GLOBAL - Investment managers throughout the globe are expecting pension funds to increase allocations to more diverse alternative investments, according to Mercer Investment Consulting's 2006 Fearless Forecast.
According to the report, the shift is expected to be greatest in the US where nearly 60% of investment managers surveyed expect allocations to jump from 5% to 15% or possibly more.
However most regions are only expected to raise their allocation by 5%, but it does reflect the global change in mentality of funds’ in coping with new fiscal and demographic changes.
“New accounting standards and funding challenges are placing pension plans under growing pressure to review their investment strategies, “ said Andrew Kirton, worldwide partner and european head of Mercer Investment Consulting.
“We expect emphasis on risk management to continue despite this, on occasion, leading to greater investment in some asset classes, notable government and corporate bonds which appear unattractive on investment grounds.”
The classes expected to see the largest increased allocations are private equities in every region; hedge fund of funds in every region bar Canada; single manager hedge funds in the US and Australia; property in Singapore and the UK; commodities in Europe and the US and infrastructure and currency overlays in Canada.
The Fearless Forecast also warned of storms ahead with global equity returns, including Europe, being in single digits for major global equity indices. A “particularly sharp decline in outlook for emerging markets” has also been touted. However global bond market yields are expected to rise, with low or negative returns for long bonds.
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