We combine our Swiss capital market model, knowledge of market practice and top technology to deliver a clear and understandable ALM study for your pension fund. ALM studies provide a comprehensive analysis that assess the relationship between the pension fund's assets and liabilities. By evaluating various factors such as investment performance, market risks, and demographic trends, these studies provide valuable insights into your pension fund's financial health and sustainability. Utilizing ALM studies enables the pension board to make informed decisions, optimize asset allocation, mitigate risks, and align the fund's investments with its long-term obligations.
Goals of an ALM analysis
ALM is mainly a risk management study. The board of trustees of a pension fund is responsible for defining the objectives of the pension fund, the main principles of asset management and for implementing and monitoring the investment process. Our market-proven, dynamic ALM analyses make it possible to visualise the probable development of the asset and liability aspects of the fund within realistic scenarios and propose sensitivity analyses and dynamic modeling.
From this, we can determine the risk capacity of the pension fund and the probable development of the asset portfolio, cash flows and coverage ratio over the next 15 years. This provides the basis to optimize the strategic asset allocation and/or adjust the financing and design of the plan.
Core elements of our ALM studies
- Asset Allocation Analysis: Evaluating the current and target allocation of assets within the pension fund's portfolio to optimize the balance between risk and return.
- ESG Considerations: Integrating Environmental, Social, and Governance (ESG) factors into the ALM studies.
- Liability Assessment: Projecting the pension fund's future liabilities, considering a time horizon up to 15 years, to understand the long-term financial commitments.
- Cash Flow Projections: Estimating the pension fund's future cash inflows and outflows to ensure its ability to meet pension obligations and maintain sufficient liquidity.
- Scenario Analysis: Conducting stress tests and scenario simulations to assess the fund's resilience under different economic conditions and in comparison with other pension funds.
- Workshops: Conducting interactive workshops for the different stakeholders.
Why WTW?
WTW is one of the world's leading providers of Asset Liability Management (ALM) for pension funds and Insurances. Our analysis of risks and market opportunities is based on independent, objective and measurable criteria. We take into account risk factors, such as illiquidity, or credit, which go beyond the traditional designation of investment categories and can therefore construct more robust and diversified portfolios, including ESG considerations.
Our strength lies in our proprietary capital market model, which was created over 25 years and continuously fine-tuned to align with changing market dynamics and which has been calibrated for Switzerland. It furnishes us with forward-looking return and risk projections for each asset class. Moreover, we leverage the Swiss-developed tool, "PensionCompass," for precise cash flow and liability forecasting, offering a comprehensive visual representation for all foundation types.
