Large numbers of pension scheme managers have shifted investments from equities to bonds and other investments over the past twelve months, according to Aon Consulting.
However, more than half of the schemes surveyed by Aon made no changes to their investment strategy despite major change in the global economy.
The survey of 100 defined benefit pension managers found 23% had made a major shift from equities to bonds, while another 23% made a minor shift in the same direction.
The remaining 54% made no changes to their investment strategies, despite major declines in equities across the world.
Of the non-equity assets contained in the schemes, UK property continued to be popular, with around 44% of schemes holding this asset.
Private equity and infrastructure was also popular with over 20% of schemes invested in these assets, while a similar amount held absolute return funds.
Daniel Peters, investment consultant and actuary at Aon Consulting, comments: “It’s no surprise that as pension schemes mature and trustees become increasingly risk aware, nearly half have moved some part of their growth portfolio into matching assets. To reduce volatility further, growth assets require diversification away from equities.
“Alternative assets such as funds of hedge funds that have low correlations with more traditional investments can be used to target a similar level of return to equities but with lower volatility. Indeed, whilst equity values fell over the first quarter of 2008, many funds of hedge funds have proven remarkably resilient.”
Funds with small equity exposures have seen volatility significantly reduced since the credit crunch in comparison with equity-only strategies, he adds.
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