The average defined contribution plan for a U.K. FTSE 350 company has significantly increased its exposure to alternative asset classes at the expense of developed market equities, a new report from Schroders shows.
In its analysis of the DC market for the largest companies in the U.K., money manager Schroders found the average plan had an allocation of 11% to alternatives as of March 31, compared with 7% as of March 31, 2013, when the firm first did such analysis.
FTSE 350 DC plans have increased allocations to alternatives by one percentage point in the six months ended March 31, and four points from March 31, 2013.
Fixed income also has gained popularity, increasing to an average 14% allocation, compared with 9% as of Oct. 31, 2014, and 9% as of March 31, 2013.
These gains have been largely at the expense of moves out of developed markets equities. As of March 31, the weighting to developed markets equities averaged 71%, vs. 75% as of Oct. 31, 2014, and 79% as of March 31, 2013.
The data suggest FTSE firms “may have turned a corner,” said Stephen Bowles, head of U.K. institutional DC at Schroders, in the report.
However, FTSE 100 firms have moved further along in diversifying their assets vs. FTSE 250 companies. The data show the average weighting to developed markets equities is 69% for FTSE 100 firms, compared with 73% for FTSE 250 companies.
The average allocation to emerging markets equities was 3%, steady from March 31, 2014, and Oct. 31, 2014. Other allocations, which were not specified, accounted for 1% as of March 31, vs. 3% as of Oct. 31 and 2% as of March 31, 2013.
Data were analyzed from 65 FTSE default DC plans.
