UK - The recent economic downturn is likely to have led to a change in trustees' behaviour with regards to pension investment strategy and a greater balance between risk and reward, according to Unilever pension fund's Angela Docherty.
Docherty, senior investment consultant at Unilever corporate pensions, told IPE that while pension schemes started the de-risking process in 2007, "the pace of these things is slower than planned". So in early 2009 trustees were urged to take equity allocations back up to the strategic benchmark to enable them to take advantage of the expected equity rebound.
"We have then encouraged them to start designing a de-risking plan so that when the scheme gets to a strong funding level they can take the profits quicker than before. It is about having a plan in place and being ready to act," said Docherty.
Docherty, who is one of the nine nominees for the Outstanding Industry Contribution Award at the IPE European Pension Fund Awards in Dublin tomorrow (18 November), argued that trustees should in future be "much more conscious of the interaction between strategy and funding levels, and of not separating them. There needs to be a greater balance between risk and reward."
She added that the behaviourial change she would like to see of pension trustees should be a shift in the time between key asset allocation reviews.
"Instead of doing an asset liability modelling (ALM) study every three years or so, trustees need to build the asset allocation and formally review it at least once a year, while keeping in touch with the funding position on say a quarterly basis. Then if the scheme hits certain triggers it can take risk off the table," said Docherty.
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