US - Diversification and liability matching have pushed pension funds to change investment strategies more rapidly, according to Greenwich Associates.
William Wechsler, consultant, Greenwich Associates, said: "Our research reveals that diversification remains the dominant trend in institutional portfolios and in general, this diversification is taking two forms: the shift of assets into alternative investments and allocation adjustments that reduce the level of 'home-bias' and change portfolio composition to better reflect global market capitalisation."
Since 2005 around 38% of funds said they would significantly change their portfolio structure in the next three years.
International equities made up 17.9% of assets in 2007, almost a 3% increase on the year before at the expense of domestic stocks which have continued a steady decline.
Greenwich found the current allocation to international holdings was one third higher than four years ago.
Pension funds increased allocations to hedge funds and at least one third planned to continue that trend but include private equity and real estate in the mix.
Dev Clifford, consultant, Greenwich Associates, said: "What we're seeing is a fundamental shift in how institutions manage their assets."
Clifford continued: "Although the new approach is still a work in progress, institutions seem to believe that new financial instruments and strategies will allow them to optimise investment performance while also ensuring their ability to fund future liabilities."
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