Pension funds go the 'bond' way: IMA survey |
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Tue, 24 May 2005 16:15
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The Investment Management Association (IMA) in its recent survey announced that pension funds had moved £40bn worth assets from shares into bonds that were considered 'safer', in 2004.
Chief executive of the IMA, Richard Saunders, disclosed that last year saw asset allocations in pension funds record a fall in equity amounts, from 60 to 56 %, whereas bond allocations were sturdy and scaled up to 38 per cent from the previous 36 %.
According to Saunders, “The most striking finding is the shift in asset holdings by pension funds now under way, which we estimate to have been £40bn over 12 months out of equities and into fixed interest. We believe this process will continue for some time yet, representing a fundamental reallocation of pension fund assets.”
| He added that these figures had considerably strengthened IMA’s belief in its predictions of transfers worth £150bn during the coming three to five years. Saunders mentioned that since most companies had stopped offering final salary pension schemes, it was imperative for people having pensions exposed to risks of variations in financial markets to posses a powerful ‘risk-averse’ policy. Traditionally it implied that one ought to opt for more bonds, instead of relying solely on equities and property.
He reiterated that pension funds and life assurers had to consider long-term advantages and risks rather than taking short-term fluctuations into view. In Saunders’s words, “Pension funds have to take the long-term view. Timing is the most difficult thing in this game.”
Furthermore, IMA’s survey illustrated that assets managed by its member firms in UK and across the world had risen in 2004, with assets in UK increasing by 9%. Saunders believed that the shift of trend towards bonds signified “changing demands on asset managers by their clients.”
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