UK - Schemes will slash their equity weightings in order to increase their bond allocations and move to liability-driven mandates, fund managers claim.
Research carried out by the Investment Management Association shows fund managers believe the 56% equity weightings held by pension funds will fall sharply. They believe equity levels will fall to levels similar to life funds, where the average weighting is 31%.
Bond investments currently make up 33% of pension fund portfolios and the 113 IMA members surveyed – who collectively manage £2trn on behalf of UK-based clients – expect this to increase at the expense of equities. Liability mandates will also benefit from moves to cut equity weightings.
IMA chief executive Richard Saunders said: “The emerging trend of liability-based benchmarking is likely to result in an increased level of bond investment, and illustrates firms’ ability to adapt to a changing environment.“
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