UK - Mercer Investment Consulting says UK pension funds are taking around £30bn (€43.6bn) a year out of equities.

Senior investment consultant Fiona Dunsire told a conference today said that 20% of schemes are directing all new money into bonds. And there was more new cash available now, with higher contributions and lumps sums being paid into schemes.

A feature of this move was that there was a “very strong trend” for fixed income mandates to be less constrained.

“Recent trades have seen the outperformance target for bond mandates increase and is now typically in the order of 125-150 basis points,” Dunsire told the ‘Bond Investment for Pension Funds’ event organised by Specialist Pension Services.

Larger schemes had “rather counter-intuitively” moved less into bonds, she observed – which was surprising because large plans tended to be more mature.

The possible reasons for this were that they were still-open industry or local authority schemes where there understood to be a greater sponsor covenant.

But that was now changing as larger schemes have caught up in the shift to bonds, Dunsire said.

Plan sponsors were being approached more now by investment banks offering products – encroaching onto territory traditionally occupied by consultants and asset managers, Dunsire added.

“Clearly we are stepping on each other’s toes in some areas but from a client perspective it’s important we work together.”

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