| Defined benefit (DB) plan sponsors face the challenge of generating the required return as well as the need for stability in the plan’s funding status. In a new paper, PanAgora Asset Management says, “We have long argued that these challenges can be addressed through asset allocation in general, and risk parity in particular.” For those plans unable to invest in risk parity, the paper discusses an alternative strategy to target equity exposure within a pension plan—employing a defensive equity strategy designed to reduce downside exposure to market movements, coupled with risk parity-like portfolio construction techniques—referred to as “defensive equity multi-factor.” Bryan Belton, director, multi asset, at PanAgora Asset Management, says, “A cap-weighted strategy skews its way toward the largest stocks, but if plan sponsors own equities in a much more balanced way, it will help with stability.”Read more > |
