The Forgotten 70%: Strategies for Pension Plans Accruing Benefits
- While up to 70% of all single-employer pension plans have participants who are still accruing benefits, risk management solutions discussed in the pension community typically focus on the needs of the other 30% of plans—those that are hard frozen.
- The mechanistic “glide path” approach tailored to hard-frozen plans is likely suboptimal for accruing plans, as it would lock in the need for permanently higher contributions.
- We recommend a more flexible, holistic risk budgeting approach that seeks to maximize expected return subject to each sponsor’s unique risk tolerance.
- Pursuing excess returns through active, alpha-driven strategies is particularly valuable for accruing plans, which face many years of future benefit accruals that must be met through either asset returns or contributions.
In this video series, several of our practitioners share their current views on both global and region-specific private equity and venture capital markets, recent performance trends, and insights from their latest experiences.
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By considering the return profile of a manager along with its size in the portfolio, active risk provides additional insight to risk management decisions, helps build better portfolios, and contributes to better governance.
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