UK - Trustees and scheme sponsors are paying greater attention to liabilities than ever before and the trend is set to continue, a leading fund manager claims.
Schroder Investment Management said three years of negative equity returns to the end of 2002 resulted in many schemes moving into significant deficits and focusing trustees’ minds on liabilities.
Director of strategic solutions Diane Knowles said that some trustees have questioned both the amount of equity exposure within their benchmarks and whether setting a fixed benchmark between equities and bonds is the best approach for strategy and ultimately meeting their liabilities.
She added: “A significant obstacle to pension funds looking to match asset and liabilities completely is the fact that many of them are in deficit.
“As a better matched portfolio tends to consist of bonds and thus would only be expected to generally meet changes in the liabilities, the sponsor would need to ‘top-up’ the fund to the 100% funding level.”
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