UK equities – Feature


One way or another it was destined to be a year that would see the relationship between pension schemes and UK-listed equi- ties tested.


The hidden hand of the market that Adam Smith described centuries ago was painting an economic backdrop that would encourage cautious investment behaviour. Looming on the horizon was the great disruptor, Brexit. This time last year, it was not even clear to the most sagacious of market observers whether the UK would exit the European Un- ion, or if it would do so with a trade deal. The latter issue re- mains unresolved at the time of writing.


Against such challenges there was also a long-term but dis-


cernible trend for pension schemes to move away from having a home bias in the form of a large, oversized exposure to UK- listed equities. Instead, pension funds moved towards global mandates, whether that was within a passive vehicle or global unconstrained exposure or a combination of the two. According to Koray Yesildag, an asset allocation specialist at Aon, the case for pension funds extending their equity expo- sure beyond their home shores is clear cut and one that con- sultants have long been advocating. After all, reposing all of one’s equity eggs in a single geograph- ical basket goes against the oft-repeated investment mantra to diversify, diversify, diversify.


Issue 92 | April 2020 | portfolio institutional | 37


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