This report is a deeper dive into Chapter 2 of the UK Findings from Aon's Global Pension Risk Survey 2019. Download the full report above to learn more about this topic: Investment Strategy Considerations.
The Global Pension Risk Survey is an Aon survey, conducted every two years, of the defined benefit pension scheme universe. 170 respondents replied to the 2019 UK survey, representing schemes of a broad range of sizes from less than 500 members to over 10,000 members. Nearly two-thirds of respondents were trustees, with the remainder primarily being a combination of pensions managers and corporate representatives.
Looking back over the last decade, we can see how the pensions landscape has developed. Ten years ago, schemes were dealing with the fallout from the global financial crisis, and over the following years, increasing numbers of schemes closed to accrual in response to rising costs.
As a result, schemes began to set their sights on longterm, lower-risk destinations, but market conditions and rising longevity seemed to conspire against making progress. The ultimate low risk target forever seemed just out of reach. However, in recent years, schemes’ long-term objectives have grown closer than they have ever been (see chart), as schemes mature.
The overall themes in the survey – of maturing pension schemes and reducing time to reach longterm targets – are inevitably reflected in the way schemes have outlined their investment strategies.This survey demonstrates many of the trends we saw two years ago – notably de-risking and diversification. But this year the difference lies in the pace of change and the level of activity; schemes have firmed up their views and acted decisively.
The way schemes have acted has been very much driven by their own circumstances, but typically actions have fallen into two categories: schemes that have reduced equity exposure but increased liability hedging to reduce overall volatility, and those that have diversified from equities into alternative growth assets. We have also seen continuing interest in illiquid asset classes as schemes look to alternative investment ideas.
This year’s survey also asked schemes which elements of their investment strategy and implementation they had delegated or planned to delegate in the future. As in previous years, this is an area where attitudes are evolving, with moves to partial delegation the most popular strategy.
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