Pension Investment Objectives To meet pension liabilities, defined benefit plans need to mix investment returns with contributions. The long-term return on pension plan assets must exceed the discount rate typically used by actuaries to value pension liabilities. Defined contribution pension…

Defined benefit plans are giving way to defined contribution plans. However, in some countries, such as Japan and the Netherlands, they are still featured prominently. This Los reviews the main factors that contribute to the risk of a DB plan….

The Investment Policy Statement is the governing document for managers working with institutional investors, just as it is with individual investors. The IPS outlines the goals and objectives of the institution and serves as a guide that predetermines how the…

It is important for financial institutions to be highly regulated because they have a direct impact on the non-financial sector of the economy. As a result, when large financial institutions fail, it can ripple through the economy, causing unemployment, lack…

Pension funds are vehicles that assist workers in saving for retirement. There are two types of pension plans: defined benefit, in which a plan sponsor agrees (legally) to pay a specified retirement benefit, and defined contribution, in which contributions are…

The Investment Policy Statement is the governing document for managers working with institutional investors, just as it is with individual investors. The IPS outlines the goals and objectives of the institution and serves as a guide that predetermines how the…

Institutions include corporations, trusts, or other legal entities that invest on behalf of groups or individuals, including both current and future generations. Institutional investors carry considerable influence over the capital markets due to their size, scope, and structure. This reading…

Reading 9: Risk Management for Individuals Los 9 a: Compare the characteristics of human capital and financial capital as components of an individual's total wealth Los 9 b: Discuss the relationships among human capital, financial capital, and economic net worth…

This is a cumulative LOS that combines all of the previous readings about insurance, asset allocation, and individual risk management. A few key points to take away are: Investors and managers must consider total wealth in the asset allocation decision…

Asset allocation should consider total wealth. Remember that total wealth is comprised of both financial capital and human capital Total Wealth = Financial Capital + Human Capital Human capital tends to be static unless the investor were to head back…