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Fund execs split on approach to allocation for 2019 – NEPC

U.S. corporate and health-care organization defined benefit plan executives are split on how to approach asset allocation in 2019 in the face of an uncertain geopolitical environment, an NEPC survey found.

In a flash poll completed by executives at 33 corporate and health-care organization, 43% said geopolitical tensions will be the biggest threat to their portfolios in 2019, followed by 30% who cited political uncertainty. Twenty-one percent cited Federal Reserve action, while 6% said global inflation.

When asked whether they believe a recession is likely in 2019, 61% of respondents said it was 1% to 25% likely, while 36% said it was between 26% and 75% possible, and 3% said a recession next year is impossible.

Respondents were evenly split on how they will approach their asset allocation strategies in 2019, with 33.5% responding they will focus on risk mitigation strategies and the same amount responding they plan to stay the course. Twelve percent of respondents will create or redesign their derisking glidepath, and another 12% will focus on return-enhancing strategies. Nine percent said they will conduct an asset/liability study.

"Our survey results indicate that plan sponsors are almost evenly split on whether their course of action in 2019 should be to begin preparations for an economic downturn or recession, or to stick with their current strategy and continue capturing returns for as long as possible," said Michael Valchine, senior consultant in NEPC's corporate practice, in a news release announcing the survey results.

When asked how they plan to reduce Pension Benefit Guaranty Corp. premiums, 50% said they plan a partial plan annuitization in 2019, while 33% said they would use lump-sum offers to terminated vested participants who have yet to retire. Seventeen percent of respondents said they plan additional contributions.