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Alternative Market Briefing

U.S. institutions' investment portfolios jump 11% in 2013, but revamp continue

Tuesday, March 18, 2014

Komfie Manalo, Opalesque Asia:

According to the results of Greenwich Associates’s 2013 U.S. Institutional Investor Study, the value of U.S. institutional investment portfolios increased 11% in 2013. But despite the strong recovery in asset valuations and improvements in pension plan funding levels, the rapid pace of change in institutional investment portfolios has not slowed down.

"Despite that appreciation, institutional investors continue to implement major changes to their portfolio management strategies and asset allocation profiles in an effort to achieve their increasingly diverging objectives," said Greenwich Associates consultant Andrew McCollum.

A combination of strong investment returns and improved discount rates have strengthened funding levels for U.S. pensions. But U.S. public and corporate pension plans are reacting to their current circumstances in very different ways. Corporate funds, which are subject to mark-to-market accounting rules that expose sponsor companies’ earnings to pension valuation volatility, are looking for opportunities to reduce risk.

"As companies’ funding ratios inch up, they tend to increase allocations to fixed income as part of risk-reducing asset-liability matching and liability-driven investment strategies," said McCollum. Companies have taken additional steps to reduce pension fund risk, including closing their defined benefit plans to new employees and engaging in ......................

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