This survey-based study looks at the risk-management practices of large pension funds, relying on responses from 27 funds around the world with total assets of US$2.7 trillion. The primary driver for differences in the number of full-time equivalent risk-management staff (risk FTE), which ranged from 3 to 96, is the complexity of the investment program. We explore differences in risk FTE across seven different risk activities and discuss sources of variation between funds. We also look at “new paradigm” risk-management practices, which have become more common among the participating funds, demonstrating that risk management has become much more prominent.

Through a collaborative benchmarking forum organized by CEM Benchmarking Inc. (CEM),1 27 leading pension funds from Australia, Canada, Europe, Korea, New Zealand, the United Kingdom, and the United States came together last year to share information on their risk management practices. Each of these organizations has significant internal operations and varying degrees of complexity. The overarching goals of the forum were for the funds to learn from each other and to gain new perspectives on shared management challenges related to risk management.

This article focuses on the differences in the number of fulltime-equivalent risk-management staff (risk FTE), both at the global level and at the level of seven different individual activities. We establish that the principal driver of differences in risk FTE is the complexity of the investment program. We also discuss “new paradigm” risk-management practices, which have become more common at many of the participating funds, demonstrating that risk management has become more prominent. Finally, we note what participants identified as their biggest risks.