Top Priority for Pension Execs: Controlling Volatility

(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.

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.