| Shift in assets to hedge funds |
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| 13/01/2008 | |
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A new study shows a significant shift in allocation of pension fund assets to hedge funds. In 2006, 17% of those surveyed invested in a single strategy or fund of hedge funds compared to 47.8% in 2007, reflecting increased levels of interest in alternative investments from institutional investors, according to Baring Asset Management. The study found that the average proportion of a scheme's total assets allocated to hedge funds is still relatively low at 3.7% compared to 3.4% in 2006. The survey covered 24 of the top 100 UK pension schemes ranked by size. Commenting on the results, Marino Valensise, CIO at Baring Asset Management, says that pension schemes are becoming more open to the options available to them in the alternative space. The results corroborate the findings of other studies, including one by Russell Research (see related article), showing an increase in appetite for alternatives. Equities not so hot Baring also reported an overall reduction in allocation to listed companies, with pension schemes cutting their equity exposure from 70.8% in 2006 to 63.9% in 2007. Slightly more than half of those surveyed (50.5%) are still positive on the prospects of global equity markets in 2008. While only 4.5% expect global equity values to decease in value, 52.3% do not plan to increase their allocation to equities this year. Regionally, Asia was identified as the most promising reason in support of equities. "In our view, Asia still offers pension funds the best growth potential for the long term and we believe that many schemes still have too little invested in Asian equities," says Valensise. "Indeed, over the past year, Asia has been a potent MSCI region and this performance looks set to continue. Korea overtook China this year as the region viewed as having the most potential. Hong Kong is viewed as the second most likely to outperform, while pension funds feel the least confident on the prospects for the US. "Pension funds are still cautious when it comes to emerging markets, with just 4.3% stating that the recent global market volatility would make them more likely to invest in emerging economies," concludes the report. Seventy-eight percent said they would not be changing their allocation to emerging equities. VB |
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