first, followed by securities litigation complaints (d) relationship between fiduciary liability insurance costs and litigation damages and (e) globalization of class action litigation that involves pension plaintiffs. 

Email or click here for more information 

Harvard Law School Presentation About Pension Litigation


Back from several speaking engagements (governance is a hot topic these days), I'll be chairing a session about pension litigation at the Harvard Law School on Friday, May 1. Part of the "Capital Matters: Managing Labor's Capital Conference" that spans several days, "Litigation to Remedy Meltdown Damage: What Can Be Gained, What Can Be Learned?" will include comments from Attorney Jeffrey C. Block, Partner, Berman DeValerio and Professor of Law Allen Ferrell, Harvard Law School. 

I will have much more to say about pension litigation trends in the next few days. In case you missed it, our ERISA litigation study may be of interest. Click here to access "ERISA Litigation Study: April 15, 2009."

Enron Redux? Pension Plans as Plaintiffs

According to the Stanford Law School Securities Class Action Clearinghouse, several cases against Washington Mutual, Inc. were consolidated in May 2008. Ontario Teachers' Pension Plan Board was designated lead plaintiff. The "complaint alleges that, during the Class Period, defendants issued materially false and misleading statements regarding the Company's business and financial results....On September 30, 2008, defendant Washington Mutual Inc. filed a notice of bankruptcy."

According to "Suing a Broken Bank" (CNN Money, March 30, 2009) and other sources, a motion to dismiss has since been filed.

Elsewhere in this video, I am asked by CNN Money anchor Poppy Harlow to comment on financial reporting as an element of risk management. (I agreed to discuss transparency in general but told producers upfront that I possessed no information about this particular case, other than what I had read as a member of the general public.) About allegations that material information was withheld from shareholders (whether this case or others), I stated that "It's essentially the same thing that we saw a couple years ago with Enron and WorldCom - Who knew what, when and on what basis and what was the obligation of senior management to disclose information to the shareholders?" Click to view "Suing a Broken Bank." In terms of full disclosure, I own 212 shares of Enron common (worth about a penny per share).

I wrote about Washington Mutual on September 26, 2008 when I posited whether better disclosure would have helped WaMu shareholders. At the time, the U.S. Securities Exchange Commission had just released a statement urging more "transparent disclosure for investors." I countered that "sufficient" news is always welcome but wondered (and still do) if numbers alone are meaningful. I think not. Let me repeat what I said then.

<< What exact type of disclosure can really make a difference? I vote for information about process and accountability. Otherwise, financial statement users end up with snapshot assessments of mandated metrics. While these numbers could be potentially helpful, they are made less so without an understanding as to how they are derived, why they change and the extent to which an organization is exposed to economic danger. A few of the countless questions on the minds of inquiring individuals are shown below. (This is by no means an exhaustive list.)

  • Who has the authority to effect change for all things financial management?
  • Who oversees authorized persons and the latitude they enjoy to make decisions?
  • How are risk drivers identified, measured and managed on an ongoing basis?
  • What creates "stop loss" threshholds?
  • How are functional risk managers compensated? >>

In addition to their already long "to do" list regarding asset allocation, plan design and so forth, countless pension fiduciaries are charged with corporate governance related duties such as monitoring. After all, they are frequently large shareholders in public companies stateside and abroad. It is interesting to note that most securities litigation leads are either public pension funds (U.S. and non-U.S.) or Taft-Hartley plans but not ERISA funds. Why this is true is one of the questions that will be discussed during our April 27, 2009 webinar entitled "Pension Plans as Plaintiffs - 800 Pound Gorilla of Litigation." Click here to register.

Pension Governance, Inc. Schedules Two Live Webinars About Pension Litigation

Pension Governance, Incorporated, an independent research, analysis and training company, is pleased to announce a top-notch roster of legal and fiduciary experts, each of whom will address the changing landscape of litigation as relates to plan sponsors. Click to learn more about “Pension Fiduciaries in the Hot Seat – What to Avoid & How to React if Sued” to be held on April 14, 2009 from 2:00 PM to 3:30 PM EST and “Pension Plans as Plaintiffs – 800 Pound Gorilla of Litigation” to be held on April 27, 2009 from 11:00 AM to 12:30 PM EST.

Learn why pension plans are a force in the legal arena, how both corporate governance and investment governance practices are fast-changing as a result, what can be done to manage litigation exposure and the link between litigation and fiduciary liability risk.

Who Should Attend: Public pension plan trustees, ERISA fiduciaries, pension analysts, asset managers, financial advisors, actuaries, consultants, securities litigation attorneys, pension attorneys, board members

Speakers for “Pension Fiduciaries in the Hot Seat – What to Avoid & How to React if Sued,” scheduled for April 14, 2009 (2:00 PM to 3:30 PM EST):

  • Dr. Susan Mangiero, AIFA, AVA, CFA, FRM - Moderator and President, Pension Governance, Incorporated
  • Mr. Richard Haran, Jr. - Speaker and Vice President, Chubb & Son
  • Attorney Marla J. Kreindler - Speaker and Partner, Winston & Strawn LLP
  • Attorney Stephen Rosenberg - Speaker and Partner, The McCormack Firm, LLC
  • Attorney Joshua Sternoff - Speaker and Partner, Paul, Hastings, Janofsky & Walker, LLP

Speakers for “Pension Plans as Plaintiffs – 800 Pound Gorilla of Litigation,” scheduled for April 27, 2009 (11:00 AM to 12:30 PM EST):

  • Dr. Susan M. Mangiero, AIFA, AVA, CFA, FRM - Moderator and President, Pension Governance, Incorporated
  • Attorney James Baker - Speaker and Partner, Jones Day
  • Attorney Daniel Berger - Speaker and Partner, The Pomerantz Law Firm
  • Attorney Jay McElligott - Speaker and Partner, McGuire Woods LLP

Email or visit to register for one or both of these exciting webinars. Additionally, registrants are entitled to a 10% discount off a subscription to

Tweet Tweet - We've Started Twittering

We've gone native (technology-wise that is) and decided to try our hand at micro-blogging. If you'd like to follow me or Pension Governance, Incorporated or both, check out or With only 140 characters, you'll need to economize your communications. I hope you'll decide to follow me.

Pension Risk Matters Celebrates Its Third Birthday With Continued Readership Growth

Since I started this blog three years ago to the day, I've been overwhelmed with insightful feedback from readers around the globe. Thank you so much for making more than a labor of love. Your continued support and feedback (even if you disagree with me) is always welcome. The blog has won awards and recognition from all corners of the world. We are proud to count hundreds of thousands of visits.

I look forward to many more productive years in pension blog land. Many thanks readers!

Valuation Policies and Procedures

Tomorrow marks our second in a series of webinars about valuation. The March 9 event focuses on the creation of valuation policies and procedures. If you need help with your "hard to value" asset process, email Our valuation experts represent years of academic training, "roll your shirt sleeves up" practical experience and lots of common sense.

In the meantime, please take our short survey. We will be announcing the results soon. Click to answer a few questions about "Hard to Value Asset Policies and Procedures." Preliminary answers enlighten with 80 percent of respondents answering "Yes" to replacing an asset manager if the manager cannot properly value financial instruments. Three quarters of survey-takers cite concerns such as "auditor's ability to properly model financial instruments," "data quality," and "fiduciaries' ability to properly model financial instruments for oversight purposes."

Hard to Value Assets and Fiduciary Duties

Pension Governance, Incorporated will soon release two webinars on the important topic of valuation and investment fiduciary duties. In the spirit of providing impartial thought leadership and insight, our team has created a short survey about valuation policies and procedures and their relationship to asset allocation and manager selection, respectively.

Click here to take the survey entitled "Hard to Value Asset Policies and Procedures." The survey should only take about 3 or 4 minutes to complete. Results will be aggregated and published in several weeks. Individual responses will not be published nor will information about any respondent be made public.

In advance, many thanks for your time.

Forbes Describes Public Pension Benefits as Rich

According to Forbes Magazine journalist Stephane Fitch, public pension participants are living the life of Riley. "Gilt-Edged Pensions" (February 16, 2009) showcases individuals who have been able to retire at a relatively young age and with a comfortable nest egg, courtesy of taxpayers, at least in part. Examples include the following:

  • Retired police offer who received a pension at age 42 worth about $2 million
  • New Jersey social studies teacher who earns $80,000 per year, pays 5.3% towards a pension, can retire at age 60 with full benefits and the ability to teach part-time thereafter
  • Florida security guards who can moonlight for private companies, with time clocked on such assignments being credited toward public pension payouts

Adding insult to injury, Fitch relies on Bureau of Labor Statistics data to suggest that a pay gap exists, in favor of public workers. He writes that "State and local government workers get paid an average of $25.30 an hour, which is 33% higher than the private sector's $19."

I'm not picking on public workers but I do think it is important to understand how much taxpayers owe now and in the future for others' benefit claims. (By the way, I think that includes Social Security and Medicare unfunded liabilities too.) Many people I know are amenable to the notion of a municipal employee receiving higher benefits if they receive lower cash wages, as compared to the private sector. However, few taxpayers want to subsidize both current and future compensation, especially if they themselves are cash strapped (self-employed, lost their job, work for a company without a retirement plan, etc).

The stage is set for continued frustration on the part of public employees (many of whom no doubt work quite hard to do a great job) versus Joe and Sally Taxpayer who have less and less disposable income to finance giant IOUs.

Editor's Note: Fitch quotes me in the article by writing that "Taxpayers are on the hook," says Susan Mangiero, who maintains, a blog highlighting pension plan issues.

Risk Management for Corporate Counsel

I am pleased to announce my participation as part of the February 26, 2009 Lexis Nexis Corporate Counsel Series. According to the official program site, the 60-minute Webcast will focus on critical corporate governance and risk assessment issues that pertain to in-house company attorneys. Click here to register for what promises to be an interesting and timely event.

I've excerpted information about panelists below. I hope you can join us.

  • Susan Mangiero, Financial Analyst, Risk Assessment and Valuation Expert -  Susan has over 20 years of experience in capital markets, global treasury, asset-liability management, portfolio management, economic and investment analysis, derivatives, financial risk control and valuation. She has worked for organizations such as the General Electric Company, PricewaterhouseCoopers LLP, Bank of America, and Bankers Trust.
  • Lynn Brewer, Ethics Expert and Author of Confessions of an Enron Executive: A Whistleblower's Story - Lynn was responsible for Risk Management in Energy Operations at Enron, worked in forensic accounting, and spent 18 years as a legal professional in private practice until she joined Ralston Purina, where she worked in Corporated Development for the General Counsel and Chief Financial Officer.
  • Jason Greenblatt, Executive Vice President and General Counsel. The Trump Organization - Jason is involved in a large number of transactions worldwide, including deals with major financial institutions, Fortune 500 companies, governmental agencies, and joint venture partners.

Private Equity and Derivatives - Double Whammy or Blissful Combo?

According to the U.S. Government Accountability Office, nearly 4 out of 10 surveyed pension plans say they allocate monies to private equity. Allowing that some managers have turned in acceptable returns, respondents also cited numerous "challenges and risks beyond those posed by traditional investments." Valuation and limited transparency are two issues cited in "Defined Benefit Pension Plans: Guidance Needed to Better Information Plans of the Challenges and Risks of Investing in Hedge Funds and Private Equity" (GAO-08-692, August 14, 2008).


To shed light on some of the intricacies associated with private equity investments, I authored a case study for the February 2009 issue of PEI Manager, a private equity and venture capital focused publication. The bottom line is that institutions that invest in private equity funds are directly impacted by their portfolio companies' use of derivatives.


"Swapping out" by Dr. Susan Mangiero, an Accredited Valuation Analyst and CFA charterholder, is reproduced below. Email Ms. Jennifer Harris, Associate Editor - PEI Manager, for permission to reprint the case study.


                                                                       * * * * * *




Private Equity Holdings (“PEH”) is required by its charter to avoid companies that use derivative financial instruments to speculate. In reviewing numbers for FAS 157 reporting purposes, a PEH managing partner notices that one of its portfolio companies, ABC Incorporated (“ABC”), recently included a FAS 133 entry for a $20 million interest rate swap hedge. During a call to the company to query about how the swap is being used, the PEH managing partner is informed that its counterparty is Global Bank Limited (“Global”). Not only has Global just reported a $30 billion loss due to poor valuation of its structured product portfolio, it posted no collateral in favor of ABC while ABC was required to pledge $2 million in U.S. Treasury Bills in order to protect Global in the event that ABC could not make its contractual swap payments to Global. Not being too familiar with derivative instrument pricing and default risk analysis, PEH hires an expert to investigate whether the swaps reflect a hedge versus a market bet and to further assess how PEH should adjust the valuation of its equity stake in ABC. What does the expert need to look at and how should she arrive at an appropriate conclusion?




This fact situation, ripped from the headlines, raises several important valuation questions, including, but not limited to the following:


  • Notwithstanding FAS 133 numbers, is the company exposed to changes in interest rates that could adversely impact cash flow, liquidity and net income?
  • Was the swap correctly valued?
  • How might ABC be impacted by Global’s deteriorating health?
  • What adjustments, if any, should PEH make to its initial valuation of ABC equity?

There are several critical issues here, all of which could seriously hamper the fortunes of both ABC shareholders and PEH investors. An inaccurate valuation of the swap leads to a flawed accounting representation for ABC and may lull treasury staff into thinking that the hedge offers full protection against unexpected moves in interest rates. PEH may report a bad FAS 157 number which in turn could lead to flawed asset allocation decisions made by institutional limited partners or the overpayment of performance fees to PEH. A poorly constructed hedge (in economic versus accounting terms) that exposes ABC to negative market conditions could force PEH to violate its prohibition against speculative trades being executed by portfolio companies. If Global does not meet its swap obligations and/or files for bankruptcy protection, ABC may not be able to recover its collateral quickly or could lose it altogether, depending on its standing vis-à-vis other creditors.


Swap pricing models can differ depending on the complexity of the transaction. However, for standard fixed to LIBOR swaps, the secondary market is large ($111 trillion, according to the Bank for International Settlements). Active trading makes it easy to readily obtain prices for various maturity interest rate swaps with quotes reflecting the discounting of future projected fixed and floating swap payment amounts. In contrast, the assessment of credit worthiness varies, sometimes considerably, across banks. Unfortunately for ABC, even if they posted more collateral than should have been required, the fact remains that they have no immediate recourse in the event that Global’s distress prevents the bank from paying what it owes to ABC. If Global defaults, ABC will then have to decide on a course of action that could include any or all of the following:


  • Enter into a second interest rate swap to replace Global at a now higher fixed rate
  • Attempt to sell the initial swap in the open market and consider another way to hedge against rising interest rates though few will be willing to accept the Global risk
  • Take legal action to reclaim its collateral
  • Write down the value of the swap on its books

There is no ideal situation. The expert will necessarily have to ask ABC what they plan to do in the event of swap non-performance and how it is expected to impact its cash flow, cost of money (which in turn affects capital budget decisions), balance sheet, dividend payments and interest coverage. Once that scenario analysis is conducted, both the expert and PEH will be able to quantify how much of an adjustment downward they will need to make for both accounting and performance reporting purposes.

New Study Says Plan Sponsors Must Improve Fiduciary Practices

As I stated during my September 11, 2008 "hard-to-value asset" testimony before the ERISA Advisory Council, there are some stellar examples of pension risk management and there is everyone else. Given the dearth of publicly available information about pension financial best practices, one can only guess at the size of each of the two buckets, “great” and “not so great” except for occasional studies that offer empirical validation. In October 2008, Pension Governance, LLC (now Pension Governance, Inc.) released a unique study about the use of derivatives by plan sponsors. Sponsored by the Society of Actuaries, “Pension Risk Management: Derivatives, Fiduciary Duty and Process” found that the “everyone else” bucket is rather large, hinting at future problems if poor process is left unchecked. (Click to read my hard-to-value asset testimony. Click to download "Pension Risk Management: Derivatives, Fiduciary Duty and Process.")


Now, a new report offers additional and troublesome evidence that the “everyone else” bucket remains large. Hot off the press, the MetLife U.S. Pension Risk Behavior IndexSM (“PRBI”) considers investment, liability and business risk management among the largest U.S. defined benefit pension plan sponsors. (Pension Governance, Incorporated is proud to have assisted with what we think is path-breaking research.)


Designed to measure both the aptitude and attitude of employee benefit decision-makers, the research creates a base case gauge as to the current state of pension risk management. Not surprisingly, respondents ranked the following risk factors as “Most Important,” in part it is believed because they are the simplest to model and measure:


  • Asset Allocation
  • Meeting Return Goals
  • Underfunding of Liabilities
  • Asset and Liability Mismatch

Given radically changing demographic patterns and the related, oft material economic impact on plan sponsors, it is surprising that the following risk factors were identified as relatively unimportant (and in some cases ignored altogether):


  • Early Retirement Risk
  • Mortality Risk
  • Longevity Risk
  • Quality of Participant Data.

Also disturbing is what appears to be a disconnect between the importance attached to prudent process by plan sponsors and the regulatory and legal reality that PRUDENT PROCESS IS IMPORTANT. Not only can plan participants suffer untold harm in the absence of a good process or the presence of a bad process, fiduciaries are professionally and personally on the hook. (As this blog has urged many times before, questions about prudent process and fiduciary duty are best answered by plan counsel.)  


According to the MetLife press release, dated January 26, 3009, “While respondents ascribe a particularly high rating to the quality of their Plan Governance, they do not seem to carefully consider the effectiveness of their decision making methods or how to improve the way they make decisions. This suggests that many respondents don’t perceive decision making process as an integral element of plan governance, when recent ERISA litigation would suggest just the opposite. In addition, plan sponsors report that they routinely review liability valuations and understand the drivers that contribute to their plan's liabilities. However, at the same time, they indicate that they do not actively implement or regularly review procedures to manage either mortality, longevity or early retirement risk, which are major determinants of both the timing and level of future liabilities. These inconsistencies may indicate that plan sponsors tend not to systematically consider the interrelationships among risk items and plan their implementation of risk management measures to maximize effectiveness across all items. Over time, a lack of holistic risk management may have serious repercussions, including unnecessary volatility in earnings and/or cash flow or potential plan failure. “


Unlike other studies, this research sought to quantify attitudes and aptitudes, in essence creating a unique score card against which subsequent results can be compared. The news is not great. On a scale of 0 to 100%, the PRBI level is 76. Roughly translated, defined benefit managers earn an average grade of C with respect to how they manage defined benefit plan risk.


These results beg a hugely important question. Is “mediocre” performance acceptable or does the MetLife study sound a warning that someone needs to stay after school for extra help? This blogger thinks it is the latter and welcomes your suggestions about how to fix a wobbly system. (Email with comments.)


As I’ve said many times, reward good process and make life difficult for those who do sub-par work. With trillions of dollars at stake, how can we accept anything less?


Editor's Note: Click to read the MetLife press release, dated January 26, 2009, about this new study. Click to download "MetLife U.S. Pension Risk Behavior IndexSM: Study of Risk Management Attitudes and Aptitude Among Defined Benefit Pension Plan Sponsors." Now Available on Kindle

I am delighted to announce that will soon be available to Kindle readers, courtesy of Newstex and According to a recent announcement by Newstex, "Kindle blogs are downloaded onto Kindle so you can read them even when you're not wirelessly connected." I will announce more details as they become available.

Editor's Note: Click to read more about Kindle, an electronic reading device that is produced and sold by Amazon.

Dr. Susan Mangiero to Speak at NYSSA Pension Event

Mark your calendars for an exciting event about pension risk realities. Dr. Susan Mangiero, President of Pension Governance, Incorporated, will join other pension professionals for a half-day workshop entitled "Pensions at Risk: A Meeting of Fiduciary and Financial Minds." Presented by the New York Society of Security Analysts, Derivatives Committee, the event will be held in midtown Manhattan on January 21, 2009 from 8:30 am to noon.

Click to register. A description of the program is excerpted below.

<< Recent market turmoil, coupled with changes in pension funding and accounting rules, have helped produce a “perfect storm” of volatility and risk in our defined benefit pension plans. As pension investment and risk management strategies continue to evolve to meet these demands, so does the need for informed fiduciary decision-making. This program is intended to provide an up-to-date and in-depth discussion regarding the fiduciary legal and risk management considerations involved in the design and implementation of pension investment management strategy, including liability driven investing (LDI) approaches and those integrated within a framework of corporate finance. Topics will include performance benchmark development, asset/liability duration matching, timing of implementation and the use of derivatives, alternative asset classes and leverage. >>

Martin Rosenburgh, Esquire, will moderate a panel to include the following speakers:

  • Nell Hennessy, President and Chief Executive Officer, Fiduciary Counselors Inc.
  • Susan M. Mangiero, PhD, AIFA, AVA, CFA, FRM, President, Pension Governance, Inc
  • James Moore, PhD, Executive Vice President, Pension Strategist, PIMCO
  • Michael W. Peskin, CERA, Managing Director, Morgan Stanley.

PensionRiskMatters Cited as "Favorite Blog" by

Imagine my surprise and delight when told that is part of the "Our Favorite Blogs" collection for a major hedge fund site, Veteran financial guru, founder and editor Chris Holt has done a great job with his site.

Thanks Chris. We are honored.

New Study Addresses Pension Risk Management Gaps

 At a time of great market turmoil, plan participants, shareholders and taxpayers want to know whether their retirement plans are in good hands. Risk is truly a four-letter word unless plan sponsors can demonstrate that a comprehensive pension risk management program is in place. Unfortunately, there is little information that details if, and to what extent, plan sponsors are doing a credible and pro-active job of identifying, measuring and mitigating a variety of risks. The risk alphabet includes, but is not limited to, asset, operational, fiduciary, legal, accounting, longevity and service provider uncertainties.

While no one could have predicted the extreme volatility that characterizes the current state of global capital markets, it has always been known that poor risk management can make the difference between economic survival and failure. Applied to pension schemes, ineffective risk management could prevent individuals from retiring at a certain age and/or leaving the work force with much less than anticipated. Others pay the price too. Taxpayers worry about rate hikes that may be inevitable for grossly underfunded public plans. Shareholders could find themselves on the hook for corporate promises or experience depressed stock prices due to post-employment benefit obligations.

In an attempt to shed some light on this critical topic area, Pension Governance, LLC is pleased to make available a new research report that explores current pension risk management practices. In what is believed to be a unique large-scale assessment of pension risk practices since the publication of a 1998 study by Levich et al, this survey of 162 U.S. and Canadian plan sponsors seeks to: (1) understand why and how pension plans employ derivative instruments, if they are used at all (2) identify what plan sponsors are doing to address investment risk in the context of fiduciary responsibilities and (3) assess if and how plan sponsors vet the way in which their external money managers handle investment risk, including the valuation of instruments which do not trade in a ready market. The report was written by Dr. Susan Mangiero, AIFA, AVA, CFA, FRM, with funding from the Society of Actuaries.

Each survey-taker was asked to self-identify as a USER if he/she works for a plan that trades derivatives in its own name. A NON-USER works for a plan that does not trade derivatives directly but may nevertheless be exposed indirectly if any of the plan's asset managers trade derivatives.

In answering broad questions, a large number of surveyed plan sponsors describe themselves as doing all the right things to manage investment, fiduciary and liability risks. However, answers to subsequent questions - those that query further about risk procedures and policies at a detailed level - do not support the notion that pension risk management is being addressed on a comprehensive basis by all plans represented in the survey sample.

Key findings include the following points:

  • Plan size seems to be one factor that distinguishes USERS from NON-USERS, with 39% of USERS managing plans in excess of $5 billion versus 14% of NON-USERS associated with plans larger than $5 billion.
  • Pension decision-making appears to vary considerably by job function, with 48% (37%) of USERS (NON-USERS) choosing "Other" rather than selecting from given titles such as Actuary, Benefits Committee Member, CFO or Human Resources Officer.
  • Time allocation varies considerably with 64% (40%) of USERS (NON-USERS) saying they devote 75 to 100 percent of their work week on pension issues. In contrast, 37% of NON-USERS say they spend 0 to 24% of their work week on pension issues.
  • A majority of USERS (64%) and NON-USERS (48%) have had discussions about the concept of a fiduciary duty to hedge asset-related risks. A smaller number say they have discussed the concept of a fiduciary duty to hedge liability-related risks.
  • Few plans currently embrace an enterprise risk management approach with 59% (57%) of USERS (NON-USERS) responding that their organization does not use a risk budget. When asked if their organization has or is planning to hire a Chief Risk Officer, 57% (64%) of USERS (NON-USERS) answered "No."
  • NON-USERS cite numerous reasons for not using derivatives directly, including, but not limited to, "Lack of Fiduciary Understanding" (25%), "Perception of Excess Risk" (31%), "Considered Too Complex" (23%), "Prohibition Against Possible Leverage" (19%) and/or "Defined Benefit Plan Risk Not Considered Significant" (28%).
  • A query about whether survey-takers review external money managers' risk management policies results in 70% (58%) of USERS (NON-USERS) responding "Yes." Fifty-two percent (57%) of USERS (NON-USERS) say they review external money managers' valuation policies. This survey did not drill down with respect to the rigor of questions being asked.
  • Survey respondents seem to rely mainly on elementary tools to measure risk. Eighty-three percent (64%) of USERS (NON-USERS) rank Standard Deviation first in importance. Seventy-nine percent (63%) of USERS (NON-USERS) rank Correlation second. Only one-third (38%) of NON-USERS cite Stress Testing (Simulation). Four out of 10 USERS cite Value at Risk in contrast to 23% of NON-USERS who do the same.
  • Survey respondents worry about the future with 58% (60%) of USERS (NON-USERS) ranking "Accounting Impact" as a concern. Other concerns were also noted to include "Regulation," "Longevity of Plan Participants" and "Fiduciary Pressure."

Click to download the 69-page study, entitled "Pension Risk Management: Derivatives, Fiduciary Duty and Process" by Susan Mangiero. Given the large file size, readers are encouraged to (a) first save the file (right mouse click) and then (b) open the file from wherever you have saved the file. Otherwise, you may receive an error message, depending on your computer configuration. 

The study is also available by visiting Send an email to if you experience any difficulty in downloading the pdf file and/or want to comment about the study.

Me and Donald Trump

Imagine my surprise upon receiving the September 2008 newsletter from Big Speak and seeing that I am profiled on the same page as billionaire Donald Trump. Beyond the fact that we are each registered with this California-based speaker's bureau, I happen to agree with Mr. Trump's familiar bark. To executives who did less than their best work, with dire consequences for all, might it be time to say "You're Fired?"

Click to read my Big Speak overview. Forgive the shameless plug. I have reprinted the text below.

                                 Is Your Pension Safe? Bring Econ. 101 to Finance 911.

The times are turbulent, the titans are tumbling and once venerable financial institutions find themselves drowning in debt. As global economic turmoil seems to envelop every facet of our lives, numerous questions about the financial future and investment stability are at the forefront of both corporate and individual concern. BigSpeak represents a number of corporate and personal financial pros that can help you navigate today's (and tomorrow's) stormy seas. Susan M. Mangiero has more than 20 years of experience and is a leading authority in such areas as capital markets, asset-liability management, derivatives and financial risk control. Dr. Mangiero has worked at General Electric Co., PricewaterhouseCoopers, LLP and Bank of America.

As a speaker, she has made recent appearances before the Harvard Club, as well as testifying in front of the U.S. Department of Labor about valuation issues (hedge fund, private equity, derivatives, etc…) as pensions, endowments and foundations are allocating hundreds of billions into these investments. Taking into consideration asset allocation, risk management and public policy, among a bevy of related topics, she addresses key questions and potential pitfalls facing finacial professionals in these challenging times. Dr. Mangiero also tackles the fast changing operating environment for investment buyers and sellers alike. Important topics, including portfolio valuation and operational controls have become front and center as fund managers, institutional investors and their service providers deal with new rules and regulations and the continuing fallout of credit-related problems. Dr. Mangiero shares her insights about: regulatory enforcement hot buttons, valuation and risk management litigation trends, best practices for evaluating key risks and managing exposures and institutional investor impact as pensions/endowments/foundations allocate more money to alternatives and complex securities. You've got questions, we’ve got experts. So before you clear those accounts, melt down the jewelry or stuff that mattress, get the Big financial picture from BigSpeak.

Editor's Note: Click to access my one-page profile with testimonials and a sampling of where I've presented.

Low-touch regulation, not black letter rules

I had the pleasure of speaking twice at the annual SIBOS conference last week in Austria. (The 2007 event was in Boston. The 2009 forum will be held in Hong Kong.) The first panel could not have been more timely, given the current regulatory frenzy underway. Sure to cause a stir on any day, you can imagine the lively banter as market prices tumbled. Here is a summary of what ensued. This article was first published in Sibos Issues, SWIFT's daily newspaper devoted to reporting the Sibos conference sessions. You can view more articles and download each issue from SWIFT's website.

                           Regulation that fails to keep up could damage the funds market

Panelists at Wednesday's session on whether regulation helps or hinders the investment funds industry claimed to see no threat from regulation as such but plenty from sledgehammer regulation that failed to keep up with the market.

"We work in an industry that prefers light-touch regulation to black-letter rules," said moderator Bob Currie, editor of FSR. "It has good reason to." Overall, the question for panelists was not whether but how much and what kind. "Regulation creates trust and makes the system work. It's a fiduciary business with a risk asymmetry between investor and provider," EFAMA chairman Mattias Bauer pointed out. "But regulators need to ensure they create a level playing field between products, with no regulatory arbitrage."

In the UK, that's precisely what regulators had failed to do, claimed EU Consumer Representative Mick McAteer. By treating insurance products and mutual funds differently, he said, UK regulators had "failed to improve market conditions, increase confidence in the market, or create a level playing field for consumers."

A.P. Kurian, chairman of the Association of Mutual Funds of India, took a contrarian position, urging "regulatory activism" as an approach and posing as a metric for existing regulations, "whether it had survived the test of a crisis." He claimed "strict regulation and strict compliance" had helped the funds industry in his native India minimize the impact of current economic volatility.

In contrast, Pension Governance CEO Susan Mangiero warned that over-regulation counterproductively increased risk because it impeded the transfer of information between buyers and sellers. "When you have excess regulation, it becomes difficult to reward good people and penalize bad ones because everyone's concerned with compliance rather than best practice in risk management. The result is that they have no incentive to do what they should be doing," she said.

A compromise came from Jack Gaine of the Management Funds Association, who cited what he described as a "compact" between regulators and the US hedge fund industry whereby hedge funds exclusively target institutions and high net worth clients in return for a waiver on short-selling restrictions.

In any case, Mangiero suggested finally, the debate was most likely academic. "I advocate a free market approach but what I expect is more regulation," she said.

                                                                            * * * * * *

Editor's Note: While I realize that espousing capitalism during a horribly tough economic environment is inviting verbal tomatoes, it is critical to acknowledge both sides of the argument. Check out the video entitled "The Resurgence of Big Government" by Yaron Brook, September 18, 2008. Dr. Brook is the President of the Ayn Rand Institute and a former finance professor.

Testimony of Dr. Susan Mangiero About "Hard to Value" Assets


At the invitation of the ERISA Advisory Council, I presented testimony about "Hard to Value Assets" on September 11, 2008 in Washington, D.C. Some of the questions I was asked to answer are listed below:

  • Should valuation issues play a role in the selection of plan investments, and in achieving proper asset allocation and diversification?
  • What, if any, modifications to plan investment policies and guidelines should plans consider when utilizing "hard to value assets?"
  • As fiduciaries, what do you deem to be or what do you expect to be "hard to value assets?"
  • Who can the fiduciary rely upon when ascertaining the value of "hard to value assets" when the fiduciary is incapable of valuing, in order to fulfill their fiduciary responsibility to plan participants?
  • What valuation policies and procedures should a fiduciary adopt when holding "hard to value" assets?
  • What disclosures and education measures are required or suggested for participants and fiduciaries with respect to plans which invest in "hard to value" assets?

Given the recent tumult in the global financial markets, it seems as if an eternity has passed since the September 11 hearing date. Valuation continues to be a hugely important topic. I hope that my comments are informative and helpful to readers. Let me know what you think. Click here to read "Testimonial Remarks Presented by Dr. Susan Mangiero." 

SIBOS 2008 in Vienna

I'll be blogging from Vienna, Austria shortly. I look forward to attending the SIBOS 2008 conference, billed as "the world's premier financial services event." I am honored to be speaking twice, once about regulation and a second time about pension issues. The theme is definitely global and the mood is serious. If you want more information, click here. The program is jam packed with terrific sessions and will no doubt offer interesting topics for

I've included details about my participation below.

EVENT ONE: September 17 - "Will regulation help or hinder the investment funds industry?"

The funds industry is facing a tide of regulation, of which UCITS (Undertaking for Collective Investment in Transferable Securities) III and IV are the latest examples. In addition, the European regulator is demanding more transparency from the fund industry, especially around cross - border distribution (for example the Klinz report). How much impact will these initiatives have? What does the industry need to do to comply? Can initiatives such as the Fund Processing Passport provide an answer? And, most importantly, will the regulation help or hinder the industry going forward?


  • Mattias Bauer, Chairman, EFAMA
  • John G. (Jack) Gaine, Managed Funds Association
  • A.P. Kurian, Chairman, Association of Mutual Funds in India
  • Mick McAteer, EU Consumer Representative, Fin-Use
  • Susan Mangiero, CEO, Pension Governance LLC


  • Bob Currie, Editor, FSR Magazine

EVENT TWO: September 18 - "Where is my pension?"

The issue of pension shortfalls is a universal one, caused by a combination of longer life expectancy and inadequate planning. How does the financial services industry need to respond? In most markets, you need returns way above forecast beta. Does that mean that leveraged investment will become the norm? How should we fill the holes?


  • Robert Brown, CEO, Ausmaq
  • Glyn Edward, Funds, Custodian and Administrators, SWIFT
  • Susan Mangiero, CEO, Pension Governance LLC
  • Clive Witherington, Head of Business Development, Watson Wyatt

Dr. Susan Mangiero Will Give Hedge Fund Conference Keynote

Join me at the 6th Hedge Fund Accounting & Administration Forum 2008 on July 22, 2008 at the Harvard Club. I will be giving the second day keynote presentation entitled "Hedge Fund Risk Management and Valuation - No Time for Shrinking Violets."

More about this presentation is excerpted below.

"Explore key questions and challenges facing hedge fund professionals in these turbulent times. Join appraiser and risk manager, Susan Mangiero, for a topical discussion about the fast changing operating environment for buyers and sellers alike. Always important topics, portfolio valuation and operational controls are front and center as fund managers, and their service
providers, deal with new rules and regulations and the continuing fallout of credit-related problems. Dr. Mangiero will share her insights about:

  • Regulatory enforcement hot buttons
  •  Valuation and risk management litigation trends
  • Best practices for evaluating key risks and managing exposure
  • Institutional investor impact as pensions/endowments/foundations allocate more money to alternatives.

To learn more about this FRA, LLC sponsored two-day conference (July 21-22, 2008), download the flyer. Cited as a "Best Blog" by Pensions & Investments

This bloggerette has just learned that is included in "Pensions & Investments' Best Blogs and how they got that way" (Pensions & Investments, June 9, 2008). As an avid fan of this Crain publication (along with its sister periodicals, FinancialWeek and InvestmentNews), I am duly honored. 

Since the inception of this pension blog in late March 2006, I've tried to write about timely topics and issues that (I hope) help to raise the pension investment fiduciary bar. My goal is to both inform and entertain. Sometimes it's tough to be funny about very serious topics but I do believe that humor helps to spice up things. (If you have any jokes or funny stories about compliance, governance, risk management, derivatives, investing or valuation, send them my way. Let me know if I may attribute them to you or if you instead prefer to remain anonymous.)

However much a labor of love for me, this blog importantly represents the sentiments, concerns and realities of hard-working benefit plan fiduciaries (and retirees) around the world. Thanks to the 275,000+ readers, in many countries, who have visited to date. You continue to make great suggestions, point out problem areas and identify "hidden" news.

Comments and suggestions are always welcome and can be emailed to (While it is not possible to answer every email, please know that all emails are read and appreciated.) If you want to guest blog and are willing to write with the goal of educating readers (versus direct selling), let's talk. (Since is now being syndicated by multiple news blog aggregators, material must be original or otherwise properly credited.)

What topics are of interest to you? Do you favor short or long posts? Is analysis and research of interest or would you prefer more news-oriented posts?

Dr. Susan Mangiero Speaks About Hedge Fund Valuation

Dr. Susan Mangiero, AIFA, Accredited Valuation Analyst, CFA and FRM addresses an audience of valuation practitioners on June 10, 2008 as part of the 15th annual conference sponsored by the National Association of Certified Valuation Analysts.

Part of its 15th annual conference, this mini workshop is a unique offering that combines information about hedge fund industry structure with core valuation concepts. The course will examine the overall structure of a hedge fund, including standard partnership terms, revenue structure, liquidity restrictions, and impact of hedge fund strategy on the value of hedge fund business itself. Special issues such as side pockets and high water marks will be discussed, along with a description of regulatory and accounting initiatives with respect to hedge fund valuation.

Editor's Note: A later posts will cover changes in regulations that directly impact the valuation process, including appraisal penalties now part of the Pension Protection Act of 2006.

Are You Managing Your Investment Fiduciary Risk? Ten Things You Need to Know

This blog's author is off to San Francisco to keynote the 2nd day of the 2008 Pension Bridge conference. I'll be speaking about investment fiduciary risk and ten things one needs to know. The session description is shown below.

<< Fast changing rules and regulations, increased investment complexity, market volatility and changing demographics create new challenges for retirement plan decision-makers. Fiduciary accountability has taken on a new urgency as headlines about big losses motivate shareholders and taxpayers alike to demand reform. Integral to the process is the proper identification, measurement, and management of risk, including the selection and monitoring of consultants, money managers, actuaries and other key players. Join Dr. Susan M. Mangiero, CFA, FRM, AVA, for an update about performance pitfalls, sources of hidden risk, risk control gaps, pension litigation trends and valuation difficulties that directly impact defined benefit and 401(k) plan investment strategies. Learn ten things you can use to mitigate personal and professional liability. >>

Of course no one can summarize everything a fiduciary must know in ten steps or provide an exact recipe for staying out of trouble. (As I always remind, legal advice and interpretation is best left to attorneys and regulators.) The goal is to provoke thought about the investment process and related risk-taking. Interestingly, a recurring theme of the international regulatory pension conference (where I spoke on April 2, 2008) was a global emphasis on outcomes and not process. Imagine how different life would be in the U.S. if realizations trump decision-making.

Click to access the full agenda for Pension Bridge.

Dr. Susan Mangiero Speaks at World Bank Pension Conference

Don't think there are no crocodiles because the water is calm.
...Malayan proverb

This blog's author (Dr. Susan Mangiero) joins internationally recognized leaders as part of the World Bank/IOPS 4th Contractual Saving Conference: Supervisory and Regulatory Issues in Private Pensions and Life Insurance. Nearly 200 regulators and practitioners convene in Washington, DC, hailing from countries such as the United States, Australia, Norway, Denmark, Mexico, Chile, Sweden and New Zealand.

Dr. Mangiero will address hidden risks from an implementation perspective. Other presentations similarly emphasize the message that risk mitigation is the sine qua non of modern asset-liability management. Without a dynamic and comprehensive process, fiduciaries leave themselves wide open to allegations of breach. Click to access the conference agenda.

Note: The International Organisation of Pension Supervisors (IOPS) is an "independent international body representing those involved in the supervision of private pension arrangements. The organisation currently has around 60 members and observers representing approximately 50 countries and territories worldwide."

UK Pension Gains Wiped Out

Even British comic book hero Union Jack may not be able to save the day for some UK pension plans. According to data just released by the Pension Protection Fund, the net funding status for nearly 8,000 private defined benefit plans widened to 97.5 billion pound sterling. Worse than the 80.8 billion GBP gap reported for January 2008, this February 2008 number is deemed "highest since June 2003" and represents the fourth consecutive monthly gap. Another telling indicator of problems is the news that "In February 2008, the total surpluses of schemes in surplus fell to £32.6 billion from £37.3 billion1 at the end of January 2008." Twelve months ago, the "aggregate surplus of all schemes in surplus stood at £68.6 billion." Click to review the Pension Protection Fund data report.

Citing anemic equity performance and falling bond yields as the culprits, the report's authors add that lower bond yields resulted in a 8.1% rise in aggregate liabilities "while weaker equities have reduced assets by 1.5%." Noteworthy are the results of a survey commissioned by the PPF and carried out by KPMG that show that few respondents (defined benefit plans considered "large") employ liability hedging techniques. The chart that maps funding status to percent of liabilities seems to support a widely held belief that "where funding is severely low the schemes need to take a certain degree of investment risk to help get back to full funding, given the PPF is insuring a certain level of benefits."

Does this mean that regulatory subsidies discourage hedging? If so, the UK would not be unique in terms of a rational but perverse response to changed incentives. (The notion of unintended consequences is one of the free market economic arguments against regulation, especially when "innocents" end up paying the bill.)

Click to access the January 2008 survey entitled "Pension Protection Fund: Investment Strategy and LDI Survey."

On a related note, a survey of US and Canadian plan sponsors, focused on their pension risk management practices, is due out shortly. A collaborative effort on the part of the Society of Actuaries and Pension Governance, LLC, the results support those of the aforementioned UK survey with respect to lower than expected amount of hedging (of both assets and liabilities).

Fiduciary Risk, Trading Controls and External Asset Manager Selection

Join us for our timely webinar about trading controls. At a time of unprecedented market volatility and repeated reports of larger than life losses, hear experts talk about  processes used to determine and monitor limits, vet authorized trading, review style drft and detect early warning signals. You can register today by clicking here. If you are unable to attend, a taped recording will be available for a nominal cost. Email us with questions or comments.

The event takes place on March 5, 2008 from 11:00 a.m. to 12:15 p.m. EST.

Pension Governance, LLC is registered with CFA Institute as an Approved Provider of professional development programs. This program is eligible for 1.5 PD credit hours as granted by CFA Institute.

Who Should Attend:
Plan sponsors, plan administrators, pension consultants, board members with responsibilities for selection of investment fiduciary advisors, regulators, bankers, mutual fund and hedge fund managers with (or seeking to attract) pension fund investors

Learning Points:
Persons who attend this 75-minute webinar will learn the following:

  • What Constitutes "Must Have" Elements of Effective Risk Management Systems
  • Ways to Detect Deviation from Management Style and/or Excess Position Concentration
  • Red Flags Regarding Possible Rogue Trading
  • Industry Best Practices for Trading Controls and Lessons Learned About What to Avoid

Dr. Susan M. Mangiero, AIFA, AVA, CFA, FRM - Moderator
Pension Governance, LLC

Mr. W. Anthony Turner - Speaker
Financial Tracking, LLC

Mr. Gavin W. Watson – Speaker
Business Manager for Asset Managers, Pensions and Insurance
RiskMetrics Group, Inc.

Hedge Fund Valuation Goes Global

Just as US banks and hedge funds are coming to grips with a maze of pricing rules in the form of FAS 157, other countries are joining the fray. It's no surprise that institutional investors and their regulators favor more disclosure and evidence of tighter policies and procedures (if they don't already exist at a particular firm). Private and government plan sponsors from around the world will be convening in Sydney next week to discuss alternatives, strategic asset allocation, valuation, global regulation and pension risk management techniques.

This blog's author looks forward to participating in the Asset Allocation Summit. (Pension Governance, LLC is a conference media sponsor.) I will be leading the master class entitled "Global best practices in hedge fund valuation and risk management" and another workshop on 130/30 strategies. Click here to learn more. If you need to find a speaker or want to provide investment risk/valuation training for your team, we'd love to hear from you. Drop us a line.

Until then, look for news from Down Under this coming week!

Chile Pension Reform Adds to Foreign Investments

In "Chile set to boost foreign investment," Financial News reporter Johanna Symmons (January 28, 2008) describes a proposed law that increases maximum international holdings from the current 40 percent to 80 percent. This means that the half dozen authorized private fund administration companies will have more latitude in how they manage the country's mandatory individual savings accounts. When approved, non-Chilean holdings could rise as much as USD 50 billion. In addition, reform will add to retirement plans of impoverished citizens, "funded by windfalls from copper production." Credit goes to President Michelle Bachelet who identified the need for change as "her administration's most important task."

This blogger is proud to say that she worked as a financial risk management expert on an official fact-finding team in early 2006. Led by Dr. Roberto Rocha (World Bank), colleagues and report co-authors included Mr. Graeme Thompson (former Australian regulatory chief and now pension consultant) and Dr. Eduardo Walker (Pontificia Universidad Catolica de Chile). If you are interested in learning more, know that pension professionals from around the world will be presenting at The 4th Contractual Savings Conference: Supervisory and Regulatory Issues In Private Pensions and Life Insurance. Hosted by the World Bank and occurring on April 2 through 4, 2008, the discussions will emphasize the "brave new world" of pension risk management. Yours truly is presenting a session entiled "Risk Management of Pension Funds: A Practitioners View."

If you are unable to join us in Washington, DC, I invite you to read about what other countries are doing in the area of pension reform for different types of plans. Chile is a particularly interesting case inasmuch as politicians and public policy leaders often reference this Latin American system as a noteworthy and innovative model. Think of it as a national 401(k) plan of sorts. While not perfect (no system is), many people like having their own account rather than being part of a "pay as you go" system. For more information, visit the site for the Superintendency of Pension Fund Administrators and click on the English overview.

Move Over Madonna - Pension Tension Blues Video Debuts

A few months ago, Pension Governance, LLC introduced PENSION TENSION BLUES in MP3 file form. We now present our 5-minute musical commentary, written for fiduciaries and beneficiaries, as a video for your viewing pleasure. We hope PENSION TENSION BLUES will make you laugh and cry at the same time. (Email us if you want a medium or high resolution version of this video.) You can also watch the video directly on

Inspired by those who bring attention to serious issues through humor, Dr. Susan M. Mangiero (President and founder of Pension Governance, LLC) and Mr. Steven Zelin (The Singing CPA) have co-created a (hopefully) memorable ballad about the state of affairs in retirement benefits land. Pension Governance, LLC is committed to helping fiduciaries do a better job of identifying, measuring and managing financial risk. We hope the song is a friendly reminder of the hard work ahead. The decision to use satire is in no way meant to impugn the countless fiduciaries already on the right track. We simply want to draw attention to areas of growing concern to employees, retirees, shareholders and taxpayers alike.

To those in the vanguard of pension governance, bravo! Email your success stories and we will gladly publish them.

If you want to sing along, here are the lyrics.

Words by Susan M. Mangiero and Steven Zelin
Music by Steven Zelin
Copyright 2007 Pension Governance, LLC and Steven Zelin.
All rights reserved.
71 bpm

I work for a corporation. I’ve been there 30 years
But my pension plan went bankrupt;
It has left me in tears
They’re telling me now I gotta work till I’m 432
I got the pension tension bliss suspension nobody ever mentioned blues

I signed that stupid paper 100 years ago
It said if I worked forever, they’d give me lots of dough
I wish I knew what happed; I can’t find many clues
I got the pension tension bliss suspension nobody ever mentioned blues

I thought the plan was looked at by a bunch of CPAs
Thought they said it all looked just fine, then gave their Okay’s
But I guess something was happening outside their view, now
I got the pension tension bliss suspension nobody ever mentioned blues

They invested in some hedge funds and paid up lots of fees
They gambled all my money, with no guarantees, now
I’ve got nothin’ for tomorrow and you know I’m gonna sue
I got the pension tension bliss suspension nobody ever mentioned blues

Guess I should have realized my account was discretionary
Now all I got is these papers. What’s a fiduciary?

I’m putting all my stuff on e-bay, I gotta raise some cash
My piggy bank is empty, my portfolio has crashed
I read that Social Security has gone down the tubes
I got the pension tension bliss suspension nobody ever mentioned blues
I got the pension tension blues
I got the pension tension blues

Susan Mangiero Moderates Pension - Hedge Fund Mock Deposition

At a time when pensions, endowments and foundations are investing billions of dollars in alternatives such as hedge funds, responsible decision-makers must understand financial and legal risks. If they fail to dig deep or negotiate their interests properly (even when they use a consultant or fund of funds manager), fiduciary breach lawsuits could result. Join Dr. Susan Mangiero, AIFA, AVA, CFA, FRM (President of Pension Governance, LLC); ERISA attorney Noah Weissman (Bryan Cave LLP); and hedge fund attorney Nir Yarden (Bryan Cave LLP) for a mock deposition involving a pension fund’s investment in hedge funds, gone awry. Part of the Fiduciary 360 National Conference, audience members can see what happens during this discovery phase of litigation, watch and hear firsthand what someone in the “hot seat” is likely to experience and learn lessons about proper investment fiduciary process. According to Mangiero, author of "Risk Management for Pensions, Endowments and Foundations" and countless articles about investment risk and valuation, "The challenge is particularly acute when hedge funds invest in 'hard to value' assets or employ complex derivative instrument strategies. Identifying hidden risks can save institutional investors money, reduce stress and avoid harm to reputation."

For more information about this May 7 - 9, 2008 conference, go to For more information about pension best practices, visit

Fiduciary Risk, Trading Controls and External Asset Manager Selection - New Webinar

Pension Governance, LLC is registered with CFA Institute as an Approved Provider of professional development programs. This program is pending approval for 1.5 PD credit hours as granted by CFA Institute.

Join us on March 3, 2008 from 11 am to 12:15 pm EST for a lively discussion about ways to mitigate transaction risk.

Description: Fiduciary duties mandate oversight of external asset manager selection. This includes a proper vetting of trading-related controls and the process used to determine limits, authorized persons, style drift, early warning signals and liquidity traps.

Who Should Attend: Plan sponsors, plan administrators, pension consultants, board members with responsibilities for selection of investment fiduciary advisors, regulators, bankers, mutual fund and hedge fund managers with (or seeking to attract) pension fund investors

Learning Points: Topics covered during this 75 minute online and telephone event are shown below.

  • What Constitutes "Must Have" Elements of Effective Risk Management Systems
  • Ways to Detect Deviation from Management Style and/or Excess Position Concentration
  • Red Flags Regarding Possible Rogue Trading
  • Industry Best Practices for Trading Controls
  • Lessons Learned About What to Avoid


  • Dr. Susan M. Mangiero, AIFA, AVA, CFA, FRM - Moderator
    Pension Governance, LLC
  • Mr. W. Anthony Turner - Speaker
    Financial Tracking, LLC
  • Mr. Gavin W. Watson – Speaker
    Business Manager for Asset Managers, Pensions and Insurance
    RiskMetrics Group, Inc.

To register, click here. There is a modest charge of $125 per person. If you are interested in a discounted rate for multiple attendees, email

Pension Litigation Database Launches as Lawsuits Surge debuts with over 1,500 retirement plan legal actions, each classified by nearly 100 fields, including court circuit, type of allegation, plaintiff, defendant and date. A joint venture of Pension Governance, LLC and The Michel-Shaked Group, this continuously updated and searchable database reflects the dramatic rise in pension lawsuits. Market volatility, complex investment strategies, new accounting rules, federal regulations and heightened scrutiny of financial decision-making are a few of the many reasons that explain the addition of hundreds more cases each quarter.

This unique web-enabled tool helps attorneys, trustees, board members and policy-makers to better understand the nature of individual pension lawsuits and related litigation trends, thereby encouraging improved practices. “We’re excited to introduce as a way to stimulate the conversation about fiduciary responsibilities,” said Dr. Susan Mangiero, President and CEO of Pension Governance, LLC. “Litigation is a fact of life now. Regardless of plan type, those in charge need to understand the personal and professional liability. Our hope is that subscribers can learn valuable lessons about what to avoid.” Co-founder of The Michel-Shaked Group, Dr. Israel Shaked urges outside and corporate counsel to pay close attention to ERISA cases, adding “These lawsuits are greater in number, more severe and often accompany securities litigation filings, including class actions.”

A charter annual subscription rate of $695 provides unlimited access to the site, saves decision-makers countless hours of research time and offers otherwise hard-to-find intelligence about pension litigation issues. Users will find cases about a variety of topics such as prudence, duty to monitor, reasonableness of fees and plan design. Circuit commentaries written by and for attorneys are available and cover numerous retirement plan pain points that challenge sitting fiduciaries and their service providers. Assessing statistical patterns, evaluating case precedents, tracking fiduciary hot button issues by circuit, case type and time to settlement are just a few of the information tools you will find here.

For more information, visit

Pension Litigation - Investment Link

In "Pension Fund Litigation Could Slow Investments," New York Sun journalist Liz Peek quotes yours truly on the surge in pension lawsuits, notably those alleging breach of fiduciary duty. Attorney Stephen Rosenberg, and creator of a popular ERISA law blog, is likewise quoted as citing the Herculean challenge faced by plan sponsors. Charged with a bevy of everyday tasks, now added to the list is the need to familiarize themselves with increasingly complex instruments and investment strategies. The article suggests that "increased accountability could dampen institutional enthusiasm for alternative investments."

In contrast, a survey just released by Russell Investments finds a worldwide trend on the part of endowments, foundations and pensions towards continued allocation of monies to alternatives such as hedge funds and private equity funds. With increases expected by 2009 in most countries, the twin issues of risk management and valuation will become arguably even more important (though they have never been unimportant).

The next several years promise to be interesting ones, to say the least.

Seeking Alpha Certification

Seeking Alpha Certified

We are proud to say that our investment commentary posts are now being picked up by Seeking Alpha. Check out their site for discussions about market conditions and various stocks and bonds.

Pension Fund Governance - Campaign Against Corruption


According to "Clean Up" (Global Proxy Watch, November 2, 2007), the California State Teachers' Retirement System ("CalSTRS")  has approved new rules that seek to prevent the practice of "pay to play." Set to become effective as of November 28, 2007, California Code of Regulation, Title 5, Division 3, Chapter 1, Article 14 prohibits campaign contributions to board members in excess of $5,000 per year from any firm providing investment services. CalSTRS self-identifies as the "first public pension fund in California to pursue ethics reform of this scope."

Editor Stephen Davis writes that the focus on pension fund governance continues unabated in the UK, US and elsewhere. We appreciate the nod to our efforts at Pension Governance, LLC.

Davis concludes with a quote by former U.S. SEC chief Arthur Levitt who, in a recent speech, emphasizes the need for improvement. Referring to pension fund governance as a "ticking time bomb," he urges trustee literacy as one of several solutions. See "Ex-Chief of S.E.C. Says Pension Funds in Danger" by Mary Williams Walsh, New York Times, October 31,2007.

Webinar About Fiduciary Risk, Trading Controls and External Asset Manager Selection

Fiduciary duties mandate oversight of external asset manager selection. This includes a proper vetting of trading-related controls and the process used to determine limits, authorized persons, style drift early warning signals and liquidity traps.

Who Should Attend:
Plan sponsors, plan administrators, pension consultants, board members with responsibilities for selection of investment fiduciary advisors, regulators, fund of fund and hedge fund managers with (or seeking to attract) pension fund investors

Learning Points:
Persons who attend this 75-minute webinar will learn the following:
What Constitutes "Must Have" Elements of Effective Risk Management System

Ways to Detect Deviation from Management Style and/or Excess Position Concentration

Red Flags Regarding Possible Rogue Trading

Industry Best Practices for Trading Controls and Lessons Learned About What to Avoid

Dr. Susan M. Mangiero, AIFA, AVA, CFA, FRM - Moderator
Pension Governance, LLC

Mr. W. Anthony Turner - Speaker
Financial Tracking, LLC

Mr. Gavin W. Watson – Speaker
Business Manager for Asset Managers, Pensions and Insurance
RiskMetrics Group, Inc.

Thanks to Russell Bailyn for a Nice Thumbs Up

Since its creation in late March 2006, has continued to attract attention. We love getting your feedback and hope this blog informs on a variety of important topics. Given my passion to keep the blog current and lively, I am delighted to get a nice "thumbs up" from veteran blogger, Russell Bailyn. I've excerpted part of his post below.

"I came across a great blog while doing research for my book which I’d like to share with my audience. It’s, written and maintained by Susan Mangiero. Based on the title, you may have caught on to the blog’s theme--mainly pension plans and the host of factors which affect them. The topic spectrum is fairly broad, such that anyone from a pension manager, plan sponsor, attorney, financial advisor, or even individual investor can learn something.

In an article written by Susan just last week, I learned about how the recent credit crunch is affecting institutional investors, including pension fund managers. As a financial advisor who deals mostly with individuals and small businesses, I hadn’t thought much about the affects going out 20 or 30 years of today’s credit issues and how institutional investors may be shifting their strategies to accommodate this newest area of confusion."

Click here to read the rest of the post and to check out Russell's blog, including an announcement about his new book. Entitled "Navigating the Financial Blogosphere," it's chock full of great resources about a host of topics ranging from life insurance to the role of the financial advisor. Click here to learn more. (Russell - best of luck with book sales!)

Pension Risk Management Course

The RiskMetrics Group and Susan Mangiero, author of Risk Management for Pensions, Endowments and Foundations, are pleased to present an introductory course on Investment Risk Management for Pension Funds. The two and a half day workshop addresses investment risk measurement and valuation fundamentals, along with an overview of new pension rules and regulations as they relate to procedural prudence. Combining lectures, cases and lab work, plan sponsors will learn about risk management standards, how to apply various risk assessment techniques and what to avoid in creating and implementing a risk management plan.

Who should attend: chief investment officers, portfolio managers, corporate governance officers, chief risk officers, trustees, risk analysts and board members

Instructor: Dr. Susan Mangiero, CFA, AIFA, AVA, and FRM, President and CEO Pension Governance, LLC.

Wednesday- Friday, September 12-14, 2007

September 12-13 - 9:00 am - 5:00 pm
September 14 - 9:00 am - 12 noon

RiskMetrics office
1 Chase Manhattan Plaza
44th Floor
NY, NY 10005

Email to register for the course or to obtain additional information about cost or content. 

Space is limited so, please reserve your space today.

Pension Tension Blues - Musical Commentary

Pension Governance, LLC is proud to present a musical commentary for fiduciaries and beneficiaries alike. PENSION TENSION BLUES will make you laugh and cry at the same time.

Inspired by those who bring attention to serious issues through humor, Dr. Susan M. Mangiero, PG president and founder, and Mr. Steve Zelin, the Singing CPA, have co-created a (hopefully) memorable ballad about the state of affairs in pension land. Mangiero adds "Pension Governance, LLC is committed to helping fiduciaries do a better job of identifying, measuring and managing financial risk. We hope the song is a friendly reminder of the hard work ahead."

The decision to use satire is in no way meant to impugn the thousands of hard-working fiduciaries but rather to draw attention to areas where some plans can make improvements.

Click here to listen to a one-verse sampler with a play time of slightly over one minute.

Click here to listen to the full five-verse song with a play time of just over four minutes.

If you want to sing along, here are the lyrics.

Words by Susan M. Mangiero and Steven Zelin
Music by Steven Zelin
Copyright 2007 Pension Governance, LLC and Steven Zelin.
All rights reserved.
71 bpm

I work for a corporation. I’ve been there 30 years
But my pension plan went bankrupt;
It has left me in tears
They’re telling me now I gotta work till I’m 432
I got the pension tension bliss suspension nobody ever mentioned blues

I signed that stupid paper 100 years ago
It said if I worked forever, they’d give me lots of dough
I wish I knew what happed; I can’t find many clues
I got the pension tension bliss suspension nobody ever mentioned blues

I thought the plan was looked at by a bunch of CPAs
Thought they said it all looked just fine, then gave their Okay’s
But I guess something was happening outside their view, now
I got the pension tension bliss suspension nobody ever mentioned blues

They invested in some hedge funds and paid up lots of fees
They gambled all my money, with no guarantees, now
I’ve got nothin’ for tomorrow and you know I’m gonna sue
I got the pension tension bliss suspension nobody ever mentioned blues

Guess I should have realized my account was discretionary
Now all I got is these papers. What’s a fiduciary?

I’m putting all my stuff on e-bay, I gotta raise some cash
My piggy bank is empty, my portfolio has crashed
I read that Social Security has gone down the tubes
I got the pension tension bliss suspension nobody ever mentioned blues
I got the pension tension blues
I got the pension tension blues

Free Pension Subscription for Telling Us What You Think

If you have two or three hours to learn more about helpful pension resources, we'd like to hear what you think about, this blog and our forthcoming site,

If you are interested, click here to send an email. We'll ask you a few questions and then set you up to test the sites for content and ease-of-use. Following a short assessment on your part, we'll provide a free six-week subscription to Click here to read about the many benefits of being a Pension Governance subscriber.

We will hold this offer open until we have completed our assessment. We reserve the right to rescind the offer at any time (except to those already working with us as testers).

We look forward to hearing from you!

Pension Governance, LLC Offers Webinars for Pension Fiduciaries about Hedge Fund Risk Management

Hedge funds are increasingly being used as part of a pension’s liability-driven investing (“LDI”) strategy or to potentially diversify a portfolio. At the same time, several recent hedge fund blow-ups, along with their prominent presence in corporate boardrooms via activist investing, has regulators and institutional investors more than a little concerned. Pension fiduciaries must demonstrate a rigorous due diligence in their selection process or risk breach of duty allegations. 

In an effort to assist plan sponsors, Pension Governance, LLC continues its Hedge Fund ToolboxSM series with two more online events this week. Join pension decision-makers for an engaging and timely discussion about the use of leverage, derivatives and financial risk controls (July 10, 2007) and operational risk (July 12, 2007).

According to series creator, Dr. Susan M. Mangiero, CFA, Accredited Valuation Analyst, Financial Risk Manager and Accredited Investment Fiduciary Analyst, "There is a sea change underway with respect to the use of hedge funds by pension plans. While increased monies to alternative fund managers may make perfect sense in some situations, a lack of understanding about financial and trading risks could spell disaster for retirement plans. We help plan sponsors interview a hedge fund’s risk manager as a more complete gauge of potential problems. If that function does not exist, that could be a red flag. However, the existence of a risk management function in and of itself does not mean that it is an effective safeguard against runaway losses. Personal and professional fiduciary liability exposure, duty to oversee and an increasingly complex investment landscape makes this a particularly challenging time for plan sponsors.” President of Pension Governance, LLC, Mangiero adds that "Our goal is to help fiduciaries with research, process checks and training to thwart trouble and help to promote best practices."

For more information, click here. Recordings of all six webinars are available for a modest fee to non-subscribers. To order past webinars, click here.

Pension Governance, LLC is registered with CFA Institute as an Approved Provider of professional development programs. Each program qualifies for 1.5 PD credits.

About Pension Governance, LLC:
Pension Governance, LLC ( is an independent research, analysis, training and publishing company, emphasizing investment fiduciary risk management. Covered topics include fee structure, liability-driven investing, controls, valuation, alternatives and fiduciary best practices for board members, CFOs, treasurers and their attorneys, consultants and banks.

Media Sponsors:
Pension Governance, LLC is proud to have Albourne Village,, Lipper Hedge World, and the National Association of Certified Valuation Analysts as media sponsors.

401(k) Plan Governance Webinar

Pension Governance, LLC is registered with CFA Institute as an Approved Provider of professional development programs. This program is eligible for 1.5 PD credit hours as granted by CFA Institute.

06/04/2007 : 12:00 pm to 1:15 pm EST

Join us for a lively discussion about 401(k) investment fiduciary issues in the aftermath of the Pension Protection Act of 2006, emphasizing economic and operational issues.

Who Should Attend:
Money managers, plan sponsors, plan administrators, custodians, pension consultants, pension attorneys or board members with responsibilities for selection of investment fiduciary advisors

Learning Points:
Persons who attend this 75-minute webinar will learn the following:
  • Description of fiduciary duties under ERISA
  • Discussion of procedural prudence as relates to 401(k) plan selection of fiduciary advisors
  • Overview of safe harbor and selection of fiduciary advisor pursuant to the Pension Protection Act of 2006
  • Litigation trends in the area of investment fiduciary breach as relates to plan sponsors and service providers such as consultants
  • Fiduciary investment process for assessing 401(k) provider fees
  • Role of fiduciary advisor in providing financial education
  • Governance considerations with respect to selection of default investment 
  • Structural changes in money management industry in response to material shift away from defined benefit plans
  • Fiduciary advisor “red flag” practices such as soft dollar questions, revenue-sharing, limited disclosure
  • Dr. Susan M. Mangiero, AIFA, AVA, CFA, FRM - Moderator (Pension Governance, LLC)
  • Mr. Blaine F. Aikin, AIF®, CFA, CFP® - Speaker (Fiduciary36)
  • Mr. David J. Bauer - Speaker (Casey, Quirk & Associates LLC)
  • Mr. David Vriesenga - Speaker (Centre for Fiduciary Excellence, LLC)
Note: Subscribers to receive free access to this webinar.


Click here to register.

Pension Risk Matters Joins the Knowledge Mosaic Blogwatch Team

We are proud to have our blog picked up by Knowledge Mosaic. If you'll excuse a bit of chest puffing, here is the May 2, 2007 announcement from KM president, Mr. Peter Schwartz. Check out Securities Mosaic and Litigation Mosaic and other members of their virtual family.

<< We are pleased to announce that we are now publishing Susan Mangiero of the Pension Governance website and the Pension Risk Matters blog on our Securities Mosaic and Litigation Mosaic Blogwatches. Susan brings stellar academic credentials and more than twenty years of experience to her thoughtful posts on pension governance, risk management, asset liability, fiduciary obligations, and other matters of interest to asset managers, funds compliance officers, and legal counsel.

Susan's new Pension Governance LLC is published by an independent research and analysis company that focuses fiduciary obligations associated with on benefit planning, investment risk, corporate strategy, valuation, and related accounting issues. Pension Governance LLC works closely with ERISA plan fiduciaries, public plan fiduciaries, fund board members, CFOs, actuaries, attorneys, financial advisers, and money managers.

We are delighted to add Susan's perspective on pension fund and asset management matters not previously addressed in our Blogwatch publications. This is an important area of interest to our customers that we have not previously addressed. In short order, we also plan to add new authors with a special focus on market regulation, broker-dealer governance, and arbitration. >>

Invitation to Try For Free

After many months of work, we're proud to launch our website,, and invite you to check us out.

You can sign up for a free two-week trial by clicking on SUBSCRIBE. We won't ask you for your credit card information UNLESS and UNTIL you decide to subscribe after the free two-week trial.

Here are some of the many items we've added this week.
  • "The Amaranth Debacle: Failure of Risk Measures or Failure of Risk Management?"
  • "Alternative" investment managers and bankruptcy: the brave new world of Chapter 11" 
  • "Airline pilots file suit over retirement rule"
  • "You want to diversify risk? Consider economic derivatives"
  • "United States Court of Appeals for the District of Columbia Circuit Argued October 5, 2006 Decided March 30, 2007, No. 04-1242, Financial Planning Association, Petitioner, v. Securities and Exchange Commission, Respondent"
  • 401(k) Plan Governance Webinar - Join a panel of experts to address 401(k) governance on June 4, 2007 (Note: Good news - PG subscribers get to attend all webinars for no additional charge!)
  • "Fitch: Ratings Beneficial for Hedge Funds but Few Will Achieve Investment Grade"
  • Interview with Mr. Gary W. Findlay, Executive Director - MOSERS about board governance
  • Interview with Mr. Donald B. Trone, CEO - Fiduciary360 about fiduciary investment standards
  • "Predicting Corporate Governance Risk: Evidence from the Directors' & Officers' Liability Insurance Market" 
  • San Diego v. Amaranth Legal Complaint
  • SEC Chief Economist Debates Merits of Passive Versus Active Investing
Some of the new additions coming very soon ...
  • A board member's perspective about what pension governance means as compared to corporate governance
  • Interview with Mr. Skip Halpern, president of Independent Fiduciary Services
  • Article about pension plan opt-outs and the impact on class action litigation
  • Interview with Mr. Ron Ryan, president of Ryan ALM, about liability benchmarking
  • Details about the Hedge Fund Toolbox webinar series
  • Details about the Private Equity Toolbox webinar series
  • Many legal cases about pension finance issues
Don't miss out. We are still offering charter subscriptions at a discount of $200 less than the regular 6-month rate. Other benefits include:
  • Unlimited access to the Subscribers-Only website - including timely news, articles, checklists, interviews with market leaders, practice aids, surveys, and reference material
  • Unlimited access to topical PG webinars, with expert guests - each individual webinar costs from $125 to $200, if purchased separately
  • Free PG webinar recordings, if you cannot attend live events
  • Limited access to specialized researchers and analysts - ask the questions you need answered
  • Discounts on selected PG Partner products and services
  • Advance notice of invitation-only research sessions
  • Free access to soon-to-be-released pension risk newsletter (details soon!)
We'll keep you abreast of other things we're planning for the summer (lots in store).

Risk Center TV - Hedge Fund Risk and Plan Sponsors

For those who don't know, has recently started broadcasting interviews with risk management professionals. I had the pleasure of being interviewed a week ago about a few of the many steps that pension funds can take to assess hedge fund risk. Clearly, in just a few minutes, it's impossible to provide more than a few soundbites. However, allow me to reiterate one point.

Before plunking down monies to invest in a hedge fund or fund of funds, ask to meet with the risk manager and request a copy of their risk management policy. If the fund has no official risk manager, ask to meet the person who assumes functional duties (if not the title). If the fund tells you that their risk management policy is proprietary, ask for a general description of risk controls and the system of oversight. If you still get push back, think about your comfort level if something goes awry and you are asked why you invested anyhow, even though your request for information was rejected. (Even if information is provided to you, you may want to assess whether the information is "enough.")

Some may assert that the Private Placement Memorandum (PPM) is sufficient. See for yourself. In my view, the PPM often addresses risk in overly broad and vague terms, certainly not enough to give a pension investor any meaningful amount of information about the risk management process.

If you would like to see the short interview, go to and click on the relevant video. If you would like more information about hedge fund risk and valuation issues, contact us at We will be uploading information next week to about a forthcoming series of webinars we call the Hedge Fund ToolboxSM. Our series of webinars known as the Private Equity ToolboxSM is already in the works. We have a spectacular line-up of speakers.

P.S. These comments do not reflect investment, legal or governance advice. Readers still need to meet with their counsel about their fiduciary responsibilities as regards hedge fund investing.

Pension Governance, LLC Launches New Website Devoted to Pension Risk Issues

Pension Governance, LLC is proud to announce the launch of a new website for pension investment fiduciaries. In what is believed to be a unique online information portal devoted to pension investment risk and valuation issues, and reflecting original content from practitioners, combines independent analysis and research with commentary about urgent issues affecting both defined contribution and defined benefit plans.

At a time when pension finance dominates headlines around the world, investment committee members, treasurers, CFOs and trustees are confronted with a slew of new challenges and a need to “connect the pension governance dots.”

The primary goal is to empower investment fiduciaries with objective educational information about relevant issues before they commit millions of dollars and countless hours to a particular strategy. Dr. Susan M. Mangiero, president of Pension Governance, LLC and author of Risk Management for Pensions, Endowments and Foundations, adds, “We want to create a meaningful conversation about pressing and oft-complex investment and risk issues that are not going to go away any time soon. We have put together a top-notch group of contributing editors from a variety of disciplines, including law, insurance, treasury, alternative investments and corporate governance. Our strategic partners join us in our efforts to promote investment fiduciary education and best practices.”

In addition to the Knowledge Center Library, includes interesting features such as Pension Chat (interviews with industry leaders), Courthouse Corner and Fiduciary Focus. Soon to come is the Pension Parade of Horribles, a source of information about bad practices and lessons learned.

Subscribers can read annotated online articles from a variety of news sources, access research team members via Ask Professor Pension, download original content from expert practitioners, receive Pension Risk AlertSM and attend webinars for no additional fee. A forthcoming webinar is a June 4 discussion about 401(k) plan governance in the aftermath of the Pension Protection Act of 2006. Another webinar, part of the Hedge Fund Toolbox - a series of discussions from the pension fiduciary perspective - is a May 15 discussion about fees, documentation and key person background checks. Many other webinars about a variety of pension topics such as valuation, liability-driven investing and performance analytics are in the works and will be announced shortly.

Web designer Dawn Barson, co-founder of think creative group, llc, describes the care taken to build an infrastructure that permits Pension Governance editors maximum flexibility. “Knowing how much the editors want to keep the site fresh, we worked hard to build a robust administrative console so that new features can be added all the time.” Additional programming is already underway, with many more functions being designed to help investment fiduciaries access information and analysis quickly, easily and in a cost-effective manner.

With over thirty years of experience in the pension industry, Dan Carter, Pension Governance Vice President of Business Development, describes a sea change in the challenges that confront fiduciaries. “There is so much to know in this field and getting it from independent sources is critical as never before.” Mangiero concurs, “There is no shortage of content. We’ll be adding to the site all the time. People should check back often for updates.”

Visitors can sign up for a free two-week trial subscription by going to and are encouraged to submit requests and comments to

Pension Governance, LLC Sponsors Pension Risk Management Research Site

Pension Governance, LLC is proud to sponsor a brand new section of the Social Science Research Network (SSRN). Part of SSRN's Financial Economics Network (FEN), Pension Risk Management publishes working and accepted paper abstracts covering a range of topics in the field. These include liability-driven investing, fiduciary assessment of hedge fund and private equity investments, organization and governance of defined benefit and defined contribution plans, selection of default investments such as target date funds, appropriateness of company stock for 401(k) plans, evaluation of money managers' fees, strategic asset allocation, fiduciary duty to hedge and use of derivatives.

Working with the SSRN team, co-editors Dr. Shantaram Hegde and Dr. Susan M. Mangiero encourage contributions in this exciting and critically important research area. At no other time has there arguably been such an urgent need to understand pension investment risk issues and competing solutions. 

Dr. Hegde is Professor of Finance at the University of Connecticut and author of many papers on derivatives, market microstructure and risk management. Click here to read his bio. Dr. Mangiero is author of Risk Management for Pensions, Endowments and Foundations. An Accredited Valuation Analyst and certified Financial Risk Manager, she is President and CEO of Pension Governance, LLC. Click here to read her bio.

Joining Dr. Hegde and Dr. Mangiero as part of the Pension Risk Management Abstracts Advisory Board is a team of experts in the areas of risk management, valuation and actuarial science:

Dr. Stephen Figlewski - Professor of Finance (New York University)

Allen Michel - Professor of Finance (Boston University)

Steven Siegel - Research Actuary (Society of Actuaries)

Gavin Watson - Business Manager for Asset Managers (RiskMetrics Group).

According to Dr. Mangiero,  "With many challenges facing pension fiduciaries, our goal is to help facilitate a conversation about pension finance, risk and valuation on behalf of investment stewards for millions of plan participants worldwide. The Pension Governance, LLC team is deeply grateful for the commitment of this top-notch team to promote good ideas in these areas. We look forward to making pension risk management the topic of choice for academic researchers and practitioners."

Fiduciary Pow Wow in San Diego

Creator of this pension blog, Dr. Susan M. Mangiero, CFA and Accredited Investment Fiduciary Analyst, joins a terrific roster of speakers at the FI 360 2007 Conference.

Being held in San Diego this year, the "Conference offers attendees the opportunity to learn from the foremost minds in the fiduciary world, gain knowledge and skills to better serve clients, and network with their peers. In addition, it offers the opportunity to participate in demonstrations and hands-on workshops for the Fiduciary Analytics tools."

Click here to read the FI 360 2007 Conference agenda.

Click here for more information about the Accredited Investment Fiduciary Analyst designation.

Pension Risk Matters Celebrates Its First Birthday With Continued Readership Growth

Just one year ago, Pension Risk Matters(SM) launched as a labor of love and an attempt to create a conversation about pension investment, risk and valuation issues with real economic impact. We've been overwhelmed by the positive feedback and continue to work hard on your behalf. Thank you for making our pension blog a reality!

New Pension Risk Management Survey Launched

News ReleaseContact:Kim McKeown
For Immediate ReleaseMarketing/PR Program Manager
March 22, 2007847-706-3528 (

New Survey Looks at Pension Risk Management and Impact on Funding Gap

Pension Governance, LLC and the Society of Actuaries (SOA) are proud to join forces to research current pension risk management practices. In what is believed to be a unique large-scale assessment of this critical topic area since research was done in 1998, the jointly developed survey investigates the use of derivatives and related risk and valuation policies by pension funds and their external money managers. Questions address other topics such as the role of the pension consultant, involvement of the plan actuary, new pension rules and regulations and an increased emphasis on enterprise risk management.

Global growth in futures, options and swaps dwarfs all other financial markets. According to the Bank for International Settlements, over-the-counter and exchange-traded derivatives market activity in 2006 grew to more than $400 trillion. Public and private pension plans, a second giant force, control over $10 trillion in assets. Their risk management decisions affect millions of people around the world, compelling the need to understand pension risk management as never before.

Different than even a few years ago, markets are now more volatile, increased longevity is worsening the funding gap and pension fiduciaries seek higher returns in the form of hedge funds, private equity investments and portable alpha strategies, all of which frequently involve derivative instruments. Derivatives show up in countless liability-driven investing strategies as well, making it impossible to ignore their economic impact.

Adding to the complexity of the investment decision-making process, board members, policy-makers, taxpayers, shareholders, actuaries, fiduciary liability underwriters, debt rating analysts and plan participants need and want to understand what fiduciaries are doing in the area of pension risk management. Unfortunately, a dearth of information about plan sponsors and their money managers makes it extremely difficult to head off trouble before it starts. The primary goal of this survey is to make it easier for relevant parties to identify existing risk control practices and, by extension, encourage a long overdue discussion about best practices. While this survey emphasizes defined benefit plans, risk management applies to defined contribution plans as well. When financial controls are absent or implemented poorly, fiduciaries are unable to select appropriate 401(k) investments and evaluate service providers’ fees, possibly leaving themselves exposed to lawsuits.

Author of Risk Management for Pensions, Endowments and Foundations, Dr. Susan M. Mangiero, CFA, FRM, Accredited Valuation Analyst, Accredited Investment Fiduciary Analyst and her team are responsible for survey design and statistical analysis with ongoing input from an oversight group of pension professionals assembled by the SOA. According to SOA Research Actuary Steve Siegel, "we are all very excited about the prospect of providing our members invaluable insight about this important area.”

Invitations have been sent to nearly 6,000 pension fiduciaries in the United States and Canada. Interested plan sponsors who have not received an invitation are encouraged to participate by contacting either Dr. Susan M. Mangiero at 203-261-5519 or or Steve Siegel at 847-706-3578 or

Participation is limited to plan sponsors only. Preliminary results will be released to attendees of the SOA's Investment Symposium in New York, April 18-20.

New RSS Feed for Pension Risk Matters

We're delighted to have a new blog home with Lex Blog. We hope you enjoy the improved functionality. If you currently have us included as part of your RSS (Really Simple Syndication) feed (and we hope you do), please don't forget to change the URL. Otherwise, you will no longer receive new feeds and it will look like we've stopped adding items to our blog. Nothing is further from the truth. We have lots more to say!

Let me share some history with you. When we started the blog last year, we used to build a customized blog template. We hosted the resulting blog on our sister company's website. Until last week, when you typed, the display line immediately changed to For a few more weeks, you may come across BVA links (i.e. older blog post URLS embedded in newer blog posts). They still work so click away. However,  we are changing everything over so that all Pension Risk Matter links (old and new blog posts) have a URL that includes as part of the address. (Note that BVA, LLC is still a viable valuation company but no longer the owner of the blog, Pension Risk Matters.)

To change your feed address for Pension Risk Matters, click here to access the appropriate code. To learn more about RSS, click here for an overview.

Pension Governance, LLC Sponsors Research Sites

Pension Governance, LLC is pleased to announce the sponsorship of two sections of the Social Science Research Network. Check them out and see for yourself. You'll find interesting research papers and announcements about forthcoming events in the areas of employee benefits law and corporate governance, respectively.  At a time when so much is happening in these two areas, we're delighted to encourage cutting edge analysis by top scholars. Click here to learn more.

Section One: Employee Benefits, Compensation & Pension Law
Edited by Pamela Perun with the Urban Institute, "Employee Benefits, Compensation and Pension Law Abstracts is a forum for the exchange of ideas by policy makers, practitioners and researchers on current employee benefits issues. It publishes abstracts of working papers and recently published and forthcoming articles on the full spectrum of employee benefits, both in the U.S. and abroad, such as healthcare, pension and savings arrangements, cash and equity compensation, and Social Security."

Section Two: Corporate Governance Law
Edited by Bernard S. Black with the University of Texas at Austin Law School, "Corporate Governance Law publishes abstracts of working papers as well as articles accepted for publication in corporate governance law, and related fields of scholarship.."

New Look for Pension Risk Matters

We are going offline for a few days and will be back in business late next week. With users in mind, a newly designed will feature archived posts by both topic and date. If a reader wants only posts written about hedge funds let's say, he or she clicks on the hedge fund folder instead of having to comb through hundreds of archived items. Commenting on blog posts will likewise be much easier. As always, we welcome your feedback.

We continue to make the blog available for no charge. Steady growth in readership tells us we are on the right track. Our goal is to provide transparency about critical topics such as fees, risk management, valuation, accounting, disclosure and hedge funds. Always important but especially now, defined benefit and defined contribution plan sponsors are under significant pressure to demonstrate procedural prudence. Regulators in the U.S. and abroad, legislators, shareholders, plan participants and taxpayers are asking tough questions about the management of plans. The spotlight is not going away and is arguably shining more brightly than ever before.

For more information about the blog, please email Dr. Susan M. Mangiero, CFA, Accredited Valuation Analyst, Accredited Investment Fiduciary Analyst and certified Financial Risk Manager.

Here's to full sunshine about pension governance!

Please Excuse Us - Blog Functionality is Being Improved

Hi everyone,

Please bear with us. We are working to make our blog as user friendly as possible. We'll be back in action this weekend. Thank you for your patience.

Pension Blog News

Hi everyone:

1. I'd like to take a few minutes to thank you for your terrific emails and comments. Please keep them coming. I may not always be able to respond right away but know that every email is read. The blog is a labor of love and it's been personally gratifying to be able to provide information that our 15,000+ visitors have found helpful. The list of blog topics is long and getting longer every day. There is so much to say!

2. We are migrating to a new blog home in about four to six weeks. The URL stays the same, We'll have many more functions. The goal is to make the blog easier to navigate for our readers.

3. We are creating thought leadership in the form of research papers and webinars for the fall with a special emphasis on investment risk, pension finance, shareholder impact, valuation and alternatives (hedge funds, private equity funds, etc). If you would like to be a guest speaker or contributing author and/or want to submit ideas, please contact us. You can send an email to or call 203-261-5519.

4. The biggest challenge is knowing whether to provide more technical information or instead offer big picture analyses or both.

5. Though the blog was only created a few months ago, we look forward to a continued conversation about employee benefits.

In appreciation of our readers,
Susan M. Mangiero, Ph.D., CFA, AIFA, FRM, AVA

12,000 Visitors to Our Blog and Counting

As we prepared to pat ourselves on the back at having reached 10,000 visitors last week, things got a bit hectic and we were delayed. Since then, we've added 2,000 more visitors to PENSION RISK MATTERS (SM). Clearly, the topic of pension risk (and related issues) resonates with readers and for good reason. Changing accounting rules and regulations around the world mandate a focus on investment, operational and governance policies, procedures, strategies and lessons to be learned. Pension fiduciaries understand that they can be found liable on a professional and personal basis in the event of breach.

According to results from a survey co-sponsored by Pension Governance, the RiskMetrics Group and Ulysses Partners, seventy-seven percent of respondents said that they "feel that institutional investor fiduciaries are more vulnerable to being sued in the aftermath of recent corporate, government and non-profit scandals." (To view other results about external money managers, risk management, derivatives, governance and fees, see "Survey Shows That Institutional Investors Are Worried", July 28, 2006.)

Thank you so much for your continued support and suggestions. While our list of blog ideas is long and growing every day, we'd love to hear from you. Simply click here to send an email.

Happy Birthday - 5000 and Counting

Thank you everyone for helping to make the debut of PENSION RISK MATTERS a success. We've had more than 5000 visitors to our site in just two months. Our goal is to make the blog as user-friendly as possible. We welcome your ideas and comments.

What pension risk topics are of interest to you? Email