Derisking DB Plans in Flux
April 3, 2019
Substantial volatility in late 2018 and early 2019 highlight the challenges and risks many corporate defined benefit plan sponsors face
Learn More in our White PaperView PDF
Corporate (private, single-employer) defined benefit (DB) plans have traditionally chosen to derisk liabilities, in part because of volatility concerns. Recent financial market volatility cast a spotlight on these concerns and other issues, as the results of a Cerulli survey of midsized plans show. In this context, Cerulli offers several recommendations to asset managers and investment consultants helping derisking plans implement a liability-driven investing solution.
- After tens of billions of contributions and higher discount rates improving funded status for much of 2018, volatility negatively affected corporate DB plans in the last days of the year.
- Despite an improvement in conditions in the first months of 2019, mid-sized plans surveyed in the first quarter express a greater focus on investment risks and on the fees paid to thirdparty asset managers.
- Respondents generally hold investment risk analytics in high regard when choosing among various non-investment-management services provided by managers: more than half (56%) rank strategic asset allocation advice and risk analytics as “very important.”
- Cerulli suggests managers help corporate plans take a more holistic view of investment performance and risk in theirportfolios, particularly in the case of assetliability management.