by Illiya Atanasov
Pioneer Institute for Public Policy Research
November 29, 2012
Pension fund management can benefit from three broad sets of reforms: 1) Adopting and continuously updating a system of clear benchmarks consistent with actuarial and target returns as well as with the dual mandate of capital preservation and reliable returns. 2) Moving away from more volatile and illiquid asset classes such as commodities and private equity towards assets that generate free cash flows and would improve fundamental diversification such as blue-chip convertibles/revertibles and REITs, while maintaining a suitable cushion of liquidity in cash equivalents to prevent fire sales of securities due to market fluctuations. 3) Boosting the transparency of decision-making and adopting the best practices of continuous review and improvement. The adoption of these reforms can significantly improve the performance of retirement systems statewide and reduce the costs of funding public pension benefits.