Understanding the appropriate benchmark is a critical component in managing risk when a pension plan alters exposures. If an exposure shift is not properly aligned, the pension plan may be exposed to unwanted risks due to deviations from benchmark exposures. To minimize such deviations, we offer three techniques that fall under the umbrella of "exposure benchmarking." This Russell Investments Strategy Spotlight focuses on:

  1. Plan-level inflows and outflows (benefit payments or sponsor contributions)
  2. Changes in manager allocations (manager funding or redemptions)
  3. Changes in policy targets (asset allocation shifts)

In each of these cases, deviations from benchmarks can be reduced by employing exposure benchmarking.

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