It may be OK for pension funds to diversify into hedge funds and private equity, but they just shouldn’t go crazy doing it, as Richard Buxton suggests some are. Buxton, who runs two unit trusts and one investment trust at Schroders, has come down hard on a trend among U.K. pension funds to sell off low-valued stocks - such as HSBC, Vodafone, BT and Unilever -- and take the money and run them into private equity. This trend comes even as pension funds are on track, according to Guy Fraser-Sampson, who has written a book on alternative investments, to up their allocations to private equity to 25% of their assets by 2011. Speaking to a Schroders conference, Buxton said, “The ongoing selling of U.K, equities [by pension funds]...is absolute madness - to say you ought to sell equities at these valuations to put money into private equity, which will pay crazy prices for the assets that the pension funds are selling.” Still, Buxton couldn’t deny what a great investment opportunity this is. “Institutional forced selling, regardless of valuations, is creating wonderful value,” he said. “When it will stop, who knows? But the value is there.”
