Pension, Endowments Shift Toward International, Private Equity

April 3, 2000 (PLANSPONSOR.com) - Pension funds and endowments reduced their exposure to active US equities and fixed income in 2000, redirecting these funds to international and private equities, according to a study by Greenwich Associates.

The survey, which interviewed nearly 1,400 fund managers, found pension funds and endowments reducing their positions in domestic equities for the first time in four years, amid ongoing stock market volatility.

The survey found that in 2000:

  • Exposure to international equities increased to 12% from10-11% in 1999, fueled by the increased popularity of international diversification, coupled with increased government deregulation.
  • Fueled by IPOs, investment in private equity increased by 3%, compared with a 2% increase for the previous four years combined.
  • On average, investment in US equities fell by 1% to 52% chiefly due to outflows from managed funds where the allocation slipped to less than 27% from 28% in the previous year.
  • Passive domestic equity allocations remained unchanged from last year?s 20% level. However, that maintains an increase from 1998’s 16% level, a trend expected to continue.
  • Fixed income holdings were also on the decline, having fallen to between 23% and 24%, from 25% the previous year.

Among portfolios greater than $5 billion, 17% invest in hedge funds and a further 7% plan to start, according to Dow Jones.

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