Seventy percent of U.S. corporate pension plans use some form of liability-driven investing, although the amount they invest is small, according to a NEPC survey of 94 corporate defined benefit plans.
In all, “43% of plans reported LDI assets amounted to 25% or less of total pension assets,” according to a statement on NEPC's 2011 Corporate Defined Benefit Plan LDI Trends Survey found.
Some 27% of plans indicated they are implementing a glidepath to derisk the plan, while 25% reported having a glidepath in place, the survey found.
“Almost a quarter of plans with an LDI strategy are planning to annuitize the liability in the future,” the statement said. The majority of the plans are “early in the process of implementing their long-term LDI strategy.”
The concerns most often cited by respondents were “timing associated with extending duration and potential impact on assumed rates of return,” according to the NEPC statement.
No connections between LDI use and plan status, whether open, closed or frozen, or plan size or funded states were seen, the statement said.
“Although the adoption of custom glidepath strategies is still fairly new, corporate DB investment committees should begin to change the way they define success,” Bradley S. Smith, partner, said in the statement. “Committees should be monitoring improvement of assets vs. liabilities rather than focusing primarily on traditional asset-only benchmarks.”
Richard M. Charlton, chairman and CEO, and Mr. Smith couldn't be reached for comment.