U.K. pension funds are increasingly interested in alternative investments, according to two recent studies.
U.K. pension funds had 1% in alternative assets - defined as hedge funds, private equity and venture capital - as of Sept. 30, up from 0.3% as of Sept. 30, 2002, according to a Mellon Analytical Solutions study of 597 U.K. funds with total assets of more than £189 billion ($328.5 billion). Weightings in alternative assets had been fairly static for the eight years prior to 2002, according to the study. Hedge funds and absolute-return mandates represented 62.7% of pension funds' alternatives investments, and private equity and venture capital combined for 37.3%.
Separately, about 450 U.K. pension funds advised by Watson Wyatt Investment Consulting awarded 61 alternative investment mandates in 2005, up from 16 in 2003, according to Watson Wyatt's annual update on U.K. activity. The leading areas were real estate, with 14 mandates; private equity, with 12; and global tactical asset allocation, with 11.