Risk Budgeting for the Canadian Pension Plan Investment Board

Sterling Gunn and Tracy Livingstone

in Reorienting Retirement Risk Management

Published in print August 2010 | ISBN: 9780199592609
Published online September 2010 | e-ISBN: 9780191594618 | DOI:
Risk Budgeting for the Canadian Pension Plan Investment Board

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This chapter recounts the experience of the Canada Pension Plan Investment Board in designing and implementing its Risk–Return–Accountability Framework and risk budgeting. The implementation of a classic risk budgeting framework integrated with existing processes in the investment group investing in publicly traded liquid assets, but it proved to be problematic for investment groups investing in illiquid assets. Firm risk targets were established for publicly traded investments, but the team developing the risk budgeting program developed risk forecasts to better fit the business model of private investments and real estate.

Keywords: Defined benefit pension; asset management; illiquid assets; risk targets; risk budgeting

Chapter.  8151 words.  Illustrated.

Subjects: Pensions

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