Our Services: Defined Benefit Plans - Asset/Liability Modeling
Creating an Optimal Pension Investment Strategy…A Powerful Forecasting Tool
Pension plans often represent the longest-term commitment an organization may undertake. Accordingly, best practices in pension management should reflect the unique relationship between a plan sponsor and its plan.
Watson Wyatt begins by communicating to you our understanding of the effect of different strategies on the operation of pension plans in general. Our Asset/Liability Modeling software then gives us the ability to look at the specifics of your pension plan and to illustrate the effect of changes in asset allocation, funding and/or benefits policies in terms meaningful to your plan and your organization.
While asset optimization is important, it is only part of the equation. Our Asset/Liability Modeling quantifies not just expected results, but the risk of adverse results, in measures that you consider significant. More important, our experience enables us to help you discover solutions that best achieve your objectives.
Let Watson Wyatt work with you to:
- Determine optimal asset allocation to minimize expected contributions and/or expense over a particular time frame without violating specific constraints on investment risk or jeopardizing benefit security
- Analyze additional classes of assets; for example, private equity or real estate mortgages
- Determine optimal long-term funding targets within the legally acceptable range
- Determine actuarial methods and assumptions that will minimize expense or funding volatility
- Evaluate changes to benefits provided by the pension plan
Advantages of Watson Wyatt’s Asset/Liability Modeling
We can find the best way to finance benefits plans while minimizing costs and controlling risk. How?
- By redefining and quantifying risk based on variables critical to you
- By modeling consistently the effects of inflation and interest rates on both sides of the equation — the asset side and the liability side
- By modeling any number of asset classes on a consistent, global basis, including stocks, bonds, real estate, venture capital and many others
- By analyzing many different variables, including pension expense, contributions, funded ratio, assets and cash flows
- By allowing complete freedom to set your own assumptions — such as the number, age and sex of workers — and see actual year-by-year application of these assumptions
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