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Oxford Financial Group, LTD

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Oxford Financial Group, LTD

800-722-2289

Highly Tailored Financial Plans

Creating sophisticated, long-term financial solutions that are highly tailored to your individual needs.

Committee Directed Pension Plans

Oxford can serve as a Fiduciary Advisor to pension plans, including defined benefit, supplemental executive retirement, cash balance and other plan types. In this role, we:

  • help develop an Investment Policy
  • set strategic and tactical plan asset allocation targets
  • select and monitor money managers
  • manage total costs
  • measure results against both appropriate market and funding status benchmarks

The largest risk to a plan sponsor is a shortfall in its ability to pay its long-term liabilities. The risk may be mitigated through:

    1. a mix of funding by the plan sponsor
    2. design of the portfolio to harmonize asset allocation with the actuarial liabilities
    3. investment performance

Oxford offers asset allocation, consulting and manager selection service to address items two and three. We also can employ de-risking strategies focused on our clients’ fixed income portfolios. In general, we believe it makes sense for a defined benefit plan’s fixed income portfolio to match the duration of the actuarial liabilities. The closer a plan is to full funding, the larger the fixed income portfolio can be as a proportion of the overall assets. Some of Oxford’s defined benefit clients have fully immunized their portfolios, while others have taken a glide path approach. The choice between the two has been informed by the plan-funded ratio, whether the plan is open, and the plan sponsor’s willingness or ability to fund the plan.

Oxford’s approach to de-risking has two distinct attributes:

    1. We help pension committees clearly understand the trade-offs in immunization approaches. Reaching a target return, minimizing funding requirements and managing the volatility of a plan’s funded ratio are competing priorities for a plan sponsor. We clearly articulate the pros and cons of any approach with respect to each of these priorities to enable the plan sponsor to have clear expectations.
    2. We favor straightforward investment approaches with predictable outcomes. We recommend the use of investment grade bonds in a portfolio that matches the duration of the plan’s liabilities for the Liability Driven Investment (LDI) portfolio. We avoid approaches such as excess duration or the use of a futures overlay that claim to offer plans the ability to invest more in return seeking assets, because these strategies are vulnerable to certain assumptions about changes in the shape of the yield curve that can lead to unexpected results.

Oxford has substantial experience in developing defined benefit plan investment policy statements. We have led defined benefit plan boards to incorporate best practices into their Investment Policy Statement (IPS) document. Our process focuses on key topics that we feel all IPSs should address. These topics include:

  • the definition of your strategic asset allocation targets
  • allowable asset category ranges to allow for tactical allocations for risk control and opportunistic positioning
  • manager selection and watch list criteria
  • asset and liability matching philosophy
  • the definition of traditional measures related to risk, return expectations, liquidity, time horizon and any special circumstances that should be documented

Our customized reporting is built to help board members easily monitor the overall performance of the investment program, including risk-adjusted returns, plus the performance of managers and the total portfolio against appropriate peer groups and benchmarks.

We include an asset allocation policy within your Investment Policy Statement. We advise reviewing and either reconfirming or revising your investment Policy Statement annually. While we would not expect changes to long-term allocation targets frequently, changes in spending policy and/or any adjustments to an organizational mission should be included in a formal review of asset allocation at least once per year. Our annual Investment Policy Statement review is an agenda item that will ensure that new factors that may affect a Plan’s long-term asset allocation are systematically considered.

View a case study.