Only one in five pension investors believe they are managing longevity risk effectively, according to a survey conducted by State Street.

The survey of 400 pension professionals globally also found that investors were even less confident they were properly managing any general investment risk, or specifically investment risk, stemming from investments.

The survey – ‘Pensions with Purpose: Meeting the Retirement Challenge’ – says “this is a real concern for pension funds, especially as many move into new investment areas that require specialist understanding of different risk types.”

State Street pointed to the risks associated with illiquid, often alternative asset classes and said its research found that less than half of its respondents were confident they had achieved “real transparency on the risk associated with alternative assets”.

Examining some of the key investment areas in greater detail, the survey found that 21% of respondents said they were confident of their ability to manage longevity risk, while 73% said they were somewhat certain and 6% said they had low confidence in their ability to manage the ageing membership effectively.

The lack of certainty was mirrored across other areas of risk – such as liquidity, investment and operational risk – with only 20% indicating that they were certain they were highly effective at managing operational risk, and only one in six respondents saying they were confident of their ability to manage liquidity and investment risks.

“As pension funds increasingly recognise the importance of applying more sophisticated risk modelling, the accuracy of the data that feeds those models grows in importance,” the survey adds.

“But only 26% of respondents are highly confident in the reliability and accuracy of their risk data.”

Oliver Berger, head of asset owner solutions at State Street, said the research also showed pension investors were investing “heavily” to improve the transparency and frequency of reported data, although he conceded there was still work needed in the area.