The majority of pension funds are currently relying on investment consultants and specialist companies for most of their stress testing and scenario modelling, according to research from Ortec Finance.

The international study of pension fund managers found that 57 per cent source more than half of their stress testing and scenario modelling from pension fund investment consultants, while 53 per cent use specialist firms more than half the time for testing and modelling.

Two in five (40 per cent) pension fund managers carry out more than half of their stress testing and scenario modelling in-house.

However, the study with pension fund managers in the US, UK, Australia, Canada, the Netherlands, Switzerland, Denmark, Finland, Norway, and Sweden found that this trend could change.

More than half (52 per cent) of those surveyed said they expected to carry out more than half of their stress testing in-house within three years.

Ortec noted that the shift was unlikely to be due to dissatisfaction with their current stress testing and scenario modelling service, as 43 per cent rate the accessibility, user friendliness and general usefulness as excellent and 44 per cent said it was good.

Just 12 per cent stated that the service they receive is average.

“Stress testing and scenario modelling are clearly very important to pension funds and they are willing to spend on consultants and specialist firms for support,” commented Ortec Finance managing director pension strategy, Marnix Engels.

“That will not change markedly over the next three years according to our study but there are signs that funds plan to take a more active role in stress testing and scenario modelling.”

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