Pension fund risk management [19]

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Bullet points include: Looking only at current net asset value versus current deficit provides an incomplete picture Current net asset value not necessarily a good guide to likely longer term creditworthiness of sponsor Apparently asset-poor company may have strong intangible asset base (e.g. patents, intellectual property, brand) and good future income generating power Apparently asset-rich company may be placing optimistic value on its assets, particularly versus the (forced sale) position that might apply if it were in difficulty Industry and firm prospects change through time We should focus on how good the covenant will be in years to come rather than if default occurred now (unless the sponsor is already on its last legs!)

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