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2016/2017  KAN-CCMVV2603U  Investment Policy and Risk Management in Pension Funds

English Title
Investment Policy and Risk Management in Pension Funds

Course information

Language English
Course ECTS 7.5 ECTS
Type Elective
Level Full Degree Master
Duration One Semester
Start time of the course Autumn
Timetable Course schedule will be posted at calendar.cbs.dk
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • Claus Parum - Department of Finance (FI)
Teacher: Niels Lehde Pedersen
Contact information: https:/​/​e-campus.dk/​studium/​kontakt
Main academic disciplines
  • Finance
  • Economics
Last updated on 11-04-2016
Learning objectives
To achieve the grade 12, students should meet the following learning objectives with no or only minor mistakes or errors: Explain and evaluate how various business models for pension funds relate to strategic objectives, risk appetite, investment policy and risk management objectives
  • Be able to identify the main financial risks and relevant risk metrics from a regulatory and economic perspective
  • Have a high level understanding of VaR and stress models, capital requirement, capital plans and capital allocation
  • Be able to identify and evaluate typical investment strategies and the role of various asset classes in terms of risk and return characteristics
  • Analyse the link between assets and liabilities
Course prerequisites
Undergraduate courses in statistics, mathematics, portfolio theory and investment theory.
Investment Policy and Risk Management in Pension Funds:
Exam ECTS 7,5
Examination form Written sit-in exam
Individual or group exam Individual exam
Assignment type Written assignment
Duration 4 hours
Grading scale 7-step scale
Examiner(s) One internal examiner
Exam period Winter
Aids allowed to bring to the exam Limited aids, see the list below:
  • Written sit-in-exam on CBS' computers
  • Books and compendia brought by the examinee
  • Notes in paper format brought by the examinee
  • Any calculators
  • All dictionaries
Make-up exam/re-exam
Same examination form as the ordinary exam
If the number of registered candidates for the make-up examination/re-take examination warrants that it may most appropriately be held as an oral examination, the programme office will inform the students that the make-up examination/re-take examination will be held as an oral examination instead.
*The number of registered candidates for the re-take exam warrants if the exam, most appropriately, is to be held as an oral examination. The students will be informed if the re-take examination will be held as an oral examination instead.
Course content and structure

The course will treat general issues related to investment policy and risk management in pension funds. It will be discussed how investment policy and risk management should be anchored in the business model and strategic objectives. 


As pension funds are long term investors investment policy is also long term and risk metrixs should reflect this. However, pensions funds must also remain solvent and liquid and risk management must balance long and short term objectives. Regulatory demands must also be taken into account (Solvency II rules).


To optimise risk adjusted returns and policy holders long term interest pension funds invest in various asset classes and in the course we will analyse and discuss how to optimize under a number of constrains. Furthermore performance analys will be used to evaluate strategies.


To get "hands on" qualifications students will have to carry out a number of exercises.

Teaching methods
Lectures and exercises
Student workload
Teaching 33 hours
Preparation 147 hours
Exam 26 hours
Expected literature

Literature (preliminary):


Risk Management and financial institutions, Third Edition, John Hull, Wiley Finance 2012


Strategic Asset Allocation, Portfolio Choice for Long-Term Investors, p. 1-119, John. Y. Campbell and Luis M. Viceira, Oxford University Press 2002


Collection of relevant articles including but limited to


i)Robert C. Merton, The Crisis in Retirement Planning, July-August 2014,

Harvard Business Review

ii)Wai Lee, Constraints and Innovations for Pension Investment: The Cases of Risk Parity and Risk Premia Investing, SPRING 2014, THE JOURNAL OF PORTFOLIO MANAGEMENT

iii)MARIE BRIÈRE AND OMBRETTA SIGNORI, Inflation-Hedging Portfolios:



iv) Andre Perold, William Sharpe, Dynamic Strategies for Asset Allocation, Financial Analyst Journal, January-February 1995

v) Principles for an Effective Risk Appetite Framework, Financial Stability Board 18. November 2013

Last updated on 11-04-2016