Schemes seek alternative LDI assets

Around 60% of Baring Asset Management scheme clients have made the move, with nearly 45% citing liability matching, and 60% volatility management as their reasons.

More than a third of the funds polled claimed to have a liability-driven investment (LDI) strategy.

Long-dated index-linked gilt real yields are currently languishing below 0.1%, having dipped into negative territory in recent weeks.

Barings’ head of institutional, Andrew Benton, said: “This is a time of unnerving volatility and, for many people, a declining appetite for risk.

“Risk awareness has also become more commonplace, given the increase in industry regulation and market oversight.

“At the heart of many of these initiatives are concerns by regulators over the ability of pension providers to meet long-term commitments, and this has driven increasing interest in strong risk management.”

Robert Gardner, co-chief executive at LDI specialists Redington, said illiquid real assets, such as secured lease property, are becoming more popular with clients seeking to match liabilities.

The Barings data also revealed schemes are planning to dramatically increase their Asian equity allocations next year, with Malaysia, Thailand and Indonesia joining China and India as the most popular areas for investment