2013 PYRAMIS US TAFT-HARTLEY (UNION) PULSE POLL

Pyramis Global Advisors conducted its first survey of executive directors and other officers at 102 Taft-Hartley defined benefit (DB) plans during April and May 2013. Respondent assets under management totaled more than $150 billion USD representing 33% of the Taft-Harley DB market. The survey was executed in association with Asset International, Inc. Plan executives anonymously responded to an online questionnaire.

Our respondents filled out a comprehensive survey; among the topics covered, we asked about:

  • Sustainability of the multiemployer DB system as well as plan specific issues
  • Concerns and challenges within portfolio management along with intended allocation changes
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Key System Takeaways

Concerns regarding the current multiemployer defined benefit system

Views on system sustainability

We think the current multiemployer defined benefit system is sustainable

  • Agree; 34%
  • Neither agree or disagree; 28%
  • Disagree; 37%

Top Three Changes Being Considered

  • Increasing member contributions; 36%
  • Changing the benefits formula (e.g. pushing out the retirement age); 30%
  • Shifting from a DB to a defined contribution plan; 10%

Key Investment Takeaways
Top Three Investment Concerns

  • Low return environment; 39%
  • Volatility; 25%
  • Risk Management; 22%

Top Three Investment Challenges

  • Determining an asset allocation that diversifies risk exposure (e.g. limiting exposure to economic risk and replacing with credit risk or sovereign risk); 39%
  • Controlling total plan costs; 31%
  • Executing timely asset allocation decisions; 22%

Top Changes to Overcome Challenges

  • More investment committee education; 38%
  • Improved reporting on total plan costs; 29%
  • Soliciting counsel from an investment consultant (if not already engaged); 26%
  • Streamlining decision making process through pre-approved opportunistic allocation; 20%
  • Giving fewer managers more latitude to make asset allocation decisions; 20%

Top Changes to Increase Returns

  • Allowing more flexible mandates; 25%
  • Increasing use of liquid alternatives; 24%
  • Increasing use of illiquid alternatives; 22%

Changing investment partner relationships

  • Yes; 60%
  • No; 40%

Yes response options: Yes we’re relying on our investment partners for assistance with investment policy design, strategic asset allocation, and oversight of manager lineup (i.e. partial fiduciary management); 41%, Yes we’re giving broader mandates and more latitude to fewer partners (i.e. strategic partnership); 17%, Yes we have entrusted all investment management, fiduciary, and operational decision making to an investment partner(s) (i.e. full fiduciary management); 2%

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Insights

Moving Forward Despite Uncertainty - Full Report

June 2013

Leaders at U.S. Taft-Hartley pension funds, simply put, have their hands full operating within a very challenging multiemployer system. Nearly forty percent are uncertain the current system is sustainable. As a result many structural and investment changes are being considered.

US Taft-Hartley (Union) – Fact Sheet

June 2013

The factsheet captures respondent demographics as well as aggregate results to all questions in the survey

2012 Pyramis Global Institutional Investor Survey Results

December 2012

The Pyramis global institutional investor survey regularly asks leading pension plan sponsors about the challenges they face and the opportunities they see to overcome them. This year’s survey findings show that while managers in both sectors have ambitious goals, corporate plan sponsors seek lower risk and cost, while those in the public sector are trying new approaches to increase return.

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