In a suit brought by a pension plan and its trustees against the investment manager of one of the plan’s portfolios, plaintiffs alleged that the investment manager did not comply with the pension plan’s investment guidelines.
In a suit brought by a pension plan and its trustees against the investment manager of one of the plan’s portfolios, plaintiffs alleged that the investment manager did not comply with the pension plan’s investment guidelines. Specifically, the plaintiffs alleged that the investment manager’s portfolio failed to target the volatility of its designated benchmark.
Professor René Stulz of The Ohio State University demonstrated that the volatility of the portfolio in question was not statistically different than its benchmark index’s volatility.
Working closely with Cornerstone Research staff, Professor René Stulz of The Ohio State University demonstrated that the volatility of the portfolio in question was not statistically different than its benchmark index’s volatility. Further, Professor Stulz showed that, had the investment manager targeted its benchmark index’s volatility, the returns it would have achieved would not have been statistically different from its actual returns.
Cornerstone Research also worked with Professor John Peavy of Texas Christian University who concluded that the investment manager provided more than sufficient disclosures regarding the nature and practice of its investment strategy and that a reasonable trustee would have understood the nature, return/risk, and the volatility of this strategy based on these disclosures. The case settled.
