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Pension Trends for 2014

Plans are looking at creative ways to mitigate liability exposures, including derivative hedging strategies.

By Treasury & Risk Staff | Updated on March 05, 2014
Ledford_Main image_v2In 2013, the funded status improved dramatically for most pension plans in the United States. Still, many analysts expect pension de-risking to continue this year. Some plan sponsors will likely offer lump-sum buyouts to participants. Others are reconsidering their asset allocations.

To get a handle on current trends in pension plan risk management, Treasury & Risk sat down with Jodan Ledford, head of U.S. solutions for Legal & General Investment Management America (LGIMA), a Chicago-based firm that manages fixed-income solutions for institutional investors. The organization also helps plan sponsors implement liability-driven investment (LDI) strategies, which focus on investing plan assets in vehicles that will optimally mitigate the risks inherent in the plan’s liabilities.

T&R:  First of all, what trends did you see in U.S.-based companies’ pension plans in 2013?

Jodan Ledford:  The biggest trend, obviously, was the funded ratio improvement. But we saw other trends as well. Being on the front lines of LDI, we saw strong flows into more long-duration corporate fixed income. As plans became better-funded, they started reallocating from what we typically call ‘return-seeking assets’ into more ‘liability hedging assets.’ We saw more clients moving down their glide path. That was pretty consistent throughout Q3 and Q4 of 2013.

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