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Nearly half
of pension schemes managers have shifted investments from equities
to bonds, according to a survey by Aon Consulting.
Over 100 defined benefit (DB) pension manager across the UK were
questioned on changes made to their investment strategies in the
previous 12 months, and research showed that 46 per cent of schemes
had reallocated investments from equities to bonds. 23 per cent
of these schemes reallocated a major shift from equities to bonds,
and the same proportion reallocated a minor shift in the same way.
The remaining 54 per cent had made no change to their investment
strategy.
Pension schemes have adopted a wider range of diversifying asset
classes, which are used to reduce investment risk without reducing
expected returns. UK property continued to be the most popular non-equity
asset, with almost half of schemes (44 per cent) holding this investment
type in their portfolio. Diversified growth funds have also proved
popular with schemes, and a fifth choose to invest at least part
of their portfolio in these vehicles. Over two fifths invested in
private equity or hedge funds, and a further fifth in diversified
growth funds.
Commitment to liability driven investment (LDI) has not grown significantly,
and the 13 per cent of schemes choosing to match assets and liabilities
in this way remained at similar levels to those found in Aon’s
2007 survey, which is thought to be largely due to relatively low
level of long-term interest rates.
Commenting on the results, Daniel Peters, investment consultant
and actuary, said: “It’s no surprise that as pension
schemes mature and trustees become increasingly risk aware nearly
half have moved some part of their growth portfolio into matching
assets.
To reduce volatility further, growth assets require diversification
away from equities.
“Initial indications show that during the credit crunch and
the subsequent fall out already seen during 2008, volatility of
these funds is considerably reduced compared to the traditional
equity-only strategies.”
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Pensions Age July 2008
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