Investors fall out of love with equities

UK institutional pension funds further cut their exposure to equity markets while boosting holdings of fixed income and hedge funds last year, official data out yesterday reveal.

Pension schemes, which invest billions of pounds of workers’ money in markets, cut average equity holdings to 38.5 per cent in 2012, a drop from a figure of 61.1 per cent just six years ago.

The data, collected by pensions watchdog The Pensions Regulator based on 6,316 UK defined benefit schemes, also reveals a surprise leap in the use of hedge funds by institutional investors.

Investors now give 4.5 per cent of their cash to hedge funds, compared to 2.4 per cent in 2011 and 2.2 per cent in 2010.

Historic low yields on UK government gilts have also driven schemes away from lending money to the Treasury, with allocations to gilts plummeting 40 per cent since 2008. This has been offset by more allocations to corporate debt and index-linked securities.

The data is collected from schemes eligible to enter the lifeboat fund The Pension Protection Fund, which rescues schemes which have collapsed.

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