In order to be able to operate successfully, pension Funds have to comply with very wide-ranging and sometimes even contradictory requirements. Asset management that is exclusively aimed at the long-term may endanger the solvency of a fund on the short term. On the other hand, measures that only focus on the short-term are not a solid basis for a healthy long-term strategy. What pension Funds need are tools that they can use to convert long-term goals into a practical system for managing investments, which at the same time will monitor and manage the solvency risk. ORTEC Pension Risk Management offers that solution.
ORTEC Pension Risk Management is a total concept with which pension plans can get the maximum return from their limited latitude. It brings together systems and consultancy in the field of Asset Liability Management (ALM), Benchmark construction, Portfolio construction and Performance and Risk management.
Phase 1: Asset Liability Management
Asset Liability Management (ALM) is first and foremost a long-term financial risk analysis of a pension fund and its stakeholders (employees, pensioners and employees). An ALM study results in the formulation of a strategy with regard to investment, contribution and indexation policy ('Pension Deal') on the basis of approved risk levels over both the short and the long-term.
Phase 2: Benchmark construction
The ALM policy has to be implemented. The strategic investment policy has to be set out in an investment plan for the medium-term. An effective strategic benchmark for equity and portfolio management, which also mirrors the visions over the medium term, is part of the plan.
Phase 3: Portfolio construction
The composition of an investment portfolio is a continuous process. First of all, the main lines of the approach are set out. Once you have opted for a particular mix of passive, fundamental and quantitative investments, your portfolio managers can then make a suitable selection of the actual investment titles.
Phase 4: Performance and Risk management
A successful investment policy is not feasible without a thorough evaluation of the actual return. Apart from that, you will have to know whether the forecast risks have been correctly estimated. Good Performance and Risk management will produce valuable information that can be used for timely fine tuning of the investment policy over the short, medium and long term.