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Defined Benefit Pension Schemes in the United KingdomAsset and Liability Management$
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Philippe-N. Marcaillou

Print publication date: 2016

Print ISBN-13: 9780198738794

Published to Oxford Scholarship Online: May 2016

DOI: 10.1093/acprof:oso/9780198738794.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2022. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use.date: 28 January 2022

Investment Policy

Investment Policy

Understanding Asset Allocation Construction

Chapter:
(p.164) 5 Investment Policy
Source:
Defined Benefit Pension Schemes in the United Kingdom
Author(s):

Philippe-N. Marcaillou

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780198738794.003.0005

On the asset side, trustees must build a robust return-seeking asset portfolio in accordance with the risk and performance strategy defined in the ALM framework and the LDI strategy. This chapter provides the building blocks of an efficient investment portfolio strategy. Readers will understand the positive effect of diversification on the risk/return profile of portfolios and how to measure the skills of portfolio managers in security selection and the passive replication of risk-adjusted return of indexes. An overview is provided of the asset class universe and various management styles, the way to look at asset classes in terms of risk-adjusted returns. How to build various portfolios and undertake simulations in order to select the most appropriate portfolio to meet the objectives of performance and risk aversion are explained. Based on case studies, readers will learn how to analyse investment portfolios, simulations, build efficient frontiers and draw conclusions.

Keywords:   Alpha, asset and risk allocation, asset class, Beta, diversification, efficient frontier, growth asset portfolio simulation, idiosyncratic and systematic risks, investment portfolio construction and universe style, risk-adjusted return portfolio, Sharpe ratio

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