Analysis from Spence Johnson, the market intelligence firm, found that the top seven pension markets in the world increased their exposure to assets such as hedge funds, private equity and real estate, by 400 per cent between 2001 and 2011.
“This shows that the attitudes of institutional investors are moving with the times," explained AAA’s analysis partner, Anthony Johnson. He added, “It’s not just individual investors who are keen to diversify their portfolios to help protect their investments against risk.
“Indeed during these economically volatile times, more and more pension funds are increasing their alternative investments and edging away from more traditional investments, like equities.”
However, there is still a way to go before defined contribution schemes view alternatives in the same way as other traditional investments, claim analysts. Spence Johnson found that only around $1.7 billion of DC funds are invested in alternatives, compared with $450 billion that is invested elsewhere.
The figures do, however, show that it is the defined benefit schemes that prefer alternatives, with a much higher interest in less traditional investments than defined contribution pensions. Analysts claim that this is because defined benefit schemes are invested by experienced professionals, rather than the average “man on the street”, and alternatives are, therefore, likely to be a preferred option.
AAA supports many kinds of alternative investments, and focuses on promoting ethical choices, such as sustainable forestry and timberland investment through scheme such as that run by Greenwood Management in Brazil.
Mr Johnson added, “it’s becoming easier and easier to promote alternative asset classes as the experts know the benefits, as these latest pension figures clearly illustrate. Sometimes we feel we are preaching to the converted.”
About Alternative Asset Analysis:
The remit of Alternative Asset Analysis is to analyse and provide news on the global performance of a wide range of alternative asset classes including, but not restricted to, commodities, real estate, forestry, foreign exchange, hedge funds, private equity and venture capital.
Alternative Asset Analysis
71 Commercial St
Boston, MA 02109-1320