Survey by Fidelity Institutional Unit shows U.S. public pension plans increasing their risk tolerances and corporate plans adding more fixed income

    - Pyramis Global Advisors survey also finds that both more open to non-
    traditional investment strategies -

    TORONTO, April 17 /CNW/ - A survey of large U.S. corporate and public
defined benefit (DB) plans released today in Canada by Pyramis Global
Advisors, the institutional money management arm of Fidelity Investments found
that many plans are considering new investment strategies to help them deliver
on their obligations to employees. The survey found for the first time in its
five-year history that U.S. public DB plans invested in more international
equities than corporate DB plans. Another first revealed by the survey was
that, in 2006, corporate pension plans allocated more assets to fixed income
than public pension plans did.
    These findings are part of the fifth-annual Pyramis Global Advisors
Defined Benefit Survey of more than 200 of the largest U.S. corporate and
public defined benefit (DB) pension plans.
    "While U.S. corporate and public pension plans have historically had
different concerns and motivations, these differences became magnified in
2006," said Michael Barnett, executive vice-president of Fidelity's retirement
services in Canada (including Pyramis). "The Canadian pension industry has
historically mirrored the U.S., so these findings offer great insights into
what could happen for pension plans in this country."

    Dramatic changes in U.S. pension industry in 2006

    The U.S. pension industry experienced significant regulatory and
accounting changes in 2006, including the introduction of the Pension
Protection Act (PPA) and new standards for corporate plans from Financial
Accounting Standards Board (FASB). As well, public plans must now adhere to
new rules from the Government Accounting Standards Board (GASB). The PPA has
increased DB plan funding requirements and accelerated the timeframes to fully
fund a plan. The changes mandated by FASB and GASB require organizations to
report their pension plan deficits or surpluses on the income statement. (A
recent decision by the Canadian Accounting Standards Board (AcSB) now requires
plans to report net funded position of the plan, disclosed as a footnote on
financial statement, and recognized as an asset or liability on the balance
    "In the face of new regulatory pressures, many plans were forced to
re-examine their investment approaches," said Peter Chiappinelli, senior vice
president, Pyramis Global Advisors. "The concerns identified in this survey
show a marked shift in attitudes toward any investment strategy that can
reduce volatility or improve returns."

    Corporate DB plan sponsors rank earnings volatility as top concern

    The survey found that nearly 40% of executives from corporate DB plans
cite "earnings volatility" as their top concern. Under the new laws and
accounting rules, corporate DB plans now must adhere to faster and higher
funding requirements. To address their concerns with volatility to the
financials, corporations have begun using or considering risk management
strategies. For instance, half of all corporate DB plans claimed that they
were using or considering liability driven investing (LDI).
    According to the survey, to meet the goal of increasing returns, a large
percentage of corporate DB plans are open to new investment approaches and
reducing the past restrictions that they placed on their investment managers.
For example, results showed that many are looking beyond long only stock
portfolios, with 63% of corporate DB plans using or considering 130/30 equity
portfolios in which investment managers have limited ability to sell stocks
short. In addition, 20% of corporate DB plans said they will be increasing
allocations to non-U.S. equity and 19% of corporate DB plans said they would
be increasing allocations to real estate.

    Public DB plan sponsors focused on investment performance in a low-return

    The survey showed public DB plans are beginning to wrestle with new rules
under the GASB. Chief among their rising concerns regarding costs are
increasing life expectancies (e.g. new mortality assumptions) and rising in
health-care costs.
    Public plans are now more focused on investment performance with 53%
citing a low-return environment as their biggest concern. In addition, the
survey found that many plans were considering new ways of engineering their
portfolios. For instance, survey results found that more than 80% of large
public DB plans are either using or considering portable alpha programs.
    "Public and corporate DB plans share a common need to find and employ new
investment strategies and are loosening many of the historical constraints
they've been under. They are interested in non-traditional strategies to help
meet their return targets in a low-yielding, single-digit return environment,"
added Chiappinelli.

    About the Survey

    The fifth annual defined benefit survey was designed by Pyramis Global
Advisors and was executed by Asset International, Inc, in October 2006. CIOs,
treasurers and executive directors from 214 of the largest DB plans in the
United States (124 corporate, 90 public) responded to an online questionnaire.

    About Pyramis Global Advisors

    Pyramis Global Advisors, a Fidelity Investments company, is an investment
management firm focused on serving institutional investors such as corporate
and public retirement funds, endowments and foundations. Pyramis offers
Canadian institutional investors active and risk-controlled domestic equity,
international equity, fixed-income, real estate, and alternative disciplines,
which includes products using equity market neutral strategies. As of
December 31, 2006, assets under management total approximately $149 billion.

    About Fidelity Investments

    Fidelity Investments is Canada's eighth largest mutual fund company and
part of the Fidelity Investments organization of Boston, one of the world's
largest providers of financial services. In Canada, Fidelity manages a total
of $43 billion in mutual fund and corporate pension plan assets. It offers
Canadian investors a full range of domestic, international and income-oriented
mutual funds. Fidelity funds are available through a number of advice-based
distribution channels including financial planners, investment dealers, banks,
and insurance companies. Fidelity Investments also administers defined
contribution plans and manages defined benefit assets on behalf of corporate
clients across Canada.

For further information:

For further information: Chris Pepper, Director, Media Relations,
Fidelity Investments Canada Limited, Office: (416) 307-5388, Mobile: (416)
795-7762, Email:

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