EUROPE - European and North American pension funds are planning to increase investments in real estate over the coming year and the majority of schemes are reviewing external managers, an asset allocation survey has suggested.

Findings of a study conducted in December by Bfinance indicated there is still a trend among the 63 schemes surveyed to move towards riskier assets, and 27% of those questioned said they are planning to increase their target allocations to property over the next six months.

The recent turmoil in investment markets and subsequent underperformance means at least 62% of the respondents have also either put their managers on a watchlist or have already reviewed the firms employed to look after an average 21% of their assets under management.

At least 69% questioned said the review was prompted by underperformance while 38% acted to tackle strategic or tactical asset allocation needs.

Sentiment is less than enthusiastic, however, about fixed income and hedge fund holdings as only 8% plan to increase hedge fund allocations over the next six months while 5% will invest more in fund of hedge funds (FoHFs). The picture is still somewhat mixed for fixed income as 13% plan to increase bond holdings in the first half of this year while 22% plan to cut fixed income weightings.

Equities, meanwhile, are also expected to gain increased allocation as an asset class as 27% again said they would raise holdings in the short-term, although negative sentiment dominates after that as 21% respondents expect to reduce equities over three years.

Approximately 16% of those questioned also said they would raise holdings in private equity and commodities.

Of the representative investor base polled, 60% were based on Europe, and of these 45% were from the UK, 13% were from Germany, Switzerland and the Netherlands, 34% originate from the Nordics and 8% are based in Italy.

Half of respondents were corporate pension funds, while 27% were public pension plans, leaving the rest to represent insurers, foundations or endowments and family offices.

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