Return to Pensions & Investments


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Agenda (subject to change)
As of August 18, 2011

7:30 am - 8:30 am
Registration and Networking Breakfast

8:30 am – 8:45 am
Opening Remarks

Speaker: Ari Jacobs (Conference Moderator), National Retirement Solutions Leader, Aon Hewitt

8:45 am - 9:15 am
PRESENTATION: The Latest Bulletin from the LDI Front

Five years ago everyone was talking about LDI but there wasn’t much action. Today LDI is real. Plan sponsors are developing various strategies to better manage their pension risk, and now working on the implementation and execution of these ideas. This presentation will first review how far the market has moved in the acceptance and definition of LDI. Then, it will discuss implementation opportunities and challenges, setting the stage for the day's discussion of practical and available solutions in the market.

9:15 am – 9:55 am
WORKSHOP: The Different Levels of LDI

Level 1 LDI is defined as implementation without the use of derivatives. Today, this is the most common approach to implementing LDI and typically involves using physical long duration corporate and government bonds to manage risk. Level 2 LDI is defined as implementation with the use of derivatives. This is a less common approach today and typically involves utilizing an explicit liability benchmark for measuring the success of an LDI program. This presentation will discuss which level is appropriate for your plan and why. In addition, it will discuss how plan sponsors are customizing benchmarks for both Level 1 and Level 2 LDI solutions including how these solutions evolve over time as a plan de-risks out of return-seeking assets into liability hedging assets. Lastly, it will discuss how plan sponsors are approaching the tactical consideration around how to implement LDI in today's market environment.

9:55 am – 10:40 am
PANEL DISCUSSION: The Alpha Portfolio: Trick or Treat?

You would be forgiven for associating LDI with bond portfolios. After all, that duration mismatch that a liability hedging portfolio is designed to address is the main theme running through all LDI conversations. But in these days of still-underfunded pension funds, the return seeking or alpha portfolio is still an important element of the strategic asset allocation of many pension funds. So where should you be looking for alpha in today’s markets – and how can you keep that funding ratio ticking ever upwards?

10:40 am – 11:00 am
Networking Break

11:00 am – 11:40 am
WORKSHOP: Letting the Liabilities Drive

As plans de-risk, increases in fixed income become inevitable. However, long duration market benchmarks have little in common with a particular plan's liabilities, limiting their effectiveness as a liability hedge. Ultimately sponsors want their assets managed to their liabilities. This session will discuss how to closely align the incentives of the manager -- for both return and risk management -- to the liabilities. How can alpha strategies be used to mitigate volatility from uninvestable liability assumptions -- like liability spread and long cashflows? How should your strategies change if a termination lies in your future?

11:40 am – 12:20 pm
WORKSHOP: The Challenges of Managing a Liability Driven Fixed Income Portfolio

Managing a fixed income portfolio to a custom liability requires advanced risk modeling, the navigation of unique liquidity constraints and, an active portfolio construction process. Each step of the investment process presents unique challenges, from understanding the risks and biases embedded in the liability return methodology to navigating the constraints imposed by the marketplace. This workshop will provide a step by step discussion of these challenges and the options to address them.

12:20 pm – 1:50 pm
Networking Luncheon

1:50 pm – 2:30 pm
WORKSHOP: Derisking: Start with the End in Mind

Today, more plans than not have been frozen or closed, and most are still underfunded. All have some kind of end point in mind: Termination for some, just getting fully funded for others. But how do you define the end point? And, more importantly, how do you get there? In this session, we'll look at both: How to determine your plan's goal, and how to set up the glidepath to reach it. This includes reviewing portfolios that may make sense today and ones you should be targeting down the road. We'll also examine tools that will help construct your DB glidepath and keep you on course toward whatever end point you've set for your plan.

2:30 pm - 3:15 pm
PANEL DISCUSSION: The Corporate Finance Implications of LDI

LDI is at its heart a risk reduction strategy. And today, with regulation and accounting pressures inexorably pressing companies to take notice of the risks they are running in their pension plans, LDI is a solution that promises to fit neatly into an overall corporate risk management program. Theoretically, this makes sense, but what is the practical reality? Are companies, particularly those with relatively large pension plans relative to their core business, actually using LDI to minimize the volatility of funded status?

3:15 pm – 3:35 pm
Networking Break

3:35 pm - 4:15 pm
WORKSHOP LDI: Issues and Challenges as Interest Rates Move Higher and Funding Levels Improve

Two major headwinds confronting more widespread adoption of LDI have been (1) the underfunded status of the majority of pension plans and (2) the prevailing view that interest rates are likely to move higher in the near term. In this environment how can plan sponsors minimize the guesswork while incorporating strong well-informed views on the capital markets and interest rates into their strategies for managing funding level volatility? This presentation examines the most powerful lever for managing funding level volatility – the critical balance between allocations to return seeking and hedging strategies. This examination will include illustrations of the changing utility of return-seeking assets as funding levels move higher and the potential consequences of alternative hedging strategies across a variety of interest rate scenarios.

4:15 pm - 5:00 pm
PANEL DISCUSSION: What’s Holding LDI Back?

In the last 10 years, LDI has gone from a forward-thinking strategy to a mainstream approach. Ask a nearby plan sponsor and you’re likely to hear about the benefits of LDI. But then ask how far down the LDI continuum they’ve progressed with their plan and the tone of the conversation is likely to change. So what is stopping plan sponsors from implementing this strategy, which appears to have obvious benefits? Or are they farther along the path than they let on? This final session will address the question of where LDI adherents go next.

5:00 pm – 6:30 pm
Closing Cocktail Reception