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/CNW/ - According to new research by Pyramis Global
Advisors®, the financial crisis of 2008-2009 has
re-focused pension plans in North America, the U.K. and Northern Europe
on defining and solving the risk management challenges they face in the
decade ahead. The findings also highlight the key lessons learned by
plan sponsors from the financial crisis, their top concerns right now,
and the investment strategies they believe they will need to meet their
challenges in the years ahead.

A continuation of a research series that has tracked institutional
investor views and attitudes since its launch in 2002, the Pyramis
Global Defined Benefit (DB) research study surveyed chief investment
officers, treasurers and executive directors at 466 corporate and public
pension plans in the U.S., Canada, and 11 European countries which
cumulatively hold more than $2.0 trillion USD in assets, an estimated
12% of the global defined benefit plan market.

Pension plan executives gained a new appreciation for risk management
during the recent financial crisis, said Young D. Chin, chief
investment officer, Pyramis Global Advisors. Based on this survey and
our own conversations with clients, there is a great deal of concern in
the market today about how best to assess risk and address it. As a
result of the many lessons learned, plans are implementing new
investment strategies and risk measures designed to meet their long-term
goals.

Lessons learned from the financial crisis, top concerns

Respondents in the U.S., Canada, and Europe said that the top three
lessons they learned from the financial crisis were the need for more
downside protection (62%), improved risk management (54%), a better
match of assets and liabilities (49%), and a realization that they were
less diversified than they thought (42%).

The top concern cited by pension plan sponsors was their current funded
status (23%), followed by volatility (21%) -- either volatility of a
plans funded status or asset volatility-- and a low-investment-return
environment (19%). In the U.S., the top concern among corporate plans
was the volatility of their funded status, while public plans are most
concerned with their current level of their plans funded status.
Solvency ratio, which is a financial strength measure of Canadian
pensions, was cited by 23% of plans responding in that country. In the
U.K. and Northern European countries, the top concern was a
low-investment-return environment. The exception was the Nordic
countries - Finland, Ireland, Sweden, Norway and Denmark - which cited
risk management as their top concern (36%).

Addressing concerns with investment strategies

Plan sponsors across the regions also differed in their definition of
volatility, which influences the investment strategies they are pursuing
and their views of risk. For example, U.S. corporate and Canadian public
pension plans define volatility as funded status or solvency ratio
volatility, respectively. They often seek to better match assets and
liabilities to protect funded status, according to the survey.
Conversely, U.S. public and Northern European pensions which define
volatility as asset volatility intend to broaden diversification -- as a
return enhancer and risk reducer - to include more global equity and
alternative assets. In addition, they expect to offer more investment
committee education and streamline decision-making in order to execute
timelier asset allocation decisions.

The solutions that respondents identified are consistent with the
lessons they have learned, their top concerns, and their definitions of
volatility and risk, Chin said. For example, many plans are managing
investment risks to protect their funded status through liability-driven
investing (LDI), while others are broadening asset allocations or
implementing multi-asset-class strategies with pre-approved risk and
return goals for asset managers who invest tactically as markets change.

There is an important educational component to each strategic
response, explained Chin. The committees responsible for pension plan
investments need to understand how global diversification, for example,
can introduce new portfolio risks or, how broadening allocations can
affect liquidity risk management. Managers who can develop effective
investment strategies and effectively partner with institutional
investors in the educational effort are best positioned to help their
clients find solutions for the new decade.

About the Surveys

Pyramis conducted surveys of institutional investors during June and
July 2010, including 249 U.S. pension plans (159 corporate, 90 public),
79 Canadian pension plans (47 corporate, 32 public) and 138 U.K. and
Northern European institutional investors (57 private, 43 public, 30
multi-managers, eight insurers) in 11 countries (33 Netherlands, 32
U.K., 27 Switzerland, 14 Sweden, 13 Denmark, seven Germany, and 12 in
five other countries). Total assets managed in plans represented by
respondents more than $2.0 trillion USD. The surveys were executed in
association with Asset International, Inc., in the U.S., the Canadian
Institutional Investment Network, and the Financial Times in the U.K.
and Northern Europe. CEOs, COOs, CFOs, and CIOs responded to an online
questionnaire or telephone inquiry. A report on the survey is available
by writing to Pyramis@pyramis.com.
(PyramisUK@pyramis.com)

About Pyramis Global Advisors

Pyramis Global Advisors, a Fidelity Investments company, delivers asset
management products and services designed to meet the needs of
institutional investors around the world. Pyramis is a multi-asset class
manager with extensive experience managing investments for and serving
the needs of some of the worlds largest corporate and public defined
benefit and defined contribution plans, endowments and foundations,
insurance companies, and financial institutions. The firm offers
traditional long-only and alternative equity, as well as fixed income
and real estate debt and REIT investment strategies. As of June 30,
2010, assets under management totaled approximately $144.1 billion USD.
Headquartered in Smithfield, RI, USA, Pyramis offices are located in
Boston, Toronto, Montreal, London, and Hong Kong.

Asset International, Inc., Canadian Institutional Investment Network and
Financial Times are not affiliated with Pyramis Global Advisors.

Pyramis, Pyramis Global Advisors and the Pyramis Global Advisors A
Fidelity Investments Company logo are registered service marks of FMR
LLC.

Pyramis Global Advisors
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USA 02917
(P) 560140.1.0
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