More UK pension schemes use multiple funds - study

LONDON, March 29 (Reuters) - Most of the pension schemes sponsored by large British companies have turned to specialised asset management in the space of a few years, instead of relying on single providers for all their portfolios, a study showed on Monday.

Almost 80 percent of FTSE 100 defined contribution (DC) pension schemes, which pay out based on investment performance, now use platforms run by insurers which give access to "best-in-class" managers, consultancy Towers Watson (TW.N) said.

The figure has risen from virtually zero five years ago, when pension funds relied on a handful of chosen providers, Towers Watson said.

The continued growth of the platform method will be a further catalyst to specialist asset managers as the industry caters for more alternative and liability-oriented management, said a spokesman for Towers Watson.

"This is a very positive trend that goes hand-in-hand with stronger investment governance, making investment choices easier for members to understand and giving fiduciaries greater control and flexibility," said Gary Smith, senior investment consultant at Towers Watson.

The platforms address the issue of talent availability to DC funds, which unlike their more generous and sophisticated counterparts known as defined benefit funds (DB), have received little attention from fund managers because of their relatively small size.

The bargaining clout and influence of DC schemes is set to grow, though, as their assets increased to the current 42 percent of global pension assets from 32 percent in 1999, Towers Watson has estimated.

As part of their broader investment strategy schemes are offering new options to their members; over a third of schemes now offer ethical funds, up from a quarter last year and the number of schemes offering Shariah or Islamic funds has doubled in the same period to 22.

In spite of this change, "too many (DC) schemes still haven't taken diversification on board and still use 100 percent global equity," Smith said. (Reporting by Cecilia Valente; Editing by Dan Lalor and Simon Jessop)