More DB Plans Using Alternative Investments

September 13, 2010 ( - An SEI Quick Poll shows a significant increase in the percentage of pension portfolios investing in alternatives, when compared to the previous two years.

In 2010, 65% of pension executives surveyed said their pension portfolio was invested in alternatives, compared to 51% in 2008 and 53% in 2009. Alternatives use among pensions with more than $300 million in assets is significantly higher than those with less; 84% compared to 53%, according to a press release.   

In addition, poll respondents from larger plans are investing a greater percentage of the portfolio in alternatives. Of those with more than $300 million in assets, more than three-quarters (77%) invest 11% or more in alternatives. By comparison, 42% of pensions with less than $300 million in assets invest 11% or more.   

Real estate (77%), private equity (54%), funds of hedge funds (47%), and single manager hedge funds (30%) are the most common alternatives being used.  

The press release said the poll also found nearly all pension executives viewed improved funded status as a benchmark more important than increasing absolute returns. Of the major concerns impacting pension executives, 88% of respondents chose managing funded status. Additional priorities moving forward included improving funded status, creating a long-term pension strategy, stress-testing the portfolio, increasing due diligence, and defining the role of consultants and investment professionals providing advice to pensions.   

The poll found more than half (53%) of respondents’ pension plans are either closed or frozen, approximately a 10% increase compared to a similar survey conducted in August 2009. Respondents were asked if their plan were fully funded, would they still look to terminate the plan as soon as possible. Of those that already have frozen their plan, nearly three-quarters (73%) said they would look to terminate the plan. Of those with active plans, 75% said they would not look to terminate it.  

The poll was completed by 85 pension executives overseeing assets ranging in size from $25 million to $10 billion. Of the respondents, 36% oversee more than $300 million in assets. None of the respondents were institutional clients of SEI.  

For a copy of the complete survey results, email