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Sharp Decline Projected for Target Equity Allocations WASHINGTON, Aug. 25 /PRNewswire-FirstCall/ -- Corporate pension funds have been making numerous changes to their investment programs in response to the economic crisis, including significantly reducing their target equity allocations and shaking up their fund manager lineup. However, relatively few funds have taken steps to better plan and implement risk strategies or lower costs, according to a new survey by Watson Wyatt, a leading global consulting firm. According to the survey, two-thirds (67 percent) of companies have made or are planning to make policy changes in 2009 and 2010 to their defined benefit (DB) plan asset allocations. By next year, these organizations project that they will have decreased their average target equity allocations to 47.8 percent, a nearly 10 percentage point drop since last year. The survey also found that almost three-quarters (73 percent) of companies have hired or fired managers since June 2008 -- 52 percent having both hired and fired managers. The Watson Wyatt survey was conducted in August 2009, and includes responses from 85 senior-level financial executives from large, U.S.-based companies. "This activity is a seismic shift from business as usual," said Carl Hess, global director of investment consulting at Watson Wyatt. "The uptick in activity could be a sign that many funds were caught off guard by the crisis and are now trying to mitigate their risk exposure." The survey also found mixed results in terms of measures employers are taking to improve their DB governance strategies. Less than half (41 percent) will have implemented cost-cutting strategies by the end of 2009, while only 12 percent will have established a risk advisory committee. However, nearly two-thirds (62 percent) have taken a more stringent approach to managing fiduciary risk since June 2008, and 62 percent will have conducted stress tests on their ability to meet future funding requirements by the end of 2009. "Given the current market, finding solutions to reduce exposure to risk and improve overall investment performance is critical," said Hess. "While some employers may be limited by the steps they can take, most should be able to find ways to better manage their risks, optimize returns and improve their overall governance strategies." Employers have also been making changes to the investment lineups of their defined contribution (DC) plans -- more than half (56 percent) have already made changes since June 2008 or are planning to by the end of 2009. Many of these changes focus around adding or deleting existing investment funds. Nearly half (45 percent) of companies added new U.S. equity funds to their lineup, while 62 percent dropped an existing U.S. equity fund. Other findings: -- The vast majority (93 percent) of companies offer a default investment option in their DC plan. Of these companies, 71 percent offer a target-date fund. -- One in five (20 percent) of the companies have either already made or plan to make changes to their target-date funds, despite the relative newness of these products. Of these companies, 11 percent have chosen to apply more conservative strategies, 42 percent have made changes to lower costs, and 32 percent have made changes to build custom strategies. For more information, please visit http://www.watsonwyatt.com/newrealityreport. About Watson Wyatt Investment Consulting Watson Wyatt Investment Consulting, a division of Watson Wyatt, is focused on creating financial value for institutional investors through independent, best-in-class investment advice. We are specialist investment professionals who provide coordinated investment strategy advice based on expertise in risk assessment, strategic asset allocation, and investment manager selection. Watson Wyatt Investment Consulting provides investment advice to some of the world's largest pension funds and institutional investors, and has more than 550 associates in Europe, the Americas and Asia. In the U.S., investment advisory and investment consulting services are provided by Watson Wyatt Investment Consulting, Inc., which is a subsidiary of Watson Wyatt Worldwide Inc. Watson Wyatt Investment Consulting, Inc., is a registered investment adviser with the Securities and Exchange Commission. About Watson Wyatt Watson Wyatt (NYSE:WWNASDAQ:WW) is the trusted business partner to the world's leading organizations on people and financial issues. The firm's global services include: managing the cost and effectiveness of employee benefit programs; developing attraction, retention and reward strategies; advising pension plan sponsors and other institutions on optimal investment strategies; providing strategic and financial advice to insurance and financial services companies; and delivering related technology, outsourcing and data services. Watson Wyatt has 7,700 associates in 33 countries and is located on the Web at http://www.watsonwyatt.com/. DATASOURCE: Watson Wyatt CONTACT: Ed Emerman for Watson Wyatt, +1-609-275-5162, ; or Steve Arnoff of Watson Wyatt +1-703-258-7634, Web Site: http://www.watsonwyatt.com/

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