Diversified growth strategies have doubled in popularity among corporate U.K. pension funds, according to a new survey by Aon Consulting.
Aon found 40% of pension funds invested in diversified growth strategies as of Dec. 31, up from 20% the year prior.
Diversified growth strategies allow managers to dynamically allocate to multiple asset classes, including alternatives, and aim to deliver equitylike returns with lower volatility.
“The increase in popularity of diversified growth and absolute-return strategies is recognition that trustees and scheme sponsors are looking at a variety of ways of de-risking their investment strategies,” Mark Powley, investment principal at Aon, said in a news release. Use of absolute-return strategies rose to 28% of respondents, up from 22% at the end of 2008. “These approaches are targeting the same long-term returns as equities but with lower volatility,” Mr. Powley said in the release.
In the survey, Aon also found 25% of corporate defined benefit plans made “major” asset allocation changes, and another 34% made “minor” changes, in 2009. Aon defined “major” as being a shift of more than 10 percentage points, while “minor” was less than 10 percentage points.
Forty-three percent of respondents moved out of growth assets such as equities and into matching assets like bonds; however, 16% shifted out of bonds into equities.
The survey was based on 82 responses from corporate officers overseeing midsize to large pension funds.