The impact of equities in pension investing

October 23, 2012

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A new Vanguard research paper, The impact of equities in pension investing: It's not just return, by Kimberly Stockton of Vanguard Investment Strategy Group, explores the relationship between equities and interest rates. The author uses empirical data to explain how equity duration can be used to help determine a long-term investment strategy.

Although bonds are the primary tool for interest rate hedging in pension plans, most plans maintain some allocation to equities because of stocks' higher expected returns. However, return is only one performance measure for plan sponsors to consider when developing a liability-driven investment strategy; interest rate sensitivity is just as important.


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