A new study from fund management giant BlackRock has found that public and private defined benefit (DB) plans are on diverging paths, with private DB plans winding down, while public DB plans are building for the long haul.
The study is based on a survey of 300 senior executives and CIOs. BlackRock global head of institutional client business, Edwin Conway, commented: “Pension leaders today are on the front lines of a historic and urgent transition in how societies provide for retirement. Managing this changing environment, seeking efficient and higher-yielding investment styles, and tackling challenges stemming from new regulatory and governance regimes will be key for both corporate and public pension schemes. While in many areas their paths are diverging, they both play a crucial role in reshaping global retirement.”
While there is a common emphasis at all DB plans on improving governance and investment policies, at corporate DB plans, de-risking, possible endgames, and cross-border coordination at multinationals top the agenda, while at public DB plans, enhancing the ability to invest in private assets is a major focus. The survey found that 70% of non-corporate plans have added a new private asset class within their investment guidelines, with 65% adding investment professionals to focus on this asset class.
Across the board, the research found an increased interest in factor-based investing, with 74% of plans using this approach. Conway commented: “It is not surprising to see the number of pension plans investing in factor-based strategies, given the variety available, but we expect to see further growth in the number of plans that are using factors to inform their asset allocation decisions.”