Nearly all of the GP 100 Panel members have avoided stocking up on sovereign debt as a way to de-risk their schemes.
Industry experts have warned against regulations that could force funds to invest in sovereign bonds in order to reduce the risks in their portfolios.
Slater Investments chairman Mark Slater said pension funds will suffer “significant capital losses” if they continue to invest in sovereign bonds over equities. He said many pension funds were stocking up on sovereign bonds for regulatory purposes, instead of investment ones.
Slater said: “The likely returns on Western sovereign bonds are very low and the potential risks are very high, and I think the reason lots of pension funds buy these things are for non-investment considerations. They are considerations that relate to a kind of comfortable consensus that it is the right thing to do, not from a value perspective, but from a regulation perspective.
“The sad aspect of this is these investors are not nimble, but they’re hoping they’ll get out in time. My view is there will be an unholy rush for exit and there will not be room for very many people to get out the door.”
Over 90% of the GP 100 panel said they have not increased their investments to sovereign bonds, while 8% said they had.
The Global Pensions 100 Panel was launched in July 2006 and every month asks pension funds two topical questions on events in the pensions industry.
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