More U.S. pension plans are investing in alternatives, according to a recent poll by SEI.
Seventy-eight percent of pension executives surveyed by SEI’s Quick Poll reported their organization had some allocation to alternative investments, up from 65% in 2010. However, while more plans appear to be using alternative investments, allocations greater than 10% of the overall portfolio have decreased. In 2010, 77% of respondents with more than $300 million in pension assets allocated at least 10% of the portfolio to alternatives, compared to only 42% of pensions of the same size this year.
The poll found discrepancies in regard to use of liability driven investing (LDI) strategies. Notably, 57% of respondents with pensions greater than 90% funded status have no allocation whatsoever to LDI strategies. Of those from the group using LDI, 70% have at least 40% of the overall pension portfolio in LDI.
“Alternative investments continue to be integrated into pension portfolios as another channel for mitigating risk, while providing additional return, apparently” said Jon Waite, director, investment management advice and chief actuary for SEI’s Institutional Group. “However, ongoing volatility of interest rates continues to put liability risk as a primary concern for plan sponsors.”