Pension plan sponsors view controlling funded status volatility as the top priority for their organizations for the third year in a row, according to an SEI Quick Poll.
Of the participants identifying this as a top focus for 2012, nearly three-quarters (70%) say it is at least a “high priority,” with 43% of those saying it is an “extremely high priority.” Not far behind, plan sponsors identified the need to improve the funded status of their pension plans as the second most important priority this year.
“Market swings and low interest rates have really taken a toll on the funded status of pension plans over the past few years,” says Jon Waite, director of investment management advice and chief actuary for SEI’s Institutional Group.
“Many plan sponsors now face the burden of making substantial contributions to their plans in order to meet funding requirements,” says Waite. “As markets continue to be volatile, plan sponsors continue to pursue sophisticated risk management strategies designed to better control volatility of the funded status of their pension plans.”
The poll, conducted in January, surveyed 50 executives overseeing U.S. corporate defined benefit plans. Respondents were asked to rank statements as a “marginal,” “high” or “extremely high” priority for their organizations.
Here are the top 10 priorities for 2012:
1. Controlling funded status volatility
2. Improving plan’s funded status
3. Managing duration moving forward
4. Implementing a Liability-Driven Investing approach using long-duration bonds
5. Providing senior management with long-term pension strategies
6. Stress-testing the portfolio to gauge its ability to withstand macroeconomic environments
7. Conducting a study of asset-liability
8. Implementing an asset allocation process aimed at exploiting shorter-term market inefficiencies to add return and/or mitigate risk
9. Changing funding policies and timelines
10. Defining fiduciary responsibilities for investment consultants as well as trustees
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