Market volatility and wider macro-economic uncertainty is driving a surge in hedge fund investment from UK defined benefit (DB) pension schemes, according to Aon, the global professional services firm.
A combination of circumstances has led to the increased take-up from pension schemes, which are again seeing hedge funds as a means both to drive returns and to strengthen the resilience of their portfolios.
With the improvements in funding levels over the last 18 months, an increased focus on their endgame – including planning for a buyout or for running-on – is prompting many schemes to look at shorter-term investment horizons, said Aon
“Unlike the defined contribution scheme sector, where there is an increased emphasis on illiquid investments, the shorter-term investment horizons of DB schemes – prompted by thoughts of moving to a risk settlement solution or plans to run-on – have made illiquids less of an option and reopened greater interest in more agile hedge fund investment,” said Guy Saintfiet, partner and head of EMEA fund management at Aon.
Saintfiet added: “Schemes are obviously seeking hedge fund solutions that give strong investment results but there is also a heightened emphasis on liquidity, cost and ESG integration that is in line with the governance needs of institutional allocators. Funds that offer that combination are increasingly attractive.”
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