Some of the world's largest pension funds are decreasing the amount of funds dedicated to stocks.
Included among the list of pension funds adjusting asset allocations are well known names such as The California Public Employees' Retirement System (Calpers), The California State Teachers' Retirement System (Calstrs), the Dutch government retirees fund, and the South Korean private sector employees fund.
Painful and persistent equity losses over the past decade have prompted many of these large investors to focus more on bonds, commodities and alternative investments such as private equity and hedge funds.
Equities appreciated an average 12.91 percent a year from 1900 to 1999, while bonds returned 4.69 percent annually, according to the data from the London Business School and Credit Suisse. Since the start of the new century, bonds gained 6.36 percent, compared with a loss of 2.27 percent for shares.
The adjustments in target equity allocations are considered by some industry analysts to be in the beginning stages. In addition, many see these changes as permanent.
“Given the storm in financial markets that we have seen, the name of the game is risk management,” said Dirk Popielas, head of the Pension Advisory Group at JPMorgan Chase & Co. in Frankfurt. “The majority of pension funds have not finished taking risk off their portfolios. Some have not even started.”
Source: Bloomberg
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