Dynamic Risk Allocation Model (DRAM) sets an asset allocation policy that determines the response of a defined benefit plan’s asset mix to changes in the market environment. Through DRAM, plan sponsors are able to directly manage assets relative to projected liabilities, while the fund’s asset allocation is permitted to shift in response to the plan’s funding ratio, according to a news release.
SSgA is offering the new service as an overlay to an existing investment strategy, building from the client’s liability profile.
“By starting with the liabilities and adopting a strategic policy, a plan sponsor will be able to focus on changes relative to the projected liabilities of the fund, rather than focusing on measuring everything relative to the traditional strategic benchmark,” said Alan Brown, group chief investment officer for State Street Global Advisors. “The separation of a plan’s Alpha and Beta investment strategies can also be more easily achieved and, for the first time, a plan’s surplus position can be directly managed.”