Booth knew that a higher allocation to equities would likely raise total yields over the long term, thus this resulted in Booth reducing the price of funding the plan. Nevertheless, equities exhibited greater volatility than bonds and a higher allocation to equities consequently created some danger that future funding costs might rise above present levels.
Learning Objective: The case attempts to attain the following teaching objectives:
Comprehend the nature of pension fund management and identifying the various threats faced by pension funds
Comprehend the theory of the efficient frontier and how the results can be affected by the various assumptions used in the evaluation
Understand effect and the significance of selecting and defining asset classes.
Publication Date: 01/29/1997
This is just an excerpt. This case is about Finance
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