Concern over volatility rising

Reducing volatility has been the main priority for pension fund managers this year, with two thirds reporting that they have recently reduced their fund’s exposure to volatile assets.

Responding to a survey by Baring Asset Management, 61.5% of pension fund managers stated the need to reduce volatility as their main reason for changing their fund’s asset allocation.

“This research clearly shows that the concerns of UK pension fund managers centre on the need to manage volatility and protect against extreme losses,” said Andrew Benton, head of UK and international institutional sales at Barings.

Achieving greater investment returns and matching assets to liabilities were also given as reasons for adjusting a fund’s asset allocation.

Other changes to asset allocation suggest that pension fund managers are trying to manage their portfolios more dynamically. “The increase in allocation to multi-asset and diversified growth strategies suggests pension professionals are looking for equity-like returns without the levels of risk,” said Benton.

Trustees should speak to their investment managers to ascertain how their pension fund is being managed in the current volatile economic environment.