Research from Chatham Partners, LLC suggests two-thirds of DB sponsors are in transition. One-quarter of respondents indicated they are intending to make significant changes to their DB programs (either through changes to their plan design or adjusting their asset allocation), and 43% expressed a degree of uncertainty, saying they are still considering the impact that PPA and FAS 158 will have on their plan.
Only 20% of sponsors said they are considering closing to new entrants, freezing, or terminating their DB plans. Only 14% of plan sponsors surveyed said it was “very likely” they would change the asset allocation of their DB plans, while 39% said it was “somewhat likely.” Thirty-two percent were neutral about the likelihood of changing their DB plan asset allocation.
There was also an expectation by both managers and consultants that search activity will increase following the regulations given perceived high levels of interest in new products, tools, and approaches for managing DB plans. However, the level of search activity to date has been less robust than expected, as plan sponsors appear less committed to changing their current asset allocations.
Managers and consultants have been more actively responding to the impact of the regulations than plan sponsors, the survey indicated. Twenty-seven percent of managers and 33% of consultants said they are changing their client service model by developing enhanced asset/liability modeling capabilities.
Additionally, 24% of managers and 11% of consultants said they are increasing the knowledge level of personnel. Eighteen percent of managers said they are developing a more solutions-based/ consultative approach, and 12% said they are developing new sources of alpha. Sixteen percent of consultants said they are enhancing their capabilities in non-traditional asset classes.
“New Frontier or Familiar Ground? Opportunities and Challenges for Institutional Asset Managers Post PPA and FAS 158” is a summary of online surveys completed by 656 plan sponsors affiliated with corporate defined benefit and defined contribution plans ranging in size from 250 employees to more than 10,000 employees, and telephone interviews with 36 investment managers and retirement services providers and 39 investment consultants.