Industry fund Vision Super has implemented a tail risk hedging strategy to shield its defined benefit plans from market volatility.
In a statement, Vision Super said it has moved to protect its defined benefit plans by implementing a tail risk hedging strategy, mitigating market downturns.
Vision Super chief investment officer Michael Wyrsch said: “Management of the defined benefit plan requires a balance between taking risks to meet demanding funding objectives to be able to make the defined benefit payments, and federal regulation requiring benefits to be fully funded every step of the way – not just when they are due to be paid.”
The fund said it utilises a diversified strategy across asset classes to reduce risk. Such strategies, which include tail risk hedging, also help meet return targets.
“Our careful investment strategy in the defined benefit plan effectively provides insurance against fluctuating markets,” said Mr Wyrsch.
According to Vision Super, such strategies reduce the need for councils to provide additional contributions to meet the liabilities they have to their employees.
“The primary risk with defined benefit plans is the need to make additional calls on employers to fund liabilities,” Mr Wyrsch said.
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