RISKING OR
DE-RISKING?
PICK BOTH AND
BE DELIBERATE.
BY MARTIN LECLAIR, VICE PRESIDENT
Risking (also known as re-risking) and de-risking are not opposing forces you pick based on a list of pros
and cons. The two do not contradict one another, rather they work together along the same continuum.
The two are not exclusive, except in the case of a small minority of pension plans where full buyout is
implemented. For all other plans, de-risking is the new liability-driven investing (LDI).
The pension management industry has revisited and – in a process not entirely alien to marketing incentives
– rebranded LDI into de-risking, which has been very successful. The growing acceptance and adoption of
de-risking strategies amongst plans of all sizes makes for increasingly standardized procedures; greater
access to products and services; better pricing from providers and easier communication with
stakeholders.
De-risking means “managing a plan responsibly”
Employers are increasingly focused on the end point of their pension plan when the need for future funding
requirements is removed. The investment strategy is the key variable in determining how any deficit removal
will be divided between additional investment returns and contributions.
Regardless of a plan’s funding position, it is important for plan sponsors to develop a long-term strategy.
In order for plans to ensure plan solvency and meet their fiduciary obligations, developing an investment
strategy cannot be performed in a silo.
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PROTEUS