Fifty-five percent of U.S. defined benefit plan sponsors take one to three months to change their asset allocation or make manager changes, according to a Mercer survey.
Also, 28% take three to six months; 21% take less than a month; and 6% take six months to a year.
Twenty-one percent said the slow reaction with allocation changes caused them to miss investment opportunities brought about by volatile markets.
Kimberly Plummer, U.S. leader for implemented consulting at Mercer, said in a telephone interview that anecdotally she has seen some plan sponsor clients taking more time on investment decisions and looking closer at risk.
“A lot of these plan sponsors thought they had the right plan in place (prior to the financial crisis),” she said. “Generally, I think a lot of plans had asset allocations in place that incorporated what they thought was sound diversification. Markets diverged and the benefit of diversification didn't work in their favor like they thought it would.
“So what we're seeing is a trend toward more cautious decision making because the impact of making a mistake affects not only plan financials but company financials to a certain degree.”
Forty-one percent of respondents said they will take a wait-and-see approach on changes to reduce their risk and improve their funded status by investing more in fixed income. Twenty-six percent plan to phase in derisking according to a predetermined schedule, while 23% have no plans to derisk, 5% plan to derisk immediately and 5% have other plans related to risk.
She said the trend in taking more time on investment decisions could result in increased reliance on investment outsourcing, although only 15% are considering outsourcing their investments over the next 12 months.
Pension fund executives “are not just able to make decisions more quickly (with investment outsourcing), but they are more informed about what's happening in the portfolio,” Ms. Plummer said.
Forty-one percent of survey respondents said they are very comfortable with the committee that makes investment decisions for the plan, while 38% were somewhat comfortable but need help, 19% were somewhat uncomfortable and rely on external expertise for most decisions, and 2% were very uncomfortable.
The survey of 124 defined benefit plan sponsors was conducted in June. Sixty-eight percent of survey respondents were from corporations sponsoring DB plans; 18% from non-profit organizations; 6%, government entities; 6%, other; and 2%, professional organizations or associations.