Sponsors of pension plans in the US
are increasingly shying away from equity and turning to
liability-matching investment strategies, reports Aon Hewitt, the
consulting and human resources unit of Aon Corporation.

Ari Jacobs, retirement strategy
leader at Aon Hewitt, commented: “Once just a strategic idea
without much traction, liability-matching investments continue to
grow as a proportion of plan assets. Regardless of the future
direction of equity and bond markets, this shift should bring less
volatility and greater predictability to pension plan costs.”

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Based on a study of 227 large US
employers, representing $389bn in total assets, Aon Hewitt found
that in 2010, 38% of pension plan sponsors reduced their exposure
to domestic equities. The same percentage of sponsors expect to do
so in 2011.

Just 4% expect to increase domestic
equity exposure.

Aon Hewitt’s study also revealed
that plan sponsors are primarily shifting assets to
liability-matching investments with long-duration corporate bonds
as the asset of choice.

Nearly a third (32%) of plan
sponsors expect to increase allocation to long-duration bonds and
24% expect to increase allocation to other corporate bonds, while
just 13% expect to do so for government bonds.

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Aon Hewitt’s global head of
retirement Cecil Hemingway noted that as funding levels of pension
plans improve from the dangerously low levels seen in 2008 and
2009, attitudes of plan sponsors are shifting.

“Confusion and anxiety have faded, and most sponsors are making
substantial changes in the management of their retirement
programmes,” said Hemingway.