The increasing complexity of pension investment management and the need to control the negative impact of investment volatility upon corporate financials are prompting Canadian organizations to reevaluate the management of their pension investments, according to a survey sponsored by asset manager SEI.

Of the 100 organizations polled across the country, more than half (55%) said they were reevaluating their investment management approach with 42% reporting that the main factor for considering alternative approaches is a need to better control investment volatility. Almost all (95%) acknowledged that the traditional consultant model of pension investment management is not the only available option to their organization.

The survey asked pension plan sponsors, at various corporations across Canada who manage $25 million to more than $1 billion in pension assets, if investment management is increasing in complexity. Seventy per cent of managers, who use the traditional consultant model of pension management, said they feel managing pension investments has become increasingly complex. In contrast, only half of sponsors polled, who handle investment decisions internally, felt the same way, with only 8% of those who use a manager of managers model noting an increase in complexity.

“As pension investments become more difficult to manage, plan sponsors are recognizing that it is time to evaluate the current approach and determine if it addresses their new challenges,” said Andrew Kitchen, managing director, strategies & solutions, SEI Global Institutional Group, in a release. “Pension plans are negatively impacting company financials and are drawing increased scrutiny.”

Survey results confirm that 31% of the pension sponsors using the traditional consultant model say the pension is negatively impacting the company’s financials. Sixty-seven per cent report feeling that the pension expense is unpredictable and therefore unmanageable, with the majority (95%) noting that closing the plan to new entrants or freezing accruals will not alleviate the problems caused by the plan.

“In Canada, the current risks the pension plan is posing to the organization will continue as long as plans are open to new participants and are still accruing benefits,” noted Kitchen. “The pension plan is a growing liability and the management strategy for it is beginning to draw the attention of many boards and CEOs.”

A complete summary of survey results can be found at www.seic.com/institutions/cda/en.