Schroders’ Survey reveals de-risking is high on its clients’ agenda for 2012
Schroders recently asked a group of pension funds their thoughts* on defined benefit strategies, governance and de-risking.
Defined Benefits: Governance
A little over half (56%) of the respondents revealed that the average time for a pension scheme to make an investment decision (i.e change of asset allocation) was over a month. 17% revealed that they were able to make immediate investment decisions and 27% would usually be able to make an investment decision within a month.
When it comes to monitoring a scheme’s funding level, the survey revealed 6% reviewed weekly, 22% quarterly and 28% reviewed funding levels less regularly than that but the majority (44%) reviewed their funding level on a monthly basis.
Exactly half of the respondents (50%) said that they had a target end point for their pension scheme, beyond full funding relative to the technical provisions and half (50%) had not. Again when asked if this was either buy-out or self sufficiency this revealed the same split.
Defined Benefits: De-risking
51% of respondents commented that de-risking is on their scheme’s agenda this year, whether it’s growth assets or risk management.
The de-risking mechanisms* that clients are most likely to use would be:
– Review of growth allocation in general (36%)
– LDI (28%)
– Reducing overall growth allocation (18%)
– Longevity hedging (14%)
Our survey also revealed that there was no single overall barrier to a scheme implementing a derisking framework. 32% cited the size of their scheme which would make it unsuitable, 22% a lack of understanding from the trustee group, 21% cited various costs,18% said lack of understanding from the corporate sponsor and 7% cited the reason because of complex documentation.
Mark Humphreys, Head of UK Strategic Solutions, commented:
“The recent market turmoil has put de-risking firmly on Trustees’ agenda for 2012. However our survey highlights what we believe is a wider trend – infrequent monitoring and slow decision making may mean that schemes are not set up to take advantage of opportunities to de-risk when they arise.
“Another interesting finding from our survey is the willingness of many schemes to engage with a wide range of parties* when forming investment ideas. Around 36% of the trustees that responded to our survey said they would turn to their fund manager, 67% said to an investment consultant, 48% said to the scheme actuary and 27% said to other advisers including internal resources.”
* Source: Schroders. Multiple choice questionnaire completed, participants were asked to select all that apply. Survey undertaken in March 2012.
For further information, please contact:
Estelle Bibby, Institutional PR Tel: +44 (0)20 7658 3431/ email@example.com
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Schroders is a global asset management company with £187.3bn (€224.2 billion, $291.0 billion) under management as at 31 December, 2011. Our clients are major financial institutions including pension funds, banks and insurance companies, local and public authorities, governments, charities, high net worth individuals and retail investors.
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