Top Priority for Pension Execs: Controlling Volatility

Following the financial crisis with corporate pension plans looking to minimize risk, SEI’s poll shows that other focus areas include stress testing portfolio, evaluating investment approach and defining fiduciary roles.

(February 16, 2010) – According to a new SEI Quick Poll, controlling portfolio volatility is the top priority for corporate pension plan executives in 2010.

Jon Waite, director of investment management advice and the chief actuary for SEI’s Institutional Group, said successfully executing strategies to improve pension plan finances will be a significant challenge. “Now more than ever, the plan sponsors that can best leverage external expertise will stand to benefit the most in addressing these challenges,” he said.

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Ninety-one percent of pension plan sponsors said controlling volatility is a No. 1 priority. One-third of respondents said it was a high priority. Improving the plan’s funding level ranked next in priority for 2010.

According to a news release, other priorities cited in the poll include:

1. Providing senior management or their Board with a long-term pension strategy;

2. Gaining the ability to most effectively manage duration (the measure of price sensitivity for a change in yield for both assets and liabilities);

3. Conducting an asset-liability study;

4. Implementing a Liability Driven Investing (LDI) approach using long-duration bonds;

5. Stress testing the portfolio to gauge its ability to withstand extreme macro economic environments;

6. Evaluating a different approach for investment management;

7. Changing funding policies and timelines;

8. Defining fiduciary responsibilities for trustees and investment consultant.

The SEI poll, conducted in January, was completed by 54 executives overseeing pensions ranging from $250 million to $10 billion in assets. The poll asked respondents to pinpoint priorities for the year, ranking them as a “marginal,” “high” or “extremely high” priorities.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

San Diego Pension Shifts Its Private Equity Portfolio

The $7 billion San Diego County Retirement Association is working on adjusting its strategy in alternative investments.

(February 12, 2010) – As part of its ongoing asset-liability study, the $7 billion San Diego County Retirement Association (SDCERA) will be aiming to shift its private equity assets.

 

The public pension fund will reallocate private equity assets to distressed investments and intellectual property funds, Pensions & Investments reported. The system’s new outsourced CIO, Lee Partridge of Integrity Capital, is assisting with the strategy.

 

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The California pension will invest $25 million with private equity firm Atlantic-Pacific Capital’s Drug Royalty II fund. Additionally, under the fund’s private equity planning strategy, it’s seeking to redeem its $43 million investment in a multistrategy hedge fund managed by UBS O’Connor.

 

This follows Denmark’s pension fund ATP, which manages 609 billion Danish crowns ($112 billion), announcing to invest 1 billion crowns annually in hedge funds and doubling its exposure to private equity.

 

According to Reuters, the scheme is striving to achieve an “all weather portfolio” by implementing a long-term strategy that will obtain returns independent from market conditions.

 

Separately, a survey by Global Private Equity Barometer from Coller Capital at the end of last year suggested Asian and European institutional investors are more weary of private equity investments than their North American peers. According to the survey, Asian, European and North American segments see 2010 as a good vintage year for private equity, with 85% saying that this will be likely (a “good” or “excellent” chance), as opposed to only 2% who believe it to be unlikely.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

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