Investment Policy and Risk Management in Pension Funds
Lecturer: Niels Lehde Pedersen
The course will treat general issues related to investment policy and risk management in pension funds. It will be discussed how investment policy and risk management should be anchored in the business model and strategic objectives. As pension funds are long term investors investment policy is also long term and risk metrics should reflect this. However, pensions funds must also remain solvent and liquid and risk management must balance long and short term objectives. Regulatory demands must also be taken into account (Solvency II rules). Pension funds invest in various asset classes to optimize risk adjusted returns and policyholders’ long-term interests. In the course we will analyze a number of approaches pension funds apply to obtain these goals. Furthermore performance analysis will be used to evaluate strategies.
Course coordinator: Svend E. Hougaard Jensen
The course offers a broad account of the role of pension systems and policies for individual economic decisions as well as for macroeconomic outcomes including distributional implications. The first part will deal with the Danish pension system from a practical perspective focusing on types of pension schemes, and management of pension schemes seen from the perspective of Danish pension companies. It will give an account of how the pension system has evolved over recent decades and relate to pension systems in other countries on the Western hemisphere. The second part will contain an introduction to the modelling framework – overlapping generations models – for analyzing microeconomic and macroeconomic implications of pension systems and welfare consequences of pension policies. It will focus on individual decisions on consumption, savings, and retirement from a lifecycle perspective as well as on generational accounting. Furthermore, the impact of pensions on macroeconomic balances and performance will be addressed. The third part will give an account of the empirical literature estimating and testing the abovementioned implications of various pension schemes and changes in pension policies. As an integral part of the course outside speakers will be invited to give presentations on selected topics.