Three quarters (73 per cent) of senior pension fund executives said the pension fund they work for would increase their budget for, and focus on, scenario modelling, asset-liability management, and stress testing over the next two years, Ortec Finance has found.

Ortec Finance said this included 20 per cent who were planning to increase their budget and focus “dramatically”.

The research also found that a further one in five (21 per cent) said their budget and focus in this area would stay the same as it is today, while 6 per cent said this would decrease over the next two years.

Around a third (32 per cent) of pension fund managers said the fund they work for was already very effective at scenario modelling and stress-testing, while 66 per cent said it was quite effective and 2 per cent said it was not very effective, highlighting that most senior executives see room for improvement.

In addition to this, the research found that almost half (44 per cent) of pension funds outsource their asset-liability management (ALM) studies, while an additional 50 per cent partially outsource but do some of the work in-house.

Meanwhile, 4 per cent of pension fund managers said they do not outsource ALM studies.

Ortec Finance said that part of the reason behind this was due to one in eight (12 per cent) rating the quality of its in-house ALM monitoring capabilities as excellent, meanwhile, 64 per cent rated it as good, and 24 per cent rated it as average.

Ortec Finance managing director global pension risk, Marnix Engels, said that with the increased market and geopolitical uncertainty, Oretc Finance said scenario modelling is one of the best methods for supporting pension funds looking to navigate “unknown waters”.

“It’s promising to see that the pension plan managers surveyed plan to increase their budget set aside for stress-testing and scenario modelling because we see those who do benefit as scenario modelling can leave managers better prepared to make decisions in light of increased uncertainty,” he added.

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