Pension Revolution: A Solution to the Pensions Crisis PDF
Preview Pension Revolution: A Solution to the Pensions Crisis
Pension Revolution A Solution to the Pensions Crisis KEITH P. AMBACHTSHEER John Wiley & Sons, Inc. AdditionalPraiseforPensionRevolution ‘‘Thetectonicplatesofgovernancereformhavetotallytransformed thelandscapeofgovernanceinpubliclytradedcorporations.Now, Ambachtsheer challenges the owners of those corporations, the institutional investors, to examine themselves and to reform their ownfiduciarypractices.’’ —DavidBeatty,ManagingDirector,CanadianCoalitionfor GoodGovernance,Canada ‘‘I discovered Keith Ambachtsheer’s cutting-edge ideas and think- ing a decade ago, and only wish I had discovered him sooner. Ambachtsheer offers intelligent and practical strategic thinking aboutpensiongovernance,benefitdesign,andinvestmentpolicy.If youarestrugglingwiththepensioncrisis,youoweittoyourselfto readthePensionRevolution.’’ —DavidBlitzstein,Director,NegotiatedBenefitsDepartment, UnitedFood&CommercialWorkersInternationalUnion,U.S.A. ‘‘Retirementplansareacriticalpartofboththesocialsystemsand the financial systems of the free world. They are failing on both counts.Turningfailuretosuccesswillbenomeantask,andthereis nobetterplacetobeginthanPensionRevolution.Itdemandsyour attention.’’ —JackBogle,FounderandFormerCEO,TheVanguard Group,U.S.A. ‘‘Over the years, Keith Ambachtsheer has triggered pension funds around the world with ground breaking initiatives like CEM and his insightful ‘Ambachtsheer Letters.’ This book is no exception to this impressive tradition. The issues raised in this book should be in the forefront of the minds of trustees, pension professionals andregulators.PensionRevolutionwilldefinitelybeoneofthekey contributions to the pension debate and the challenge to design sustainablepensionsystems.’’ —ElseBos,CEO,PGGMInvestments,TheNetherlands ‘‘Yet another revolution in pensions! This one is about the very future of private pensions, their design, benefits, funding and the distributionofrisk.AswewouldexpectfromKeithAmbachtsheer, this book combines perceptive and informed assessment of the issueswithawayforward.ThisisnothingshortofDrucker’sworld re-writtenforthetwenty-firstcentury.’’ —GordonClark,ProfessorofGeographyandDirectorofthe OxfordUniversityCentrefortheEnvironment,Oxford University,U.K. ‘‘Financingretirementincomehasreachedcrisisproportionsaround theworld.Keithhasthoughtasmuchasanyoneabouthowtobest redeemandredefinesocieties’vital,yetfrailstructuresfordelivering income to workers once they retire. Here in one place you get the benefitofthataccumulatedwisdom.’’ —RichardEnnis,Co-founderandChairman,EnnisKnupp+ Associates,U.S.A.,andEditor,FinancialAnalystsJournal ‘‘I have known and worked with Keith for many years and look forward to the next chapter in his analysis of the pension fund business. I anticipate a thought provoking ‘‘solution’’ which will no doubt impact how many of us think about our business going forward.’’ —NancyEverett,PresidentandChiefExecutiveOfficer, GeneralMotorsAssetManagement,U.S.A. ‘‘WhileIdon’tnecessarilyagreewithallofKeith’spensionrevolu- tionconclusionsandproposedsolutions,Idobelievethereisgreat value in seriously considering the issues. This thought-provoking book makes a substantial contribution to promoting that highly desirableendresult.’’ —GaryFindlay,ExecutiveDirector,MissouriState Employees’RetirementSystem,U.S.A. ‘‘Acureforpensionills?Foundedonproblemssowelldefinedand incorporatingrelevantfactorssowelldescribedinhisearlierworks, Keith’s Pension Revolution is surely an excellent prescription. Whether it is a cure is up to those of us with oversight respon- sibilities.’’ —MichaelGrandin,CorporateDirectorandformerDean, HaskayneSchoolofBusiness,UniversityofCalgary,Canada ‘‘Keith Ambachtsheer is one of the few pension thinkers con- sistently worth (re-)reading. His writings push all stakeholders towards clarity of purpose, governance, measurement, expression, andexecution.IneluctablyhisTOPSmodeloffersanewvisionfor futurepensiondeals.’’ —JackGray,GlobalInvestmentStrategist,GMOAustralia LimitedandAdvisortoSunsuper,Australia ‘‘Whenitcomestoinvestmentandpensionfunds,Keithhasspend more time than anyone thinking, researching, writing and talk- ing about how to get better investment performance and pension outcomes. Pension systems around the world are at a crossroad. The book is a must read for decision makers as well as plan participants.’’ —ClaudeLamoureux,President&ChiefExecutiveOfficer, OntarioTeachers’PensionPlan,Canada ‘‘NooneintheworldknowsmoreaboutPensionFundsthanKeith Ambachtsheer.PensionRevolutionexactlyelucidatesthecausesof the global pension crisis and offers a comprehensive blueprint for pensionreform.’’ —BurtonMalkiel,ProfessorofEconomics,Princeton University,U.S.A.,andauthorof‘‘ARandomWalkDown WallStreet’’ ‘‘As a keen reader of Keith’s ‘Ambachtsheer Letters,’ I know his writings to be thought-provoking, bar-raising, and innovative. His new book is a ‘must-read’ for anyone involved in pension fund management.Puttinghisideasinpracticewillbenefitpensionplan membersaroundtheworld.’’ —RoderickMunsters,ChiefInvestmentOfficer,ABP Pensionfund,TheNetherlands Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, AustraliaandAsia,Wileyisgloballycommittedtodevelopingandmarketing print and electronic products and services for our customers’ professional andpersonalknowledgeandunderstanding. TheWileyFinanceseriescontainsbookswrittenspecificallyforfinance and investment professionals as well as sophisticated individual investors and their financial advisors. Book topics range from portfolio manage- menttoe-commerce,riskmanagement,financialengineering,valuationand financialinstrumentanalysis,aswellasmuchmore. Foralistofavailabletitles,pleasevisitourWebsiteat www.WileyFinance.com. Pension Revolution A Solution to the Pensions Crisis KEITH P. AMBACHTSHEER John Wiley & Sons, Inc. Copyright(cid:1)c 2007byKeithP.Ambachtsheer.Allrightsreserved. PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey. PublishedsimultaneouslyinCanada. Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmittedin anyformorbyanymeans,electronic,mechanical,photocopying,recording,scanning,or otherwise,exceptaspermittedunderSection107or108ofthe1976UnitedStatesCopyright Act,withouteitherthepriorwrittenpermissionofthePublisher,orauthorizationthrough paymentoftheappropriateper-copyfeetotheCopyrightClearanceCenter,Inc.,222 RosewoodDrive,Danvers,MA01923,(978)750-8400,fax(978)750-4470,orontheWeb atwww.copyright.com.RequeststothePublisherforpermissionshouldbeaddressedtothe PermissionsDepartment,JohnWiley&Sons,Inc.,111RiverStreet,Hoboken,NJ07030, (201)748-6011,fax(201)748-6008,oronlineathttp://www.wiley.com/go/permission. LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthorhaveusedtheir besteffortsinpreparingthisbook,theymakenorepresentationsorwarrantieswithrespectto theaccuracyorcompletenessofthecontentsofthisbookandspecificallydisclaimanyimplied warrantiesofmerchantabilityorfitnessforaparticularpurpose.Nowarrantymaybecreated orextendedbysalesrepresentativesorwrittensalesmaterials.Theadviceandstrategies containedhereinmaynotbesuitableforyoursituation.Youshouldconsultwitha professionalwhereappropriate.Neitherthepublishernorauthorshallbeliableforanylossof profitoranyothercommercialdamages,includingbutnotlimitedtospecial,incidental, consequential,orotherdamages. Forgeneralinformationonourotherproductsandservicesorfortechnicalsupport,please contactourCustomerCareDepartmentwithintheUnitedStatesat(800)762-2974,outside theUnitedStatesat(317)572-3993orfax(317)572-4002. Wileyalsopublishesitsbooksinavarietyofelectronicformats.Somecontentthatappearsin printmaynotbeavailableinelectronicbooks.FormoreinformationaboutWileyproducts, visitourWebsiteatwww.wiley.com. LibraryofCongressCataloging-in-PublicationData: Ambachtsheer,KeithP. Pensionrevolution:asolutiontothepensionscrisis/KeithAmbachtsheer. p.cm.–(Wileyfinanceseries) ISBN-13:978-0-470-08723-7(cloth) ISBN-10:0-470-08723-4(cloth) 1.Pensiontrusts.2.Pensiontrusts—Management.3.Pension trusts—Investments.I.Title. HD7105.4.A632007 331.25(cid:2)22—dc22 2006024003 PrintedintheUnitedStatesofAmerica. 10987654321 To Peter Drucker, who foresaw the pension revolution thirty years ago and To Virginia Atkin, who provided the inspiration to see this project through.
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