21/11/2008

Asset diversification still paramount for UK pension funds

UK pensions are continuing to diversify their assets into hedge funds and other investment classes due to significant volatility in the world equity markets, according to the annual survey conducted by the National Association of Pension Funds (NAPF).

The survey received responses from 294 defined benefit funds in the UK with a total of £450bn in assets. The percentage of all pension fund assets invested in hedge funds has increased to 1.9% in the space of two years. They invested 1% in 2006 according to the survey. Meanwhile equities have fallen from 59.7% in 2006 to 49.9% this year.

“The pattern of UK pension fund investment continues towards greater diversification as a means of better risk management and reducing the impact of significant volatility in world equity markets. If volatile equity markets persist it would be likely that this trend will continue in 2009,” said David McCourt, NAPF Policy Adviser on Investment and Governance