Hi, I've been looking at question X2.5 from this assignment which asks to "Describe the three main components of the overall risk inherent in the current investment position of this pension fund". In the solutions, one of the risks is structural risk and it goes on to say that the "aggregate benchmarks given to the managers will not equal the strategic benchmark set by the trustees". I'm just unsure how this was deduced from the case study if someone could explain please? Kind regards, Colin
Hi Colin We are told in the background information that the proposed investment strategy (as recommended by the actuary) contains undated bonds, but then below the last bullet point on page 2 of the questions that they have been unable to find a bond manager with experience of this area, this is then creating structural risk. This idea is raised in the [1] mark point on the marking schedule that leads into the point you have raised. Best wishes Helen
