Pension Revolution: A Solution to the Pensions Crisis (Wiley Finance) [Hardcover]

Keith P. Ambachtsheer (Author)

Book Description

Publication Date: January 29, 2007 | Series: Wiley Finance (Book 388)

Praise for Pension Revolution

"When Keith Ambachtsheer puts his keen mind to work on a problem, watch out! Here he exposes today's fragile arrangements for the most serious social dilemma of our times--financing retirement. Then he provides a compelling and powerful set of solutions. His writings are essential reading for all who care about the future of American living standards."
--Peter Bernstein, founder and President, Peter L. Bernstein, Inc., and author of Capital Ideas and Against the Gods

"This book describes one of the most ingenious inventions in the history of mankind: pension funds offering credible promises about old-age income. It reads like a thriller: how can well-governed pension funds be created in an imperfect world in which mortals wrestle with foibles and moral shortcomings? One of the world's leading experts on pensions searches for the answer--and finds it."
--Lans Bovenberg, Scientific Director, Network for Studies on Pensions, Aging, and Retirement, Tilburg University, The Netherlands

"Pension Revolution exposes the inadequacies of current pension systems and persuasively makes the case for the fundamental changes that are needed. It is essential reading for both the pension industry and policymakers."
--Elizabeth Bryan, Chair, Investment Committee, Unisuper Management PM Ltd, Australia

"Most analyses of complicated issues deal with complexity by simplifying or only looking at one piece-part, and, in doing so, provide limited value. In stark contrast, Keith Ambachtsheer boldly wades into the complexity in Pension Revolution to come up with a valuable integrative solution. He is a most welcome revolutionary!"
--Roger Martin, Dean, Joseph L. Rotman School of Management, University of Toronto, Canada

"We have known Keith for over ten years, and consistently over that time, he has constructively and comprehensively challenged conventional wisdom. He has done this so effectively that many of his initial thoughts have now become universally accepted norms. Such is his energy however that he continues to push the boundaries of pension and investment thinking."
--Peter Moon, Chief Investment Officer, Universities Superannuation Scheme Ltd, UK

"Pension Revolution not only explains the shortcomings of the existing pension system and the underlying design features that have resulted in the current pension upheaval. It also offers thoughtful and creative suggestions for prospective pension design. A must-read for anyone interested in the future of retirement finance."
--James Poterba, Professor of Economics, Massachusetts Institute of Technology and a member of the TIAA-CREF Board of Trustees

Editorial Reviews

Review

“I enjoyed reading the book…Well documented, the author makes it clear that it is time to change our thinking about asset management.” (Investment & Pensions Europe,  April 2007) 

“This book is a valuable tool in raising awareness of the current climate and provides people with the information they need to create efficient pension solutions in the future." (Pensions World, May 2007)

 

Review

"The tectonic plates of governance reform have totally transformed the landscape of governance in publicly traded corporations. Now, Ambachtsheer challenges the owners of those corporations, the institutional investors, to examine themselves and to reform their own fiduciary practices."
—David Beatty, Managing Director, Canadian Coalition for Good Governance, Canada

"I discovered Keith Ambachtsheer's cutting-edge ideas and thinking a decade ago, and only wish I had discovered him sooner. Ambachtsheer offers intelligent and practical strategic thinking about pension governance, benefit design, and investment policy. If you are struggling with the pension crisis, you owe it to yourself to read the Pension Revolution."
—David Blitzstein, Director, Negotiated Benefits Department, United Food & Commercial Workers International Union, U.S.A.

"Retirement plans are a critical part of both the social systems and the financial systems of the free world. They are failing on both counts. Turning failure to success will be no mean task, and there is no better place to begin than Pension Revolution. It demands your attention."
—Jack Bogle, Founder and Former CEO, The Vanguard Group, U.S.A.

"Over the years, Keith Ambachtsheer has triggered pension funds around the world with ground breaking initiatives like CEM and his insightful 'Ambachtsheer Letters.' This book is no exception to this impressive tradition. The issues raised in this book should be in the forefront of the minds of trustees, pension professionals and regulators. Pension Revolution will definitely be one of the key contributions to the pension debate and the challenge to design sustainable pension systems."
—Else Bos, CEO, PGGM Investments, The Netherlands

"Yet another revolution in pensions! This one is about the very future of private pensions, their design, benefits, funding and the distribution of risk. As we would expect from Keith Ambachtsheer, this book combines perceptive and informed assessment of the issues with a way forward. This is nothing short of Drucker's world re-written for the twenty-first century."
—Gordon Clark, Professor of Geography and Director of the Oxford University Centre for the Environment, Oxford University,U.K.

"Financing retirement income has reached crisis proportions around the world. Keith has thought as much as anyone about how to best redeem and redefine societies' vital, yet frail structures for delivering income to workers once they retire. Here in one place you get the benefit of that accumulated wisdom."
—Richard Ennis, Co-founder and Chairman, Ennis Knupp + Associates, U.S.A., and Editor, Financial Analysts Journal

"I have known and worked with Keith for many years and look forward to the next chapter in his analysis of the pension fund business. I anticipate a thought provoking "solution" which will no doubt impact how many of us think about our business going forward."
—Nancy Everett, President and Chief Executive Officer, General Motors Asset Management, U.S.A.

"While I don't necessarily agree with all of Keith's pension revolution conclusions and proposed solutions, I do believe there is great value in seriously considering the issues. This thought-provoking book makes a substantial contribution to promoting that highly desirable end result."
—Gary Findlay, Executive Director, Missouri State Employees' Retirement System, U.S.A.

"A cure for pension ills? Founded on problems so well defined and incorporating relevant factors so well described in his earlier works, Keith's Pension Revolution is surely an excellent prescription. Whether it is a cure is up to those of us with oversight responsibilities."
—Michael Grandin, Corporate Director and former Dean, Haskayne School of Business, University of Calgary, Canada

"Keith Ambachtsheer is one of the few pension thinkers consistently worth (re-)reading. His writings push all stakeholders towards clarity of purpose, governance, measurement, expression, and execution. Ineluctably his TOPS model offers a new vision for future pension deals."
—Jack Gray, Global Investment Strategist, GMO Australia Limited and Advisor to Sunsuper, Australia

"When it comes to investment and pension funds, Keith has spend more time than anyone thinking, researching, writing and talking about how to get better investment performance and pension outcomes. Pension systems around the world are at a crossroad. The book is a must read for decision makers as well as plan participants."
—Claude Lamoureux, President & Chief Executive Officer, Ontario Teachers' Pension Plan, Canada

"No one in the world knows more about Pension Funds than Keith Ambachtsheer. Pension Revolution exactly elucidates the causes of the global pension crisis and offers a comprehensive blueprint for pension reform."
—Burton Malkiel, Professsor of Economics, Princeton University, U.S.A., and author of "A Random Walk Down Wall Street"

"As a keen reader of Keith’s 'Ambachtsheer Letters', I know his writings to be thought-provoking, bar-raising, and innovative. His new book is a ‘must-read’ for anyone involved in pension fund management. Putting his ideas in practice will benefit pension plan members around the world."
—Roderick Munsters, Chief Investment Officer, ABP Pensionfund, The Netherlands

See all Editorial Reviews

Product Details

• Hardcover: 368 pages
• Publisher: Wiley; 1 edition (January 29, 2007)
• Language: English
• ISBN-10: 0470087234
• ISBN-13: 978-0470087237
• Product Dimensions: 9.4 x 6.1 x 1.2 inches
• Shipping Weight: 1.1 pounds (View shipping rates and policies)
• Average Customer Review: 4.0 out of 5 stars  See all reviews (1 customer review)
• Amazon Best Sellers Rank: #1,569,918 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

4 of 4 people found the following review helpful:

4.0 out of 5 stars Helps to have some economic or financial background to follow the details..., June 11, 2007

By 

Thomas Duff "Duffbert" (Portland, OR United States) - See all my reviews
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This review is from: Pension Revolution: A Solution to the Pensions Crisis (Wiley Finance) (Hardcover)

When you look at the way that companies are folding their pension plans (or leaving them severely underfunded), it's not hard to come to the conclusion that the pension system in America is broken. I didn't quite understand just *how* broken it was until I read Pension Revolution: A Solution to the Pensions Crisis by Keith P. Ambachtsheer. While it is a bit eye-opening, the book would be best appreciated by someone with an economics or financial background due to the level of terminology used.

Contents:
Introduction - Why a Pension Revolution Now?
Part 1 - The Pension Revolution - Touchstones: Are Pension Funds "Irrelevant"?; The Pension Revolution - Are You a Believer Yet?; After the Perfect Pension Storm - What Now?; Beyond Portfolio Theory - The Next Frontier; The United Airlines Case - Tipping Point for U.S. Pension System?; Peter Drucker's Pension Revolution After 30 Years - Not Over Yet; Winning the Pension Revolution - Why the Dutch Are Leading the Way; Pension Reform - Evolution or Revolution?
Part 2 - Building Better Pension Plans: Can Game Theory Help Build Better Pension Plans?; If DB and DC Plans Are Not the Answers, What Are the Questions?; Human Foibles and Agency Dysfunction - Building Pension Plans for the Real World; DB Plans and Bad Science; Peter Drucker's Pension Legacy - A Vision of What Could Be
Part 3 - Pension Fund Governance: Reinventing Pension Fund Management - Easier Said Than Done; Should (Could) You Manage Your Fund Like Harvard or Ontario Teachers'?; "Beauty Contest" Investing - Not Dead Yet; Eradicating "Beauty Contest" Investing - What It Will Take; High-Performance Cultures - Impossible Dream for Pension Funds?; How Much Is Good Governance Worth?
Part 4 - Investment Beliefs: The 10 Percent Equity Return Illusion - Possible Consequences; Stocks for the Long Run?... or Not?; "Persistent Investment Regimes" or "Random Walk"? Even Shakespeare Knew the Answer; The Fuss about Policy Portfolios - Adrift in Institutional Wonderland; Shifting the Investment Paradigm - A Progress Report; Whose "Investment Beliefs" Do You Believe?; Our 60-40 Asset Mix Policy Advice in 1987 - Wise or Foolish?; "But What Does the Turtle Rest On?" - A Further Exploration of Investment Beliefs; Professor Malkiel and the New Investment Paradigm - Raining on the Parade?; The "Post-Bubble Blues Decade" - A Progress Report
Part 5 - Risk in Pension Plans: Rethinking Funding Policy and Regulation - How Should Pension Plans Be Financed?; Funding Policy and Investment Policy - How Should They Be Integrated in DB Pension Plans?; Resurrecting Ranva - Adjusting Investment Returns for Risk; Adjusting Investment Returns for Risk - What's the Best Way?
Part 6 - Measuring Results: Pension Plan Organizations - Measuring "Competitiveness"; Measuring DC Plans as "Value Propositions" - The New Imperative for Plan Sponsors; Measuring Pension Fund Behavior (1992 to 2004) - What Can We Learn?
Part 7 - Pensions, Politics, and the Investment Industry: Wither Security Analysis?; Pension Funds and Investment Firms - Redefining the Relationship; The New Pension Fund Management Paradigm - Feedback from Financial Analysts; Reconnecting GAAP and Common Sense - The Cases of Stock Options and Pensions; Is Sri Bunk?; Alpha, Beta, Bafflegab - Investment Theory as Marketing Strategy; The Turner Pensions Commission Report - A Blueprint for Global Pension Reform; More Pension Wisdom from Europe - The Geneva Report on Pension Reform
Part 8 - The Case of PERS: PERS and the Pension Revolution - Active Participant... or Passive Bystander?; Advice for Alyson Green - How PERS Can Join the Pension Revolution
In Conclusion - A Call to Arms

As you can tell from the table of contents, there's no lack of material here... :)

Ambachtsheer makes the case (and quite convincingly) that the current state of pensions in the U.S. is not a sustainable model. There are too many parties with conflicting interests who want the other side to take on more of the long-term risk associated with returns and payouts. And of course, those same parties want to keep any of the short-term benefits that come with an investment time period that was more successful than most. Instead, he advocates for a system he calls TOPS, which stands for The Optimal Pension System. It's designed to eliminate the conflicts of interest, control costs, and look towards producing realistic returns through systematic behavior. He points out that there is a large gap between what people think they do (rational actions) and what they really do (bet the farm). Furthermore, the generally accepted wisdom that the market will return 10% over time ignores the needs of those who are expecting payout during times when the investments are *not* paying out anything close to that. If nothing else, you'll come away from this book with all your rote investment sayings challenged and shaken.

For a subject that he digs into pretty technically, the book is surprisingly readable in style. The major fault that I found is that economic concepts and theories are often thrown out without much explanation, as if the reader should already be familiar with them. As such, it makes it hard to follow the exact details of where he goes in many of the chapters unless you already live in that particular world. Still there's more than enough that *is* followable by the average layman to make it clear that counting on pensions as they are currently structured is betting on some pretty long odds.