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Missing Collateral = More Risk for Hedge Funds and Pension Plans

December 26, 2007

Hedge funds assess exposure to banks | www.ft.com

Institutional investors must ask hedge funds how they are assessing counterparty risk and what that means in terms of collateral management.

Can the Pension World Learn Something from Ayn Rand?

November 30, 2007

In Major Projects, Agreeing Not To Disagree | www.nytimes.com

1. Plan sponsors should take a leadership role in promoting best practices and good pension governance. 2. Pension fiduciaries should embrace accountability and transparency. 3. Arguments against excessive government regulation apply today as well as they did fifty years ago when Atlas Shrugged was written.

A Billion Here, A Billion There ...

October 26, 2007

The Recent Financial Turmoil and its Economic and Policy Consequences | www.federalreserve.gov

1. Many financial institutions are reporting losses related to valuation problems. 2. Institutional investors are on the hook to properly vet external asset managers. This includes asking tough questions about their valuation processes.

Pension Risk and Hedge Fund Cherry Picking

October 15, 2007

Pricing Tactics Of Hedge Funds Under Spotlight: Some Managers Select Favorable Valuations To Lift Performance | online.wsj.com

1. Pension fiduciaries must ask tough questions about a hedge fund's valuation policies and procedures. 2. There are many "tricks" that can be played when reporting valuations of "hard-to-value" instruments.

The Abracadabra of Valuation - Pension Fiduciaries Beware

October 15, 2007

U.S. Investors Face an Age of Murky Pricing | online.wsj.com

1. Pension fiduciaries must understand how their external asset managers value "hard-to-value" assets. 2. Fiduciaries could face personal and professional liability for failing to do proper oversight of external money managers with respect to asset valuation. 3. Model risk is real and must be addressed with an in-depth assessment by investors.

Liquidity Crunch, Bonds and Pension Plans

September 25, 2007

Liquidity Crunch: How Long Will it Last | www.cfo.com

1. Defined benefit plan sponsors could be seriously impacted by the sub-prime crisis, possibly triggering a funding status violation. 2. For those companies directly involved in poor credit risk assessment, defined contribution plan fiduciaries are assessing whether company stock in the 401(k) plan makes sense. 3. Sub-prime litigation that involves institutional investors is rising.

Valuation Problems Are Going To Cost Plan Sponsors Big Time

September 21, 2007

Funds Struggle With Pricing Pitfalls | online.wsj.com

1. Asset managers and plan sponsors alike should have a vested interest in valuation best practices. 2. Poor valuation process adversely impacts nearly every element of investment management, including hedge size, portfolio re-balancing, performance reports and the ability to attract and retain institutional clients.

Salaries and Bonuses for Investment Risk Professionals

September 17, 2007

Bigger bonuses approved for Texas Retirement System investment staff | www.statesman.com

1. The need for talented pension risk managers is growing. 2. Demand is starting to quickly outweigh supply and driving up wages as a result. 3. Pension investment returns and related strategy must consider the cost of attracting and retaining talented risk managers.

Can the Pension World Learn Something from Ayn Rand?

September 17, 2007

Ayn Rand's Literature of Capitalism | www.nytimes.com

1. How can plan sponsors embrace best practices if proper economic incentives are not in place? 2. What are the ills of excessive regulation with respect to commercial risk-taking? 3. Is there a role for bold leadership on the part of plan sponsors?

New IRS Form Mandates Governance Disclosures for Non Profits - What About Pensions?

September 11, 2007

Form 990 and Pension Protection Act Mandate | www.expertclick.com

1. Investors must be aware of who and how decisions are made by plan sponsors. 2. A bad or incomplete decision about employee benefits could cost big money and drive share price downward. Fiduciary risk has economic impact.

LDI Costs Go Up for Plan Sponsors as LIBOR Soars

September 10, 2007

The Economics of Nuclear Power | www.uic.com.au

1. Liability-driven investing has another cost in the form of higher short-term rates. 2. LIBOR has been moving away from the Fed. Funds rate. 3. Central bankers may have a tougher time keeping market volatility in check. That adversely impacts pension plan financial health.

Pension Investment Risk Disclosure - What Don't You Know?

September 6, 2007

The Economics of Nuclear Power | www.uic.com.au

1. Understanding a plan sponsor's investment risk exposure is necessary but not sufficient. 2. Plan participants, corporate investors and lenders all need to know whether pension investment risk could create financial problems. 3. There is limited information currently available. A move by FASB to require additional disclosure may help.

Wall Street May Be in for a Rude Awakening

September 4, 2007

Can Pension Clients be Hazardous to Your Financial Health? | www.mannpublications.com

1. Service providers who do not consider their implicit or explicit fiduciary status vis-a-vis public or corporate pension plans could find themselves in the litigation cross hairs. 2. Pension litigation is skyrocketing with fiduciary breach allegations leading the way.

Man or Machine - Do Pension Trustees Know?

August 13, 2007

Insurers Brace for Policy Fight | online.wsj.com

1. Quantitative investing could worsen market volatility. 2. Fiduciaries have a responsibility to assess trading risks. Automated trading strategies could make it more difficult to carry out their duties. 3. Some banks and hedge funds are experiencing losses due to "quant" trading.

Model Risk - Great Unknown for Pension Plans

August 10, 2007

Insurers Brace for Policy Fight | online.wsj.com

1. Proper valuation (and related risk management) cannot ignore model risk. 2. Model risk, or "model error" means different things to different people. 3. Complex models require an understanding of the dynamic behavior of input variables such as default or recovery rates.

Are Fiduciaries Paying Enough Attention to Default Risk

August 1, 2007

Housing Market to Weaken Even Further as Mortgage Industry Takes Cure | online.wsj.com

1. Plan sponsors are responsible for prudent investment decision-making. 2. There is concern that some plan sponsors may not be doing enough to vet credit risk and the quality of supporting collateral.

Two Hedge Funds Report Assets Are Nearly Gone

July 31, 2007

Subprime Uncertainty Fans Out | online.wsj.com

1. Valuation drives a plethora of urgent financial activities - risk management, re-balancing, fee assessment and strategic asset allocation. 2. Bad valuation numbers lead to bad decisions. 3. Institutional investors and their service providers are likely to find themselves struggling to justify their decision if they have failed to ask tough questions about target hedge funds' valuation policies and procedures at the outset.

Is There a Pension Crisis?

July 25, 2007

Pension Tension Blues - Musical Commentary | www.pensionriskmatters.com

PENSION TENSION BLUES will make you laugh and cry at the same time. It draws serious attention to the pension crisis.

Hedge Fund Returns - Illusion or Fact?

July 16, 2007

A third of funds hide their true volatility | www.financialnews-us.com

1. Someone has to clearly "own" the valuation process check responsibility or pension fiduciaries could be exposed to tremendous liability for poor decision-making. 2. Smoothing makes it difficult, perhaps impossible, to gauge a hedge fund's risk and return profile. 3. Pension funds critically depend on hedge fund performance information to decide whether investing makes sense. (They should be looking at many other factors as well.)

Disclosure and Fiduciary Implications - Big Problem?

July 10, 2007

Retirement Plan Disclosure: Ethical Principles and Legal Obligations | papers.ssrn.com

1. Increasingly, pension-related lawsuits allege fiduciary breach. 2. Pension decisions are fast migrating to the C-level and boardroom. Questions about fiduciary liability abound. 3. How much information is minimally required to discharge proper fiduciary responsibilities? 4. What is the boundary between ethics and legal requirements for disclosure about fees charged by asset managers?

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