UK – Pension consultants are increasingly pushing UK pension funds into choosing more globally oriented investment managers with seven out of ten saying they believe as much as 50% of a UK scheme’s portfolio should be invested overseas, according to a survey by Dresdner RCM Global Investors.

The surveys findings reveal that after years of sticking to the so-called safe haven of UK equities, consultants are conceding that pension funds have to move further into global markets to make the most of future returns.

Mark Archer, head of institutional business development at Dresdner RCM Global Investors, comments: “With the current ratio of UK and overseas equity investment in UK pension funds standing at around 68% and 32% respectively (WM figures), our research is showing a significant sea change in consultants opinions as to where pension funds should be invested.”

Dresdner says that on balance most consultants believe the split between UK and overseas investment should be even.

The research also shows that the downturn in global markets is not dampening consultants enthusiasm in recommending a move towards increased investment in global equities, with virtually all the consultants emphasising the need for trustees to take a long-term view of market volatility.

However, consultants are less bullish on the prospects of such an investment shift happening in the short-term. Trustee caution is still recognised as a major block on overseas investment, although the Myners report and MFR requirements have made trustees begin to consider alternatives to UK equities.

The report also says that a major challenge to consultants is finding investment managers with true global equities capabilities.
Brendan Reville, a consultant with Gissings, says: “There are simply not enough global managers in the global equity arena, and the existing managers cannot simply switch to being global overnight as teams have to be set up from scratch.”

Finally, the research revealed a consultant split on the issue of benchmarks.
Half of those interviewed believe that currently there aren’t enough global benchmarks. But, eight out of ten believe that benchmarks for UK pension funds will change following the Myners report.