Whether you were in the U.S., Canada or Europe during the financial meltdown, the economic effects were felt by every investor class, which in turn, is now forcing many to find alternative means to curb risk and diversify their investment portfolios.
This point rang true Wednesday when nearly 466 corporate and public pension plans in North America, the U.K. and northern Europe agreed that they have taken steps to finding a solution to the investment and funding problem, Pyramis Global Advisors said in a Sept. 8 announcement.
"Pension plan executives gained a new appreciation for risk management during the recent financial crisis," Young Chin, the chief investment offier for Pyramis Global Advisors, said in a statement. "Based on this survey and our own conversations with clients, there is a great deal of concern in the market today about how best to assess risk and address it. As a result of the many lessons learned, plans are implementing new investment strategies and risk measures designed to meet their long-term goals."
The Pyramis Global Defined Benefit research study, which fielded responses from CIOs, treasurers and executive directors at the retirement plans, said that the top three lessons learned was that there was a need for more downside protection (62%), improved risk management (54%) and a better match of assets and liabilities (49%).
Top concerns for the responding group, which collectively was worth nearly $2 trillion in combined assets, included funded status, volatility and low investment returns. Specifically, in the U.S., volatility and funding status was the top concern for corporate and public plans, respectively. Alternately in Canada, plans in the country cited solvency as the chief apprehension among its plan sponsors.
Additionally, in the United Kingdom and northern Europe, low investment returns topped out, with Finland, Ireland, Sweden, Norway and Denmark listing risk management as their primary concern, the study stated.
Some of the solutions, according to the respondents, are imbedded in the realization of what can manage risk and how it applies to their respective plans.
"For example, many plans are managing investment risks to protect their funded status through liability-driven investing, while others are broadening asset allocations or implementing multi-asset-class strategies with pre-approved risk and return goals for asset managers who invest tactically as markets change," Chin said in the release.
He said pension plan investment committees "need to understand how global diversification can introduce new portfolio risks or, how broadening allocations can affect liquidity risk management."
"Managers who can develop effective investment strategies and effectively partner with institutional investors in the educational effort are best positioned to help their clients find solutions for the new decade," Chin said.
The survey, which was gathered thanks to the help of Asset International, Canadian Institutional Investment Network and The Financial Times, was conducted during June and July, the firm said.
Presently, the Smithfield, R.I.-based Fidelity Investments subsidiary, manages nearly $144.1 billion in traditional long-only, alternative equity, fixed-income, real estate debt and REIT strategies for its international institutional clientele.