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WHITE PAPER

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

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Summary

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.


Key Points

  • 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.

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