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NEPC Survey: Majority of Pension Plans See Fed and Soaring Corporate Profit Margins As Biggest Threat to Markets

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.


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PlanSponsor: DCIIA Announces Three New Advisory Councils

NEPC’s Bill Ryan was announced as chair of the newly created Institutional Consultant Advisory Council (ICAC), as part of the Defined Contribution Institutional Investment Association (DCIIA) in a recent PlanSponsor article. View the announcement on PlanSponsor’s site here.

 


PlanSponsor: Rising Interest Rates Top Institutional Investor Concerns

NEPC’s Brad Smith was featured in a recent PlanSponsor article to discuss the findings of our 2022 Governance Survey. View the article on PlanSponsor’s site here.

 


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Markets Group: Investing in Private Equity in '23 Could Prove Challenging to Over-Allocated Institutions

NEPC’s Josh Beers was quoted in a recent Markets Group article to discuss the importance of vintage year diversification. View the article on the Markets Group site here.

 


Pensions & Investments: Plan Sponsors - Navigating Uncertain Times Takes Careful Investing and Communication

NEPC’s Thomas Cook was quoted in a recent Pensions & Investments article highlighting key takeaways from the Defined Contribution West conference earlier this month. View the article on Pensions & Investments’ site here.

 


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CIO: The Rise of 3rd Party Search Firms That Find Consultants

NEPC’s Steve Charlton was quoted in a recent CIO article to discuss how the process of bringing in the right investment advisers for asset allocators has reoriented how the consulting industry does business. View the article on CIO’s site here.

 


NEPC Expands Real Assets Team, Hires Real Estate Industry Veteran

BOSTON–(BUSINESS WIRE)–NEPC, LLC, one of the largest independent, research-driven investment consulting firms, today announced that real estate industry leader Shelley Santulli has joined the firm as Principal and Senior Investment Director, Real Assets, effective October 10, 2022.

Santulli brings more than two decades of real estate investment and advisory experience to her new role, and will help NEPC identify and report on emerging investment themes across real asset markets, which include real estate, energy, renewables, natural resources, and infrastructure.

As a part of NEPC’s Real Assets Team, Santulli will be responsible for providing clients with market viewpoints, sourcing investing ideas, conducting manager due diligence, creating educational materials for various real estate and real asset strategies, and advising clients on the implementation of investment strategies.

“It’s only through our best-in-class talent that we’re able to consistently deliver actionable, best-in-class investment ideas to our clients,” said Matt Ritter, CAIA, head of NEPC’s Real Assets Team. “We’re thrilled to be adding yet another experienced leader like Shelley to our team. I know our clients will benefit from her diverse investment experience across markets, property sectors, strategies, investment structures, and market cycles.”

Prior to joining NEPC, Santulli was Executive Vice President, Portfolio Management at American Realty Advisors, where she helped lead the portfolio management and strategy of a diversified, open-end value fund. Throughout her career, she has held several other senior positions in notable investment management firms like Berkshire Group, AEW Capital Management, and Fidelity Investments.

“I’m joining a team that prioritizes delivering research-driven investment solutions tailored to clients’ unique investment goals,” said Santulli. “I have a proven track record of helping institutions navigate turbulent markets, and I’m excited to put that to work for NEPC clients every day.”

Learn more about NEPC’s Real Assets Team here.

About NEPC, LLC

NEPC, LLC, is one of the country’s leading investment consulting firms, servicing more than 400 retainer clients with $1.5 trillion in assets with $301.2 billion in alternative assets. 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.

Contacts

Emma Rayder

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CIO Announces 2022 Asset Management and Servicing Industry Innovation Award Finalists

NEPC is pleased to be nominated as a finalist for the 2022 Chief Investment Officer Industry Innovation Awards in the following categories: Diversity and Consultant of the Year, recognizing Kristin Reynolds and Allan Martin. It’s an honor to be recognized as one of the firms driving change and enhancing performance in institutional investing. View the announcement on Chief Investment Officer’s site here.

 


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The Boston Globe: Harvard, the Richest University, is a Little Less Rich After a Tough Year in the Markets

NEPC’s Kristin Reynolds was quoted in a recent Boston Globe article to discuss how Harvard’s endowment shrunk by $2.3 billion to $50.9 billion during a down time for financial markets. View the article on The Boston Globe’s site here.

 


NEPC Survey Finds Institutions Want More OCIO Services But Gaps Exist

BOSTON–(BUSINESS WIRE)– NEPC, a leading research-driven investment consultant with $1.5 trillion in assets under advisement, today published its 2022 Governance Survey, which examines how institutions like pensions, endowments and foundations, and healthcare organizations are making strategic investment decisions and engaging with investment consultants to preserve and grow their capital across different asset classes and market cycles.

This year’s survey showcases data from 247 respondents, 47% of which are senior executives within their organization, while 28% serve on their organization’s board or investment committee.

The data across all respondents shows a desire for more OCIO services from investment consultants. Currently, 12% of respondents say their most trusted advisor handles everything like an OCIO. 17% of respondents expect their most trusted advisors to perform the role of investment manager that handles everything like an OCIO in the next 5-7 years.

However, the new report also showcases potential gaps in the OCIO market. When comparing NEPC’s 2018 Governance Survey to 2022, the data shows that expectations haven’t materialized. In 2018, respondents believed the share of trusted advisors acting as an OCIO would increase to 15% by 2023. The general survey results mask a decided shift toward OCIO for certain market segments, including endowments, foundations, healthcare, and defined contribution relative to 2018, and likely increased migration in the years ahead.

“As investment programs have grown over the past several years, we’ve also seen firsthand the increased desire and need for ways to streamline management and operational functions,” said Steve Charlton, Partner and Head of Client Solutions. “There are often good reasons to maintain trusted advisory relationships, which has slowed the overall progression to OCIO. Some clients look to maintain decision-making responsibility or hand off only portions of the governance process, whereas others have decided to move entirely to OCIO.  We believe advisory and OCIO can co-exist within our firm and intend to provide the best services consistent with our clients’ objectives.”

Beyond OCIO relationships, the data also helps show how institutions are remaining committed to their ongoing diversity, equity, and inclusion (DEI) investment goals even amid a tough economic landscape. While data shows that more than half of respondents expect an economic recession and 67% are concerned about rising interest rates, the survey also shows:

  • 80% of all respondents said it is important to incorporate DEI in their investment program, with 18% saying it is extremely important.
  • Healthcare organizations were more likely to believe that incorporating DEI in their investment programs is a top priority, with 29% of these respondents saying it is extremely important.
  • Alternatively, pensions and insurance organizations were slightly less likely to recognize the importance of incorporating DEI into their investment programs, as 23% of these respondents stated DEI was not an important piece of their program.

For more information about NEPC’s, click here, and about NEPC’s OCIO Services, here. To download the full results of NEPC’s 2022 Governance Survey, click here.

ABOUT NEPC, LLC

NEPC, LLC, is one of the country’s leading investment consulting firms, servicing more than 400 retainer clients with $1.5 trillion in assets with $301.2 billion in alternative assets. 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.