UK - Property is the asset class most likely to benefit from an increasing taste from pension funds for alternatives, according to new research from F&C Asset Management.
The firm said demand for alternatives like property, hedge funds and private equity was set to expand with almost half (45.9%) of the pension fund trustees surveyed planning to increase their fund’s allocation to alternative assets. No respondent was planning to decrease their alternatives weighting.
Of those planning an increase, 13.5% said they would choose property, 5.4% were looking at private equity, 3% planned to move more into hedge funds and 2.7% said they would look at emerging debt for increased returns.
Commenting on the findings, Tim Watson, director at F&C, said: “Trustees have embraced the need to look beyond traditional equities and bonds to meet current and future liabilities. The fact that weightings to non-traditional assets is increasing reflects the fact that many pension funds are becoming more comfortable with these types of investments, and therefore we would expect to continue to see overall allocations to alternatives increase with time.”
Property remains the most popular alternative for UK pension funds with three quarters (72.9%) already investing in the asset class. Funds are displaying equal demand for private equity and hedge funds. One in ten (8.1%) have some weighting in venture capital and 5.4% are currently invested in emerging debt.
The survey also revealed an increase in preference for single strategy hedge funds, although fund of hedge funds remain the most common form of hedge fund with 54.3% of funds choosing this approach. Nearly a third of trustees investing in hedge funds stated a preference for single strategy hedge funds (28.5%) against less than one in four (23.5%) last year.
“For larger pension funds where there is greater scope for breaking the hedge fund allocation down into distinct strategy types, single strategy funds are clearly suitable,but the majority of funds quite rightly feel more comfortable with the fund of funds approach, which diversifies the risk,” Watson said.
The Pension Protection Fund (PPF) has published contingency planning guidance for trustees to help them manage risk.
The trustees of the Autoenrolment.co.uk and Moore Stephens master trusts have been fined for "deficient" chair's statements after failed court action against The Pensions Regulator (TPR).
Henry Tapper shares his thoughts on how IGCs could provide value for money statements that people wanted to read