- 4th annual survey shows equities returning to favour –

23 November 2009 – Baring Asset Management’s (Barings) annual select poll of UK pension schemes* reveals that almost a third (29%) are now more likely to allocate to emerging markets as a result of the recent global market volatility, compared to 4.3% in 2007 and 0% last year.

Of those pension funds that invest in emerging market equities, 90% include Asia in their portfolio while three quarters (76%) of funds invest in Eastern Europe and Latin America.  Just under half (48%) of UK pension funds invest their equity exposure in global emerging markets though a standalone emerging markets mandate, whereas 43% invest it as part of a global equity portfolio.

Overall asset allocations to equities have decreased significantly over the last four years, from 70% in 2006 to just 47% this year. However, the research indicates that confidence is returning for equities with 14% of respondents expecting to increase their allocation to equities in the next 12 months compared to just 5% a year ago.  Just over half (52%) expect their allocations to remain the same.

When asked to cite their most important investment priority over the year ahead, maximising returns with minimal risk was voted the most important while achieving cash plus returns ranked second.  When it comes to defining success from an investment perspective, measuring returns against their ability to match liabilities ranked top.

Richard Graham, Head of UK Institutional Business at Barings comments, “This shows that schemes recognise that Emerging Markets are more likely to lead the world out of economic recession than the debt laden developed markets. Schemes have seen that there are few safe equity havens and would prefer more exposure to the growth parts of the world, and less to the volatile West. We are seeing significantly more interest from both schemes and their consultants.”

ENDS

*Source: The Baring Asset Management UK Pension Fund Poll was conducted amongst 21 of the top 100 UK pension schemes ranked by size between 5th and 16th October 2009.