DB schemes are “surging” into hedge fund investment, driven by market volatility and wider macro-economic uncertainty, Aon has claimed.

According to the firm, DB schemes are seeing hedge funds “as a means both to drive returns and to strengthen the resilience of their portfolios”.

The improved funding levels for many DB schemes, thereby accelerating their endgame focus, has also prompted schemes to look at shorter-term investment horizons, it added.

“Different economic times demand different investment approaches, and hedge funds are currently offering an opportunity that pension schemes need,” Aon investment practice partner, Tim Banks, said.

The current economic backdrop and the changing investment needs of UK pension schemes has led to many reviewing their portfolios, Aon partner and head of EMEA fund management, Guy Saintfiet, stated.

“Unlike the defined contribution scheme sector, where there is an increased emphasis on illiquid investments, the shorter-term investment horizons of DB schemes – prompted by thoughts of moving to a risk settlement solution or plans to run-on – have made illiquids less of an option and reopened greater interest in more agile hedge fund investment,” he explained.

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