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Pension Funds

Cerulli: Midsize U.S. corporate pension plans focusing more on risks, fees

Midsize U.S. corporate defined benefit plans are focusing more on investment risks and money management fees in 2019 following a volatile end of 2018, a survey from Cerulli Associates shows.

In an April white paper called "Derisking DB Plans in Flux," Cerulli said when asked about third-party investment management fees, 70% of surveyed plan executives said third-party money management fees were somewhat concerning, 22% said very concerning and 8% said not concerning. When asked about performance/risk measurement and generating returns/yield, the same amount of plan executives — 22% — said those were very concerning as well. Forty-eight percent and 38% were somewhat concerned about generating returns/yield and performance/risk measurement, respectively, while a respective 30% and 40% were not concerned at all.

Regarding midsize DB plan executives, the white paper said "after years of low discount rates negatively reflecting the present value of future liabilities, followed by rates rising for much of 2018 (providing some relief), the current environment has now muddied the waters of plans' interest rate outlook." On an asset-weighted basis, 42% of surveyed plan executives are concerned about the interest rate environment, while 37% are not, according to the paper.

When asked about the importance of strategic asset allocation and risk analytics, the results were identical: 56% of surveyed plan executive said those were each very important, 22% said somewhat important and 22% also said not important.

The white paper is available at Cerulli Associates' website.

Cerulli Associates surveyed plan executives with between $2 billion and $10 billion in assets, representing a total of $43 billion in assets as of Dec. 31.