EUROPE - European pension funds drastically accelerated the outflow from equities during the second quarter of 2008, a report by financial information company MandateWire has found.
Gavin Ralston, head of the Global Financial Institutions Group, Schroders, commented: "The weightings in equity are much higher in the UK, so we have seen much less of it in Europe."
MandateWire's Deal Flow survey also indicated alternative assets were reaping the rewards of European investors' shift from equities.
Ralston said hedge funds had been the asset class benefiting the most from the exodus in Europe, while in terms of investments in property, the main trend he saw was a diversification of geographical exposure.
Commenting on whether pension funds were overreacting to the current market volatility, Ralston said: "They should ease off on the trend [of moving out of equities] until there is a recovery on equity levels and then look for better opportunities."
Olaf van den Heuvel, head of investment strategy, AEGON Asset Management, said: "We have definitely observed a shift from equities towards cash. This caused by the short term distress in the market."
Contrarily, van den Heuvel said it would have expected sovereign bonds to be a safe haven in this kind of environment. Yet, he explained high and rising inflation pressures triggered a different outcome.
He added commodities had been the best performing asset class in five out of the last ten years. He commented: "Commodities produced returns of 41% this year, which is much more than minus 20% performed by equities."
For the future, van den Heuvel concluded: "We see value in structured fixed income asset classes, as asset backed securities or mortgage backed securities. I would not advise people to invest in them now, but as soon as the situation stabilises, those asset classes will offer real value."
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