Pension Fund Use of Alternative Investments and Derivatives: Regulation, Industry Practice and Implementation Issues

This paper reviews the regulation in place which aims to manage the potential risk exposures that alternative investments and derivatives present, canvasses the implementation issues, highlights the potential risks and reviews current risk management practices observed by pension funds in managing these risk exposures. It concludes with observations which can be translated into lessons for consideration by supervisory authorities when developing future pension fund regulation and supervision practices of alternative investments and the use of derivatives, whilst also taking into account the IOPS Good Practices.