-Popularity of multi-asset investing doubles since 2010
-Popularity of emerging Asia set to increase over next 10 years
Baring Asset Management's (Barings) annual poll of UK pension schemes* reveals that an increasing number of pension professionals have recently changed the asset allocation of their fund in order to reduce volatility. The research, conducted online among professionals involved with the investment management of a UK private or public pension scheme, found that two-thirds (65%) of respondents had recently changed the asset allocation of their fund, up from 50% last year.Moreover, according to the results from this year's poll, 65% of respondents now invest in multi-asset strategies to some degree. This figure has almost doubled since last year's survey when just 38% of respondents invested in these strategies.
The reasons behind these asset allocation changes mirror the responses of last year, with an emphasis on minimising volatility. The majority - 61.5% - stated the need to reduce the volatility of the fund as the main reason for altering its asset allocation. 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.
Andrew Benton, Head of UK and International Institutional Sales at Barings commented, "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 that are 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."
Looking forward to how pension professionals may alter their asset allocation in the future, it seems an allocation to Emerging Asia is increasingly likely. The research revealed that 62% of respondents felt that Emerging Asia has the biggest potential for equity gains over the next 10 years. Far behind Emerging Asia, but next in terms of the regions considered to have the greatest potential going forward, were Emerging Europe, Africa and Latin America (each with 10% of respondents choosing them as the area of the biggest potential for gains)
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