BOSTON–(BUSINESS WIRE)–NEPC, LLC one of the industry’s largest independent, research-driven investment consulting firms, today announced new data showcasing what corporate and healthcare pension plan sponsors believe are the biggest risks to markets over the next 12 months. The new report also gives insight into how plan sponsors are assessing their glide path and managing their asset allocation against the backdrop of this year’s heightened market volatility.
Plan sponsors overwhelmingly agree that the three biggest risks to markets over the next 12 months are: the Fed’s ability to fight inflation (93%), rising interest rates (79%), and corporate profit margins (57%). Interestingly, geopolitical risk seems to have taken a backseat to these three relatively domestic concerns. Of all respondents, 43% listed geopolitical concerns in Europe as one of the three biggest threats, with only 16% listing geopolitical risk in China as one of their top concerns.
“It’s been nearly a decade since plan sponsors have had to keep factors like rapid inflation and rising rates in mind when rebalancing or determining their asset allocation strategies,” said Bradley Smith, Partner and NEPC Corporate Defined Benefit and Defined Contribution consultant. “With rising concerns about how corporate profits will likely impact the market in the year ahead, our priority right now is helping ensure that our pension and defined contribution clients are well equipped to mitigate risk and have a clear plan of action in 2023 and beyond.”
Other notable findings include the following:
- The majority of respondents have an established glide-path. 49% of respondents have a one-way (de-risking only) glide path, compared to 16% that utilize a two-way (de-risking and re-risking) glide path. 35% of respondents indicated they are not currently utilizing a glide path.
- Most plan sponsors are not currently rebalancing back to existing targets. 23% of respondents are only partially rebalancing back to targets, with 21% of respondents delaying rebalancing until the market stabilizes. Only 35% of respondents are rebalancing to existing targets. Notably, 0% of plan sponsors are re-risking.
- Smaller pensions (less than $1 billion AUM) are more likely to consider a Pension Risk Transfer (PRT). Overall, 15% of respondents are either moving forward with some form of PRT while 21% are considering some form of PRT in the near future. 80% of those respondents considering a PRT say the current market environment has not impacted their views. 77% of pension plans with over $1 billion in assets are not currently considering any PRT activity.
This survey was conducted online by NEPC’s Corporate Defined Benefit Practice in September 2022. For the full results of this survey, click here.
For more information on NEPC’s Corporate Defined Benefit Practice, click here.
NEPC, LLC
NEPC, LLC, is one of the country’s leading investment consulting firms, servicing 403 retainer clients with $1.5 trillion in assets1 with $301.2 billion in alternative assets2. Combining a proprietary research team dedicated to the long-term challenges facing investors with our unique client-centric model, NEPC builds forward-looking investment portfolios for institutional investors and ultra-high-net worth individuals. To learn more about NEPC, visit nepc.com.
1 As of 4/1/2022
2 As of 12/31/2021, NEPC provides some form of advice to all clients counted but does not advise all clients on all asset classes.