Many U.S. pension plan sponsors believe they are well positioned to weather the current volatility in global markets, according to a study.
Greenwich Associates’ 2008 U.S. Investment Management Research Study reveals that a growing number of corporate and pension plan sponsors are adopting a new portfolio management model in whole or in part.
The first component of the new model, broader portfolio diversification, is based mostly on the approach that has been successful for U.S. endowments. It rests on the fundamental assumption of modern portfolio theory that a diversified portfolio with low levels of correlation among holdings can reduce risk and boost investment returns.
The second element of the new model, asset-liability matching, encompasses a series of approaches and products designed to more closely align assets to future pension liabilities. For a growing minority of funds, tightening the link between assets and liabilities has included steps as simple as reducing their exposures to long-only equities, increasing fixed-income exposure, and lengthening the duration of their portfolios.
Says the firm’s managing director, Dev Clifford: “The results of this year’s Greenwich Associates’ research indicate that U.S. institutions believe the new financial instruments and strategies they have adopted have them well prepared to sail through the shoals now revealing themselves in global financial markets.”
To comment on this story, email craig.sebastiano@rci.rogers.com.