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Portfolio Management
book

Portfolio Management

by Scott D. Stewart, Christopher D. Piros, Jeffrey C. Heisler
March 2019
Beginner content levelBeginner
720 pages
24h 22m
English
Wiley
Content preview from Portfolio Management

MSSI

DEFINED BENEFIT PLAN CASE: DESIGNING THE INVESTMENT STRUCTURE FOR MSSI CORPORATION'S DEFINED BENEFIT PLAN

Background

MSSI Corporation offers a defined benefit plan for its employees. You are invited to design and present an investment structure for the pension plan, including an asset-liability study and an asset allocation and funding proposal, with the anticipation of assuming full investment management responsibility for the plan. To facilitate your work, the pension committee has kindly sent you a copy of its latest actuarial valuation reports as factual bases for your work.

The Problem

A rule of thumb in the pension investment world is the “60/40 rule”—that is, 60 percent equity and 40 percent bonds.

  1. Can you apply this general 60/40 rule to the plan?
  2. What funding levels provide what comfort level of the plan retaining a healthy status through time?
  3. Can you quantify the risk–return trade-off (in easy-to-understand terms) for the pension committee?

The Assignment

You are an associate portfolio manager at DBSol reporting to Jay. He has asked you to design a program for the pension plan. The program must include the following:

  1. An analysis of the current liability exploring the cost to maintain the plan and the growth of the liability through time.
  2. An analysis of the current funding status, including the future of the plan with the current funding and asset allocation strategy, and key risk measure definitions.
  3. Proposed funding and asset allocation strategies. ...
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Publisher Resources

ISBN: 9781119397410Purchase book