Officials at 466 corporate and public pension plans in the U.S., Canada, the U.K. and Europe surveyed by Pyramis Global Advisors showed heightened concerns about downside protection and risk management.
The lesson from the recent financial crisis cited most frequently by respondents was the need for “more downside protection,” at 62%, followed by “improved risk management,” at 54% and “a better match of assets and liabilities,” at 49%.
In a telephone interview, Young D. Chin, Pyramis' chief investment officer, said pension funds worldwide are grappling with the same challenges, but executives at U.S. corporate plans and Canadian public plans appear more focused on bolstering downside protection, in part by better matching their assets and liabilities.
In Europe, along with U.S. public plans and Canadian corporate plans, respondents were focused more on improving risk management by diversifying their asset mix, boosting allocations to alternative and non-domestic equity strategies.
Thirty-five percent of U.S. corporate plan respondents are looking to reduce their equity allocations, compared to 27% of public plans, and anticipate boosting fixed-income allocations, 44% vs. 21% for public plans.
Meanwhile, 39% of U.S. corporate respondents said they're likely to adopt liability-driven investment strategies, compared to only 7% of public funds.
U.S. public funds, however, showed greater interest in diversifying their portfolios, with 60% predicting they will boost their alternatives exposure, compared to only 22% of U.S. corporate funds. On the question of reducing home country bias, 39% of public fund respondents said they intended to do so, compared with 20% of U.S. corporate respondents.
The survey, conducted in June and July, elicited responses by CIOs, executive directors or treasurers from 249 U.S. plans (159 corporate, 90 public) and 79 Canadian plans (47 corporate, 32 public). Plans outside of North America were included for the first time since the series' launch in 2002, with 138 U.K. and European-based plans surveyed.
The plan executive survey was the first by Pyramis since June 2008, three months prior to the Chapter 11 bankruptcy filing of Lehman Brothers Holdings. n