Pensions Across Globe Increase Alternatives, Green Bonds

Globally, pension funds have increased allocations to alternative investment vehicles and green bonds, according to a recent survey from the Organisation for Economic Co‑operation and Development (OECD).

Additionally, pensions funds have a growing interest in infrastructure – but levels of investment remain low.

From Investments & Pensions Europe:

Large pension funds’ allocation to alternatives, which includes infrastructure, increased on average from 14.3% of total assets in 2010 to 15.3% in 2014, according to the survey report.

“The trend in alternatives is even stronger among PPRFs,” it said.

On average, at the 19 funds that submitted data over the past four years, average allocations to alternatives increased from 11.2% in 2011 to 13.5% in 2014.

[…]

Infrastructure, meanwhile, is drawing growing interest from pension fund managers, but the survey results show a low level of investment on average, according to the OECD.

For the 77 funds that returned questionnaires, infrastructure investment in the form of unlisted equity and debt was $85.6bn in 2014, representing 1.1% of the total assets under management.

The pace of the increase in infrastructure allocation has slowed over the past few years at 23 funds that reported their allocation over the 2010-14 period, according to the survey report, “indicating that funds have not been able to grow their infrastructure allocations”.

[…]

Direct investment remains the most common method for funds to gain exposure to infrastructure, according to the report.

Another noteworthy trend, according to the OECD, is that, among the funds that reported green investments, there was “a general increase” in the amount of pension funds that invest in green bonds, as well as in the relative size of their allocations.

The report can be viewed here.