Mid-size corporate pension plans cite risk as their No. 1 concern even as the promise of high investment returns in a rising market is luring them to invest in more volatile assets, a survey found.
The poll of 166 midsize U.S. corporations with pension assets of $50 million to $500 million, conducted in September and October by Fidelity subsidiary Pyramis Global Advisors, found the top three concerns were risk management (31 percent), low return environment (29 percent) and volatility (24 percent).
The survey found that despite concerns regarding risk, the majority of plans intended to raise their risk profile in the next year or two with increased investments in emerging market equity (17 percent), global equity (16 percent), liquid alternatives (12 percent), and emerging market debt (10 percent). Ten percent said they planned to reduce allocations to U.S. equities.
Recommended For You
"While risk management is stated as a top concern, the combination of rising equity markets and an unprecedented low return environment is motivating investors to consider increasing risk to generate higher returns," said Chuck McKenzie, head of institutional solutions at Pyramis Global Advisors, in a statement. "That said, by taking on more risk, investors need to remain diligent about plan oversight, including the potential impact on their funding status in the event of a market decline."
The rising equities market has lifted the overall health of pension plans, with 55 percent funded at 90 percent and a fifth (21 percent) fully funded. Of those that want to derisk their plans, 32 percent said improvement in funding of liabilities would trigger such a move. Rising interest rates would spur 17 percent to do so, and a desire to manage volatility would lead 15 percent down that path.
The biggest challenges facing plan managers, the survey found, were matching assets and liabilities, 31 percent, controlling plan costs, 27 percent, and executing timely investment decisions, 13 percent.
To help them, 81 percent of the funds surveyed said they used a consultant for manager selection, asset allocation, risk oversight or performance review. Half of all plans, 49 percent, used an outsider as chief investment officer.
While risk was the top concern of those surveyed, some plans, 16 percent, said nothing would make them derisk. Nearly a third, 30 percent, said they intend to derisk but have not established the criteria for doing so.
Pyramis, based in Smithfield, R.I., has more than 600 institutional clients and more than $200 billion in assets under management.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
