UK - Property and private equity will be the most attractive alternative investment classes for pension funds in 2004, new research predicts.Standard Life Investments' annual Global Horizons report says both asset classes are likely to be safe and profitable in coming months.
The firm said that while the classes were traditionally viewed as risky and illiquid by pension schemes, continuing stock market volatility would make them an essential portfolio diversifier.
Head of global strategy Andrew Milligan said: “A key message from the bear market was that portfolios became too concentrated in one asset class, which happened to be equities.
“Pension fund trustees should therefore ensure their scheme invests in a diversified portfolio of assets with an overall mix likely to be less volatile but without sacrificing too much return.”
Milligan said risk could be reduced by focusing on subsections of the market, such as buyouts and fund-of-funds.
Milligan added: “Also, our analysis of the costs of property transactions suggests that if fund managers’ objectives are to stick to a fixed weighting, then the costs of property’s illiquidity are negligible.”
Most respondents in this week's Pensions Buzz do not think businesses should be able suspend AE contributions if in financial distress.
Former BHS owner Dominic Chappell has lost the appeal against his section 72 conviction and sentence for failing to hand over information to The Pensions Regulator (TPR).
This week's top stories include Marsh and McLennan Companies agreeing to buy JLT, and the home secretary calling for AE to be scrapped in a no-deal Brexit scenario.
Lesley Titcomb says the watchdog wants closer interactions with pension funds to spot problems sooner and act before having to use its more stringent powers