U.K. pension funds increasingly are adopting specialized benchmarks and are using asset/liability modeling to determine their asset mix, according to a survey by PDFM Ltd., a unit of UBS Asset Management London Ltd., London.
While balanced management still predominates among U.K. pension funds, at 77%, 72% of the 356 funds surveyed now use index returns to measure performance of specialist managers, up from 53% in 1992. This reflects a move away from industry median benchmarks offered by The WM Co. and Combined Actuarial Performance Services Ltd.
What's more, 41% of funds now say asset/liability modeling has a significant influence on portfolio structure, up from 20% in 1991. Some 44% use customized asset mixes, up from 35% in 1992, the survey said.
Elsewhere, the survey found an increase in investments in venture capital, to 43% of funds surveyed from 37% last year. Also, growth occurred in securities lending, both domestically and overseas, although it still is near the 10% level.
Use of derivatives also is increasing slowly. Only 13.3% use traded equity options, up from 12.2% last year, while 19.8% use index futures, up from 17.5%. But one-third of funds may start using derivatives, the survey found.