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Pension Funds

U.K. funds continue move out of equities, ‘Purple Book’ shows

U.K. corporate defined benefit pension funds continued to divest from equities in favor of bonds, show data in the Pensions Universe Risk Profile — known as "The Purple Book."

The book, a joint annual publication by the Pension Protection Fund, London, and The Pensions Regulator, provides an overview of the pension funds protected by the lifeboat fund.

The 13th edition of the book, published Monday, includes information on risk reduction, asset allocation and demographics for these pension funds as of March 31.

The aggregate deficit of these funds improved by 56.4% to 70.5 billion ($90.4 billion) as of March 31, with the funded level increasing to 95.7%. As of March 31, 2017, the funded level was 90.5%.

The book said that half of the increase in funded levels was due to more up-to-date valuations and a shrinking dataset; while the remainder is due to market moves, with higher gilt yields pushing down liabilities and rising equity markets bolstering assets.

The asset allocation of these pension funds saw equities fall on average to 27% as of March 31, compared with 29% a year earlier. Within this allocation, U.K. equities fell to 18.6% from 20.5% a year earlier, while foreign and private equity allocations both increased, to 69.4% from 69%, and to 12% from 10.5%, respectively.

Bond allocations grew to 59% as of March 31, from 55.7%. Within bond exposure the pension funds had a 24.1% allocation to government bonds, stable over the year; while corporate bonds fell to 28.8% from 31.4%. Index-linked bonds accounted for 47.1% of bond allocations, up from 44.5% a year earlier.

The remaining 14% of assets were invested in other classes.

The dataset covered 5,450 pension funds, representing 98.7% of the estimated universe of pension funds that are eligible for PPF compensation.