Contents -- Foreword -- Acknowledgments -- Part One: Summary and Key Messages -- Governance: Summary Findings -- Investment Management: Key Messages -- Part Two: Key Principles of Governance and Investment Management -- Managing Public Pension Funds: From Principles to Practices -- Lessons for Pension Funds on the Governance of Investments -- Part Three: Governance of Public Pension Assets -- 1. Governance Structures and Accountabilities -- Governance Process of the New Zealand Superannuation Fund -- Reforming Governance Structure and Accountabilities: The Experience of QSuper -- Governance Reform Proposals for the Republic of Korea's National Pension Service -- Governance of the World Bank Staff Retirement Plan and Trust -- 2. Qualification, Selection, and Operation of Governing Bodies -- Licensing Requirements and Operating Standards for Pension Fund Trustees in Australia -- Selection, Appointment, and Operating Processes for Board Members: The Case of Canada's AIMCo -- 3. Operational Policies and Procedures -- Policies and Procedures Needed to Implement Good Governance -- Key Ingredients in Developing Operational Policies and Procedures -- Effective Policies, Procedures, and Internal Controls: A Regulatory Perspective -- 4. Managing Fiscal Pressures in Defined-Benefit Schemes -- Building Sustainable Defined-Benefit Pension Schemes: The Landscape for Reform -- Creating a Sound Funding Framework: The Experience of OMERS in Canada -- Lessons from Defined-Benefit Pension Funds in Japan -- 5. Policy Responses to Turbulent Financial Markets -- Adjustments and Risk Mitigation in National Pension Systems -- Key Lessons for Pension Policy Makers: An OECD Perspective -- The Case of the Irish National Pensions Reserve Fund -- Renationalization of Argentina's Pension System -- Thailand's GPF: From the 1997 Asian Crisis to the 2008 Global Financial Crisis.

Part Four: Investment of Public Pension Assets -- 1. Defining the Investment Policy Framework for Public Pension Funds -- The Investment Policy Process: A Perspective from the World Bank -- Designing Investment Policy to Ensure Long-Term Solvency: The U.N. Joint Staff Pension Fund -- Making Investment Policy Consistent with Overall Pension Plan Design: Japan's GPIF -- Linking Risk Tolerance and Pension Liabilities with Investment Strategy: Denmark's ATP -- 2. Managing Risk for Different Cohorts in Defined-Contribution Schemes -- A Glide-Path Life-Cycle Fund Approach -- A Hybrid Approach to Managing Members' Investment and Longevity Risks: Singapore's CPF -- An Age-Based Multifunds Regulatory Approach for Latin American Funds -- Using a Hybrid Pension Product in a Collective Framework to Distribute Risk: Denmark's ATP -- 3. An Asset-Liability Approach to Strategic Asset Allocation for Pension Funds -- Liability-Driven Investing: Hype or Hope? -- Strategic Asset Allocation as a Risk Management Exercise: A Perspective from the QIC -- Using Asset-Liability Analysis to Make Consistent Policy Choices: The Approach in the Netherlands -- Determining Investment Strategy from the Liability Structure: South Africa's GEPF -- 4. In-House Investment versus Outsourcing to External Investment Managers -- Evaluating Internal and External Management of Assets: New Trends among Pension Funds -- In-House Investment Management by Public Pension Funds: Risks and Risk Mitigation Strategies -- 5. International Investments and Managing the Resulting Currency Risk -- A Framework for Evaluating International Diversification and Optimal Currency Exposure -- International Investments: Developing a Strategy to Manage Currency Risk -- Managing the International Investments of Pension Funds in Latin America.

International Diversification and Hedging: The Netherlands' All Pensions Group -- 6. Alternative Asset Classes and New Investment Themes -- Characteristics, Risks, and Risk Mitigation Approaches for Alternative Asset Classes -- A Framework for Evaluating Alternative Asset Classes and New Investment Themes -- Glossary -- Contributors -- Institutional Profiles -- Index -- Figures -- 2.1 Five Critical Factors of Successful Institutional Funds -- 3.1 Management Framework of the Guardians of New Zealand Superannuation -- 3.2 Governance Structure of Korea's National Pension System -- 3.3 Outline of Proposed Governance Reform -- 3.4 Current versus Reformed Governance Structure of Korea's National Pension System -- 3.5 Asset Management and Advisory Functions of the World Bank Treasury -- 3.6 World Bank Staff Retirement Plan: Governance Structure -- 3.7 Delegation of Duties to World Bank Staff by Pension Finance Committee -- 3.8 Good Governance Mechanisms -- 3.9 Reporting Structure within the World Bank Staff Retirement Plan -- 3.10 AIMCo's Key Indicators of Good Governance -- 3.11 Selection and Appointment Process of AIMCo Board Members -- 3.12 Good Governance: Key Policies and Procedures -- 3.13 Processes Ensuring Accountability in Public Pension Schemes -- 3.14 Components of Risk Identification, Control, and Monitoring System -- 3.15 Mean Variance Optimization Methodology Inputs -- 3.16 Best Asset Class Performance, by Economic Environment -- 3.17 Governance Risk Assessment in Pension Funds -- 3.18 APRA's Supervision Process: Application of a Feedback Loop -- 3.19 Conditional Indexation by PFZW -- 3.20 Nominal Funded Ratio and Replacement Rate Projections for Various Pension Plans aft er 40 Years -- 3.21 The Governance Structure of OMERS -- 3.22 Steps for Arriving at Collaborative, Long-Term Solutions for Pension Plan Funding.

3.23 Pension Plan Management Spectrum -- 3.24 Achieving Funding Objectives -- 3.25 A Collaborative, Long-Term Funding Framework -- 3.26 Correlation of Returns of Various Asset Classes -- 3.27 Effects of Stress Test Scenarios on GDP Growth and GDP Level -- 3.28 Estimated Financing Gap for Mature Pension Systems in Europe and Central Asian Transition Economies -- 3.29 Estimated Financing Gap for Young Pension Systems in the Middle East and North Africa -- 3.30 Estimated Funded Ratios for Young Pension Systems in the Middle East and North Africa -- 3.31 Pension Fund Returns 2008-09 -- 3.32 Variation in Equity Allocation of Pension Funds in Select OECD Countries, 2001-08 -- 3.33 Equity Allocation of Public Pension Reserve Funds in Select OECD Countries, 2004-08 -- 3.34 Estimated Median Surplus/Deficit of Companies' Aggregate Defined-Benefit Obligations, by Country of Domicile -- 3.35 Mechanism of Financial Transfers in Argentina's Social Security System -- 3.36 Renationalization of the Integrated Argentine Social Security System -- 3.37 Total Asset Growth of the GPF -- 3.38 GPF Returns versus Inflation -- 3.39 Accumulated GPF Returns -- 3.40 Reduction in Equity Investments by the GPF -- 3.41 GPF's Asset Allocation -- 4.1 Steps in the Investment Policy Process -- 4.2 Typical Risk Constraints within a Defined-Benefit Pension Fund -- 4.3 Willingness versus Ability to Take Risk -- 4.4 Historical Performance of U.S. Asset Classes: Maximum and Minimum Returns over Various Holding Periods, 1926-2007 -- 4.5 UNJSPF Contributions and Benefit Payments -- 4.6 Evolution of UNJSPF's Actuarial Situation Since 1990 -- 4.7 UNJSPF Stochastic Simulation Model Results -- 4.8 Risk-Tolerance Framework within the UNJSPF -- 4.9 UNJSPF Asset Allocation: Current Asset Classes versus Proposed Asset Allocation -- 4.10 Overview of Japan's Public Pension System.

4.11 The Benefit Adjustment Rule Used by Japan's Public Pension System -- 4.12 Governance Structure of Japan's Public Pension System -- 4.13 ATP's Model for Pension Excellence -- 4.14 ATP's Dynamic Risk Budget -- 4.15 ATP's Assets and Liabilities with Hedge Protection -- 4.16 ATP's Neutral Risk Allocation -- 4.17 Allocation to Growth and Safe Assets by Years to Retirement -- 4.18 Long-Term Income Replacement Rates of Various Asset Mixes -- 4.19 Investment Risk Factors to Consider -- 4.20 A Stylized Typology: Members of a Defined-Contribution Plan -- 4.21 A Glide-Path Approach to Steady Reduction of a Member's Investment Risk -- 4.22 Effect of Asset Allocation on Distribution Portfolios -- 4.23 Member Risk at Different Stages in Funded Defined-Contribution Pension Plans -- 4.24 Contribution of Different Pension Programs to Retirement Income -- 4.25 Pensions from Pay-As-You-Go Defined-Benefit Programs -- 4.26 Ratio of Assets to Earnings Using a Target Date Fund, 1911-2008 -- 4.27 Denmark's Pension Pyramid -- 4.28 Contribution of Various Sources of Pension Income by 2045 -- 4.29 Conversion of Pension Contributions to Guaranteed Pensions under ATP's New Pension Model -- 4.30 Impact of a Small Difference in Asset Management Cost on Pension Savings Value -- 4.31 Evolution of Value of U.S. Equities and Interest Rates -- 4.32 Evolution of Funded Ratio and Equity Returns for U.S. Pension Funds -- 4.33 The Asset-Liability and Asset-Only Efficient Frontiers -- 4.34 Factors Determining Pension Funds' Risk Tolerance -- 4.35 Asset Allocation of U.S. Pension Funds -- 4.36 Illustrative Back Test: Surplus Volatility of an Asset-only versus LDI Pension Portfolio -- 4.37 Correlation of Various Asset Classes with Long-Duration Government Bonds, 1980.2009 -- 4.38 LDI: Liability Hedging and Return Generation -- 4.39 Impact of Derivatives on the Surplus Efficient Frontier.

4.40 Illustrative Back Test: Surplus Volatility of an Asset-Only versus LDI (with Derivatives Overlay) Pension Portfolio.