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Relativity and volatility: A special relationship

Relativity and volatility: A special relationship

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

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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