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Majority of pension funds optimistic economy will rebound this year, says GPS survey

Thursday, February 25, 2010
Opalesque Industry Update – The majority of European pension funds have expressed optimism the economy would rebound this year, according to the latest study made by the Global Pension Study (GPS).

The study, commissioned by GPS and organized by Tilburg University, IPE and the European Pension Academy has shown that 53% of pension funds expressed optimism in the economy. The survey, which was completed in January, also showed that 15% of those polled were less optimistic this year.

Some 32% of pension funds believe the global economy will remain unchanged.

Among the top concerns expressed by the pension funds are interest rate risk, cover/solvency/funding level, and the stability of the financial system, the report said.

According to the pension funds, their key focus in the next 12 months is the tactical and medium term asset allocations. Most of the pension funds surveyed posted an average 12% returns in the most recent years.

Pension front
There has been a growing trend amongst pension funds across the globe to allocate in hedge funds as the industry regained faith into the portfolio. FT.com reported that Hewitt Associates saw inquiries from clients rise sharply as pension funds trustees scrabble to find high-performing investment strategies.

Indeed, the New York State Common Retirement Fund disclosed early this month that it had allocated some $446.3m in 10 funds, including hedge funds, private equity and other alternative investments (see Opalesque Exclusive here).

The $46bn Pennsylvania Public School Employees Retirement System invested $350m in a hedge fund, $200m in structured alpha, $250m in residential mortgage-backed securities, and $500m in emerging markets equity, in January this year, while the $460.3m Icelandic pension fund, the Festa Lífeyrissjóđur increased its hedge funds exposure by 10% this year.

Bu the Dutch pension manager PGGM announced last week that is it phasing out its fund of hedge funds strategy amounting to roughly $1.5bn from its $2.3bn portfolio in favor of direct investments.

For its part, the California State Teachers’ Retirement System, the second-biggest U.S. public pension, said it was looking at commodities to boost returns and provide a hedge against inflation and slumping equities.

Industry consultant bFinance has said that a survey among pension funds revealed that majority of European and Canadian funds wanted hedge funds to further drop their fees this year. Full article: Source – PD

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