“The vast majority of providers surveyed are outsourcing because they lack the depth of internal resources and expertise to cover and manage assets across the spectrum, including alternatives and global assets,” Michele Guiditta, associate director at Cerulli, said in the report.

Guiditta continued, “Nearly 32 percent of asset managers polled have an alternative investment mandate for a corporate DB plan that is currently adhering to a derisking strategy. These plans are looking to better diversify their portfolios and enhance returns. Several public pension plans looking to narrow their funding gaps are increasing their holdings in risky assets, and may need guidance with building an alternative assets portfolio.”

Asset allocation strategies that are becoming increasingly complex are resulting in greater use of alternatives — more by corporate defined benefit plans than by public ones, since their incentives are different. Still, alternative asset managers view public defined benefit plans as presenting some of the best opportunities.

But asset managers supporting corporate defined benefit plans on a derisking glidepath during 2016 are putting greater emphasis on alternatives, with 57 percent using hedge funds and/or low-volatility absolute return (low beta hedge funds). Thirty-six percent are turning to real estate, while 29 percent use infrastructure and 14 percent use private equity.