MFA Blog

Survey Shows 40% of Pensions Are Considering Alternatives to Reduce Risk

Posted on October 11, 2013

A recent survey from Aon Hewitt noted that 40% of pension plans are considering alternative assets to reduce portfolio risk.  The survey’s results, as noted in Opalesque, “highlight the increasing willingness of trustees to consider a wider range of asset classes than has historically been the case within the industry.”  Further, trustees of pensions more readily accept that alternatives can plan a key role in reducing risk and offering the chance to deliver solid returns.

Tim Giles, a Partner in Aon Hewitt’s Global Investment Practice, also noted that trustees are more prepared to hire third party consultants to expand their range of investment options.  “The response we saw from the delegate survey at our conferences…highlighted the increasing readiness that trustees and schemes are showing to investigate new opportunities,” he said.  “These seem to be taking various forms, including examining alternatives to traditional indexation approaches, accessing a wider spectrum of absolute return bonds funds or exploring better diversified hedge fund investments,” he added.

Giles also noted that many pensions are building their skills to better understand a broader range of investment opportunities.  The fact that 40% of respondents are considering alternatives to reduce portfolio risk reflects the findings of Aon Hewitt’s Global Pension Risk Survey that was released earlier this year.  That survey found that 36% of pensions expect to increase their alternatives allocation over the next year.

Read more about this survey and its findings online from Opalesque.