Investment Policy at New England Healthcare

Jay O. Light; Luis M. Viceira; Akiko M. Mitsui

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Case | HBS Case Collection | July 2003 (Revised December 2003)

Investment Policy at New England Healthcare

by Jay O. Light, Luis M. Viceira and Akiko M. Mitsui

Abstract

The Investment Committee of New England Healthcare must decide how to invest three long-term investment pools: a long-term, endowment-type fund and two pension plans. In particular, the committee is evaluating whether the two pension funds--one is a "final salary" pension plan, the other a "cash balance" pension plan--should have special investment considerations due to the unique characteristics of these plans' liabilities.

Keywords: Decisions; Asset Management; Investment; Investment Portfolio; Policy; Taxation; Health Industry; England;

Format: Print

14 pages

Educators Purchase

Citation:

Light, Jay O., Luis M. Viceira, and Akiko M. Mitsui. "Investment Policy at New England Healthcare." Harvard Business School Case 204-018, July 2003. (Revised December 2003.)

About the Authors

Jay O. Light

George F. Baker Professor of Administration, Emeritus

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Luis M. Viceira

George E. Bates Professor
Senior Associate Dean, Executive Education

Finance

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More from these Authors

Article | Journal of Political Economy | August 2020

Macroeconomic Drivers of Bond and Equity Risks

John Y. Campbell, Carolin E. Pflueger and Luis M. Viceira

Our new model of consumption-based habit generates time-varying risk premia on bonds and stocks from loglinear, homoskedastic macroeconomic dynamics. Consumers' first-order condition for the real risk-free bond generates an exactly loglinear consumption Euler equation, commonly assumed in New Keynesian models. We estimate that the correlation between inflation and the output gap switched from negative to positive in 2001. Higher inflation lowers real bond returns, and higher output raises stock returns, explaining why the bond-stock return correlation changed from positive to negative. In the model, risk premia amplify this change in bond-stock return comovement and are crucial for a quantitative explanation.

Keywords: consumption-based habit formation; consumption Euler equation; time-varying risk premia; inflation dynamics; bond-stock correlation; Risk and Uncertainty; Bonds; Macroeconomics;

Citation:
Campbell, John Y., Carolin E. Pflueger, and Luis M. Viceira. "Macroeconomic Drivers of Bond and Equity Risks." Journal of Political Economy 128, no. 8 (August 2020): 3148–3185. View Details

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Case | HBS Case Collection | July 2020

Mortgage Backed Securities and the Covid-19 Pandemic

Emil N. Siriwardane, Luis M. Viceira and Dean Xu

In April 2020, global financial markets were still reeling as the COVID-19 pandemic spread rapidly across the world. Global equity markets had initially fallen by 30% in response to the pandemic, and high-yield credit markets had dropped by nearly 20%. In contrast, U.S. Treasury markets were up 20% year-to-date (YTD). Interestingly, the U.S. Mortgage Backed Security (MBS) market had been much less responsive to the health crisis, exhibiting very low volatility throughout this period and returning about 2% YTD. Maya Russell, head of asset allocation research at a large global institutional investor, must make a recommendation on whether her fund’s board should invest in MBS, and if so, whether this is a good time for the fund to implement the allocation and whether it should do so pursuing an active or a passive investment approach. This case covers a wide range of topics in fixed-income investing, including duration and interest rate risk, prepayment risk, mortgage securitization, and the design of mortgage-backed securities. These concepts are analyzed from the perspectives of both individual and professional investors in fixed-income and mortgage markets.

Keywords: COVID-19; mortgage-backed securities; Health Pandemics; Financial Markets; Assets; Resource Allocation; Financial Instruments; Decision Making;

Citation:
Siriwardane, Emil N., Luis M. Viceira, and Dean Xu. "Mortgage Backed Securities and the Covid-19 Pandemic." Harvard Business School Case 221-010, July 2020. View Details

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Case | HBS Case Collection | July 2020

Sustainable Investing in Private Markets at TIFF

Luis M. Viceira and Victoria Sienczewski

Citation:
Viceira, Luis M., and Victoria Sienczewski. "Sustainable Investing in Private Markets at TIFF." Harvard Business School Case 221-005, July 2020. View Details

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Investment Policy at New England Healthcare

Abstract

Citation:

About the Authors

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