The vast majority of U.S. public pension funds plan to increase spending on scenario modeling and stress testing in the next two years, according to a report from Rotterdam, Netherlands-based risk management consultant Ortec Finance.

According to interviews conducted in February with 50 fund executives overseeing a total of $1.315 trillion in assets, 90% plan to increase spending on those items to help manage market volatility.

“Many pension plans saw the value of their assets fall last year in what was a tough time for markets and are clearly preparing for future market shocks,” said Marnix Engels, managing director, pension strategy, at Ortec Finance, in a news release Wednesday. “The degree of uncertainty is extremely high for U.S. public sector pension plan sponsors, but there is genuine optimism that lower inflation will become well-established with very few managers expecting it to be as high as it currently is within a year or two.”

Ninety percent of public pension fund executives said they are confident that inflation is on the decline, with 52% saying they believe inflation could be 3.3% or lower by the end of 2023, while 10% said they believed inflation would be over 6% in that time frame.

The vast majority — 86% — say their pension funds are well hedged against inflation, with 26% saying they believe they’re “very well” hedged.

Read more @pionline