Will underfunded liabilities bankrupt the government, or worse, corporate America? The 2006 New York City Transit strike was a harsh wake-up call about the growing problems of underfunded public pensions in America. Scroll through the financials of some of the largest companies in America and you will find ExxonMobil, for example, with the biggest funding deficit: close to $11 billion in its employee pension fund. In November 2007, the Financial Accounting Standards Board voted in favor of implementing FAS 157 and its companion, FAS 159, which allow organizations to choose to measure many financial instruments and certain other items at fair value. An incomplete understanding of the two will ultimately lead to bad investment decision-making for your plan. Unfortunately, nothing has changed since the NYC transit strike and in 2007, ExxonMobil had the best earnings year in its history. Town, county, state, and even federal officials and corporate plan trustees across the US today are either dumb or dumbfounded about the massive problem at hand.
Headline risk, inflation risk, interest rate risk, economic risk, and legislation risk can all wreak havoc on a portfolio at any given time. As a CFO or Trustee to a pension plan or health and welfare fund, there is no saying 'no' to those in need of their retirement savings or welfare benefits. Don't get caught with your pants down: be proactive and not reactive to the future liabilities that exist in your plan.
As a fund's financial advisor, SAC can tailor an asset- liability study to meet the various funding needs that are projected for the fund. We ensure that the currency, interest rate, inflation, and maturity risk of the fund's assets and liabilities are within the correct risk parameters. We apply a prudent holistic approach to balance sheet management with the aim of controlling undue financial risks.