UK – The UK’s 50 largest fund managers saw an increased shift from UK equities to fixed income and global equities in 2005, according to an annual survey by Hymans Robertson.

According to the ‘Market Briefing 2006’, fixed income accounted for roughly 29% of assets under management - an increase of more than 50% in the last four years.

Changes to UK pension regulations and the associated ‘flight to bonds’ has been the main driver behind this growth in bond mandates, said the report.

This has been “largely sourced from sales of UK equities as trustees look to better match their assets to their liabilities”.

Another key factor is the continued move away from multi-asset briefs to specialist bond mandates.

As a result, the proportion of assets under management managed in UK equities has remained at the 2004 figure of 21% despite a strong equity market.

“UK equities have also been the source of funds for increased allocations to global equity mandates in 2005, as clients have recognised the benefits of diversifying the risks associated with the extent of their domestic equity bias,” said Hymans.

There has also been a “modest increase” in alternative investment in 2005 due to increased diversification. According to the survey UK institutional investors have considered the likes of hedge funds, private equity, commodities, currency overlays and real estate.

However, Hymans largely attributed the increase to “market movements”.

According to a statement from Hymans, “Diversification from UK equity ‘home bias’ has continued towards global mandates, often with higher performance targets, reflecting greater tolerance for global managers to exploit a broader opportunity set to add value.”

Overall, managers’ UK client asset base had 13% in global equity, 5% in property, 1% in currency overlay, 18% was multi-asset and 13% was allocated to ‘Other’.

Liability driven investment, or LDI, was the “hot topic” in 2005, said Hymans.

Managers, who invested in the development and resources behind LDI solutions in 2004, started to see dividends in 2005 as a number of clients invested in LDI type solutions, said the report.

The top five players of LDI cash flow matching solutions recorded over £26bn of wins. This is a relatively small amount compared to the roughly £1tn of pension assets, but it has grown quickly, said Hymans in a statement.

According to Stephen Birch, co-head of Hymans’ manager research, “It will be interesting to see how those firms who are currently behind the curve for LDI solutions compete for market share. We expect the LDI market to continue to gather pace throughout 2006.”

Overall, Legal & General, BGI and Hermes topped Hyman’s chart of the largest institutional pension UK fund managers for 2005. Alliance Bernstein – in tenth position – jumped 16 places from 2004.

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