Updated with correction.
Many corporations have not moved to derisk their pension plans, leaving them vulnerable to widening funding deficits if equity markets and interest rates decline, according to asset management strategists.
“We still think we are in the very early innings of this (derisking) because clearly a number of plans have not made these shifts” to fixed income to match the duration of pension obligations, said Michael A. Moran, pension strategist, Goldman Sachs Asset Management LP, New York.
“There are a number of what I'd call headwinds ... (as to) why they haven't,” he said.
The aggregate asset allocation across the 50 companies with the largest pension funds in the Standard & Poor's 500 stock index was about the same at the end of 2013 as it was at the end of 2012, Mr. Moran noted.
But the relatively static allocation “masks some movement,” Mr. Moran said.
For the first time in his analysis — which started in 2003 when financial reporting rules required disclosure — the target asset allocation to fixed income (41%) exceeded that of equities (40%), based on preliminary 2013 data, Mr. Moran said.
But given “that equities massively outperformed fixed income last year ... many plans may be underallocated to fixed income if they operate under a glidepath strategy” in derisking, Mr. Moran said.
Many plans are holding off rebalancing and derisking because of continuing low interest rates.
“Some plans have a very strong view on interest rates,” Mr. Moran said. Executives at these plans say, “Rates are going to move higher and therefore why do I want to buy fixed income today? I'd rather wait this out.”