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A Global Pension Solutions & Advisory Group case study Combining product-agnostic views and proprietary analytics to develop a total portfolio solution

The Challenge

A multi-billion dollar pension plan of a large manufacturing corporation expects the return-seeking portion of its portfolio to earn 9.5% at 13% volatility, annually. While this is sufficient to pay Pension Benefit Obligation cash flows, it is insufficient to pay future service costs without additional contributions. Our pension specialists partnered with the client to:
  1. analyze and perform initial plan diagnostics,
  2. advise on product-agnostic solutions,
  3. implement a solution tailored to their needs.

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Patrik Jakobson
Patrik Jakobson

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Our Approach


We assessed the overall health and structure of the plan asset allocation using our factor analysis model. The team, diagnosed concerns with the plan's existing asset allocation; specifically around return shortfall and risk exposures. Using J.P. Morgan's Long Term Capital Market Return Assumptions, we modeled a new asset allocation to achieve target return objectives.

Liquidity needs: We defined better liquidity risk exposure allowing for larger alpha capture through Alternatives.


  • Current allocation does not achieve return targets
  • Portfolio is heavily allocated to public equities, which contributes to over half of the growth portfolio's risk
  • Stress scenario analysis showed that the current portfolio has elevated exposure to equity risk resulting in high funded status volatility

Based on our analytics and a de-risking objective we provided a solution design to provide:

Return enhancement: Proposed various portfolio options (A, B & C) including an increase in hedge fund, private equity and real estate allocations which would potentially deliver a 9.5+% return with below-threshold volatility.

Liquidity: Developed constraint optimized portfolio options which ensured limited liquidity risk



  • Our optimization tools, along with J.P. Morgan's Long Term Capital Market Return Assumptions, helped determine a number of efficient portfolios
  • Allocations were stress tested for range of assumptions including non-normality, auto-correlation and correlation convergence of asset returns
  • Constraints were added to reflect institutional goals and requirements, making optimization results implementable

The Solution

A more efficient, liquidity-aware and diversified portfolio
  • Three implementable alternative portfolios were presented (Portfolios A, B & C). Suggested allocations improved Sharpe ratio while maintaining liquidity risk within desired boundaries
  • Client elected to implement a private credit portfolio for its balance of return and liquidity risk. The Solution is generating a higher return than a hedge fund portfolio, and is less volatile and more liquid than a typical private equity investment of similar size
  • The revised asset allocation has been on-track, delivering expected returns within the stated liquidity constraints. The client has maintained asset values while generating enough income to pay benefits over the short-medium term

years with
J.P. Morgan