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Risk Budgeting in Pension Investment

Published online by Cambridge University Press:  10 June 2011

R.C. Urwin ,
S.J. Breban ,
T.M. Hodgson  and
A. Hunt
R.C. Urwin
Affiliation:
Watson House, London Road, Reigate, Surrey RH2 9PQ, U.K. Tel. +44(0) 1737-241-144; E-mail: roger.urwin@eu.watsonwyatt.com
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Abstract

This paper extends the concept of investment efficiency from investment management structures to include strategic asset allocation and liability related issues. The concept of risk budgeting is developed. It represents a valuable way of incorporating risk and return information to produce more efficient investment decisions. Information ratio is a key measurement in the process, and it is concluded that the risk budget should be allocated based upon the marginal contribution to it for different sources of risk. Non-financial risk is also considered in terms of both governance and risk.

Keywords

Active ReturnGovernanceImplementation ReturnsNet Information RatioRegret RiskRisk Budgeting

Information

Type
Sessional meetings: papers and abstracts of discussions
Information
British Actuarial Journal , Volume 7 , Issue 3 , 01 August 2001 , pp. 319 - 347
Copyright
Copyright © Institute and Faculty of Actuaries 2001

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References

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