Economics, Econometrics and Finance
8 years ago

Optimal asset management strategy maximizes pension fund returns and minimizes risk.

Oxford University Press eBooks
Decentralized asset and liability management
Jules H. van Binsbergen, Michael W. Brandt, Ralph S. J. Koijen

Paper Summary

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The article discusses how pension funds manage their investments using multiple asset managers. The Chief Investment Officer allocates funds to different asset classes, each managed by a different manager. The CIO must balance the benefits of decentralization with the costs. The optimal portfolio of asset managers consists of two parts: one that maximizes returns and another that minimizes risk. These components are combined based on the manager's risk attitude to create the best portfolio.