A not-so distant mirror
Here in the US, in Fall 2019, we watch formerly calm equity markets start to rumble, while Fed easing stirs fears that negative interest rates will spread from Japan and Europe to our shores. Aon’s biennial Global Pension Risk Survey gives us a chance to look back at how things have changed, and how they haven’t, since our 2009 survey.
Reading through past editions of this survey, we find a remarkable consistency over the past decade:
- Steady shift towards more liability-matching fixed income, leading to rising interest rate hedge ratios
- A concurrent dialing back of equity exposure. In most cases this is part of a policy to reduce equity and interest rate risk as funded status improves, sometimes called a ‘glide path.’
- Amid rising valuations and declining return expectations for public equities and bonds, an increase in diversification of return-seeking assets.
- Shift to outsourced chief investment officer (sometimes called outsourced CIO, or OCIO) as the preferred operational and governance structure to implement the desired de-risking strategy.
- Growing comfort with the use of settlement options to eliminate the full spectrum of pension asset and liability risks for some or all of the pension plan.
The US Global Pension Risk Survey was carried out in fall 2019. The findings in this report cover only the US survey, in which approximately 90 people took part, from a range of pension clients, all within the US. Respondents received no incentive for taking part in the survey.
Download the full US Survey findings report above to learn more.
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