An Exploration of the Benefits and Considerations of Overlay Adoption
Viewpoints
The use of overlays is known to vary significantly across pension plan sponsors. With a better understanding of the value an overlay can add when combined with thoughtful risk management, overlay adoption can prove a powerful tool. Overlays can significantly reduce certain risks for plan sponsors and may allow for more efficient capital allocation with or without introducing leverage into the plan. By implementing an overlay as part of a broader strategy, plan sponsors can potentially solve some of their most pressing portfolio management problems: liquidity, cash drag, transaction costs and tracking error. In a conversation with Joaquin Lujan and Neil Olympio, we explore the benefits and considerations of adopting an overlay, specifically how they can help achieve a plan’s unique objectives.
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