Pension funds move from equities to bonds

By Jennifer Hill

LONDON (Reuters) - Almost half of final salary pension funds have moved assets from equities to bonds in the past year, as they respond to market volatility and aim to match assets more closely with liabilities, figures show.

Some 46 percent of British defined benefits schemes, collectively worth billions of pounds, have reallocated funds from equities to bonds in the past 12 months, according to a survey by Aon Consulting.

Around 54 percent said they had made no change to their investment strategy.

The poll of more than 100 pension managers also found that pension schemes have adopted a wider range of diversifying asset classes, which are used to reduce investment risk without reducing expected returns.

British property continued to be the most popular non-equity asset, with almost half of all schemes (44 percent) holding this in their portfolio.

Private equity, absolute return funds and diversified growth funds are also proving popular.

Daniel Peters, an investment consultant and actuary at Aon, said: "It's no surprise that as pension schemes mature and trustees become increasingly risk aware, nearly half have moved some part of their growth portfolio into matching assets.

"To reduce volatility further, growth assets require diversification away from equities.