Insights Investment

"This [coronavirus] has put a lot of strain and stress on pension deficits, and it's going to get worse," said Kevin McLaughlin, head of liability risk management at Insight Investment. "Pressures that were there before are now magnifying…underfunded plans will have to engage in "firefighting" to ensure they have enough cash on hand to pay their obligations in the short term, in the long term, plans will need to craft a "liquidity strategy that's more formal than they've had in the past…When the dust settles, you'll see plans making more fundamental changes to their investment strategies going forward."

Insight Investment expects to see “record” levels of rebalancing for the quarter’s end. Yet not too long ago corporate pensions were more hesitant to go down that route…Especially in the current crisis, with its twists and turns, being quick might be the only way to capture some of the opportunities as reactions from the Fed and the government are coming in quicker than during the great financial crisis. “The time frames we’re working with right now are magnitudes shorter. If you had a month during the great financial crisis to react to a market opportunity, you have days in the current period,” Insight says.

In its U.S. Pension Market Quarterly Outlook, Insight Investment looks at what it calls generally the most complex pension liabilities of all—cash balance plans—and how they can be managed in practice. Insight notes this matters because most of the firm’s clients are on the path to de-risking their plans, and, as they get farther down the path, managing assets to liabilities gets more important—unhedged liability risks become a bigger component of residual risk.