GENERATING SCENARIOS FOR THE TOWERS-PERRIN INVESTMENT SYSTEM

The Towers Perrin company applies integrative asset-liability planning to the problem of pension management. The planning system depends upo n a stochastic economic projection model-called CAP:Link-for generatin g economic factors and asset returns via a set of representative scena rios. Each scenario depicts a coherent set of outcomes. The projection s span a long-run horizon-10 to 40 years. Risks and rewards for altern ative investment strategies are determined via dynamic asset and liabi lity allocation over the scenarios. The approach has been implemented in 12 countries in Europe, North America, and Asia.