Pension fund allocation

CFA Level III
#1

Can someone who knows this off the top of their head post these please:

Possible Allocations : Equity , real bonds, nominal bonds

Dimensions of different pension plans to consider:

1.Frozen Plan

2.Closed to new Entrants

  1. Surplus

  2. Active Lives to Inactive Lives

  3. Inflation Indexing offered

Much appreciate a concise summary . ( I’m referring to an efficient way to solve Q3 of 2010 AM essay)

#2

Yes/No:

Equity: always unless it’s frozen. Real Bonds: always unless it’s forzen. Nominal Bonds: always. Weight/Allocation:

  1. Frozen Plan: nominal only 2. Closed to new Entrants: less equity and real bond. but not 0. 3. Surplus: higher risk tolerance => more equity? 4. Active Lives to Inactive Lives: lower risk tolerance => less equity 5. Inflation Indexing offered: more real bonds.
#3

thanks tulkiuu . Looking at 2010 exam AM , would the above rules be enough

#4

I think so. Yes/No can answer 2/3 of Q3.B.

#5

I have another question.

if a pension plan states “not inflation adjusted”,

there is still need for real bonds to cover future wage inflation, correct?

future wage inflation is a default requirement UNLESS pension is frozen. Correct?

#6

yea i agree^