Investment management costs are soaring for local government pension schemes across the UK, as many choose raise their allocations to expensive alternative investments, including private equity and infrastructure.
Alternative investments, though a minority of these pension schemes’ portfolios, are often responsible for the bulk of total investment management costs.
One public pension fund, Devon Pension fund, has doubled the proportion of its assets allocated to alternatives over the past five years, sending investment management costs up by as much as 39 per cent, according to information obtained by Freedom of Information request.
Read Institutional Asset Manager’s original data investigation examining pensions schemes’ push into alternative assets and private markets.
Real estate is also benefitting from an uptick in investment from pension funds, with commitments rising in the second quarter of 2021, according to Nasdaq eVestment’s Private Markets Monitor.
Confidence appears to be returning to the asset class after turbulent times throughout 2020, and the latest real estate commitments still represent a drop of 10 per cent compared with the same period last year.
Chinese equities have also sharply reversed course in 2021, after notching up significant gains during the country’s rapid recovery from the coronavirus pandemic last year. More recently, the country’s tech sector has suffered from increasing activity from China’s regulators.
Nevertheless, Unigestion says that the grounding of Chinese equities is helping funds by bringing back equity and emerging market risk premium, which had fallen to a low level.
Madeleine Taylor
Editor, Institutional Asset Manager
maddy.taylor@globalfundmedia.com