After delving into equities for the first time during the late 1990s — at the height of the market boom — many continental European plans cut their allocations during 2000-2002 in favor of fixed income and cash.
"That was partly an active decision. It was also because the deteriorating funding ratio of some schemes meant they then came under the jurisdiction of regulatory regimes that forced them to sell equities to reduce portfolio risk," Mr. Ohlig said in an interview.
The popularity of hedge funds isn't surprising.
"Given what's happened to markets in the past few years, there's a desire to see more risk-controlled returns, and hedge funds are seen as a possibility," Mr. Ohlig said.
"Overall it looks on reversing the situation of the past few years when European institutions' allocation to equities has fallen. But that may or may not translate into new opportunities for managers, since this many schemes simply have to rebalance to return to their previous allocation," Mr. Ohlig said.
Meanwhile, use of external managers is set to increase in some markets.
Across Europe, about 37% of investors now use external managers. But 60% of pension schemes in the Nordic countries said they were planning to make more use of external asset managers in the near future; in Italy, 40% of respondents said they would make further use.
"It really drops off in the other markets … only 18% in Germany anticipated increasing use of external management," said Mr. Ohlig.
Yet most respondents in the survey indicated a general dissatisfaction with external management.
"That is a symptom of the market performance and the numbers that, as a result, managers are delivering," Mr. Ohlig said.
While external manager use is likely to rise slightly, Greenwich expects use of consultants, on the other hand, to remain static — or even fall among European pension schemes.
"Relatively few pension funds in continental Europe employ investment consultants — and that trend is flat to down," said Chris McNickle, a managing director at Greenwich.
Whereas 95% of schemes in the United Kingdom and 75% of schemes in the United States use consultants, just 43% of those in Europe do, the survey showed.
Usage in Belgium and Switzerland fell during 2002, the survey showed, and only 12% of respondents indicated they would start using one.
Other findings in the study show total assets at the biggest European schemes fell €250 billion ($287 billion) in 2002, a 15% drop from the previous year.
Europe was also the most underfunded market, with an average funding ratio of 92% of assets. That compares to 103% in the U.S. last year, and 98% for the United Kingdom.