The number of pension funds that now have exposure to a range of global assets to decrease market volatility shot up by 65% compared to last year, according to a international investment management firm.
In its latest industry poll, published yesterday, Baring Asset Management highlighted that over four-fifths (83%) of defined benefit pension funds now have exposure to multi-asset strategies to provide long-term risk-adjusted returns. Such asset classes could include: bonds; equities; commodities; property or cash. Overall, the poll found a rise in the number of pension funds concerned about volatility and risk.
Barings' poll of 85 private and public investment managers in the UK revealed that 60% of the respondents had changed the asset allocation of their funds to reduce volatility while two-fifths (40%) had done so to better match assets to liabilities more effectively. Just a third (33%) had made changes to secure greater returns.
Andrew Benton, head of international sales and business development at Barings, said: 'The overarching theme from this latest study is an increasing awareness of "volatility", and the need to manage that, among pension funds. There are tangible rises in the use of multi-asset strategies and a continuing focus on liabilities as pension funds look to better manage risks.'
However, the biggest challenges to investment growth over the next six months, remained European sovereign debt, levels of US debt and the slow growth in China - cited by 61%, 58% and 47% of respondents respectively.
Just 3%, however, thought there was a risk of deflation in the UK, although a third (34%) saw rising interest rates in the UK as a threat.
Benton added: 'It is clear that pension professionals remain intensely focused on managing volatility and risk, particularly with regards to major macroeconomic risks and the economic health of the world's major trading superpowers - particularly with regards to sovereign debt.
'While many equity markets made strong gains in 2013, a degree of uncertainty has returned in 2014 and, in this environment, it is not surprising to see managers diversifying assets and looking to control risks.'