The 2000-2010 decade has faced two global financial crises and due to a simultaneous fall in equity prices and interest rates, the funding ratios of Dutch pension funds dropped dramatically. Furthermore,
the last five years did not resulted in a large recovery for Dutch pension funds because of the European debt crisis and the financial situation of Greece.
To define the strategic investment strategy, most pension funds make use of a stochastic ALM-study that provides insight in the distribution of possible future results. However, such a study assumes
normality of returns and provides limited attention to risks in the tails beyond the confidence level.
This has proved to be misleading about the consequences of extreme market movements. Moreover, a simultaneous drop in interest rates and stock returns of the significance we saw in 2008 had a probability of occurrence of 0.1%. However, even though the probability was small the magnitude of the consequences were extreme. Instead of over relying on measurable risk, uncertainty should be incorporated in order to develop a robust strategic investment strategy. An analysis is carried out, with its conclusion being that incorporating stress tests to the traditional process leads to a robust investment strategy taking the consequences of extreme events into account.

Netspar, Network for Studies on Pensions, Aging and Retirement, is een denktank en kennisnetwerk. Netspar is gericht op een goed geïnformeerd pensioendebat.

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