SEI White Paper: Plan Sponsors Can Better Align Enterprise Risk Metrics With
Analysis Shows Sample Companies Have Similar Investment Portfolios
Despite Different Risk Profiles
OAKS, PA -- (Marketwired) -- 06/11/13 -- SEI (NASDAQ: SEIC) today
released a white paper suggesting ways that pension plan sponsors can
better align investment portfolio decisions with overall enterprise
risk metrics. As part of the paper, SEI compared the asset
allocations of more than 1,200 corporate pension plans with assets
over $10 million each. According to the results, there was little
evidence to show that the majority of corporate pension plan sponsors
have implemented more customized solutions that consider the
companies' unique risk tolerances and finances. One sample finding
concludes that companies with credit ratings of "A" or higher had
almost identical fixed income allocations to those with credit
ratings of "B" or lower, despite their very different risk profiles.
"Failure to integrate the pension portfolio strategy with various
enterprise risk factors could potentially have a detrimental impact
on balance sheets, cash availability, and other financial metrics,"
said Thomas Harvey, Director of Advice, SEI's Institutional Group.
"Plan sponsors can benefit from a careful analysis that not only
stress-tests the portfolio against economic variables, but also
projects corporate financials under matching environments."
Most plan sponsors already employ financial modeling tools that use
capital markets assumptions to project future asset allocation
outcomes, in order to make educated decisions regarding
pension-specific strategies. The paper suggests that plan sponsors
find ways to determine how these potential outcomes impact not only
the pension, but also important corporate financial metrics as well.
The ability to stress test the pension portfolio alongside corporate
financials provides a dynamic view of how pension volatility and
corporate performance interact. Three areas of enterprise risk
identified by the paper include:
1. Operational risk: The stability and visibility of free cash flows
and the risks and key drivers associated with top line performance.
2. Financial risk: Liquidity such as cash flows and available credit,
tenor, and covenants associated with existing debt structure,
refinance risk and potential contingent liabilities.
3. Pension risk: Size of the pension assets and liabilities relative
to the corporate sponsor, measured by multiple metrics, including:
-- Pension Assets/Market Capitalization
-- Pension Assets/Adjusted Corporate Assets
-- Pension Assets/Book Value
-- Unfunded Pension Obligation/Adjusted Balance Sheet Liabilities
-- Pension Expense/Corporate Income
None of the companies evaluated are Institutional clients of SEI. To
access the full paper, please visit:
About SEI's Institutional Group
SEI's Institutional Group is the
first and largest global provider of outsourced fiduciary management
investment services. The company began offering these services in
1992 and today acts as a fiduciary manager to approximately 450
retirement, nonprofit and healthcare clients in seven different
countries. Through a flexible model designed to help our clients
achieve financial goals, we provide asset allocation advice and
modeling, investment management, risk monitoring and stress testing,
active liability-focused investing and integrated goals-based
reporting. For more information visit:
SEI (NASDAQ: SEIC) is a leading global provider of
investment processing, fund processing, and investment management
business outsourcing solutions that help corporations, financial
institutions, financial advisors, and ultra-high-net-worth families
create and manage wealth. As of March 31, 2013, through its
subsidiaries and partnerships in which the company has a significant
interest, SEI manages or administers $495 billion in mutual fund and
pooled or separately managed assets, including $206 billion in assets
under management and $289 billion in client assets under
administration. For more information, visit www.seic.com.
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