Pensions & Performance Measurement

Crisis Compels Economists To Reach for New Paradigm - WSJ.com#mod=todays_us_page_one: "The result was a new orthodoxy, known as 'rational expectations,' that still dominates, underpinning everything from the way pension funds invest to how financial analysts put values on securities."

In the same edition, some of the ways pension benefits can be manipulated was demonstrated along with the lead story about executive pensions rising in 2008 despite horrific company performance.

While pension calculations are not in the purview of today's performance measurement professionals, the idea of manipulating formulas is. Whether it is the underlying benchmark selection for attribution analysis or the choice of risk-free rates or pricing sources for securities, these inputs provide a substantial impact on the final product. The performance professional needs to be cognizant of the firmness of the foundations of his work before providing this data to the end user.