Understanding the factors that support or weaken a pension fund’s funding ratio is important since it forms the basis of crucial policy decisions including the allocation to risk sources in the investment portfolio. In part 1, we argue that funding ratio risk is an important metric and can produce valuable insights. In part 2, we will argue that a more detailed grasp of the sources of economic risk can help the portfolio manager adjust the allocation as and when required.
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Pension funds: understanding funding ratio risk better (part 1)
