Defined benefit (DB) plan sponsors took an unexpected hit when the market crashed because of the COVID-19 pandemic, and many found past strategies they used in bear markets needed to be tweaked for the unprecedented volatility that followed.
The volatility is likely to continue for an unknown amount of time, and some financial professionals are speculating about whether and when another market fall is likely. An Insights article from Willis Towers Watson suggests institutional investors should adopt the right strategy, investment approach and governance structure for a permanently changed environment rather than building a framework that depends on waiting for a recovery. “Rather, the aim should be to be well-positioned to deal with a continued period of uncertainty, whether this is directly related to the current pandemic or something that is as yet unforeseen,” the article concludes.
“We do think there will be a lot of uncertainty from here given that there are several different paths the economy can take,” says Jon Pliner, senior director, investments and U.S. head of delegated portfolio management, Willis Towers Watson in New York City. He adds that DB plan sponsors need to manage risk at a total portfolio level.