UK - Almost half of defined benefit (DB) schemes have shifted their asset allocations from equities to bonds over the past 12 months, data from Aon Consulting has revealed.
Daniel Peters, investment consultant and actuary, Aon, said: "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."
Peters said the move was "no surprise" given the bottom line volatility of pension funds. "To reduce volatility further, growth assets require diversification away from equities," he added.
The survey also showed the take up of liability driven investment (LDI) had not grown over the past year, with many trustees citing the low interest rates as making LDI approaches too expensive. Just over 10% of UK funds said they had an LDI strategy.
Among non-equity asset classes, property remained a favourite for diversification purposes. Some 44% of UK funds said they had holdings in property, while around 20% had private equity/infrastructure and absolute return funds.
Peters said: "Alternative assets such as funds of hedge funds that have low correlations with more traditional investments can be used to target a similar level of return to equities but with lower volatility. Indeed, whilst equity values fell over the first quarter of 2008, many funds of hedge funds have proven remarkably resilient."
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.