This document is intended for everyone who is in some way involved with financial risk management for pension funds. In it, we describe the vision of Ortec Finance on this topic. Due to the financial crisis and the increased vigilance of the supervisor it has caused, financial risk management for pension funds is currently taking center stage.
Calls for “being in control” or “managing your future” are omnipresent. When it comes to financial decision-making, Ortec Finance advocates an integral and consistent approach and this belief pertains to risk management as well.
In this document we demonstrate how by using a cascade model across and between the various layers of the investment process, risk management can be consistently organized. We will start at the strategic level and expressly and explicitly include all relevant details of daily asset management. And, vice versa, the risk management at the implementation level is organized in such a way that it is possible to connect consistently with all other levels of the investment process.
The unique combination of the cascade model and our Dynamic Scenario Generator (DSG) enables one to set up financial risk management for a pension fund consistently: on every desired horizon, with each relevant frequency, and for every level of the investment process.