Why hedging and asset allocation are equally important ingredients in an uncertain world

By Christian Hristov

It is too early to define this decade, but it seems unlikely that we’ll see a repeat of last century’s ‘roaring Twenties’. From tariffs and trade wars, to climate change and COVID-19, economists across the world are watching indicators carefully.

Following a period of strong performance in equity markets, particularly in the US, and a bond rally in the US and the UK, stocks recently plunged on fears of a global pandemic and investors seek safer havens as the FED cut interest rates to 0%. For a pension plan, any volatility on the journey to the ultimate funding level matters.

Funding-level progression 2018-2019

PFaroe™ software holds data for more than 3,500 defined benefit (DB) pension plans across the US and the UK, with in excess of $1.5 trillion assets under management. The plans themselves range from less than $500 million to more than $2 billion.

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