U.K. pension funds' use of active U.K. equities is expected to shrink to 35.3% of total assets in 2000, from 44.1% in 1993, according to a new report by Greenwich Associates.
Active U.K. equities have shrunk consistently, falling to 39.8% of total assets in 1997 and 37.6% in 1998, according to the consultant. The reduction reflects a major reduction in overall equity allocations, now at 72.8%, down from 78.5% five years ago. A big increase in indexed portfolios has boosted passive U.K. equities to 14.9% in 1998, up from 10.8% five years ago. Index-linked gilts and passive fixed income also have grown to 7.2%, up from 4.1% in 1993.
The reduction in equity allocations reflects the introduction of the minimum funding requirement in the 1995 Pensions Act and greater maturity of many British pension funds, resulting in increased asset/liability matching, Greenwich consultants said.