A recently completed report by a special commission into the appropriateness of the Massachusetts retirement system contemplated the defined benefit versus defined contribution benefit design, concluding that the existing defined benefit structure was optimal, in part because it put the portfolio management in the hands of professionals.

The report entitled, The Special Commission to Study the Massachusetts Contributory Retirement Systems, concluded that a defined benefit structure assured participants of the most secure source of retirement income and puts the portfolio management in the hands of professionals, thereby circumventing the widespread tendency of individual investors to make basic errors investment decisions.

The special commission met 10 times between March and October with a process of review that began with extensive background analysis identifying the principles underlying an efficient and effective system and then comparing the Massachusetts system to that.

From this process it adopted 32 proposals to improve the system, create a fairer and more effective system, share retirement costs between employers and employees as well as improving the funding.

Two of the more interesting recommendations include more resources dedicated to system administration and to require judges to, finally, contribute to their schemes.

 

The status quo of ‘passive’ equity investment, ranking companies by market capitalisation, is delivering lower returns for higher volatility than a beta strategy which blends a cap-weighted approach with two of its competitors – minimum variance and fundamental indexing. Michael Bailey spoke to Lazard Asset Management’s Asia Pacific chief, Rob Prugue, about a paper co-written with Research Affiliates which claims to prove it is so.

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The status quo of ‘passive’ equity investment, ranking companies by market capitalisation, is delivering lower returns for higher volatility than a beta strategy which blends a cap-weighted approach with two of its competitors – minimum variance and fundamental indexing. Michael Bailey spoke to Lazard Asset Management’s Asia Pacific chief, Rob Prugue, about a paper co-written with Research Affiliates which claims to prove it is so.

(more…)

The Harvard Management Company (HMC) is looking to fill 12 new IT positions across trading, risk and portfolio management in a move that strengthens its internal investment support structure even more.

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