Pension fund allocations to equities are increasingly replaced with alternatives as European investors seek to cover themselves from the increasing volatility created by the Euro-zone crisis, Mercer’s annual European Asset Allocation Survey says.
With the recent warning from the European Commission that financial disintegration was imminent, the detected trend now seems to have started even quicker and fiercer than was predicted in the study.
The survey, which looked at 1200 European pension funds with assets of over €650bn, found that a wide set of alternative asset classes are being considered by pension funds, with 50% of schemes now holding an allocation to alternatives. This marks an increase of 40% compared to last year.
Mercer’s study reveals that pension schemes in what could be called ‹traditionally equity-heavy markets›, such as the UK and Ireland, still have the largest equity weightings, although they have also seen the largest falls in equity allocations. This is mainly due to the desire to drive away from domestic equities. In the UK, average allocations to domestic and non-domestic equities fell by 4% (from 47% to 43%) during the past 12 months.
