For the fourth straight year, pension schemes at
Britains blue-chip and mid-cap companies have cut
equities exposure for employees that are invested in the asset
class by default. Theyre favoring government bonds,
credit and index-linked bonds instead.
Research published Thursday by U.K. fund group Schroders
found FTSE 350 companies pension plans increased asset
allocation to fixed-income by 5.3 percentage points to 20.8
percent in March, from 15.5 percent a year earlier. Assets
invested in global and U.K. developed market equities dropped
by 4.8 percentage points to 61.9 percent from 66.7 percent over
the same period.
The British governments Department for Work &
Pensions has been meeting with asset managers as part of an
ongoing review to better understand how the U.K. company
pensions can be improved. British companies with more than 250
of staff have been obliged to automatically enroll employees
into retirement savings plans since 2012, with smaller firms
subject to the same obligation over time.
At the moment, you pay into a fund and you keep your
fingers crossed that there is going to be enough in the pot for
when you get there, said Euan MacLaren, managing director
and head of U.K. and Ireland institutional business at Natixis
Asset Management. The worker, the corporate and the
investment industry have to engage.
The U.K. has 7.78 million members of defined contribution
pension trusts as at the end of April 2017, according to the
latest data from The Pensions Regulator.
Among FTSE companies, asset allocation to fixed-income has
grown the most over the past four years, rising 11.6 percentage
points since March 2013, according to the Schroders report.
Allocations to alternatives including commodities, hedge
funds, real estate, absolute return funds rose to 13.1
percent in March, from 7 percent four years earlier. Global
Equities exposure fell to 39.8 percent from 46.2 percent over
the same period, while UK equities tumbled to 22.1 percent from
Stephen Bowles, head of U.K. Institutional Defined
Contribution (DC), at Schroders, said the rise in fixed
income allocations in the DC space is we believe part of the
broader move towards more diversified portfolios that the
report has identified over the past four years.