EFRP opposes legislative review

On the occasion of last month's conference last month, EFRP presented the results of a member survey about the Pensions Directive. The Federation underlines the innovative nature of the Directive and suggests that the legislative review which is planned by the EU Commission for next year is premature since the Directive has not been given enough time after implementation. There are a number of interesting comments on important "details" such as mandatory second pillar, or that there are more than 48 cases of cross-border pension plans as reported by CEIOPS earlier.

EDHEC alternative investments days

Very commendably, EDHEC Risk has decided to make the full documentation of its recent Alternative Investment Days 2007 available to the general public. This includes the much discussed - and dearly sold - paper about passive hedge fund replication as well as a lot of other interesting stuff. 

CDI vs. LDI?

Wilshire has a fairly interesting white paper out with the title Commitment-Driven Investing (CDI): LDI as We 'C' It. The paper's rather semantic focus on commitment rather than liability is probably a consequence of its US accounting context, so we are not going to hold that against it. The thrust is certainly correct, namely that CDI, i.e. the Wilshire variety of LDI is aimed at managing the true economic funding ratio of pension plans and is therefore inherently a risk management technique. 

Confusing at best however is the frequent reference to two equally important (but partially conflicting) goals of CDI, whereas the only correct objective (from the sponsor's perspective) must be to minimise the cost of running the plan at a given level of benefit security. Also, the authors seem to be struggling - quite fashionably, one might add - with the rationale behind marking-to-market of pension liabilities. The impending revision of IAS 19 will deal with that issue.

Their conceptual conclusion, nevertheless, is an intriguing one: The commitment discount rate is set to be a random variable described by the expected inflation characteristics of the individual plan's benefit stream. This is where the authors can start their optimisation engines, hopefully without being blinded by the light of past correlation stability. 

While we feel more comfortable with the more comprehensive approach recently proposed by Waring & Siegel, the authors deserve a prize for originality as this paper is the first that I know of to include the complete lyrics of a Springsteen song.

XBRL advisory council

The International Accounting Standards Committee Foundation (a.k.a. IASCF) today announced the formation of an XBRL advisory council, which I have the honour to say that I am a member of on behalf of the CFA Institute. I am looking forward to contributing my small share to the further establishment of XBRL as a major agent of change in the preparation, dissemination and use of financial reporting.

Asset pooling

epn has an interesting story mostly about the competition between asset pooling locations in Ireland, the Netherlands and Luxemburg. The Belgian approach with its relaxed solvency regime gets bad marks, especially with regards to next year's Commission review of the Directive and its transposition.