Corporate Pensions Break Out of Herd Mentality: Report

The largest U.S. corporate pensions have diversified their investment strategies and broken out a herd mentality, according to new research.

Bob Collie of Russell Investments studied the regulatory filings of the twenty largest U.S. corporate pensions. He found:

For me, the most striking feature is the divergence between the investment approaches. Once upon a time, pension plans paid a lot of attention to peer group comparisons.

Among the twenty corporations in the $20 billion club, we today see significant differences in just about every aspect of investment strategy:

– Return-seeking vs. liability hedging: Ford’s U.S. plans have 77% of their assets invested in fixed income, and just 7% in listed equity. Johnson & Johnson has 79% of their worldwide pension assets invested in equity, just 21% in fixed income.

– Global or domestic bias: over half of UPS’s U.S. plan equity assets are international. Honeywell’s U.S. plan equity assets are 76% domestic.

– Real estate: Dow, Northrop Grumman and Verizon each have around 10% of worldwide pension assets invested in real estate. Exxon Mobil has none.

– Private equity: Verizon has a 19% allocation to private equity; Federal Express less than 1%.

– Hedge funds: Over 12% of UPS’s pension assets are invested in hedge funds. Five club members have no allocation.

Read the full blog post here.

Photo by Sarath Kuchi via Flickr CC License