UK pension funds’ exposure to UK equities is now at the lowest level since 1984, according to performance measurement consultants WM Company. Funds moved nearly £4bn (E6.7bn) out of UK equities in the second quarter of the year, compared to an increase of £1.3bn in the previous quarter. Overseas equity exposure, however, stands at 25%, the highest level during the last three decades.
“Funds appear to be moving out of the traditional markets such as the UK, into overseas equities, seeking higher returns,” says Peter Warrington, executive director at the WM Company. “£1.8bn went into overseas equities , spread across US, Continental Europe and emerging markets. £1.6bn was transferred to cash – a familiar pattern that usually follows any sharp correction in the UK equity market,” he adds.
In the fixed income side , despite the strong performance of overseas bonds – returning 6.3% - the shift from overseas to UK bonds - with returns of 1.6% - continued.
UK pension funds showed flat returns in the second quarter of the year, generating a 0.2% increase.