DB Sponsors Focus on LDI, Risk Management

An SEI news release said more than two-thirds (68%) of respondents reported there is an increased focus on managing pension assets in association with the pension’s liabilities. More than half (54%) said the organization has an increased interest in risk management and a goals-based approach to pension management.

However, the poll shows that on average pension executives are spending half of their time on either administrative activities (27%) or monitoring investment managers (23%), while only spending less than a fifth of their time on functions necessary to implement new strategies, such as evaluating new investment managers (10%) and researching new asset classes (6%).

The poll, completed by a total of 105 executives who oversee pensions around the world ranging from $30 million to more than $5 billion in assets, shows that recent market conditions have caused pension plans to have a negative impact on overall corporate finances for more than half (56%) of the participating companies, according to the news release. In response, nearly half (44%) of all global participants said the recent market turmoil has increased the likelihood the organization will take steps to terminate the pension plan as soon as possible. In addition, senior management has increased scrutiny of DB plans and is requesting a long-term pension strategy.

The poll also found plan design changes continue as almost half (48%) of global plans are closed to new hires.

Current processes are being reviewed, as more than a third (34%) of those using a consultant said the heightened investment risk has made trustees question whether or not the consultant provides enough accountability for results and enough fiduciary protection. Nearly a quarter said they either had to proactively ask their consultant for advice during the market turmoil (23%) or that they felt there should have been a higher level of proactive communication from their consultant (24%).

Nearly half (49%) of U.S. poll participants said that additional funding relief – beyond last December’s relief bill – is still needed.

The poll, conducted by SEI’s Pension Management Research Panel, was completed in July 2009. None of the poll participants were institutional clients of SEI.

A complete summary of the poll can be requested by emailing seiresearch@seic.com .