More than 90% of pension funds are considering changes to their governance model in response to low yield and demographic challenges, a recent State Street survey revealed.
The poll, conducted among 400 pension experts in 20 different countries, highlights that institutions are increasingly aware of the need for change. Improving transparency, reporting and data service were considered key priorities for 41% of respondents.
Pension funds are also increasingly dissatisfied with their custodians, with only 32% expressing confidence that custodians are able to consider a long-term vision in their portfolio management.
Moreover, among pension funds which prioritise tackling deficits, six out of ten consider increasing their exposure to hedge fund strategies. However, among all survey respondents, only a third would consider increasing hedge fund exposure.
Another key trend is the focus on consolidation, with 80% of all respondents considering merging assets and obligations of several pension funds, in an attempt to reduce costs and enhance operational efficiency.
“Amidst a difficult economic environment and demographic challenges, the most innovative pension funds can be seen to tackle the difficulties with optimism” comments Oliver Berger, head of Asset Owner Solutions & Strategic Market Initiatives, Sector Solutions EMEA at State Street.
“While there isn’t a single strategy to solve all problems in the industry, these pension funds focus on the right combination of talent, strategy, risk, and efficiency improvements” he concludes.
Among the respondents, 68% represented private s and 25% public pension funds.