EDHEC-Risk Survey of the Asset-Liability Management Practices of European Pension Funds EDHEC-Risk Institute took a recent survey of pension funds, their advisers, regulators, and fund managers. One hundred twenty-nine of these asset/liability management (ALM) specialists, representing assets under management (AUM) of around €3 trillion, responded to the survey. Pension funds and their sponsors account for approximately €0.9 trillion.

ALM involves covering liabilities and generating performance; in addition, pension funds must respect their minimum funding ratios, or, more broadly, achieve their goals. In the end, proper ALM requires three forms of risk management. Covering liabilities requires hedging risks; generating performance in efficient portfolios requires diversifying risks; ensuring that minimum funding ratios and other constraints are respected at all times requires insuring risks away. More....