About 80% of large U.K. pension funds are planning to overhaul their investment portfolios in the next three years, according to an annual study released today by Greenwich Associates. Fixed-income and alternative investment exposure is set to increase by 2008 - 24% of the 412 fund executives Greenwich interviewed for the study plan to increase their hedge fund allocations, 30% expect to increase private equity, 34% are more likely to make more real estate investments, and 40% plan to buy more bonds. Over the same time frame, 55% of the funds studied plan to reduce their U.K. equity exposure.
"There is a sense that corporate plans in particular would welcome the comfort of higher allocations to fixed interest, but their weak solvency positions coupled with low interest rates will not allow bolder movements," Greenwich consultant Markus Ohlig said in a news release about the study.
The findings suggest that recent strong investment performance has not been enough to eliminate the many critical problems facing the country's pension plans, the study said. At a time when global stock markets have remained buoyant and plan sponsors are making sizable pension contributions, the average funding ratio for U.K. pension plans fell to 91% in 2006 from 92% in 2005.
The study was conducted in April and May 2006.