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Common Sense. Please.: Government Watchdogs Snooze, but Make Up for It with Lots of Barking After the Fact
The objectives of most pension funds include funding the retirement liabilities of the plan, complying with the provisions of ERISA (where applicable), achieving adequate diversification and portfolio stability, matching portfolio liabilities with longer-term assets, supporting the achievement of targeted portfolio returns, and in doing all of the above, containing and, where appropriate, reducing fund administration costs.
In addition to the above, the objectives for specific assets within the portfolio can vary considerably, from diversification to current cash flow to volatility reduction to inflation hedging to risk-adjusted return enhancement, to the capturing of alpha.
It goes without saying that the achievement of all of those objectives is not an easy task. And, because of the long-term nature of the liabilities pension funds are trying to finance, the job can’t be done in a short time frame;