Pension funds must focus on ‘left tail’ risk

Pension funds must focus on ‘left tail’ risk

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Too great a focus on maximising portfolio efficiency has resulted in pension funds not taking full account of tail risk when constructing an asset allocation – particularly with respect to sponsor failure, according to a report by actuarial consultancy, Towers Watson.

Carl Hess, London-based global head of investment at Towers Watson, says pension funds should review their investment strategies to determine whether their assets would mitigate or exacerbate the impact of sponsor impairment

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