Results from a fall 2009 Global Pension Pulse Poll conducted by Pyramis Global Advisors were recently released and, according to Peter Walsh, institutional portfolio manager with the firm, the numbers basically speak for themselves.
“The most surprising result from the poll was that volatility was not as big a concern as we thought,” said Walsh, who presented the results on March 24 at a roundtable luncheon.
The short 12 question survey was made up of 50 Canadian pension plans (56% corporate and 44%; 36% with over $1 billion in assets) and focused on identifying the top concerns, attitudes and future investment intentions of defined benefit (DB) pension plan sponsors, after what most are now calling one of the most volatile two-year periods in investment history.
The survey revealed some very surprising numbers. When asked what the top concern regarding their defined benefit plan was, 42% of the total group said their current funding status ranked highest. Risk management and the impact of upcoming accounting changes were also prevalent.
When asked about investment strategies for managing volatility, 73% said they would definitely/likely diversify into alternatives. “Generally, people are thinking about moving into things like infrastructure, real estate and private equity,” said Chris Pepper, director of corporate affairs with Fidelity Investments.
Other alternatives such as venture capital, hedge funds, market neutral, long/short products or commodities or other sources of real return products would also fit under the definition.
Finally, 61% of corporate plans said in ten years from now, liability-driven investing (LDI) would be the most likely asset allocation trend. Currently, 70% of the group are actually using or are seriously considering implementing LDI into their plan structure.
“Another surprise was LDI in that it seems to be an area where everyone wants to go,” said Walsh. “It’s the flavour of the day.” Currently, 43% of the plans surveyed are expected to increase their allocation to long bonds (both public and corporate).
Walsh stated that even though it’s not the right time to invest, plan sponsors know they have to. “Despite the uncertainty of rates and that they are likely to increase, the downside risk is to high not to,” he said.
For additional facts from the Pulse Poll, download the PDF.
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