Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • May 2012
05

Pension funds 'abandoning equities' as eurozone crisis hits

Open-access content Monday 28th May 2012 — updated 5.13pm, Wednesday 29th April 2020

Market volatility caused by the eurozone crisis is causing European pension funds to turn away from equities and increasingly invest in alternative asset classes, Mercer said today.

2

The consultancy's annual European Asset Allocation Survey, involving more than 1,200 pension funds in 13 countries with assets of over €650bn, found 50% of schemes now have assets allocated in alternative asset classes, compared to 40% a year earlier.

It said that the move away from equities had been most pronounced in 'traditionally equity-heavy' markets such as the UK and Ireland.

In the UK, average asset allocations to domestic and non-domestic equities fell by 4% over the past 12 months, from 47% to 43%, while Irish schemes' current average allocation to equities was 44% - down 6% from a year ago, and down over 20% since 2008.

Nick Sykes, European director of consulting within Mercer's investments business, said schemes faced the challenge of managing the risk market volatility posed to their portfolio at the same time as finding ways to generate returns to support future costs.

'In their quest to control volatility without sacrificing long-term returns investors have turned their attention to alternative asset classes,' he said.

 'In addition to their relative attractiveness compared to low-yielding bonds, alternative asset classes also offer appealing diversification characteristics. Indeed, schemes are looking to asset classes that are less exposed to the sovereign debt crisis, with a particular focus on emerging markets, both for equities and bonds.'

He added: 'Investors are also looking globally for yield in bond markets, since the crisis has pushed core yields in Europe to very low levels. Liquid asset classes are also favoured, as investors value access to their assets in such turbulent times.'

Hedge funds, emerging markets debts and high yield bonds were the most popular alternative asset classes across Europe (excluding the UK) with almost 20% of schemes having an allocation to one or more of these areas. In the UK, diversified growth funds, macro hedge funds and funds of hedge funds were the most popular alternative classes.

However, Mercer stressed that, while allocations to alternative asset classes were on the increase, they were still relatively small compared to traditional asset classes such as assets and bonds. This year the total allocation to alternative asset classes reached an average of 8.5% for all surveyed schemes.

The next 12 months are expected to see schemes continue to move away from traditional classes, and equities in particular. Europe-wide, around 20% of schemes surveyed plan to reduce their domestic or overseas equity allocation.

At the same time, 27.2% of UK schemes - and 12.9% of European schemes - expect to increase their allocations to alternative asset classes.

The popularity of alternative asset classes is likely to persist over the next year and beyond with 27.2% of UK schemes and 12.9% of European schemes expecting to increase their allocations, Mercer added.

This article appeared in our May 2012 issue of The Actuary .
Click here to view this issue

You may also be interested in...

ta

Solvency II for pensions 'good for bonds, bad for equities'

Applying Solvency II rules to pensions could give UK defined benefit schemes an incentive to move £400bn of equities into fixed income securities such as government bonds, according to Fitch.
Monday 28th May 2012
Open-access content
2

IAS 19 could make pension buy-ins more attractive, says Mercer

The imminent European Union endorsement of a new international accounting standard covering defined benefit pensions is likely to prompt an increased focus on the risks involved in pension plans, Mercer said yesterday.
Tuesday 15th May 2012
Open-access content
2

ECJ ruling could signal €5bn UK investment fund windfall

UK investment funds with shares in French companies could be in line for a €5bn tax refund after a European Court of Justice ruling that will bring an end to a ‘discriminatory’ tax being levied on dividend payments made to overseas investors.
Friday 11th May 2012
Open-access content
2

FSA spells out recovery and resolution plan approach

The Financial Services Authority has provided an update on how it expects firms to develop recovery plans and resolution packs.
Thursday 10th May 2012
Open-access content
2

Invest more to boost growth, says NIESR think-tank

The UK government has been urged to increase its investment in the economy to boost growth, amid warnings that fiscal austerity risks creating a ‘negative feedback loop’ in the countries most affected by the global economic crisis.
Friday 4th May 2012
Open-access content
2

Pension schemes urged to consider emerging markets

Pension schemes should allocate a substantial portion of their growth assets to both equity and debt in emerging markets, according to JLT Investment Consulting
Wednesday 2nd May 2012
Open-access content

Latest from Global

rdth

Make My Money Matter's Tony Burdon on the practical power of sustainable pensions

Years working in international development showed Tony Burdon, head of Make My Money Matter, that sustainable pensions can harness trillions of pounds to build a better world – at a scale governments and charities can’t. He talks to Travis Elsum
Wednesday 1st March 2023
Open-access content
ULH

Growth of the profession in Zambia

One of only three Fellows in Zambia, Mulenga C Mutati anticipates exciting growth in the country’s actuarial sector
Wednesday 1st February 2023
Open-access content
cj

Natural capital investing

Chris Howells and Andrew Dreaneen discuss how today’s investments in natural capital profit portfolios as well as the planet and humanity
Wednesday 1st February 2023
Open-access content

Latest from May 2012

2

Letters to the editor - July 2012

In which actuaries discuss the AGM, the actuarial exam and defined benefits
Thursday 5th July 2012
Open-access content
ta filler

70% of FTSE 100 firms now offer diversified growth funds

The number of the UK's leading firms offering diversified growth funds as an option in their defined contribution pension schemes has increased by more than 50% over the past 12 months, according to Towers Watson.
Thursday 31st May 2012
Open-access content
ta filler

FSA unveils reduced pension projection rates

Rules which aim to give investors taking out a pension or life insurance policy a realistic indication of potential future returns have been published for consultation today by the Financial Services Authority.
Thursday 31st May 2012
Open-access content

Latest from formbuilder_item_removed

2

Implementing IFRS 17 Discount Curves: Theoretical and Practical Challenges

The International Financial Reporting Standard (IFRS) 17 requires liability cash flows to be discounted at rates that reflect the characteristics of the cash flows, including their liquidity
Tuesday 3rd September 2019
Open-access content
2

Profit Emergence Under IFRS 9 and IFRS 17: The impact of choice of liability discount rate

With the IFRS 17 accounting standard, insurers need to understand the patterns of profit emergence that arise under the standard, and how current business and methodology decisions affect such patterns.
Wednesday 10th July 2019
Open-access content
2

Whitepaper: Aggregation and diversification of the IFRS 17 Risk Adjustment

This paper forms part of a series of high-level papers designed to provide an introduction to different features of the risk adjustment that should be considered in advance of implementation.
Tuesday 29th January 2019
Open-access content

Latest from 05

ta filler

70% of FTSE 100 firms now offer diversified growth funds

The number of the UK's leading firms offering diversified growth funds as an option in their defined contribution pension schemes has increased by more than 50% over the past 12 months, according to Towers Watson.
Thursday 31st May 2012
Open-access content
ta filler

FSA unveils reduced pension projection rates

Rules which aim to give investors taking out a pension or life insurance policy a realistic indication of potential future returns have been published for consultation today by the Financial Services Authority.
Thursday 31st May 2012
Open-access content
Lloyd's of London interior

General insurance news round-up - June 2012

Financial crisis / Solvency II / PPI / Lloyd's / Deepwater / Aviation / Fitch reinsurance / UK motor / Aviva / Large losses
Wednesday 30th May 2012
Open-access content
Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Exposure Management Analyst

London, England
£40000 - £50000 per annum
Reference
148639

Pricing - Casualty Actuary

London (Central)
£128K + bonus + benefits
Reference
148638

Reporting Contractor

Negotiable
Reference
148636
See all jobs »
 
 
 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ