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Level_III_SS9_Essay_Quiz.pdf - Level III SS 9 Essay Quiz (9...

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Level III SS 9 Essay Quiz (9 questions, 40 minutes)Copyright © IFT. All rights reservedPage 1MIKE MARTIN CASE SCENARIOQUESTION HAS FIVE PARTS (A, B, C, D, E) FOR A TOTAL OF 20 MINUTES.Mike Martin is an Investment Manager at Magenta Asset Management. Martin is working closelywith an institutional client, “Maple Pension Fund” toreview its investment strategy, investmentgovernance system and reporting framework. Martin observes that asset allocation policy is draftedby a third-party consultant and approved by investment staff members. The Investment staff is alsoresponsible for appointing an independent third-party for governance audit. As far as riskmanagement systems are concerned, the Investment Committee approves principles and performsoversight whereas responsibility of designing risk management infrastructure and reporting lieswith Investment staff.George Fletcher, chief financial officer of Landmark sports, a leading producer of winter and watersports gear, comes to meet Martin.Landmark is a small company, and all of its revenues comefrom the United States. Product demand has been strong in the past few years, although it is highlycyclical. The company has growing earnings and a strong (low debt) balance sheet. Landmark is arelatively young company, and as such its DB pension plan has no retired employees. Thisessentially active-lives plan has $100 million in assets and an $7.5 million surplus in relation to theprojected benefit obligation. Several facts concerning the plan follow:The duration of the plan’s liabilities (which are all U.S. based) is 22 years.The discount rate applied to these liabilities is 5.5 percent.The average age ofLandmark’s workforce is 37 years.Because of excellent recent investment results, Landmark has not needed to make a contribution tothe pension fund in the two most recent years. Fletcher considers it very important to maintain a

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Term
Fall
Professor
NoProfessor
Tags
Landmark, Mike Martin, Thomas Powell

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