Stock market volatility in the past few weeks is a further reminder to pension trustees and their sponsors that investment strategies mismatched to the cash flows inherent to their liabilities can produce some nasty effects on fund surpluses and deficits.

It should surprise no one that these phases happen from time to time. It is in the nature of security market behaviour, amply demonstrated by even a cursory study of market history. And as soon as liabilities (priced off bond yields) are "matched" by an asset policy comprising a good proportion of equities, large swings in surpluses and deficits are simply inevitable. Or are they?