Defined benefit plan - how to invest?

[Mark Cavazos]

From the questions, it does not seem like the OP is Registered Investment Advisor.

The plan should hire an investmen manager rather than relying on some office clerk.

[Colymbosathon ecplecticos]

Originally Posted by Zahra

Why do my liabilities go down if the interest rate goes up?

This is an interesting question. Obviously, we need to believe whatever the model says. In order to correctly interpret the output you need an actuary.

Since you don't have one, let's try an imagine what one might say ...

An increase in interest rates corresponds to an increase in economic activity, which in turn, implies that the workers will work more when interest rates are higher.

Slightly higher interest rates will cause an increase in heart attacks from overwork.

Moderately higher interest rates will result in higher suicide rates from workers working 20+ hour days.

Layer on even higher interest rates and supervisors will beat their workers to death for missing quotas.

Actuaries call these "plan gains."

This is why you see plan liabilities decrease as a function of interest rates.

[Duffer]

Originally Posted by Colymbosathon ecplecticos

This is an interesting question. Obviously, we need to believe whatever the model says. In order to correctly interpret the output you need an actuary.

Since you don't have one, let's try an imagine what one might say ...

An increase in interest rates corresponds to an increase in economic activity, which in turn, implies that the workers will work more when interest rates are higher.

Slightly higher interest rates will cause an increase in heart attacks from overwork.

Moderately higher interest rates will result in higher suicide rates from workers working 20+ hour days.

Layer on even higher interest rates and supervisors will beat their workers to death for missing quotas.

Actuaries call these "plan gains."

This is why you see plan liabilities decrease as a function of interest rates.

I bow to the master. Your perception is far beyond my wildest imagination.

[JMO]

Originally Posted by Colymbosathon ecplecticos

This is an interesting question. Obviously, we need to believe whatever the model says. In order to correctly interpret the output you need an actuary.

Since you don't have one, let's try an imagine what one might say ...

An increase in interest rates corresponds to an increase in economic activity, which in turn, implies that the workers will work more when interest rates are higher.

Slightly higher interest rates will cause an increase in heart attacks from overwork.

Moderately higher interest rates will result in higher suicide rates from workers working 20+ hour days.

Layer on even higher interest rates and supervisors will beat their workers to death for missing quotas.

Actuaries call these "plan gains."

This is why you see plan liabilities decrease as a function of interest rates.

In case anybody missed the point, this post is tongue-in-cheek.

Originally Posted by Duffer

I bow to the master. Your perception is far beyond my wildest imagination.

PS - Are we out of red font, or what?

[Mr. BoH]

Originally Posted by Zahra

Especially now, practically all investments have very short durations, because managers know that the rates will only go up, so they purposefully shorten the duration of their portfolios with swaps and shorts.

I predict you will fit right in as a DB investment adviser.

[Zahra]

Again, I'm thankful for all the advice that was useful. I found the GSAM presentation linked very interesting. Any further links to resources would be very welcome.

Unfortunately, more than half of this thread is an attack. I came here to learn something. We are the investment firm hired to manage the assets, I'm just trying to learn a bit more about all this.

[JMO]

If you are an actuary, I suggest that you review precept 2 of the Code of Conduct.

[Zahra]

Originally Posted by JMO

If you are an actuary, I suggest that you review precept 2 of the Code of Conduct.

Nothing there precludes me from asking questions & attempting to learn more.

[KingWithoutACrown]

Originally Posted by Zahra

Again, I'm thankful for all the advice that was useful. I found the GSAM presentation linked very interesting. Any further links to resources would be very welcome.

Unfortunately, more than half of this thread is an attack. I came here to learn something. We are the investment firm hired to manage the assets, I'm just trying to learn a bit more about all this.

You're the investment firm and its your job to manage assets for the pension plan. Look honey I think you are mistaken, actuaries deal with liabilities side and they don't have any statutory duty to approve of the investment mix.

Try an investment forum to ask these questions. Actuaries may have some cursory knowledge on the subject, however its the professional who are the experts. Good luck.

[mr coffee]

Originally Posted by JMO

If you are an actuary, I suggest that you review precept 2 of the Code of Conduct.

I've heard plenty of "qualified" actuaries advocate nonsense about pension discounting and investing. To the point that I question the value of academy "qualifications". This guy has a brain. I think that's a good start.