How does LAPP determine an appropriate level of risk when it makes investment choices?
LAPP uses risk modeling tools to assess the long-term risk and return relationships in selecting the most appropriate combination of assets. LAPP structures its asset mix primarily in bonds, real estate and equities, to capture the historically higher real rates of return from stocks. While this may result in greater fluctuations in investment returns, it has generated the highest return and lowest funding costs (contributions) for pension plans over the long term. We expect the diversified portfolio to earn the level of inflation-adjusted returns LAPP needs to pay all future pension benefits.
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