U.S. public pension funds have the fewest full-time risk management employees, on average, when compared to funds around the world, according to a study from the Rotman International Centre for Pension Management at the University of Toronto.
Pension funds worldwide have an average of five full-time risk management employees, ranging from one person for funds with less than $5 billion to 11 or more for larger funds, according to the study, “How Pension Funds Management Investment Risks: A Global Survey.”
U.S. public funds “have the smallest size staffs dedicated to risk management,” even taking into account fund size, according to the study.
“Given the difficult financial situation of many American states, state pension funds may be receiving less funding for staff than funds in other parts of the world,” said the study’s authors, all from CEM Benchmarking: Sandy Halim, partner; Terrie Miller, chief operating officer; and David Dupont, senior analyst.
Among other findings in the study, published in the fall issue of the International Journal of Pension Management, 88% of funds measure active management risk, the deviation of active managers in performance and weighting from their benchmarks and policy allocations.
Of the funds that measure active risk, 88% measure tracking error, volatility of value added, while 43% measure value at risk and 57% use risk budgeting.
Of the funds that use risk budgeting, 62% allocate the risk budget to the portfolio manager level and 71% measure risk at least monthly.
The study surveyed 58 pension funds with combined assets of almost $2 trillion, including 12 U.S. corporate plans, 12 U.S. public plans, four Canadian corporate funds and 14 Canadian public plans. Seven pension plans were from the Netherlands, six from other European countries and a total of three from Australia and New Zealand.