Multi-strategy hedge fund shop Baring Asset Management sees tough times ahead in global markets, and is advising pension schemes to adopt a top-down asset allocation strategy in the volatile environment.

Andrew Cole, a member of the firm’s strategic policy group, says the firm expects “a prolonged period of volatility in global markets, particularly in the U.K., where house prices are at record highs versus income and where the government fiscal position is poor compared even with the U.S.”

According to Cole, dynamic asset allocation strategies can offer pension schemes a “flexible and timely” method of responding to changes in markets and, unlike other strategies, are not constrained by benchmarks or peer groups.

“The best growth opportunities in our opinion are to be found in economies benefiting from structural growth stories—we believe these to be China, India, Brazil, Russia and the Middle East,” said Cole.

“These economies are not highly indebted and have strong consumer spending data. Hong Kong is also likely to be a major beneficiary of U.S. rate cuts. Commodity price pressures are here to stay, in particular we believe that the agricultural sector is likely to perform well. We believe that world growth is likely to remain robust at around 3% per annum, as a result of strong Asian consumption.”