Pension funds are increasing their investments in alternative assets such as private equity at the expense of equities, according to an annual survey by the NAPF.

Pension funds are increasing their investments in alternative assets such as private equity at the expense of equities, according to an annual survey by the UK’s National Association of Pension Funds (NAPF).

The NAPF survey, which correlated data from 294 benefit funds with £450 billion under management, discovered that allocation to private equity and venture capital was up to 2.5 per cent this year from the 1.7 per cent recorded in its 2007 survey.

However, the allocation to UK shares has fallen to 21.1 per cent of total assets from the 25 per cent last year.

The NAPF findings also indicate that investors have increased their investments in hedge funds to 1.9 per cent of total assets this year, up from 1.2 per cent. The amount invested in fixed-income has risen to 31.2 per cent so far this year from 29.4 per cent last year.

The percentage of assets invested in overseas equities, however, fell from 29.9 per cent last year to 28.8 per cent so far this year.

David McCourt, policy adviser on investment and governance at NAPF, commented on the findings: “The pattern of UK pension fund investment continues towards greater diversification as a means of better risk management and reducing the impact of significant volatility in world equity markets.”