GERMANY - Insurers and pension funds plan virtually no change to their asset allocation during 2006, meaning that they will remain mostly invested in fixed income, according to a new study unveiled by private equity fund provider CAM.

According to the study, exposure to fixed income among the investors will equal 76% of assets this year - unchanged from last year.

Meanwhile, the investors' equity exposure will decline slightly to 15.6% of assets in 2006 from 16% in 2005, while investment in real estate will edge up to 4.6% from 4.4%.

Finally, the investors' exposure to private equity and alternatives like hedge funds will, according to the study, remain unchanged at a respective 1.1% and 0.8% of assets in 2006.

The study encompassed 20 insurers and nine pension funds in Germany whose combined assets total €470bn. The investors - who answered more than 300 questions in the study - represented about 15% of Germany's institutional market.

Rolf Wickenkamp, managing partner of CAM, noted that despite low return potential, fixed income continued to dominate the investors portfolios, while demand for alternatives remained weak.

"A high degree of liquidity and low volatility are still more important (to the investors) then the potential for high returns," Wickenkamp said.

According to CAM, this mentality conflicts with what, in the study, the investors said was their most important priority: maximising returns. Another chief priority cited by the investors was fulfilling regulatory obligations.

For 2005, a good year for equity markets, non-equity oriented German pension funds have reported returns of between 4-6%. However, they did so under German accounting rules (HGB), which encourages them to understate returns.