40% of Pensions Considering Alternative Assets to Reduce Risk

A global financial marketplace that has been in recovery mode for the last five years is regarded by most to be a challenging, volatile climate for investment. On the other hand, there are those who believe that it is an opportunistic place for investment-seekers to build a portfolio. For instance, the traditional investing strategy, which consists of buying and selling stocks, bonds, real estate etc.; has not been as profitable in today's uncertain economic environment. Because of this ongoing poor performance, 40 per cent of pension funds are considering moving a larger portion of their funds to alternative assets (Aon Hewitt survey), to capitalize on new opportunities that will reduce their portfolio's exposure to common investment risks and influences; like inflation and interest rates.

The Aon Hewitt research clearly illustrates that there is an increasing willingness of trustees and advisers to consider a wider range of asset classes, than has historically been the case before. The data further suggests that trustees are now much more prepared to accept that investing in alternatives has both a key role to play in reducing portfolio risk and may also offer the chance of producing very attractive returns. It also seems that pension funds are more prepared to hire third party expert consultants to expand their range of investment options.

The fact of the matter is that alternative assets have repeatedly demonstrated they are an excellent option to help investors beat rising inflation and reduce risk in their investment portfolio. And although private investors may have started the movement toward alternative investments post-2008, an increasing number of pension funds, financial institutions and investment banks have been swift to re-allocate their capital to the growing list of alternatives, in an effort to provide clients with long-term capital growth and lower their over-all exposure to risk.