A poll this week indicated that 65 per cent of pension managers currently hold a multi-asset fund. The figure this time last year was just 38 per cent.
While a recent FE Trustnet article highlighted the general lack of interest and understanding of pensions, those who are actively managing investments are attempting to decrease their exposure to risk by adding funds in the Active, Balanced and Cautious Managed sectors to their portfolio.
The study, which was conducted online among professionals who invest in a UK private or public pension scheme, also found that two-thirds of respondents had recently changed the asset allocation of their fund, up from 50 per cent last year.
The majority – 61.5 per cent – stated the need to reduce the volatility of the fund as the main reason for altering asset allocation. The second most common reason was the need to reduce the correlation of assets, followed by the need to better match assets to liabilities. The least popular reason for changing the asset allocation was to achieve greater returns.
"This research clearly shows that the concerns of UK pension fund managers centre on the need to manage volatility and protect against extreme losses; achieving greater returns is secondary given the current turmoil and ongoing situation in Europe," said Andrew Benton, head of UK and international sales at Barings.
"That said, the changes that are being made to pension funds demonstrate a desire among managers to have a more dynamically managed portfolio. The increase in allocation to multi-asset and diversified growth strategies suggests pension professionals are looking for equity-like returns without the levels of risk."
Multi-asset funds have been equally popular with retail investors. IMA Cautious Managed was the best-selling sector in the IMA unit trust and OEIC universe in January, February, March and July this year, as well as November and December 2010. Funds in the Cautious Managed sector were the most popular overall in the first and third quartile of 2011.
Performance of funds vs index over 5-yrs
Source: FE Analytics
Sector-topping vehicles such as Sebastian Lyon’s Trojan fund, which has attracted mass inflows in recent months in spite of its soft-closure in April, Martin Gray’s CF Miton Special Siutations Portfolio, and David Ballance’s CF Ruffer Total Return fund have proven particularly popular with investors looking to diversify their portfolio.
The research also highlighted the increasing demand for emerging market funds within pension portfolios; 62 per cent of respondents to the Barings poll felt that emerging Asia has the biggest potential for equity gains over the next 10 years.