Pension funds should use mark-to-market accounting, says Rhode

Lars Rhode, chief executive of the $71.4 billion Danish state pension fund ATP, told delegates attending Risk USA’s derivatives and risk management conference in New York that pension funds must be seen as financial institutions and follow the same accounting rules.

"As an equity investor, we’re very worried because we don’t even know the pure size of pension liabilities. Some funds are using discount rates of 8%. It makes no sense. They may be understating the magnitude of their pension liabilities by a factor of two, and so only showing half the truth,” said Rhode. “I think mark-to-market and fair value reporting is appropriate in a world where liabilities have become hedgeable.”

In 2001, the Danish government passed a law that required ATP and other