Are Your Reserves Long-Term Capital?
Sizing near-term reserve funds should be guided by analysis of cash flows, endowment reliance, available liquidity, and capital needs. Any reserve funds not needed in the near term can be considered longer-term capital. When investing reserves as long-term capital, institutions should consider the policies needed to support responsible reserve fund management, how compatible the funds invested together are, and whether such investments will jeopardize the long-term investment pool.
For many US pension plan sponsors, the déjà vu of falling discount rates and volatile equity markets again raises the question of how best to hedge pension liabilities, if at all. The issue of liability hedging is especially pertinent in today’s complex and asymmetrical interest rate environment.
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With the initial chaos of the COVID-19 market dislocation behind us but uncertainty still ahead, now is the time to refocus and potentially recalibrate core tenets of pension plan management. In this video series, we share our recommendations on how to address these challenges.
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