FTSE defined contribution (DC) schemes are increasing their allocation to alternative assets and fixed income at the expense of equities, according to Schroders.
The asset manager’s latest monthly FTSE DC report found the UK’s top 100 companies were diversifying into alternatives such as real estate and commodities demonstrated by an increase in their allocation from 8% in March 2013 to 12% in March this year. Meanwhile, FTSE 250 schemes increased their allocation from 5% to 9% over the same period.
The report also found FTSE 350 DC schemes increased exposure to fixed income from 7% to 14% over the past 12 months and from 9% to 14% over the past six months. Nearly a third (29%) of schemes have an allocation of at least 20% to fixed income assets, compared to just 3% a year ago.
However, schemes reduced exposure to developed equities by 10% over the past 24 months. FTSE 350 schemes’ allocation to developed assets fell from 79% in March 2013 to 71% (29% in UK and 42% in global equities) in March this year.
In addition, FTSE 100 schemes’ allocation to UK equities fell from 29% to 25% over the last six months while the total developed equity allocation dropped from 72% to 69% over the same period.
Schroders head of UK institutional DC Stephen Bowles said: “We welcome the growing trend of diversification which we have observed in this and our report in October last year. Auto-enrolment has boosted pension scheme membership and over 5.2 million employees now have access to a company pension. This means an appropriate truly diversified defined contribution default strategy is more critical than ever before.”
Comments