Pension schemes continue to diversify their investments

The latest NAPF Annual Survey of UK pension schemes reveals that the trend away from investing in equities continued in 2007 as further diversification of defined benefit (DB) pension assets took place.

The survey covered the allocation of assets by 307 defined benefit pension schemes.

NAPF Chief Executive, Joanne Segars, said: “With growing scrutiny and pressure on pension scheme trustees to make sure there is a balance between risk and return, the survey shows they are increasingly viewing diversification as normal practice.”

The survey’s main findings are set out below:

55% of DB assets in the sample are invested in equities, down from almost 60% in 2006. 29% are in fixed interest assets (up 3%) and 16% in alternatives and cash (up 3%). On average, better funded schemes had a smaller share of their assets in equities and a larger share in fixed interest assets.

47% of respondents have reduced the proportion of their strategic asset allocation devoted to equities within the past year. 34% have increased the proportion devoted to fixed interest investments.

Since 2005, the proportion investing in hedge funds has risen from 8% to 17%. Over the same period, the proportion of schemes investing in property has risen from 50% to 60%.

On average, funded public sector schemes have more of their assets invested in equities and less invested in fixed interest assets compared with private sector schemes.