Another consequence of low interest rates: Pensions funds get out of fixed income investments

Not very surprising given that current fixed income investments have a negative real rate of return.  Pension funds, which suffer from shortfalls if income comes in less than expected, are turning away from zero-yielding assets like fixed income investments:  Via Alta:

According to a survey of 50 institutional investors representing nearly €150bn of assets by consultancy bfinance, sentiment among pension funds turned negative towards fixed income in the last six months of 2010, driven in part by concerns over the stability of Eurozone sovereign debt.

The outlook for the short and medium terms is for continued diversification into alternative investments, particularly private equity and infrastructure, and away from core asset classes.

12 per cent of investors reduced their fixed income allocations over the second half of 2010 as a result of bond market turmoil, which is expected to drop to a net decrease of 27 per cent within the next six months. 14 per cent of investors increased their allocations to private equity over the same period.


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