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Investment/Funding Risk Analysis
When a pension scheme is reviewing its asset allocation, a first step is to relate the asset strategy to the scheme’s long term funding objectives. Risk modelling can then be carried out to assess the split of the scheme’s assets between risky growth seeking assets and low risk protection assets that is likely to meet the scheme’s long term objective(s).
The next level of risk analysis is to then identify the key sources of short term risk to the funding position of the scheme and carry out appropriate analyses, to complete the development of the strategic asset allocation.