REAL ESTATE INVESTMENT INCREASES
Pension funds ramped up their investments in real estate last year, the European Institutional Asset Management Survey (EIAMS) showed. At 6.6 per cent of investors’ total assets, real estate is now at an eight-year high. The survey showed that all sizes of investors increased their allocations to real estate, with medium investors making the largest increase, perhaps starting to redress the significant cuts made the previous year. Pension funds have moved down the liquidity scale and diversified into alternatives such as real estate, hedge funds and private equity.
PENSIONS FUNDS CUT INFLATION HEDGES
UK pension funds decreased their inflation hedging by nearly a third between April and June compared to the first quarter of the year, according to the latest LDI survey from F&C. This fall can be attributed to the combination of unattractive market levels, an acute and prolonged period of pre-election wariness and renewed concerns about the prospects of a “double-dip” recession and deflationary fears, F&C said. However, interest rate hedging was maintained at similar levels due to swap rates being perceived as low and falling sharply in May as gilt yields retreated further.
ABSOLUTE RETURN FUNDS DO WELL
New research by S&P Fund Services has found that absolute return funds performed well due to a combination of low libor rates – the typical benchmark for these type of funds – and a strong market recovery. The review, which covered 2009 and 2010 to date, found that although absolute return funds had a good recovery, fewer funds had achieved their targets over the last three years as they were adversely affected by market volatility. The review found that more fund managers were turning to equities as the number of fixed income funds in the sector fell in 2009-2010.