The World Bank, Ameritech and Yale University are strengthening their pension fund risk management programs, part of a move by large institutional investors to upgrade and improve risk management.
The World Bank restructured its risk management operation, while Ameritech and Yale both created risk management oversight positions.
Others that took such steps earlier include: General Motors Investment Management Corp., New York; GTE Investment Management Corp., Stamford, Conn.; Chrysler Corp., Auburn Hills, Mich.; and the Virginia Retirement System, Richmond.
Moreover, as institutions continue to beef up risk management, benchmarks might be developed, and risk improvements beyond the largest tier of funds may become more widespread, risk consultants say.
The World Bank, Washington, restructured its risk management team of five employees to cover both its $35 billion in bank assets and $10 billion in pension and related benefit assets, and might add two more to the group.
Ameritech, Chicago, with about $16 billion in pension assets, and Yale, New Haven, Conn., with about $5 billion in pension and endowment assets, both have created risk management oversight-related positions.
Afsaneh Mashayekhi Beschloss, investment director for the World Bank, said it's more efficient to have a single risk management team to oversee the bank's two main investment areas than to have separate groups.
The new group is headed by Arun Muralidhar, who previously worked in equity portfolio management and was a senior person on the derivatives team at the World Bank, Ms. Mashayekhi Beschloss said. The team could grow to seven, she said.
In its work on risk management, the World Bank is taking a look at Bankers Trust Co.'s risk management product, RAROC 2020, she added.
RAROC stands for risk-adjusted return on capital. RAROC 2020 is a system designed to measure, manage and control risk.
Meanwhile, Ameritech promoted Susan Manske to director of risk management, a new position, industry sources said.
Ms. Manske previously was director of capital markets for the fund. Additional information was not available.
And Yale University hired Alexander Banker, director of investments, in a new position that will include risk management as a part of its focus. Mr. Banker declined to be interviewed, but a Yale spokeswoman confirmed his hiring, and said his job duties are still being defined.
Sources said Mr. Banker previously worked in the risk management practice of Deloite & Touche L.L.P., New York, but officials there declined to confirm that.
The big funds that are making changes in risk management are blazing a trail for other funds to follow, that could lead to changes in the way tax-exempt funds are managed, consultants say.
Their biggest risk management challenge is the lack of a history in the process, said Maarten Nederlof, vice president with Capital Market Risk Advisors, New York.
And faced with the challenge of not knowing how much of their resources to devote to risk management, "you do what you do in any good emergency room - triage," he said. As a result, the appropriate way to manage risk will vary with the specific needs of the fund.
Waite Rawls, chief risk officer for Ferrell Capital Management, a money manager and risk consulting firm in Greenwich, Conn., said once a pension fund has its monitoring, compliance and controls in order, the next step will be a closer examination of risk-adjusted returns. That is likely to lead to more diversification among funds, because "diversification is the best controller of risk," he said.
