One of the most important choices defined benefit (DB) plan investment committees will make is deciding the type and amount invested in asset classes over the long term. The process for making this decision is known as the strategic asset allocation review. Generally, a strategist with expertise in both assets and liabilities completes the analysis and communicates the results to sponsors.

This paper focuses on the strategic asset allocation review process and how it assists the sponsor in setting an appropriate asset allocation for the DB plan and its beneficiaries. A properly executed review will:

  • Require significant insight into the mechanics of the plan
  • Have a broad knowledge of capital markets
  • Have an in-depth understanding of the sponsor's objectives and risk tolerance

Following through on a well-thought-out and well-designed investment strategy will help the sponsor to satisfy its fiduciary responsibilities while seeking to reach long-term goals.

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