Mon, 06/03/2006 - 06:58
A new poll shows that UK pension funds and their advisers are becoming more open to using alternative products and investment techniques to reduce deficits.
According to the poll conducted by Henderson Global Investors at its annual institutional investment conference, attended by 40 people representing public and private pension funds and their advisers, 64 per cent identified a requirement for returns to reduce deficits as the main driver facing pension funds over the next 5-10 years.
As pension funds look for solutions to boost returns, further results show that they are becoming more open to the types and range of alternative assets to invest in. 92 per cent said they would allow interest rate, currency and credit overlay into their investment portfolios, with 71 per cent additionally allowing investment in secured loans.
Commenting on the results of the poll, Arno Kitts, Director of Institutional Business at Henderson, said: 'As deficits continue to drive the agenda for pension funds, we are seeing widespread interest in, and take up of, more diversified and flexible 'alternative' products. This is particularly the case for secured loans, where we are seeing a strong growth in appetite from pension funds.'
The poll also shows a changing attitude to removing the shorting constraint in portfolios. Almost half (48 per cent) of respondents would allow shorting and nearly three quarters (72 per cent) agreed that shorting can improve risk adjusted returns in an equity portfolio.
Commenting on shorting, Alistair Sayer, Investment Director at Henderson, said: 'Selling stocks that you don't own is not necessarily risky, despite widespread belief, and can actually reduce overall risk in a diversified portfolio. Managers are keen to be allowed to use shorting in their portfolios to improve risk-adjusted returns, now that recent legislative changes have increased the range of financial instruments that pooled investment funds can use. This poll shows that our clients are increasingly coming to share the view.'
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