Pension Risk News & Analysis : Pension Governance, LLC : Pension Risk & Investment

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.

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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."

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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).

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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

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

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

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

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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!

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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.

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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 YouTube.com.

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.

PENSION TENSION BLUES
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

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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 www.fi360.com. For more information about pension best practices, visit www.pensiongovernance.com.

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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

Speakers:

• Dr. Susan M. Mangiero, AIFA, AVA, CFA, FRM - Moderator
  President
  Pension Governance, LLC
• Mr. W. Anthony Turner - Speaker
  Principal
  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 PG-Info@pensiongovernance.com.

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PensionLitigationData.com 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 PensionLitigationData.com 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 www.pensionlitigationdata.com.

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Hear Susan Mangiero, PhD, AIFA, AVA, CFA, FRM speak about pension governance pitfalls. Part of the Second Annual Ohio Forum on Public Retirement: The Conference for the Public Retirement Systems of Ohio, Dr. Mangiero joins fellow pension consultant Mary Willett on a panel entitled "Fiduciary Responsibility - Is Your staff and Board on the Right Track?" Lisa Morris, Deputy Executive Director, School Employees Retirement System of Ohio, moderates. In a second presentation, she leads a case study discussion about San Diego and Amaranth Advisors.

To schedule Dr. Mangiero for your event, call BigSpeak! agent Mr. Barrett Cordero at 805-965-1400 or send an email to barrettc@bigspeak.com.

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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.

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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.

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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.

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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, 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

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

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

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

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Since its creation in late March 2006, www.pensionriskmatters.com 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 www.pensionriskmatters.com, 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!)

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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.

Dates:
Wednesday- Friday, September 12-14, 2007

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

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

Email education@riskmetrics.com to register for the course or to obtain additional information about cost or content. 

Space is limited so, please reserve your space today.

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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.

PENSION TENSION BLUES
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

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

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 www.pensiongovernance.com. 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!

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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 Toolbox^SM 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 (www.pensiongovernance.com) 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, Hedgeco.net, Lipper Hedge World, and the National Association of Certified Valuation Analysts as media sponsors.

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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

Description:
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
  

Speakers:

• 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 www.pensiongovernance.com receive free access to this webinar.

E-mail: PG-Webinars@pensiongovernance.com

Click here to register.

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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. >>

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After many months of work, we're proud to launch our website, www.pensiongovernance.com, 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).

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For those who don't know, RiskCenter.com 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 www.riskcenter.com and click on the relevant video. If you would like more information about hedge fund risk and valuation issues, contact us at PG-Info@pensiongovernance.com. We will be uploading information next week to www.pensiongovernance.com about a forthcoming series of webinars we call the Hedge Fund Toolbox^SM. Our series of webinars known as the Private Equity Toolbox^SM 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.

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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, www.pensiongovernance.com 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, www.pensiongovernance.com 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 Alert^SM 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 www.pensiongovernance.com and are encouraged to submit requests and comments to PG-Info@pensiongovernance.com.

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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."

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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.

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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!

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News ReleaseContact:Kim McKeown
For Immediate ReleaseMarketing/PR Program Manager
March 22, 2007847-706-3528 (kmckeown@soa.org)

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 PG-Info@pensiongovernance.com or Steve Siegel at 847-706-3578 or ssiegel@soa.org.

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.

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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 Blogger.com to build a customized blog template. We hosted the resulting blog on our sister company's website. Until last week, when you typed www.pensionriskmatters.com, the display line immediately changed to www.bvallc.com/pensionblog. 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 www.pensionriskmatters.com 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.

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