Alliance Pension Fund: Investment Strategies and Report

This report examines the Alliance Pension Fund's investment strategies, focusing on how pension funds are invested in stocks, mutual funds, and other financial instruments to generate returns for retirees. The report provides an overview of different investment options, including risky stocks, risk-free returns, and index funds. It discusses the roles of various investment managers, such as Mutual Assurance Company, Global Investment Managers, and City Gilt Managers, and analyzes their approaches to managing pension funds. The report also addresses problems and challenges faced by the pension fund, including union concerns and market risks. It includes financial data, regression analysis, and comparisons to other pension providers. The analysis covers international diversification, investment in gilts, hedge funds, and exchange-traded funds, highlighting the importance of diversification and risk management in securing the financial future of pensioners. The report emphasizes the necessity of understanding market dynamics and making informed investment decisions to ensure the sustainability and growth of pension funds.

ALLIANCE PENSION FUND
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Executive summary
This report tells us about the investment schemes that can happen with the fund of the
pensions of the individual. The amount that is taken as a pension fund to provide the
individual at the time of retirement is an investment in the stocks and mutual funds. This will
help to increase the amount of the pension fund and the economy of the country. There are
different types of funds in the stock market. The risky stocks give a higher return, but the risk
involved in these shares is high. Risk-free returns are something in which return is less, but
the risk is not there. This report gives a brief discussion about the stocks, funds and
investment with the pension plan funds.
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Table of Contents
Introduction................................................................................................................................4
Background of study..................................................................................................................4
Problems and statement..............................................................................................................6
Findings and analysis.................................................................................................................7
Conclusion................................................................................................................................10
Reference list............................................................................................................................11
Appendices...............................................................................................................................13
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Introduction
The pension plans help the employees to get an income after their retirement. This helps to
earn their living. The company with whom the person is working gives this benefit to their
employees. It has assets of 200 million pound. The pensioner has absorbed 10 million pound
income in the current year and rise will happen of 8%, which will make the amount to 20
million pounds. The trustees of the fund consult the actuary who looks after the day to day
facilities of the fund. The pension plan is the hope for the people as they will get an amount
after their retirement, and that will help them to live a better life. This is the responsibility
that is shared by both employer and the employee for many any decision like investment
decisions. The amount of the pension is deducted from the employee’s salary. They are ready
to take less amount of salary so that they get benefit at the time of requirement. In a study, it
is seen that in the US the 50% of employees are saving money for their retirement between
the age group of 20 to 29 years. It is essential to train employees about the benefits of the
pension plan to give knowledge about its benefits that are provided to the employees and the
company to restore its financial resources.
Background of study
● Mutual assurance company
The fund is managed by this company to pursue a “contra-cyclical policy” which
includes a large part of the pension fund. It helps the company at the time of market
fall and is allowed to deposit in the “variable rate deposit account”. They take the
help of the actuary to understand the investment policy that they want to hold. They
are invited to the parade, which helps them to increase their moderate turnover.
● Global investment managers
This is a conservative policy which concentrates on value. The decisions are taken by
the company’s group of members who have high proposed degrees. This can offer
"low management charges," i.e. 0.1% and
"low turnover," i.e. 10% per year.
Investment is made in the areas the managers are aware of, i.e. the US, UK and Japan
(Enoch et al. 2017). These managers have full knowledge of the market and its
approach. They help in development and growth by investing in the right hands.
● Index funds the UK
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The performance is the same as the
“FTSE 100 index” they promise to give such
returns in capital gains and as well in monthly dividends. They invest in
“Exchange
Traded Funds where there are no charges with the services, but the returns are good.
They even get a monthly dividend. There is no charge applied to have such funds
(Andonov et al. 2018). Many index managers claim charge of their service and the
service is not appropriate as they show no guarantees.
● City glit managers
They offer:
❏ "Guarantee return of 6% in the next five years."
❏ "Return of inflation rate."
❏ “3% foreseeable future”
The charges of these assets are 0.25% pa. They use
“advanced portfolio
immunization technique” and other bond techniques as well. Capital bonds
are such assets in which they invest their money. They have a debate about
wealth has been destroyed by inflation (Bridgen and Naczyk, 2019). The
company should give information to the investors about the shares in which
they are investing in. The investors should know the share market risk and
return.● “Enhanced Performance Managers”: They know the market and its risk and
returns. They have trading strategies that they have learnt from the past trading
performance. They take fees of “0.1% of NAV and performance charge of 1% of
returns over 12%”. This fund has a high turnover. This should continue in the
future. They have inside information on the market that helps them decide about their
future investments.
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Mutual assurance
company
Global investment
managers Index funds UK
City glit managers
“Enhanced
Performance
Managers”

Figure 1: Background of the study
(Source: Self Created)
Alliance pension consultant is a company which deals with retirements plans of the
company. They know the value of retirement plans and serve the purpose to the people. There
are many other pension companies available which give same or better sometimes plans that
will help the people at the time of retirement.
Problems and statement
The unions have problems with the suitability and objective of the pension fund. They
believe that every employee should apply to pension funds (Ekpulu and Bingilar, 2016). This
is very important for every employee to think about their future. They should know the
benefit of the pension fund, which will help to have an income at the age of retirement. The
union should provide a pension at the point to the employee. If the person dies before getting
the pension, then the amount will be given to the beneficiary of the employee (Fisher and
Hartzell, 2016). The main objective of the pension fund is to provide money to the employees
at the time when they are not applicable for earning. This will give them money that will help
them to live there with having their requirements.
The pension fund scheme has much competition in the market. This is increasing every day.
Many formalities are there for getting into any pension scheme in any company. MAC is the
pension planning company whose
standard deviation is 7 and
beta is 0.42. This shows that
the risk is involved in the finances of the business. The other companies also have
involvement of risk because this investment is a risky business. The return of the business
will be accordingly only.
Table 1: Past Performance
(Source: Self Created)
6

MAC GIM CGM EFM
-20
-15
-10
-5
0
5
10
15
2016
2017
2018 2016
2017
2018
Graph 1: Past Performance
(Source: Self Created)
2013
2014
20152016
2017
2018
Year
1
2
3
4
5
6
Graph 2: Past Performance (Year)
(Source: Self Created)
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Findings and analysis
● Claims of managers
The manager helps the company to manage their department of pension funds. These
departments take care of the pension fund collection and pass the bill. They need to
look after all the aspects of the company and its employees. They managed the
accounts of the individual employees so that the employees get their benefit at the
time of retirement. Alliance Pension Company has employees and managers who help
them to get knowledge about the plans that customers would want. This helps them to
know about their clients and their requirements.
● Risk-adjusted measures
The money collected from the employees is investments in funds or securities.
However, the return of such a market is not consistent. It depends upon the market
factor that the rate is fluctuating (Mutula and Kagiri, 2018). So the investment of the
money should be made by the officials who know the market. There is always the risk
that is involved in the share market. The risk involved in the alliance pension
company or any other company will be high because the Investment Company works
based on data. However, sometimes, the data analysis might affect the economic
condition. The measures should be strong enough to analyze the losses.
● Stock market index
This affects the pension received to the employees. If the money is invested in
inadequate plans and fund, then the return will be low. The stock market is the
fluctuating market and does not depend upon anything. The prices change every day
with any decision taken by the government or the company. So investing the money
of the pension fund to the stock is quite risking. However, taking a risk will give more
profits. Index marketing is used to duplicate the effect of a specific index. The
specific index includes “equity or fixed income index”. The regression (R Square)
of the alliance pension is 0.954230543 that is according to data that was provided.
The company needs to work more on their plans and strategies in order to sustain the
business.
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Table 2: Regression Analysis
(Source: Self Created)
1000 1500 2000 2500 3000 3500 4000 4500
-400
-200
0
200
400
600
800
FT All Share Residual Plot
FT All Share
Residuals
0
4000
8000
Normal Probability Plot
Series1
Sample Percentile
FTSE
Graph 3: Regression Analysis
(Source: Self Created)
● Current investment
There are many insurance companies which are giving pension plans like
Aegon,
Aviva pension etc. If the company is not providing any plans to their employees, then
the employees can take pension plans from the outside facilities (Naczyk and
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Domonkos, 2016). This will take a certain amount of their every month and will be
given to them at the time of retirement. The plans and strategies of such company are
essential for the other competitive company. This will help the alliance pension
company to know about the investment structure and facilities that are attracting
customers. (sdg.iisd.org, 2019)
● International diversification
Many countries are working on their pension plans, which will help the ageing
people. The international market has so many competitive companies that are giving
pension plans to benefit the customers. The alliance pension fund should know all the
companies to enhance their business. International diversification plays an important
role in fundamentally justifying the portfolio as:
❏ Enhancing the pool of potential assets
❏ The returns can be increased by the investors that will help to reduce the risk
with the
selection of “complementary assets” with “low correlation”.
Figure 2: International diversification
(Source: Self Created)
● Investment in gilts
Gilts are issued by the government known as
“gilt-edged securities”. These securities
give money to the government, i.e. the money investing is going to the government.
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Enhancing the pool of
potential assets
Selection of
“complementary assets”
with “low correlation

These are issues as 100 million pounds units. The income of the investment is fixed,
and the term is also fixed. Nominal capital value is paid to the investors when the gilt
is matured. When the interest rate is low, then it is said to be the ideal time for
investing in gilt. These are government securities, so they are benefited with
“20%
indexation benefit” (Norris, 2017). The company GIM have a standard deviation of
11.8 and a beta of 0.74. It is seen that the risks involved are negligible, but this risk
can be anytime increased. The alliance company should look at the plans of the other
companies like Aviva pension, Aegon pension. These are one of the leading pension
companies in the US. Plans and strategies are essential for other companies. Every
company should know about its competitive firm.
● Hedge funds
It is another option for investing pension money. This fund gives good returns. They
attract investors by pooling the capital and investing in different assets. They have
“complex portfolio management” and
“risk management techniques. In fund
equity, the interest exchange is contributed to the capital by investors or individually
to raise money. These funds do not use an advertisement, which makes it unavailable
for many potential investors. These work mainly within closed markets. Hedge funds
get many exceptions in the securities act. Minimum of $1 million is required to
participate in the hedge fund. The managers and partners make this regulation of the
fund. This fund includes high risk (Ząbkowicz, 2019). The risk is so high that it can
destroy the entire investment. As high risk is involved, so the growth rate is also high
in this fund. This fund can be in any “land”, “real estate” and any “other alternative
assets”. (pensionseurope.eu, 2019)
● Exchange-traded funds
These are “collection of securities”, for example
, stocks, "mixture of investment",
bonds or
commodities. There are "traded" into open markets which make readily
available for the investors. The change in marketing habits will be known as the
investor. IPO launch these funds in the market to gain more money in the "open
market" which is like stock. These stocks can be purchased through:
❏ They are open stock traded in the market precisely like stocks
❏ The taxes levied in this stock are less.
❏ As it is precisely like stocks, so the individual has to pay a "brokerage
commission" whenever they buy or sell the shares.
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These are a few of the options in which the amount of the pension plan can be invested. This
will help the insurance company or the company who has its pension plan for employees to
invest in getting huge returns. (News media alliance.org, 2019)
Conclusion
There are different funds in the stock market. Some are risk-oriented, and others are risk-free.
It depends upon the company in which shares they want to invest the money. They need a
person who understands the market fluctuation and managing these funds. The other option is
the insurance companies which are providing pension plans for the employees. Alliance
Pension Company is one of the leading companies in retirement plans. However, many other
companies are also earning huge profits. Companies like Aegon, which is doing good
business. So it is essential to have good policies, as it attracts customers. This will help to
make better policies than other competitive companies. In addition to this, The company GIM
have a standard deviation of 11.8 and a beta of 0.74 which reveals that in order to have 1 %
of return company will have .74 beta which is showing the low level of risk with high return
it will help in strengthen the return on capital employed invested in the selected pension fund.
However, investing capital in this pension fund will be beneficial and will stable earning to
the investors. Although, this company needs to work more on their plans and strategies in
order to sustain the business. Furthermore, MAC is the pension planning company whosestandard deviation is 7 and
beta is 0.42. This shows that the risk is involved in the finances
of the business but as compared to investment return, this company will give much better
return. The strategy would be to take low risk and high return. This will give higher return to
create value on this investment with low risk.
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Reference list
Books
Enoch, M.C., Bossu, W., Caceres, C. and Singh, M.D., 2017. Financial Integration in Latin
America: A New Strategy for a New Normal. US: International Monetary Fund.
Journal
Andonov, A., Hochberg, Y.V. and Rauh, J.D., 2018. Political representation and governance:
Evidence from the investment decisions of public pension funds. The Journal of
Finance, 73(5), pp.2041-2086.
Bridgen, P. and Naczyk, M., 2019. Shareholders of the World United? Organized Labour's
Preferences on Corporate Governance under Pension Fund Capitalism in the United States,
United Kingdom and France. British Journal of Industrial Relations, 57(3), pp.651-675.
Ekpulu, G. and Bingilar, P., 2016. Pension Fund in Nigeria: An Appraisal. Quarterly Journal
of Contemporary Research,(A Publication of the Federal University Otuoke), 1, pp.196-209.
Fisher, L.M. and Hartzell, D.J., 2016. Class differences in real estate private equity fund
performance. The Journal of Real Estate Finance and Economics, 52(4), pp.327-346.
Mutula, A.K. and Kagiri, A., 2018. Determinants Influencing Pension Fund Investment
Performance in Kenya. International Journal of Finance, 3(1), pp.14-36.
Naczyk, M. and Domonkos, S., 2016. The financial crisis and varieties of pension
privatization reversals in Eastern Europe. Governance, 29(2), pp.167-184.
Norris, V., 2017. A pension fund for European scientists. EMBO reports, 18(3), pp.349-350.
Ząbkowicz, A., 2019. Pension funds in Chile: bringing the state back in. Ekonomia i Prawo.
Economics and Law, 18(1), pp.97-110.
Websites
newsmediaalliance.org, 2019, americas-pension-plan-problem Available at:
https://www.newsmediaalliance.org/americas-pension-plan-problem/ [Accessed on:
16.07.2019]
pensionseurope.eu, 2019, pensionseurope-publishes-brochure-supervisory-reporting-
requirements-pension-funds-which-are-fit Available at:
https://www.pensionseurope.eu/pensionseurope-publishes-brochure-supervisory-reporting-
requirements-pension-funds-which-are-fit [Accessed on: 18.07.2019]
Online articles
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sdg.iisd.org, 2019, dutch-investors-assess-sdg-incorporation-in-pension-funds/ Available at:
https://sdg.iisd.org/news/dutch-investors-assess-sdg-incorporation-in-pension-funds/
[Accessed on: 20.07.2019]
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Appendices
Appendix 1: Pension Investments
(Source: https://www.slideshare.net/Elaketurvakeskus/earnings-related-pension-system-in-
graphs-and-figures-140844288)
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Appendix 2: Pension Funds Stock
(Source: https://www.npr.org/news/graphics/2009/feb/pensions/)
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