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Pension plan sponsors shifting asset allocation away from domestic equities

A new survey from Aon Hewitt found that pension plan sponsors are shifting their asset allocation away from domestic equities in favor of liability-matching investments in an effort to reduce plan volatility.

By Heather Trese | Updated on May 10, 2011

A new survey from Aon Hewitt, the global human resources outsourcing and consulting business of Aon Corporation, found that after years of market turmoil, pension plan sponsors are shifting their asset allocation away from domestic equities in favor of liability-matching investments in an effort to reduce plan volatility.

Aon Hewitt’s surveyed 227 large U.S. employers, representing $389 billion in total assets. The survey revealed that in 2010, 38 percent of plan sponsors reduced their exposure to domestic equities and the same percentage expects to do so in 2011. Just 4 percent expect to increase domestic equity exposure. Plan sponsors are primarily shifting assets to liability-matching investments with long-duration corporate bonds as the asset of choice. Thirty-two percent of plan sponsors expect to increase allocation to long-duration bonds and 24 percent expect to increase allocation to other corporate bonds, while just 13 percent expect to do so for government bonds.

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