As companies struggle with underfunded defined-benefit pension plans, more are deciding to offload the chore of investing their plan assets.
Russell Investments, which has been providing such outsourced investment management, which it calls fiduciary solutions, since 1980, said it received 31% more completed requests for proposals (RFPs) for investment outsourcing last year than it did in 2011. And a recent survey by Asset International’s Chief Investment Officer Magazine showed 55% of companies with pension plans did some investment outsourcing or plan to do so within the next 24 months.
Companies are also questioning whether investing their pension assets in-house is the best way to spend their time and energy, he said. “Companies are saying, ‘Things haven’t gone that well, we’re a tire company, we need to focus senior management’s attention on the core business. So if there’s a governance model that can help us focus on the high-level issues of the pension plan and outsource the more day-to-day issues to seasoned professionals, that’s a good approach.’”
Agreeing, Debra Woida, head of delegated investment services for the Americas at Towers Watson, said that interest in outsourcing among companies with defined-benefit pension plans has grown over the last several years. In fact, these days even RFPs for investment advisory services often include a request for more information about investment outsourcing, said Woida, pictured at right, adding “I think in the current environment, everyone is feeling they at least need to feel they understand what it is.”