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Alternatives have provided protection

Date: Thursday, November 6, 2008
Author: Jenny Blinch, Global Pensions.com

An indisputable majority of pension funds have claimed diversification into alternatives has protected them in the ongoing financial crisis, the results of the latest Global Pensions 100 Panel have shown.

Of the 75% of respondents the question was relevant to, almost 95% stated diversification into alternatives had had the desired “protective” effect.

However, caution was shown by one respondent, who commented: “My alternatives - mainly private equity - have been protective to date. But I fear they are simply on a later cycle than quoted equities and will not be entirely spared.”

The Global Pensions results came at the same time as a survey of Canadian corporate and public defined benefit plans, carried out by Fidelity Investments institutional asset management arm.

The survey found that for public plans, complexity and risk of some alternative investments was becoming a primary concern and possible barrier to their adoption, with 130/30 funds cited as an example of this.

Peter Chiappinelli, senior vice president, Asset Allocation Strategies, Pyramis Global Advisors, which conducted the research, commented: “Many plan sponsors indicate that they need more education on alternative investments. Also, a large majority of plan sponsors don’t think that today’s risk tools are adequate when it comes to dealing with alternative investment strategies.”