The average asset allocation of funds adopting their own specific benchmark
Mercer Investment Consulting
European pension funds are increasingly directing their attention to controlling investment risk and managing it more efficiently, according to a new survey by Mercer Investment Consulting (Mercer IC). The survey of over 650 European pension funds, with assets of €423 billion, found that a wider range of asset strategies is being used to capture the benefits of diversification, and more emphasis is being placed on active management (alpha) to enhance returns and reduce emphasis on capturing market return (beta).
The UK and Ireland continue to have the highest exposure to equities, at 61% and 60% respectively. However, UK funds have reduced their allocations from 62% last year and from 68% in 2003. In contrast, Germany and France have the lowest exposure to equities, at 24% and 26% respectively, followed by the Netherlands and Switzerland with allocations of 35% and Spain at 36%. Funds in these countries have correspondingly higher allocations to bonds.
Results showed that, on average, Continental European funds increased their allocations to equities from 40% to 42% over the last year. But, Ralph Frank, European director of consulting at Mercer IC, explained: “While it appears that allocations to equities increased in Continental Europe, the difference can be explained by their strong performance rather than by positive decisions to allocate more to this asset class.”
Link to 2007 European asset allocation