In the investment industry, we find ourselves drawn to the notion of model portfolios. Like benchmarks for individual mandates, a model portfolio helps guide the creation and evaluation of an asset-allocation decision. For corporate defined benefit (DB) pension plans, however, creating a model portfolio is notoriously difficult. Why? Simply put, no two plans are the same, and no two plan sponsors are the same.

Knowing no single solution is sufficient to encompass every situation, we have set out to build a model portfolio framework that will cover as much ground as possible based on the following four key themes:

  1. Return needs
  2. Surplus risk
  3. Differentiation of credit and treasury
  4. Inclusion of less liquid alternative assets
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