GM, Pension Funds, and Risk Management

Implications: Pension fund management has historically focused on maximizing return.  However today, risk management is taking center stage.  General Motor's announcement focuses on this point. 

Analysis: GM's announcement is imbedded in risk management.  By shifting pension assets from equity to bonds, GM will be able to lower the risk profile of the pension fund and thus the overall risk profile of GM.  Specifically GM appears to be:
1.    Lowering the volatility of returns (noted by GM's CFO).
2.    Lowering the probability of future funding due to market conditions (noted by GM's CFO).
3.    Positioning the portfolio to better immunize it (e.g., matching the duration of assets and liabilities).

The motivation and timing of this maneuver is stated to be economics.  However it is also probably embedded in the new pension accounting standard, (FASB 158).  (Note: FASB 158 better reflects a company's net pension liability> 

The success of this maneuver is yet to be seen.  Execution is everything.  On the surface it appears to make a lot of sense.