EUROPE - European pension funds feel they need to focus on more frequent asset allocation to improve investment returns, a survey by State Street Corporation has found.
According to the survey, which polled 200 UK and European pension funds with £580bn in assets, respondents expected to spend the most time on asset allocation decisions over the next 12 months.
Despite an increasing trend to diversify portfolios into alternative asset classes such as hedge funds and private equity, pension funds cited equities as the most important factor in boosting solvency ratios, State Street said.
“While respondents were relatively upbeat about their long-term expectations for equity returns, in the short-term, they had mixed views on their outlook for equities over the next 12 months: 47% said that their outlook is settled, while 44% said their outlook is changeable,” the survey noted.
Jeff Conway, senior vice president and head of State Street’s investment servicing business in the UK and northern Europe said the survey provided key insights into important developments affecting the European pensions industry.
“The pensions industry is recognising that it needs to implement a more dynamic roadmap, stating in advance expected changes to its risk appetite in the face of shifting funding ratios, and making more frequent asset allocation a natural priority of pension funds,” he said.
“Increased regulation – which many believe will lead to higher costs for pensions – and the move from DB (defined benefit) to DC (defined contribution) schemes were found to be key trends likely to have a significant impact on respondents’ pension schemes.”
Conway said the survey found the UK, Switzerland and the Netherlands heavily invested in alternative asset classes.
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