Pension schemes shun UK equities
by Gill Montia
Story link: Pension schemes shun UK equities
Aon Hewitt is claiming that the trend for medium-sized UK pension schemes to move away from investment in equities, and UK equities in particular, towards alternative and liability-matching assets, is likely to intensify during the next 12 months to three years.
The firm’s latest mid-market survey takes a look at the asset and liability strategies being implemented or considered by defined benefit (DB) schemes worth between £10 million and £500 million.
By number, the schemes represents over 60% of the UK pension landscape and the results show that interest is growing in investment strategies that aim to match scheme liabilities as schemes seek to de-risk their assets.
According to Aon Hewitt, liability driven investment strategies were once regarded as the preserve of the largest and most sophisticated pension schemes.
However, innovation in product availability means they have become readily accessible to smaller investors, at a sensible fee.
The key findings on scheme investment issues are as follows:
Some 59% of medium-sized UK pension schemes anticipate a further reduction in investment allocations to UK equities.
Almost 45% of the same sample also intends to reduce allocations to global equities.
There is significant interest in increasing allocations to diversified growth funds or those with a more dynamic capability (39%).
Greater interest was expressed in increasing allocations to corporate bonds (34%) compared with government bonds (28%).
42% of mid-market UK pension schemes intend to increase allocations to index-linked government bonds.
Two in five mid-market UK pension schemes intend to increase allocations to tailor-made liability driven investment solutions via liability driven investment funds.