Schroders latest FTSE DC report shows diversification with growth in alternatives
Schroders launches the May edition of its six monthly FTSE DC report, now in its fifth iteration.
Schroders is today launching the May edition of its six monthlyi FTSE DC report, now in its fifth iterationii. The report provides an insight into the asset allocation decisions being made by defined contribution pension schemes over the past six months. Since our first report in March 2013, the pool of employees that have access to company pension schemes through auto-enrolment is wider than ever before, now totalling more than 5.2 millioniii people in the UK. Of these members, 4.5 millioniv belong to DC schemes, with 300 such schemes available for auto-enrolmentv.
The research shows that allocation to alternative assets, including real estate and commodities has increased. FTSE 100 companies surveyed have continued to increase their asset allocation from 8% in March 2013 to 12% in March 2015. FTSE 250 companies surveyed have also made increases from 5% in March 2013 to 9% in March 2015.
Another notable trend has been the reduction of exposure to developed equities. This has decreased by 10% over the past 24 months. FTSE 350 pension scheme’s allocation to developed assets has fallen from 79% to 71% since our inaugural analysis in March 2013. This 71% can be broken down into 29% in UK Equities and 42% in Global Equities.
Looking at the FTSE 100 specifically, pension schemes have reduced their allocation to UK equities over the last six months, taking the total from 29% to 25% and the total developed equity allocation down from 72% to 69%.
A growing trend over the past 12 months has been the shift in fixed income asset allocation within FTSE 350 schemes, increasing from 7% to 14% and in the past six months from 9% to 14%. Nearly a third (29%) of the schemes analysed have an allocation of at least 20% to fixed income assets, a year ago this weighting only applied to 3% of schemes.
Stephen Bowles, Head of UK Institutional Defined Contribution, Schroders comments:
“We welcome the growing trend of diversification which we have observed in this and our report in October last year. Auto-enrolment has boosted pension scheme membership and over 5.2 million employees now have access to a company pension. This means an appropriate truly diversified defined contribution default strategy is more critical than ever before.”
i FTSE International Limited ("FTSE") © FTSE. "FTSE®" is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE International Limited under license. All rights in the FTSE indices and / or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and / or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE's express written consent
ii 65 schemes analysed made up of 30 FTSE 100 Schemes and 35 FTSE 205 schemes. The number of pensions schemes surveyed has increased by 25 since the last report in October 2014 which may have a bearing on the percentage findings in this report.
iii Source: The Pensions Regulator: Automatic Enrolment Declaration of Compliance Report (March 2015)
iv Source: The Pensions Regulator: Annual Statistics (1 January 2015)
v Source: The Pensions Regulator: Automatic Enrolment Declaration of Compliance Report (March 2015)
For further information and to receive a copy of Schroders’ FTSE DC Report, please contact:
Estelle Bibby, Senior PR Manager, Schroders
Tel: +44 (0)20 7658 3431 / firstname.lastname@example.org
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