Fundraising

Pensions’ infra exposure predicted to rise

Roughly one-third of pension executives in 20 countries polled by State Street said that their schemes were likely to increase the infrastructure allocations in the next three years.   

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Nearly half of the 400 pension fund managers polled in a new State Street survey revealed that their schemes plan to increase infrastructure exposure over the next three years. 

The survey, which was commissioned by the US-based financial services research firm, was used to inform a white paper entitled “Pensions with Purpose: Rising to the Risk Challenge”, which divided pension schemes into 'return hunters' (roughly 26 percent of respondents), 'risk cutters' (45 percent), and those who are not looking to make strategic portfolio shifts (19 percent). Roughly 43 percent of return hunters and risk cutters alike said they plan to increase infrastructure exposure in the coming years.  

The increased infrastructure appetite is paired with expressed ambitions to up exposure to private equity on the whole, with half of return hunters and about 44 percent of risk cutters looking for larger PE allocations. 

The return hunters in the group noted a general belief that the schemes they work for will need to seek higher risk strategies to meet their funding requirements in the coming years. Of this group, 62 percent said they plan to boost exposure to funds of hedge funds, 45 percent plan to add hedge fund investments, and 57 percent said they plan to add real estate assets; corresponding figures for risk cutters were 46 percent, 28 percent and 48 percent, respectively.

Only 46 percent of managers surveyed were confident that they have achieved real risk transparency on the risk associated with their alternative assets, including infrastructure. 

Global research firm Longitude Research, conducted the survey on behalf of State Street in October and November of 2015. The survey garnered 400 responses from pension fund professionals, spanning both defined contribution and defined benefit assets across 20 countries. More than two-thirds (68 percent) of respondents came from private sector pension systems, 25 percent from public sector pension funds and 7 percent from superannuation funds.