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— Alan Greenspan (left), George Bush and Ben Bernanke during the hand-over

Predictions of inflation target policies in the wake of Ben Bernanke’s Federal Reserve appointment may be mis-guided, but increased volatility is expected as well as a rise in interest rates, which would affect performance of many different asset classes, says Paula Garrido.

— Johan Cras, Frank Russell Consultants

The Dutch pensions industry is coming to terms with the effects of the FTK legislation, which include volatile liability valuations, long-dated bonds demand and a switch to DC. Elizabeth Cripps reports.

Financieel Toetsingskader (FTK), the legislation due to come into force at the start of next year, will force Dutch pension funds to focus on their liabilities, with inevitable consequences for asset allocation.

Under the new rules, funds calculating the reserves needed to meet pension obligations will have to use the effective interest rate given by the swap curve (0.05 per cent above the government bond rate) as the discount factor, rather than a fixed actuarial interest rate of 4 per cent.

 A decline in the numbers of analysts covering small-cap stocks is fuelling opportunities for investors to earn extra return, according to Prashant Bhayani, head of European and international small cap equity at Goldman Sachs Asset Management.
 The small-cap market, he says, is more under-researched than ever before which means that more of the anomalies are going unspotted.

Joe Moody explains the mechanics of a possible solution to the issue of under funded pension schemes and risk management.

 As capital markets have continued to rise from the depths of late 2002, innovative investment solutions have surfaced that incorporate the lessons of the past. The conventional approach to strategic benchmarking was simply inadequate and too slow, as the equity bear market and fixed income bull market so efficiently demonstrated. Is it safe to assume pensions have fully recovered if a rising tide lifts all boats?