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The Actuary The magazine of the Institute & Faculty of Actuaries

Continued volatility drives pension asset allocation changes

Baring's annual poll of schemes found that two-thirds (65%) of pension professionals - who manage public and private funds - had made asset allocation changes. The fund manager said this was up from 50% last year.

The survey also revealed some 65% of respondents now invest in multi-asset strategies - this figure has almost doubled since last year's survey when just 38% invested in multi-asset.

The reasons for asset allocation changes were broadly similar to last year - with an emphasis on limiting volatility. Some 61.5% said minimising volatility was the main reason for allocation amendments.

The second-most-common reason was the need to reduce the correlation of assets followed by the need to better match assets to liabilities. The least popular reason for changing the asset allocation was to achieve greater returns.

Baring head of UK and international institutional sales Andrew Benton (pictured) said: "This research clearly shows that the concerns of UK pension fund managers centre on the need to manage volatility and protect against extreme losses; achieving greater returns is secondary given the current turmoil and ongoing situation in Europe.

"That said, the changes being made to pension funds demonstrate a desire among managers to have a more dynamically managed portfolio. The increase in allocation to multi-asset and diversified growth strategies suggests pension professionals are looking for equity-like returns without the levels of risk."

The poll also revealed 62% thought emerging markets in Asia had the biggest potential for equity gains over the next ten years.

Source: Professional Pensions