Over four-fifths (83%) of pension funds now have exposure to multi-asset strategies, according to the latest industry poll by Baring Asset Management. This represents a significant increase from around two-thirds (70%) in the last survey six months ago and 65% in the one conducted a year ago.
Overall, the latest research from Barings found a rise in the numbers of pension funds concerned about volatility and risk: of the managers who had recently changed the asset allocation of their funds, the majority (60%) had done so to reduce volatility while two-fifths (40%) had done so to better match assets to liabilities more effectively. In contrast, only a third (33%) made changes to achieve greater returns.
To mitigate market volatility, over two-fifths (44%) of respondents said that they had better diversified assets, while 42% said they were reviewing investment portfolios more regularly and just over a third (36%) had shifted assets towards multi-asset products.
Andrew Benton, Head of International Sales and Business Development at Barings, comments: “The overarching theme from this latest study is an increasing awareness of ‘volatility’, and the need to manage that, among pension funds. There are tangible rises in the use of multi-asset strategies and a continuing focus on liabilities as pension funds look to better manage risks. The research found, for instance, that over three quarters of respondents were either very or slightly concerned by the end of quantitative easing.”
The biggest macroeconomic challenge to investment growth over the next six months, as perceived by survey respondents, remains issues regarding European sovereign debt (61% of respondents), with the second biggest concern being levels of US debt (58%) and third, slowing growth in China (47%). Just 3% thought there was a risk of deflation in the UK – although over a third (34%) saw rising interest rates in the UK as a threat.
Andrew Benton concluded: “It is clear that pension professionals remain intensely focused on managing volatility and risk, particularly with regards to major macroeconomic risks and the economic health of the world’s major trading superpowers – particularly with regards to sovereign debt. While many equity markets made strong gains in 2013, a degree of uncertainty has returned in 2014 and, in this environment, it is not surprising to see mangers diversifying assets and looking to control risks.”
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