De-risking Goes Mainstream

The Mercer/CFO Research 2019 Risk Survey finds that 76% of the executives polled said it was likely their organizations would take some form of lump-sum-based risk-transfer action in 2019 or 2020.

Employers have spent much of the past two decades looking for ways to de-risk their defined benefit (DB) pension plans, both to minimize their plan’s impact on their organization’s financial statements and to allow management to focus more tightly on core business activities. Today, they show few signs of slowing down. A new CFO Research survey conducted in collaboration with Mercer asked plan sponsors which of seven investment-related actions their plans were likely to take over the next two years to manage risk. All seven options were selected by at least 50% of the executives surveyed.


Topping the list: 


  • Increasing allocations to fixed-income investments, cited by 67% of the respondents (up from 53% in 2017)
  • Employing dynamic de-risking or “glide­path” strategies, cited by 60% (up from 52% two years earlier)
  • Making greater use of options or related strategies for tail risk management, cited by 56%. (This is the first year this tactic was listed as an option in the biennial survey.)
  • Broadly speaking, plan sponsors intent on de-risking have three levers on which to pull: funding strategies, risk-focused invest­ment strategies, and risk-transfer strategies.


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