UK - The FRS17 accounting standard will prompt pension funds to increase their investments in non-government debt, according to Paul Grainger, manager of Gartmore's UK gilt and fixed interest fund.
To gauge the impact of FRS17, Gartmore carried out a survey of finance directors from 100 leading UK companies with over 60 responses so far. Of the sample in the survey, more than 40% of finance directors expressed concern that FRS17 would lead to greater volatility in their company’s share price.
35% of respondents are now considering an increase in their pension fund’s fixed income exposure.
Grainger noted: “This will lead to a continuation of the trend seen in recent years for pension funds to increase their investments in non-government debt.
“Sterling corporate bonds have performed well over recent periods whilst yields are attractive relative to gilts. As of mid-October the Merrill Lynch Sterling Non-Gilts Index yielded 5.78%, 1% more than the FTSE All Gilt Stocks Index.”
By Janet Du Chenne
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