U.S. Pensions Ante Up Alternatives Portfolios

May 6 2008 | 1:35pm ET

U.S. pension funds are following in the footsteps of endowments and foundations by ramping up their alternatives portfolios while cutting down on equity and fixed-income allocations.

According to a new report from Greenwich Associates, pension plan sponsors are making the significant changes to expand their holdings of alternative investments, especially hedge funds and private equity, and increasing their exposure to international investments—particularly foreign equities, which plan sponsors expect to outperform domestic stocks by a wide margin.

While allocations to p.e. and equity real estate declined slightly last year across all U.S. institutions, allocations remain substantial among certain types of investors: Public pensions allocated 5.6% of assets to equity real estate, and endowments devoted 8.3% of assets to p.e.

Hedge fund allocations continued to climb: Institutions allocated 2.6% of total assets to hedge funds in 2007, up from 2.2% in 2006, 1.9% in 2005, and 1.6% in 2004. And allocations among active users of hedge funds were much higher.

At the same time, institutions increased their allocations to international stocks to 17.9% of total assets in 2007 from 15.2% the prior year while allocations to domestic equities continued to drop, falling to 41.7% in 2007 from 44.8% in 2006. Funds cut domestic fixed-income allocations to 21.4% from 22.4%, continuing a steady decline that now dates back at least five years.

Greenwich’s research results suggest that many of these trends will remain in place and even intensify in 2008: Nearly a third of institutions plan to significantly increase allocations to private equity, 23% expect to increase hedge fund allocations and 21% plan to boost equity real estate allocations. In each case, only 1% to 2% of institutions plan to cut their allocations.

“Our research reveals that diversification remains the dominant trend in institutional portfolios,” said Greenwich Associates consultant William Wechsler. “And in general, this diversification is taking two forms: The shift of assets into alternative investments and allocation adjustments that reduce the level of 'home-bias' and change portfolio composition to better reflect global market capitalization.”


In Depth

Q&A: Executive Recruiter Talks Hedge Fund Closures, Hiring Trends

Dec 19 2014 | 6:58am ET

This year, hedge funds have been closing at a rate not seen since the financial...

Lifestyle

Cooper-Hohn Won't Contest Divorce Settlement

Dec 18 2014 | 9:51am ET

The ex-wife of hedge fund billionaire Christopher Hohn will not contest a divorce...

Guest Contributor

Alternative Investment Funds Face A Communications Imperative

Dec 19 2014 | 6:10am ET

A handful of the top alternative investment firms on both sides of the Atlantic...

 

Sponsored Content

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

December 2014 Cover

Futures 2014 person of the year

Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.