Investment Policy and Asset Allocation for Defined Contribution Plans

August Baker, Dennis E. Logue and Jack S. Rader

in Managing Pension and Retirement Plans

Published in print November 2004 | ISBN: 9780195165906
Published online July 2005 | e-ISBN: 9780199835508 | DOI:
 Investment Policy and Asset Allocation for Defined Contribution Plans

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This chapter begins by discussing the trend towards defined contribution (DC) plans over the last 25 to 30 years. This trend has placed more and more sponsors in a situation where the employees are responsible for choosing the asset allocation that will determine their retirement pension income. Employer responsibilities in this setting are discussed. The second section discusses investment policy for DC plans, which includes the choice of investment alternatives and the approach to employee financial education. The third section discusses asset allocation for DC plans. It includes an analytical framework that demonstrates the effect of the asset allocation decision on expected risk and return.

Keywords: defined contribution plans; pension plans; asset allocation; investment policy

Chapter.  6558 words. 

Subjects: Financial Markets

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