NEW YORK — U.S. and European pension funds are seeking alpha — but from different places.
A new report from JPMorgan Asset Management finds 76% of European pension executives are using or are considering using absolute-return strategies, compared with only 56% of their U.S. brethren.
Yet 52% of American pension funds are using or are considering portable alpha strategies vs. only 37% of their continental European counterparts.
Many of the differences are rooted in varying regulations, accounting rules and risk tolerances, Eve Guernsey, chief executive officer, JPMorgan Asset Management Americas, New York, said in an interview.
"Europe isn't the United States of Europe. Pension funds are still regulated and monitored within each country's borders. Regulations are different, and cultures are different in terms of their risk tolerance," Ms. Guernsey said.
For example, U.S. investors have a much higher average allocation to stocks than Europeans — 63% vs. 31%. The typical U.S. fund had 27% invested in fixed income and 10% spread across a variety of alternatives. European pension funds' asset allocation varied greatly by country, but overall, they had 50% in fixed income and 19% in alternatives.
Client demand for alpha sources is leading JPMorgan officials to test an array of new strategies. The manager may launch 25 to 27 vehicles representing 14 sources of alpha next year, Ms. Guernsey said. Under development are strategies involving long-short value equity, high-yield bonds, emerging-market debt and a global real estate investment trust, she said.
The JPMorgan report is based on separate surveys of U.S. and continental European pension executives. The U.S. survey is based on interviews last February with executives at 120 of the largest 350 U.S. pension funds with a combined $1.2 trillion in assets. Results of that survey were published in Pensions & Investments last spring (P&I, May 16). The European survey last May and June covered 193 institutions with a total of $1.3 trillion across Germany, the Nordic countries, the Netherlands, Switzerland, Italy and France.