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Brain power

Students try to solve pension problem for C$25,000 prize

The student team from HEC Montreal won the McGill University competition.

Finance students from around the world tried their hand at solving a Canadian corporate pension plan investment problem, with representatives from a business college in Montreal walking away with a C$25,000 ($19,500) first prize for their response.

The first McGill International Portfolio Challenge concluded Nov. 4 with students from HEC Montreal taking top honors for developing a plan to create an investment strategy for a hypothetical underfunded Canadian corporate pension plan that incorporated short-term cash-flow matching and long-term use of equity futures.

The intent was to develop an investment strategy that would allow the plan to rebound from a 76% funded status on a solvency — or immediate termination — basis, said Sebastien Betermier, a professor of finance at Montreal-based McGill University's Desautels Faculty of Management. "It was a clever strategy," Mr. Betermier said.

The 40 competing teams came from universities and colleges from as far away as Hong Kong, Sydney, California and Chicago. Illinois Institute of Technology, Chicago, took second place, followed by St. Mary's University in Halifax, Nova Scotia.

Judges came from some of the largest pension funds in Canada, including the C$326.5 billion Canada Pension Plan Investment Board, Toronto, as well as investment consultant Mercer (Canada) Ltd. and money manager BlackRock (BLK) Inc. (BLK)

"The real pleasure in all this is how we were blown away by the potential for this from these students," Mr. Betermier said. "You see all the work they invested in this, and it works."