Question

Which following do you think a large pension fund would manage their assets against/relative to:

	A.	A benchmark
	B.	The plan’s liabilities
	C.	The plan’s beneficiaries desired return

Answer 1

B.	The plan’s liabilities

This is because a pension fund's funded status depends on the difference between fund assets and fund liabilities. The underlying liabilities are the most important relative measure because the asset-liability management framework is important for maintaining the fund staus of the plan.

A benchmark is used for measuring relative performance, not for managing assets

The pensioner's desired return is irrelevant because the pension fund's required return is the required return, not the pensioner's desired return