NEPC Survey: Majority of Defined Benefit Plans Expect Recession, Negative Returns Due to COVID-19

BOSTON--(BUSINESS WIRE)--NEPC, LLC one of the industry’s largest independent, research-driven investment consulting firms, today announced the results of a survey of defined benefit plan sponsors, conducted to gauge their views on the U.S. economy and investment strategies amid the COVID-19 pandemic.

“The rapid spread of the new coronavirus has rattled markets and shaken corporate pensions who are trying to determine the true economic and market impacts of this pandemic,” said Brad Smith, Partner and member of NEPC’s Corporate Practice Group. “Our survey of defined benefit plan sponsors showcases a deeply negative view of the economy and stock market, with the majority of plans expecting a COVID-19-led recession and negative returns on equities. While this is a new landscape of uncertainty, NEPC is counseling corporate pensions and all investors to mitigate risk by staying diversified, rebalancing towards targets, and having a clear plan of action.”

Top findings include:

• Investors expect a possible U.S. recession due to COVID-19: Seventy-nine percent of respondents say there is a 50 percent or greater chance of a recession, with all respondents indicating there is at least a 25 percent or greater chance.

• Negative interest rates in the U.S. are unlikely: Sixty-seven percent of respondents believe negative interest rates are unlikely (only a 25 percent chance of occurring). Fourteen percent of respondents indicated they believe there is no chance.

• The majority of investors are staying the course: Fifty-two percent of all respondents stated the market is too volatile for action. Those that are making adjustments are rebalancing to targets (31 percent) and raising cash (seven percent).

• Investors expect negative returns from the S&P 500 in 2020: Sixty-three percent of all respondents expect a negative return in 2020 with 15 percent expecting a loss greater than -10 percent for the year. Only 37 percent of respondents expect positive returns.

Of those surveyed by NEPC’s Corporate Defined Benefit Group, 53 percent had an asset size of less than $1 billion, with 47 percent of respondents having an asset size greater than $1 billion. The results of the survey indicate that asset size might play a role in a plan’s economic and market outlook.

Larger plans (above $1 billion in assets) are more likely to have a negative view of the economy, with 34 percent of these respondents indicating that COVID-19 is likely to lead to a recession (greater than 75 percent chance). This is compared to the 24 percent of smaller plans (less than $1 billion in assets) who believe the same. This difference in perception applies to markets, as well. Almost half (47 percent) of larger plans expect positive returns from the S&P 500 as compared to only 28 percent of smaller plans.

To learn more about how NEPC is helping institutional investors navigate COVID-19-driven volatility, click here. For more information on NEPC’s Corporate Defined Benefit Flash Poll, click here.

About the Survey

This NEPC poll was conducted online by the Corporate Practice Group the week of March 9th, 2020. The survey respondents represent a diverse array of corporations and not-for-profit healthcare organizations. Sixty-five percent of survey respondents oversee more than $500 million in assets. Copyright is held by NEPC.

About NEPC, LLC

NEPC is an independent investment consultant and private wealth advisor with more than 30 years’ experience creating research-based, bespoke investment portfolios that align to the goals of its clients and their constituencies. Combining a proprietary research team dedicated to the long-term challenges facing institutional and high-net investors, with our unique client-centric model, NEPC builds the investment portfolios defining the future of finance.

We service over 360 retained clients representing assets over $1 trillion from our offices in Boston, Atlanta, Charlotte, Chicago, Detroit, Las Vegas, Portland and San Francisco with a forward-thinking approach to solving the most complex challenges facing the investment industry.

To learn more about NEPC, please visit https://www.nepc.com/