London
22 March 2017
Reporter: Drew Nicol

UK pension funds embrace alternatives


UK public sector pension funds are jostling to expand their alternatives exposure as a way to diversify their portfolios ahead of the launch of the Local Government Pension Scheme (LGPS) pooling project in April 2018.

A State Street-sponsored report into pension scheme asset allocation revealed a 61 percent spike in alternatives exposure by the 89 public funds participating in the LGPS, representing £16.6 billion in assets.

A further £34.7 billion in assets were given over to fixed income, leading to a 31 percent increase in those business lines.

The report explained that “traditional assets classes such as equities and fixed income remain core holdings for these funds with equities accounting for 48 percent, and fixed income accounting for 14 percent of their overall allocation”.

State Street’s data also highlighted a 13 percent increase in overall scheme assets, bringing the total to £251.8 billion.

Overall exposure to equities went up by 9 percent to £251.8 billion.

Andy Todd, head of UK pensions and banks, asset owner solutions for State Street, said: “Mounting costs and pressures lower-for-longer yields have led pension fund investment committees to seek ‘higher yielding’ assets to assist them in meeting their strategies investment targets.”

JR Lowry, head of State Street Global Exchange EMEA, added: “LGPSs are in a period of extreme change and technology will be the next stage of their evolution.”

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