Background on Pension Funds
Public Versus Private Pension Funds
Defined-Benefit Versus Defined-Contribution Plans
Pension Regulations
Pension Fund Management
Management of Insured versus Trust Portfolios
Management of Portfolio Risk
Corporate Control by Pension Funds
Performance of Pension Funds
Pension Fund’s Stock Portfolio Performance
Pension Fund’s Bond Portfolio Performance
Performance Evaluation
Performance of Pension Portfolio Managers
Key Concepts
1. Describe the role of insurance companies.
2. Explain how insurance companies are exposed to risk.
3. Describe how insurance companies participate in financial markets.
4. Describe the purpose of pension funds and how they participate in financial markets.
POINT/COUNTER-POINT:
Should Pension Fund Managers be More Involved with Corporate
Governance?
POINT: No. Pension fund managers should focus more on assessing stock valuations and determining
which stocks are undervalued or overvalued. If pension funds own stocks of firms that perform poorly, the
pension fund managers can penalize those firms by dumping those stocks and investing their money in
other stocks. If pension funds focus too much on corporate governance, they will lose sight of their goal
of serving the pension recipients.
COUNTER-POINT: Yes. To the extent that pension funds can use governance to improve the
performance of the firms in which they invest, they can improve the fund performance. In this way, they
also improve the returns to the pension recipients.
WHO IS CORRECT? Use the Internet to learn more about this issue and then formulate your own
opinion.