Pensions and Retirement Training Course on Custom Benchmarks and Indices

Module 1: Introduction to Benchmarks and Indices
Purpose and importance of benchmarks in pension fund management
Market indices vs. custom benchmarks: definitions, applications, and limitations
Key principles of benchmark construction: relevance, investability, transparency
Types of benchmarks: broad market, style, factor-based, liability-driven
Case study: Benchmark evolution in global pension funds

Module 2: Principles of Custom Benchmark Design
Aligning benchmarks with strategic asset allocation and fund objectives
Defining benchmark universes and eligible instruments
Weighting methodologies: market-cap, equal-weight, risk-weighted, factor-weighted
Rebalancing frequency and rules
Incorporating constraints: liquidity, regulatory limits, ESG, and impact goals
Workshop: Designing a prototype benchmark for a defined benefit fund

Module 3: Liability-Driven Custom Benchmarks
Concept of liability-driven investing (LDI) benchmarks
Benchmarking against future pension liabilities
Duration and cash flow matching considerations
Hedging strategies and overlay integration in benchmarks
Practical exercise: Constructing a liability-driven benchmark portfolio

Module 4: Factor-Based and Smart Beta Benchmarks
Factor investing and smart beta principles
Constructing factor exposures for custom benchmarks
Multi-factor weighting and risk-adjusted benchmark design
Backtesting factor-based custom indices
Case study: Implementing smart beta benchmarks in pension portfolios

Module 5: ESG and Sustainability Integration in Benchmarks
ESG and impact factors in benchmark construction
Screening, tilting, and thematic integration strategies
Climate-aware and socially responsible custom indices
Monitoring ESG performance relative to benchmarks
Workshop: Developing a sustainable investment benchmark

Module 6: Quantitative Techniques for Benchmark Construction
Data collection, universe selection, and index calculation
Risk-adjusted weighting and optimization techniques
Statistical tools for correlation, volatility, and tracking error analysis
Factor decomposition and performance attribution
Hands-on session: Using Excel or Python for benchmark modeling

Module 7: Performance Measurement and Attribution
Measuring manager and portfolio performance relative to custom benchmarks
Total return vs. excess return attribution
Risk-adjusted metrics: Sharpe ratio, Information ratio, alpha, beta
Attribution by asset class, sector, factor, and geographic exposure
Workshop: Performance attribution using a custom benchmark

Module 8: Monitoring, Rebalancing, and Maintenance
Benchmark governance and oversight
Maintaining relevance and accuracy over time
Rebalancing rules, review cycles, and update procedures
Handling corporate actions, mergers, and market changes
Case study: Long-term maintenance of a multi-asset benchmark

Module 9: Regulatory and Compliance Considerations
Regulatory frameworks affecting benchmarks (IOSCO, EU Benchmarks Regulation, local rules)
Transparency, documentation, and audit requirements
Ethical considerations and fiduciary responsibilities
Reporting and disclosure to trustees, members, and regulators
Practical exercise: Developing compliance procedures for benchmark governance

Module 10: Capstone Project and Practical Application
Integrating all modules into a comprehensive benchmark framework
Design, construction, monitoring, and reporting of a custom benchmark
Group presentations and peer review of benchmark strategies
Discussion of real-world challenges and solutions in benchmark management
Capstone deliverable: Complete custom benchmark implementation plan for a pension fund