Nineteen percent of defined benefit plans surveyed by Hartland & Co. Investment Consultants, Cleveland, said they had no written policy governing investment decisions, and 36% of those that had written policies said they hadn't reviewed them in the past two years.
"During the long `contribution holiday' afforded by favorable market conditions during the past half decade or more, corporate attention has turned elsewhere, creating a situation of benign neglect in some plans," according to Harland's report on the results. "We see the potential for better returns in this area for those sponsors who rekindle active oversight of the pension function."
Admittedly, Hartland's sample is small. Of the 1,000 surveys sent out last summer to Midwest corporate defined benefit funds and 401(k) plans, foundations, hospitals and endowments, 67 were returned, including those from 16 pension funds representing $3.1 billion in assets.
Additionally, 43% of the pension plans said they were disappointed in their performance, and 56% anticipated making an investment manager change in 2000. Most pension funds (88%) were overfunded. However only 38% of pension funds said their asset allocations were based on pension liabilities, a fact the Hartland report suggests is "an opportunity missed by a large number of institutions."
The survey also found that pension funds had an average equity allocation of 30%, compared with 70% for the 30 foundations, hospitals and endowments that responded. The average pension fund return was 11.6%, compared with 15.6% for foundations. And about half of the 21 401(k) plans that responded are changing investment options or service providers. Sixty-five percent said investment options were the most important criterion when selecting a new service provider, 58% cited cost as the least important factor.
Hartland advises 38 clients with more than $8 billion in investment assets.