Pension Investing

Pension plan trustees and administrators carry out four primary functions in the investment process.

  • Adopt an investment policy – An investment policy should describe the most prudent primary objectives for a sound policy: safety, liquidity, and yield. It should also indicate the type of instruments eligible for purchase by a government entity, the investment process, and the management of a portfolio.
  • Develop an asset allocation plan – An asset allocation plan reviews the financial profile of the pension system, available asset classes, and capital market assumptions to determine the “optimal” investment portfolio.
  • Assemble an investment team – An investment team can include administrative staff, money managers, investment consultants, attorneys, actuaries, accountants/auditors, and custodians. Key questions a pension system needs to address prior to assembling an investment team includes scope of services, passive versus active management, and internal or external investment services.
  • Monitor investment program’s implementation and performance – To ensure that investment policy and asset allocation strategy is implemented efficiently and effectively, trustees and administrators have three key activities: compliance with asset allocation strategy, cost management, and oversight and reporting of investment results.

 

GFOA Best Practices and Advisories

Pension investing is filled with complexities along with legal obligations to invest on behalf of existing and future retirees. GFOA identified the following best practices and advisories related to pension investing.

Policies

Investment Strategies

Investment Risk

  • GFOA Advisory: Understanding Pension Fund Investment Risk - GFOA endorses the report developed jointly by the Association of Public Pension Fund Auditors and selected chief investment officers of public pension funds, entitled "Public Pension Systems: Statements of Key Investment Risks and Common Methods to Address those Risks."

 

 GFR  Research  Recent Presentations

 

Additional GFOA Resources

Training

GFOA Conference

GFOA Research

 

Best Practices

 

Other Links and Resources

Other Links

 

  • National Institute on Retirement Security
 
Case Studies

 

  • The Oracle of Philadelphia
  • Orange County Employees Retirement System Creates State-of-the-Art
    Portfolio Risk Toolkit
  • Orange County Employees Retirement System Pension Portfolio Investment Fee Transparency and Management Initiative