UK - Pension schemes could have halved the degree of daily volatility experienced in January and ended the month in surplus by opting for investments such as diversified growth funds, according to Aon.
Short term pension scheme volatility has contributed to an average rise in deficits from £2bn at the end of December to £10bn at the end of January. Only 40% of UK schemes are now in surplus.
Marcus Hurd, senior consultant and actuary, Aon Consulting, said: "Pension schemes are long term investors, but many cannot afford to ignore short term pressures, which can affect business plans and destroy confidence."
The level of volatility, the highest since FRS17 deficits were first recorded in 2001, has been blamed largely on high levels of equity investment.
Aon said the worst of the effects could have been avoided by pension funds reducing their exposure to equities and opting instead for other growth assets, such as diversified growth funds.
Hurd said: "Diversified growth is an opportunity neglected by many pension schemes. Many companies and trustees accept that equity investment is volatile in the quest for higher returns in the long run.
"The opportunity to seek similar returns with lower volatility, however, should not be ignored."
As Global Pensions has previously reported, equity market volatility in January wiped US$110bn off the balance sheets of US pension schemes.
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