UK- Almost a third of pension funds (30%) reallocated over 5% of their investment portfolio during 2006 as the impact of scheme closures and increased maturity affected investment strategy, according to research by Aon Consulting.
In research that surveyed 150 UK DB pension schemes between November 2006 and February 2007, Aon found increased volatility in markets and continued focus on bond yields meant the priorities for scheme sponsoring employers werenot just assets, but on how assets related to scheme liabilities.
According to the research, 14% of pension funds invested to diversify their growth assets, so they are less exposed to a single volatile asset class. The greatest shift in 2006 was the favour of the property sector with 50% of schemes diversifying growth assets using property.
However, absolute return vehicles such as hedge funds (17%) and global tactical asset allocation (11%) have also become popular.
Aon Consulting senior actuary Paul McGlone said: “The improved investment returns achieved by most schemes in recent years is going some way to alleviating the rising deficit levels experienced by almost all pension funds during the last decade.
However, while most trustees and employers still believed equity returns should outperform other asset classes over the long term, many found themselves in a shorter term game. For those not wanting to give up long term return, diversified growth assets offer one option. Interest in wider asset classes has accelerated and is expected to build on this over the next 12 months.”
The use of other strategies to reduce risk is also continuing to grow, with over a tenth (11%) of employers said their schemes have adopted some form of liability driven investment (LDI) strategy and a sixth (17%) of schemes were already using LDI assets in their portfolios, with another 20% considering it.
Aon also announced it had formed Aon Global Risk Consulting a dedicated risk consulting, captive management and risk engineering groups.
The formation of Aon Global Risk Consulting (AGRC) follows the launch of Aon Global in January and is the latest step by the company in bringing all its global capabilities together in a single unified structure.
AGRC will offer an integrated range of risk consulting solutions including enterprise risk management, actuarial and analytical services, risk finance, risk control and engineering, accelerated claims closure services, and (re)insurance company/captive management.
Alongside risk consulting, AGRC will also have services for captive (re)insurance companies and solutions for complex property and casualty related risks.
Most respondents in this week's Pensions Buzz do not think businesses should be able suspend AE contributions if in financial distress.
Former BHS owner Dominic Chappell has lost the appeal against his section 72 conviction and sentence for failing to hand over information to The Pensions Regulator (TPR).
This week's top stories include Marsh and McLennan Companies agreeing to buy JLT, and the home secretary calling for AE to be scrapped in a no-deal Brexit scenario.
Lesley Titcomb says the watchdog wants closer interactions with pension funds to spot problems sooner and act before having to use its more stringent powers