WASHINGTON, June 26, 2007 – In an era of increasingly sophisticated investment choices, many multinational companies are reexamining global investment policies and risk management strategies related to their retirement plans, a new survey by Watson Wyatt Worldwide, a leading global consulting firm, has found.
The survey of 101 large multinational companies based in 20 countries found that 31 percent are considering moving toward a more consistent global investment policy for retirement plans. Additionally, another 9 percent plan to implement such a policy in the next three years. Even more – about 21 percent – are implementing a consistent global risk management policy over the next three years, and another 20 percent are considering such a policy.
“With their exposure to opportunities throughout the world, multinationals are particularly well-positioned to gain higher returns from innovative investment strategies, especially those including alternative investments,” said Carl Hess, head of Watson Wyatt’s investment consulting practice in North America. “However, as investment approaches become more sophisticated, the need for more globally consistent governance and investment policy increases as well.”
Multinationals also are concerned about other global governance issues related to pensions and defined contribution (DC) plans. The vast majority (78 percent) of companies report that the efficient governance of worldwide pension plans is a major issue for them, and about half (53 percent) have reviewed their global governance procedures in the last three years. Eighty-three percent of those organizations have made changes. Concern over regulatory risk was the reason for the change 69 percent of the time.
The majority of companies (72 percent) say they struggle to implement policies worldwide because of regional legal and regulatory issues. As a result, many of the changes that multinationals have implemented have been modest, such as setting consistent contribution levels to DC retirement plans. However, most companies do not have a governance system in place to review DC plans: Sixty percent of companies say DC investment options are never reviewed by corporate headquarters or are reviewed only on an ad hoc basis. DC plans are company retirement plans in which employees contribute a portion of their salary and bear the investment risk, such as 401(k)s in the United States.
“Successful multinational organizations often have a huge range of retirement plans for their employees worldwide which, together with variations in local laws and regulations, makes oversight of these plans a challenge,” said Simon Gilliat, global head of Watson Wyatt's international practice. “Companies can make progress by gaining a better understanding of their retirement liabilities around the world and then constructing an approach that is suitable for their particular needs and circumstances.”
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. The firm provides coordinated investment strategy advice based on expertise in risk assessment, strategic asset allocation and investment manager selection to some of the world’s largest pension funds and institutional investors. It has nearly 400 associates in Europe, the Americas and Asia. In the United States, 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 is a registered investment adviser with the Securities and Exchange Commission.
About Watson Wyatt Worldwide
Watson Wyatt (NYSE: 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 6,000 associates in 30 countries and is located on the Web at
www.watsonwyatt.com.
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