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September 30, 2020 | Pension Solutions

Three Myths About Pension Liability Risk Management

The effectiveness of liability hedging when interest rates are low remains a topic of debate within the defined benefit pension plan community. In our view, much of this debate is adversely influenced by three myths about pension liability management:

  • Myth #1: Precision Doesn’t Matter
  • Myth #2: Derivatives are Too Risky for Pension Plans
  • Myth #3: Hedging Interest Rate Risk Doesn’t Make Sense at Current Levels

We took an objective look at how these myths can distort decision making and adversely influence an asset-liability mix. By addressing these myths, we believe plans can become more efficient, reducing risk and enhancing return potential.


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