Liabilities to remain focus for pension schemes

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Liabilities to remain focus for pension schemes

LONDON, UK - Pension scheme trustees and sponsors will continue to focus attention on their liabilities this year, the asset management firm Schroders has stated.

Diane Knowles, director of strategic solutions, explained that three years of negative equity returns up to the end of 2002 had forced many schemes to pay increased attention to their liabilities last year as many moved in to significant deficits.

This has led many trustees to question both the amount of equity exposure and whether setting a fixed benchmark between equities and bonds is the best strategic approach for meeting their liabilities, she added.

Ms Knowles continued that although better matched portfolios tend to consist of bonds, the higher on-going costs associated with bonds is currently “unpalatable” for many fund sponsors due to the deficit currently exhibited by many funds.

Allied to the fact that equities over the long term should continue to deliver good returns, she concluded: “Therefore, although we believe closer attention will be paid to the liabilities, most schemes will continue to pursue strategies which seek to improve their investment returns and reduce their deficit.”

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