US - Almost all pension executives prioritise funded status over increasing returns, an SEI quick poll shows.
Nearly 90% of poll participants elected managing funded status as their greatest current concern compared to any other matter.
"Funding deficiencies are getting the attention of various stakeholders in companies and, as a result, boards and senior management are looking for long-term strategies as this scrutiny continues," Jon Waite, director, investment management advice and chief actuary in SEI's Institutional Group.
"A plan's funded status is the top priority as liabilities are being managed within a larger, organisational, risk management framework," he added.
As a result, alternative investments are being integrated into pension portfolios to counter risk, said Waite.
Pension funds are investing more in alternative assets now than in the previous two years. Sixty-five percent of pension executives are investing in alternatives compared to 53% in 2009 and 51% in 2008, results showed.
SEI's findings parallel those of a global survey conducted by Towers Watson which showed alternative now account for 17% of all pension fund assets globally, up from 6% ten years ago. (Global Pensions; July 12, 2010)
Moreover, 77% of respondents to the SEI poll holding over $300m in assets invest 11% or more in alternatives. Contrastingly, only 42% of pensions with under $300m in assets invest 11% or more, findings showed. According to the participants, real estate, private equity, hedge funds and single manager hedge funds are the most common alternatives being used.
SEI also found 53% of pension funds are either closed or frozen, an increase of 10% from last year, and 73% of those with frozen scheme plan to terminate the fund. However, of those with active plans, three-quarters said they don't plan to terminate.
"In consideration to funded status, planned sponsors are holding off freezing right now until they get funded status corrected. If they freeze, they need to consider cost saving replacement plans. I expect this to continue at a steady level," Waite said.
Other top concerns for pension funds include long-term strategic development, stress-testing, increasing due diligence and identifying the role of consultants and investment professionals giving advice, the poll showed.
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