According to an Aon news release, its new analysis found that 62% of pension plan assets for US Fortune 100 companies were invested in equities at the end of 2005, compared to 58% of the 200 largest pension plans in theUK (including those in the FTSE 100).
Aon Consulting researchers asserted that the figures disguise a trend in theUK. With stock markets performing well relative to most other markets in 2005, there would be an expectation that the total proportion of equities in pension plans would go up. However, this has been offset in the UK by 12% of companies in this analysis reducing their allocation to equities by more than 5% – in nearly every case from equities to bonds, according to Aon.
“Our data indicates that the average US pension plan exposure to equities — net of the impact of market movements — has remained relatively stable over the last few years, suggesting plan sponsor risk tolerance has not changed much despite the market downturn of 2001 and 2002,” said Jim Scott, senior vice president with Aon Consulting, in the news release. “However, the allocation to traditional domestic equity has reduced modestly in favor of international equities, alternatives and real estate, as sponsors seek higher returns and better diversification.”
Also, forUS companies analyzed, overall pension plan assets are on average approximately 15% of the market capitalization of the company, which is comparable to 16% in 2005. However, this is less than UK companies analyzed, where the overall pension plan assets are, on average, about 23% of the market capitalization, down 1% from the end of 2005.
When combined with the somewhat lower allocation to equities, this showsUK companies were exposed to slightly less pension plan risk during the last year, Aon said.
More information about Aon is at http://www.aon.com .