United Technologies Corp., Hartford, Conn., is among companies that incorporate alternative investment strategies into both defined benefit and defined contribution plans, said Kevin T. Hanney, director, pension investments.
Mr. Hanney made his remarks June 16 during a panel discussion at Pensions & Investments' Global Future of Retirement conference in New York.
UTC integrates a wide range of alternative investments in its portfolios, including hedge funds, real estate, private equity and risk-parity approaches.
On risk parity, Mr. Hanney said: “We didn't drink the Kool-Aid" and put the entire defined benefit portfolio into a single risk-parity strategy. Because each manager does risk parity a little differently, UTC built a multimanager risk-parity portfolio, he said.
In addition to including alternative investments within its glidepath and target-date funds, UTC also offers DC plan participants stand-alone risk-parity and inflation-oriented funds, with commodities exposure in the latter option, Mr. Hanney said.
Infrastructure investing, on the other hand, in terms of invested dollars, remains on the fringe of institutional alternative investing, said fellow panelist M. Nicolas J. Firzli, director-general of the World Pensions Council and an advisory board member of the World Bank global infrastructure facility.
Mr. Firzli noted that infrastructure is one of the fastest growing asset classes, albeit from a small base. He added that as popular as infrastructure is becoming, it is “complex, fraught with risks, chief among them country risk.”
In fact, country risk might be one of the main reasons many asset owners hesitate to invest in infrastructure, Mr. Firzli said.
“If a country's regulators or local authorities start making abrupt, unilateral changes, you can't pick up your airport and move it to another country. There is a huge gap between talking about infrastructure and actually investing in it,” Mr. Firzli added.