Flight to safety for pension funds

By Jennifer Hill

LONDON (Reuters) - Pension schemes are investing more assets in less risky areas as they strive to match assets with liabilities, a survey shows.

The National Association of Pension Funds' (NAPF) annual poll reveals a continuing shift away from shares towards less volatile fixed-interest investments.

Some 47 percent of 307 final salary pension schemes have cut their exposure to the stock market in the past year, and 34 percent have increased the proportion devoted to fixed interest.

Schemes are also increasingly diversifying their assets.

Overall, some 55 percent of assets are held in equities (down from almost 60 percent in 2006), 29 percent are in fixed interest (up 3 percent on the year) and 16 percent in alternatives and cash (also up 3 percent).

On average, better funded schemes were found to have a smaller share of assets in equities and a larger share in fixed interest products.

Joanne Segars, chief executive of the NAPF, said: "With growing scrutiny and pressure on pension scheme trustees to make sure there is a balance between risk and return, the survey shows they are increasingly viewing diversification as normal practice."

Since 2005, the proportion of schemes investing in hedge funds has risen to 17 from 8 percent, while those investing in property have gone up to 60 from 50 percent.