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6. Pensions: A Risky Business?

This edition of Scholarly Works focuses on the concept of risk, principally for pension fund trustees. First, we review articles that point out the kinds of risks that pension fund administrators face when making investments, and second we provide information on how to mitigate those risks. Third, we address the issue of the appropriate mix of investing in equities versus bonds. Fourth, we consider the risk of shifting from a defined benefit scheme to a defined contribution scheme and the repercussions for investors, employers and employees. (You can find out more about this shift in pension coverage from an earlier Scholarly Works called ‘The Big Shift’.) Finally, we set up a debate concerning the appropriateness of engaging in socially responsible investment, and question whether the risks are prudent. Although we do not provide clear-cut answers to address any of these risks, the articles provide information from which you can inform your investment decisions.

Our Picks

Prasch, Robert E. (2004). Shifting the risk: The divorce of risk from reward in American capitalism. Journal of Economic Issues, 38(2), 405-412.

Watson, Ronald D. (1994). Does targeted investing make sense? Financial Management, 23(4), 69-74.

Nofsinger, John R. (1998). Why targeted investing does not make sense! Financial Management, 27(3), 87-98.

Q & A

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