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U.K. DC plans’ allocation to fixed income, alts rise as developed markets equity falls

U.K. defined contribution funds' allocations to fixed income and alternative assets have increased at the expense of developed markets equities over the 12 months ended March 31, said the Schroders 2017 FTSE DC report.

The average fixed-income exposure of DC plans to FTSE 350 companies plans grew to 21% from 16% last year, while the average exposure to alternatives increased to 13% from 7%.

The average fixed-income allocation, covering government bonds, credit and index-linked bonds, has grown from 9% in March 2013, when the survey started.

Over the 12-month period the typical FTSE 350 DC plan's exposure to developed markets equities, which comprises global and U.K. equities, fell to 62% from 67%. The average exposure in March 2013, when the survey first began, was 79%.

The average allocation to U.K. equities has fallen to 22%, from 25% in 2016 and 33% in 2013.

“Although equity markets on both sides of the Atlantic have recorded strong gains over the last 12 months, we would urge (DC) funds to remain focused on the advantages that diversified portfolios do bring and not fall into any rearview mirror investment traps,” Stephen Bowles, head of U.K. institutional defined contribution at Schroders, said in a news release accompanying the report.

The report is available on Schoders' website.