According to a global study although equity allocation by UK pension funds has fallen by a fifth in the past decade, it still remains highest in the world.
UK pension funds allocated 55% of the funds in equities compared to 74% in 2000, which is still higher than 49% allocated by both the US and Australia, found the latest study by consultant Towers Watson.
The report found that with pension assets worth £1,414 billion, the UK pension market constitutes 9% of the global pension assets pie, while the US leads with 58% share and Japan contributing 13% of the global share.
“Notwithstanding the recovery in markets, asset allocation remains challenging as companies and trustees balance such priorities as long-term de-risking, short-term market opportunities, rebalancing or maintaining a strategic asset allocation mix”, said Roger Urwin – global head of contents at Towers Watson.
“These are complex decisions made more difficult in the context of highly changeable market conditions”, he added.
UK’s share of pension assets as a percentage of GDP has also increased from 85% in 2000 to 101% now, the report found out.
The P7 group of countries – the countries with biggest pension funds like the US, UK, Japan, Australia, Holland, Canada and Switzerland, have reduced their bond exposure over the last fifteen years by 7% from 40% in 1995 to 33% now.
The drop in bond investments has been compensated by investments in hedge funds, private equity, real estate and commodities, which has seen an investment growth from 5% to 19% since 1995.
Carl Hess – the global head of investment at Towers Watson said that the global economic uncertainty is still weighing in on the minds of investors.