Weekend Reading: One for the Road

Ashby Monk

I’ll be in Abu Dhabi for a week, so I imagine posts will be lighter than usual for the coming days. That being said, I’ve got a stack of papers waist high for “weekend reading” type posts, so I may tick some of those off while I’m on the road. Anyway, I actually have an interesting paper for you today.

Sandy Halim, Terrie Miller, and David Dupont have published an article in the Rotman International Journal of Pension Management entitled, “How Pension Funds Manage Investment Risks: A Global Survey.” As an investment governance wonk, I found this to be a fun read. Why? Because it’s written by three executives at CEM Benchmarking Inc., which is probably a well known quantity to institutional investors who do benchmarking (i.e. almost all of them). And, while the paper purports to be about pensions, it’s definitely relevant to SWFs and beyond. Anyway, here’s the premise:

“The market upheaval of 2008 was the catalyst for this study by CEM Benchmarking Inc. of risk management practices across its client base of global pension funds. After this difficult period, a number of clients expressed an interest in benchmarking their risk measurement and management practices beyond the information provided through CEM’s standard survey-based databases. In particular, this required understanding how funds measure their risks in order to benchmark them going forward. The focus was on how successful funds have been in managing risk, on documenting the range of risk practices used, and on identifying risk measures that might be useful for ongoing benchmarking.”

I won’t go into all the details and findings because the journal is free, and it’s a quick (and easy) read. Still I will leave you with two interesting graphics that highlight how much risk management remains under-appreciated within certain institutions, in particular in US plans:

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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