Corporate and public defined benefit plans worldwide are showing an interest in emerging markets equities and managing volatility through alternatives, according to a survey by Pyramis Global Advisors.
The strongest interest in emerging markets came from the Netherlands, with 50% of plans interested; the Nordic region, 46%; Canada, 30%; and U.S., 25%.
“Pension plans are trying to figure out a way to get back into the equities market,” Young D. Chin, Pyramis chief investment officer, said in an interview.
Also, 50% of Canadian plans were interested in using alternatives to manage volatility as were 34% of U.S. public defined benefit plans. And 32% of European plans. Mr. Chin noted that 34% of European plans are below asset allocation targets for alternatives.
A majority of plans in several countries and regions also reported concerns over inflation — 89% of all U.S. plans, 85% of Nordic (Finland, Iceland, Sweden and Denmark) plans, 74% for Canadian plans and 61% for U.K. plans. Forty percent of Dutch plans and 32% of Swiss plans viewed deflation as a bigger risk than inflation.
“As a result, U.S. plans speak more about increasing allocations to inflation-hedging types of strategies, like TIPS, commodities or real assets,” Mr. Chin said.
The survey of 427 corporate and public pension plans — 217 in the U.S., 50 from Canada, 160 from U.K. and Northern Europe (41 in U.K., 36 in Switzerland, 21 from the Netherlands, 13 from Sweden, 12 in Finland, seven each in Germany and Norway, six each in Austria and Iceland, five Denmark, and six others) was conducted in the fourth quarter. The plans have a total of $1 trillion in assets.