UK - Better funded defined benefit (DB) pension schemes have reduced their allocations to equities during 2007, with a strong trend towards fixed income and alternatives, according to figures published today by the National Association of Pension Funds (NAPF).
Joanne Segars, chief executive, NAPF, said: "With growing scrutiny and pressure on pension scheme trustees to make sure there is a balance between risk and return, the survey shows they are increasingly viewing diversification as normal practice."
UK equities lost ground, down to below 30% from 36% in 2005. This was matched by a slight decrease in North American equities (9.4% to 8.9% over the same period) while other equities held firm.
Allocations to alternative asset classes also rose, showing a clear trend towards diversification. Overall, the average alternative investment grew by 3% to 16% of fund assets, although the make up of these allocations has changed in the past couple of years.
Infrastructure and private finance initiatives (PFI) were the biggest loser in terms of allocation, falling from an average of 10% in 2005 to 2.4% in 2007, although more funds have invested in the class, up to 7% of funds from 4%.
Hedge funds have become particularly popular with institutional investors, the number of schemes participating has more than doubled to 17% from 8% in 2005 with an average allocation of 6.7%.
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