PM institutional

Question 1

Norway model

Answer 1

traditional style, largely passive
60 equity/40 FI
very few AI
+ : low cost, transparent, suitable for large scale, easy to understand
- : limited value added potential

Question 2

Endowment model

Answer 2

high AI exposure, outsource management of AI, active management
+ : high value added potential
- : expensive, difficult to implement for very large funds/small funds

Question 3

Canada model

Answer 3

high AI exposure, insource management of AI, active management
+ : high value added potential, development of internal capabilities
- : expensive, difficult to manage

Question 4

Liability Driven Investment

Answer 4

Focus on hedging liabilities and IR risk with duration-matched FI exposure
+ : explicit recognition of liabilities as part of the investment process
- : certain risk (longevity, inflation) may not be hedged

Question 5

difference DBP vs DCP

Answer 5

DBP
* benefits payments defined by contract
* employer bears investment risk
* pension fund determines how much to save and what to invest in

DCP
* benefits payments determined by investment performance
* employee bears investment risk
* employee determines how much to save and what to invest in

Question 6

Longer IH in DBP

Answer 6

plan assets & liab small relative to sponsor BS
core business correlation with plan assets low
volatility of contributions toleravke
lower retired portion
younger active lives