There Is More Than One Way to Derisk a Pension Plan

去年的强劲股权绩效和利率上升有助于提高许多资助的资金地位corporate pension plans,increasing their funding ratios 90 percent or higher.

Given this improvement, many plan sponsors are now looking for ways to protect their funded status by implementing derisking strategies.Liability-driven investing(LDI) strategies have long been a popular approach for buffering against increases on the liability side of the funding ratio, which has meant moving money away from risk assets, like equities, into long-duration bonds. By increasing a portfolio’s allocation to bonds, LDI strategies may help insulate plan sponsors from more volatile asset classes.

But because interest rates may rise from their present historic lows, LDI strategies face significant obstacles. With yields at such a low starting point, there is not much room for them to move lower, especially as the U.S. Federal Reserve scales back bond purchases, economic growth accelerates and inflation moves closer to normal levels. As interest rates rise, the market value of fixed-income assets falls. A decline in the value of a portfolio’s long-duration bond allocation tends to limit the funding ratio improvements associated with falling liability.

由于LDI面临的挑战，我们在KKR Prisma决定进行一项研究以确定绝对回报策略是否可能是更成功的替代方案。该研究的总体目的是更好地了解养老金计划资产和负债在升级环境中的不同投资策略中的互动。我们发现使用绝对返回策略降低风险通常在保护和提高资金比率方面比LDI策略更有效，因为对冲基金投资组合的典型特征：

Low volatility.An increase in the allocation to absolute-return strategies may help smooth out returns and reduce portfolio risk.

Low equity beta.Like LDI, absolute-return strategies may help offset unstable equity markets.

Low correlation to fixed income.Absolute-return strategies tend to have little correlation to rate changes, thereby avoiding the negative effects of interest rate sensitivity.

To test the potential effectiveness of LDI versus absolute return, we analyzed three possible strategies that could help reduce portfolio risk by considering their effect on the funding ratio for an accumulated benefit obligation (ABO).

第一个策略是一种典型的LDI方法，将计划的分配增加到长期固定收入证券。我们分析的第二种方法通过减少分配给风险资产的资金增加了绝对返回的分配。第三次策略通过减少固定收入来提高对绝对回报的分配。

We found in our simulation that in a rising interest rate environment, 80 percent of the time funding ratios improved more with an absolute-return strategy than with an LDI approach. Furthermore, absolute-return strategies reduced the portfolio’s sensitivity to equity market dislocations, which decreased the volatility of the investment portfolio, thereby helping protect the funding ratio.

我们还发现，减少的融资比率更有可能是由弱势股票市场引起的，而不是持续低利率，因此通过将资金投入到与股票市场不那么相关的策略，计划赞助商可以帮助他们的投资组合免疫权益免疫市场衰退。

That’s not to say there isn’t an environment in which LDI strategies would work. We believe these strategies are likely to be most effective if rates fall well below their present levels and remain low. We don’t think that will be the case in the near future, however. The economy is improving, the U.S. government is pulling back quantitative easing, and we’re beginning to see longer-term inflation.

As funding ratiosapproach 100 percent,plan sponsors will want to preserve gainsthrough some form of derisking.Despite a perception that LDI is most effective at mitigating volatility in a plan’s funding ratio, when interest rates have more upside than downside volatility, our research shows absolute return tends to better protect against a downward move in the funding ratio. For plans that have a 40 to 60 percent allocation to equities, absolute return’s low equity beta and low volatility may help protect against equity market dislocations. We believe absolute return can serve as a risk diversifier and a return enhancer because of these characteristics. Although our examples are based on a pension plan’s ABO, the results are equally applicable to a projected benefit obligation.

There are risks to any strategy, but we believe absolute-return strategies may be an effective alternative to long-duration bonds in a rising interest rate environment and will help managers best protect their newly earned gains.

Eric Wolfe是投资委员会和高级投资组合经理的成员，负责投资组合和客户管理kkr.Prisma,对冲基金基金公司，一部分kkr.,where he is a managing director, in New York.

Read KKR’sfull report关于养老金计划衍生。

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