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 top stories this week were the High Court's decision to block the £12bn annuity transfer from Prudential to Rothesay Life, and a separate court ruling that 'raises the bar' for pension rectification exercises.
Guaranteed minimum pension (GMP) equalisation has soared to the top of pension schemes' to-do lists, with 58% stating it is a priority project, research from Equiniti has revealed.
Professional Pensions is holding its defined contribution (DC) conference on 4 September.