Pension funds to sell-off more domestic equities

Pension old woman 410European pension funds will continue selling out of equities and buying alternative assets over the next 12 months, research shows. The reduction will be mostly in domestic equity allocations.

Pension fund allocations to equities have been falling as the eurozone crisis drags on.

Over the next year, in the UK 38.8% of schemes are planning to reduce their exposure to UK equities, with only 1.4% expecting to move in the opposite direction, the European Asset Allocation Survey published today by Mercer, the investment consultancy, showed.

Nearly 24% of UK schemes – who are among the largest holders of equities among pension funds in Europe - intend to reduce their overseas equity allocation.

A similar pattern can be seen across Europe, with around 20% of schemes planning to reduce their domestic or overseas equity allocation.

The trend for schemes to reduce equities is matched by allocations to alternative assets, which have increased as schemes seek portfolio diversification.

The survey of more than 1,200 European pension funds with assets of over €650 billion found that an increasingly broad range of alternative asset classes are being considered by pension plans, with 50% of schemes now holding an allocation to alternatives, up from 40% last year.

In this category, hedge funds, emerging markets debt and high yield bonds were the most popular categories across Europe (ex-UK), with almost 20% of schemes having an allocation to one or more of these areas.

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