The percent of plan sponsors reporting that their long-term objective is to settle their pension obligations has more than doubled in two years, according to new data released by
In the 2019 edition of its
'A broader trend toward de-risking continues, as pension risk management grows increasingly diverse and each sponsor considers its own unique circumstances amid an expanding range of risk management tools. Most sponsors have taken significant steps to materially reduce pension risk,' said
Additional findings in the
Respondents reduced exposure to equities by shifting to lower risk portfolios over the prior 12 months. The percentages represent the percentage of respondents reporting an increase in the asset class, less the percentage reporting a decrease.
34% net increase in
36% net increase in corporate bonds.
45% net reductions in
Derivatives are playing a greater role with a 23% net increase in respondents reporting an increase in the use of derivatives over the prior 12 months and 8% in those expecting to increase the use of derivatives in the next 12-24 months. This may be partially driven by the increase in outsourced chief investment officer (OCIO) solutions, which allow easier access to more sophisticated hedging strategies such as completion mandates.
Hedge ratios, the ratios of exposure to a hedging instrument to the value of the hedged assets, continue to rise. A significant minority of sponsors still choose to hedge less than 20% of their interest rate risk.
There has been a massive shift among
'While there has been a shift to OCIO as the preferred operational and governance structure to implement the desired de-risking strategy, our survey respondents also predict that in the next few years there may be a slowdown in de-risking if the recent drop in discount rates persists,' said
The survey of 90 respondents represents various industries and plan sizes, covering topics that include pension risk management, investment strategy, cyber risk and governance and delegation.
For more information, the
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