Seeking an escape from volatile contribution requirements, pension plan sponsors increasingly are adopting investment strategies that focus more on matching liabilities than on generating overall return on plan assets.

A recent poll by SEI, an asset management and investment firm, suggests more than half of executives overseeing pensions are adopting a “liability driven” investment strategy—one where the investment objective is to meet the liability and minimize necessary cash contributions rather than seek overall return on plan assets. The SEI poll showed 54 percent of plan sponsors are pursuing such an approach in 2009 compared with only 20 percent in 2007. Only 15 percent of respondents said absolute return is the most important metric for measuring plan performance.

SEI said 70 percent of survey participants see greater value in a liability-driven investment strategy as a result of recent market volatility. Nearly all participants said they use long-duration bonds as part of the liability-driven strategy, though less than half said they use interest rate derivatives to achieve the objective.

“In the past, plan sponsors had a much more asset-only perspective when measuring the success of a portfolio,” said SEI Chief Actuary Jon Waite. “Given the losses they’ve incurred in 2008 and 2009, plan sponsors are now saying ‘how can we avoid that pain in the future?’ Liability driven investing is getting a lot more attention after all the ups and downs plan sponsors have suffered in the past 18 months."