Corporate Pension Peer Analysis 2022
With markets expecting six rate hikes by the U.S. Federal Reserve in 2022, many plan sponsors are slowing the growth of their hedge portfolios and instead addressing the contribution of equity beta to funded status volatility.
Although corporate pension plan sponsors can’t change the past, they can take a more enlightened approach to the future.
Funded status levels are finally back at pre-GFC levels after a long and difficult journey. Most sponsors have been multi-tasking, trying to manage and eliminate future liabilities while generating sufficient asset returns, within the confines of their de-risking glide paths.
Given the legislative and market-driven lessons and developments of the past year, we recommend plans consider the following approaches during 2022, which are further explained in our findings: take solace in pension relief, rethink the pension plan endgame and manage plan costs holistically.
As pension strategy continues to evolve, plan sponsors should consider building a sustainable, diversified asset allocation strategy that allows their plans to continue to outperform liabilities—with minimal volatility—while preserving the economic benefits for participants and sponsors alike