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Picking a diversified growth fund top concern for UK pension schemes

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The majority (88 per cent) of UK pension schemes state that picking a suitable diversified growth fund is still one of their top three areas of concern despite over 40 per cent of schemes estimated to be invested in one, according to a survey conducted by Clear Path Analysis.

When asked what the most significant issues in setting a diversification strategy were, 44 per cent said setting and continually updating the trustee governance framework to allow for new market developments.

Another 21 per cent said gaining access to potentially higher performing investments whilst protecting downside risk, while 30 per cent said communicating new fund strategies the trustees wish to employ to members.

When asked why they had a level of interest, if not already invested in, diversified growth funds, 63 per cent stated because they could offer equity like returns but with lower volatility. Almost half (49 per cent) stated the aim of protecting down-side risk for DC members was the number one attraction.

When asked what the most significant challenges were when looking to invest in a diversified growth fund, 88 per cent said that setting a criteria to pick a manager was the most significant challenge.

Another 84 per cent said satisfying the trustee committee that the scheme could truly protect down-side risk in volatile markets, and 72 per cent said ensuring the manager was investing within appropriate asset classes to their members risk appetite was a top three consideration.

Of the 32 pension professionals Clear Path Analysis spoke with, 52 per cent said that they would likely offer a diversified growth fund to members in the next 12 to 18 months or look at alternative options, should they be able to match a suitable fund to their investment strategy or member risk appetite levels.

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