Pension funds boosted alternatives in 2008
LONDON (Reuters) - European pension funds continued to increase their allocations to alternative assets such as hedge funds and commodities last year, undeterred by the financial crisis, according to a report.
A study by Mercer Investment Consulting showed German, Dutch and British schemes all increased allocations to non-traditional asset classes.
The findings, based on 1,000 funds with combined assets of 400 billion euros (350 billion pounds), indicate pension schemes stood by hedge funds even as the asset class suffered its worst year on record.
Hedge funds lost more than 19 percent in 2008, according to Hedge Fund Research, and suffered heavy outflows.
In Germany, schemes increased allocations to alternative assets to 11 percent from 10 percent last year, Dutch schemes raised their weightings to 11 percent from 9 percent, and UK schemes to 6 percent from 4 percent.
UK schemes favour hedge funds, global tactical asset allocation, and active currency as diversification strategies and since the survey was completed over 50 percent more UK schemes have allocated to these asset classes, Mercer said.
Nine percent of British schemes have allocated to funds of hedge funds. Only two percent of UK schemes invest directly in hedge funds but the average allocation among those is 9 percent.
In Europe, 14 percent of pension schemes have allocated to funds of hedge funds, 12 percent to commodities, and 10 percent to high yield bonds. Of the 5 percent investing in single strategy hedge funds the average allocation is 12 percent.
Over two-thirds of schemes surveyed have been prompted to conduct investment reviews due to the financial crisis, with almost 70 percent reviewing counterparty risk and over half looking at their cash management programmes.
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