Risk-aversion among pension schemes a recipe for poverty

There is a big concern that current asset allocation is too risk-averse and contributes to retirement poverty. FILE PHOTO | NMG

It is a known fact that pension funds, in their quest to deliver returns that will maintain pre-retirement standard of living for retirees, are faced with trilemma in their asset allocation—namely profitability, liquidity and security.

Profitability is all about investing to achieve highest returns, liquidity rotates around the ability to answer to liabilities as at and when they fall due and security entails capital preservation.

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Note: The results are not exact but very close to the actual.