Risk avoidance and volatility are the top priorities for pension plan sponsors, according to an international SEI survey of 305 executives who oversee pension plans with $30 million to more than $5 billion in assets. Nearly two-thirds (62%) said the desire to maintain current returns outweighs the potential for portfolio gains from speculative investments; a sharp rise from the 54% who voiced that opinion in a similar survey last year. That feeling was most prevalent at U.S. plans with more than $1 billion in assets; 76% of participants in that category said their organizations would not take on more active risk in an effort to increase returns.

The just-released survey was conducted in April, but the same issues that drove heightened risk concerns then continue today: the credit crisis, stock market volatility and increased regulations governing how fund assets can be allocated. Indeed, more than half (53%) of those polled said monitoring investment risk has become more complex, up from 41% last year, and just under half (45%) said that insuring compliance with pension-related laws has become more challenging. "The headache of identifying and subsequently managing risks continues to grow for pension plan sponsors," says Jon Waite, chief actuary for SEI's institutional group. "The simple fact is that financial executives are tiring of dealing with uncertainty when it comes to controlling these risks."

Those concerns are exacerbated by the fact that more funds are underfunded than they were one year ago, leaving little room for investment error. Slightly more than two-thirds of those polled indicated that their plans were above the requisite 90% funding level, a sharp drop from 75% in the same survey a year ago. The pressures have made pension plan funding an important part of governance strategy, placing increased responsibility in the hands of investment committee members and top executives, according to the respondents. More than 80% of those polled (up from just over 50% last year) said accountability for monitoring governance risk falls on these internal functions.