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Monitoring (reasons to monitor experience (update assumptions as to future…
Monitoring
reasons to monitor experience
update assumptions as to future experience
monitor any adverse experience so as to take corrective actions
to provide management information
fundamental part of the ACC
considerations when setting investment performance objectives
compare only against similar funds with similar objectives and restrictions on manager
comparison against valuation interest rate inappropriate due to the volatility of actual investment returns year on year
one of best benchmarks - return that would have been achieved by an index fund, which had maintained the asset allocation proportions set in the fund manager's benchmark
any other constraints on manager e.g. shortage of cashflow
reasons for monitoring investment performance
liabilities change over time
the funding level of a scheme or free asset position of a company changes over time affecting the level of caution required
helps indentify whether the fund manager's perfomance is on line with that of other funds
caution with results of monitoring exercises
may not be typical so not representative of future experience
may be affected by...
abnormal events
significant random fluctuations
economic cycles
trends in experience
heterogeneity of the data used
necessary to adjust for these factors or create margins in assumptions