UK - Pension schemes in the UK have increased their investments in more diverse assets including hedge funds and commodities, according to the latest NAPF Annual Survey 2005.
The survey details the investment decisions of over 350 NAPF members who run DB pension schemes.
According to the results of the survey, schemes have increased holdings in property by 13%. Alternatives, such as hedge funds and commodities have jumped by 11%.
The survey also revealed that 30% of the respondents had reduced the proportion of their portfolio invested in equities during the previous twelve months, while 25% had increased their bond holdings.
NAPF chief executive, Christine Farnish, said: “These findings add to the growing body of evidence that pension funds are becoming more risk-averse in their investment patterns.
“There are a variety of factors at work here, including greater longevity, lower interest rates, new accounting standards and a tighter regulatory climate. This combination of developments is leading UK pension funds to steer away from traditionally higher risk investments, like equities, and towards “safer” options in order to match their liabilities more effectively.”
Other key findings included:
The mean solvency level, as measured under Financial Reporting Standard 17 (FRS17), is 82.% however funding levels are higher in open schemes (85%) than in closed schemes (79.6%).
Three quarters of company schemes claim their funding levels exceeds 100% on a Minimum Funding Requirement (MFR) basis.
Almost two thirds of schemes say that at least “some” of their resources are invested in assets that track market indices, with 14% of schemes saying all of their assets are invested in such a method.
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