Corporate pension plans and other institutional investors remain committed to significant allocations to hedge funds, private equity and other alternative investments, while they continue to reduce U.S. equity allocations, according to a Greenwich Associates report on asset allocation polices.
Greenwich surveyed 152 U.S. and Canadian corporate and public pension funds, endowments and foundations. The results provide an early read on how institutional investors are reacting to the financial crisis. Among the major findings:
•Corporate plan executives stung last year by dramatic reductions in portfolio asset values are moving to reduce volatility of pension fund investment performance by increasing allocations to fixed income while cutting equity allocations.
•Public pension funds are tending to increase allocations to alternative asset classes with higher potential for returns, while fewer are shifting assets into fixed income compared with corporate funds.
•Nearly half of endowments and foundations increased their allocations to hedge funds in the past 12 months. While they are boosting liquidity in their portfolios, they are giving no signals of reconsidering investment policies that incorporate relatively high allocations to hedge funds, private equity and other alternative assert classes.
•Money manager turnover could reach historic highs in the next 12 months if corporate pension and other funds follow through on their planned investment and allocation changes. Some 66% of institutions surveyed plan to hire a new investment manager in the next 12 months, while 46% plan to terminate a manager.
Greenwich Associates interviewed institutional investors in May on actions they have taken on asset allocation and other investment policy in the past 12 months, as well as about their investment plans for the coming year. Of the respondents, 97 were corporate pension funds; 34, public funds; and 21 were endowments and foundations. All the respondents had more than $1 billion in assets.