Ortec Finance: Pension schemes set to increase spending on scenario modelling

Ortec Finance: Pension schemes set to increase spending on scenario modelling

December 3, 2024

Pension
Pensioen (08) sparen geld

Pension plans see room for improvement on their current scenario and risk modeling activities, according to new research from Ortec Finance.

The majority of pension funds surveyed report they will increase their budget for and focus on scenario modeling and stress-testing over the next two years. Just one in three reported that their fund is currently very effective on scenario modeling and stress testing. The survey targeted senior pension fund executives in the UK, Europe and North America whose plans collectively manage $1.451 trillion in assets.

Almost three quarters (73%) of those surveyed say the pension fund they work for will increase their budget for and focus on scenario modeling, asset-liability management, and stress testing over the next two years. That includes 20% planning to increase their budget and focus dramatically. A further one in five (21%) say their budget and focus in this area will stay the same as it is today, and only 6% say this will decrease over the next two years.

Moreover, around a third (32%) of pension fund managers surveyed say the fund they work for is already very effective at scenario modeling and stress-testing. Around two thirds (66%) say the fund they work for is quite effective and 2% say it’s not very effective. The majority of senior executives therefore see room for improvement.

Nearly half (44%) of pension funds outsource their asset-liability management (ALM) studies, and an additional 50% say they partially outsource this but do some of the work in-house. Only 4% say that they don’t outsource ALM studies. Part of the reason behind this is likely to be due to only around one in eight (12%) rating the quality of its inhouse ALM monitoring capabilities as excellent. Around two-thirds (64%) rate it as good, and around a quarter (24%) rate it as average.

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