Volatility: it’s not just a buzzword anymore; it’s all around us. With ongoing uncertainty relating to the U.S. economy, concerns about sovereign debt in the euro zone and markets bouncing around like ping-pong balls in response to each breaking news development, how can pension investors protect themselves—and plan members—from its effects?

The Ontario Teachers’ Pension Plan, for one, has worked hard to manage volatility and mitigate risk for the plan and its members. In my recent interview with Jim Leech, president and CEO of Teachers’, he stressed Teachers’ “obsession with risk management.” From Teachers’ perspective, this means a solid team of investment managers, robust risk modeling tools—and, most important, the agility to make adjustments quickly as circumstances change. “Small course corrections today have huge implications down the road,” he added.

Effective risk management and plan governance are critical for DB plans, many of which are still struggling with funding issues even as they anticipate other risks, such as longevity risk, in the not-too-distant future.

And dealing with volatility can be even more challenging in a DC environment, where plan members bear the risk as well as the reward (or lack thereof). Without the benefit of investing acumen or a professional investment management team, plan members are often unable to make wise choices about how to save and invest for the future. Yet they’ll be the ones to suffer the consequences of today’s volatility down the road, when they realize they can’t retire when planned or with the necessary retirement income to fund the lifestyle they’d envisioned.

Benefits Canada will be hosting our annual DC Investment Forum later this month, and dealing with volatility will certainly be on the agenda. And, in December, we’ll be holding DB Summits in Toronto and Montreal. (Visit our Events page for details.) This year’s theme is, appropriately, Expect the Unexpected. Along with in-depth discussion of trends and issues in the DB space, C-level executives at plan sponsor organizations will share the strategies they’re using to help insulate their plans from the unanticipated events that are constantly cropping up these days. I’m interested to hear what they have to say—because it seems that, at least for the near term, volatility is here to stay.

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Copyright © 2020 Transcontinental Media G.P. This article first appeared in Benefits Canada.

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