A global survey of pension plans shows that 91 percent ofinstitutional investors have confidence they can achieve targetreturns in the next five years, a notable improvement inperspective, according to Pyramis Global Advisors, a FidelityInvestments company.

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But beyond the increase in confidence levels—only 65 percent ofinstitutions believed they would meet near-term objectives whensurveyed in 2012—there are wide regional differences on volatilityexpectations and faith in alternative investments.

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Only 7 percent of U.S. institutions expect volatility todecrease, and 42 percent expect it to increase. Far more Asian andEuropean institutional investors are expecting a decrease inboom-bust market cycles.

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U.S. institutional investors say their top concern is funding status, with a majority of pensionssaying they intend to improve it.

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But they don’t plan to increase their investments in alterativeassets to achieve that goal, according to Pyramis.

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Only 22 percent of surveyed U.S. institutions plan to increaseallocations to illiquid alternatives over the next two years, and31 percent of those institutions say hedge funds are the mostlikely investment class to underperform.

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There is a huge gap in how U.S. institutions perceive the valueproposition of alternative investments relative to their globalcounterparts. Only 19 percent of U.S. plans say the expensive feesthat come with hedge funds and private equity are worthpaying, whereas 91 percent of Asian investors and 72 percent ofEuropean investors are comfortable with the fees.

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Clearly, U.S. institutions are re-evaluating the risks andrewards with alternatives, according to Derek Young, vice chairmanof Pyramis Global Advisors.

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“U.S. institutions are preparing to move back to a moretraditional, back-to-basics portfolio,” he said.

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In the U.S., the primary focus on improving funding status ismuch stronger with public plans, given their systemic fundingissues relative to private defined benefit plans. Almost two-thirdsof public plans are focused on improving their funding status,whereas only 37 percent of private plans feel the need to doso.

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European and U.S. investors report favoring North American overemerging Asian markets in the mid-term, while 71 percent of Asianinvestors are expecting the emerging markets in their own backyardto outperform the rest of the globe.

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Pyramis surveyed 811 institutional investors in 22 countries,including 191 corporate plans and 71 public plans in the U.S.

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.