More than three-quarters of pension funds around the world expect their appetite for investment risk to increase over the next three years to meet long-term liabilities, research shows.
A recent study by State Street, which took in the views of 134 pension schemes internationally, showed pension funds intended to raise their exposure to alternatives dramatically as part of the shift in risk.
Some 60% of the pension funds – in the Americas, Europe, the Middle East and Africa, as well as the Asia Pacific region – said they intended to increase their exposure to private equity.
Hedge funds will also be in more demand, according to the research, with 29% of pension funds polled saying they aim to boost their exposure to single managers, while 3% said they would reduce it.
As for funds of hedge funds, 20% planned to increase their allocation, and around 3% said they would cut it.
Some geographical differences were thrown up by the research, with private equity shown to be of greatest interest to respondents in the Americas, where 68% said they planned to up their allocation to the asset class.
Meanwhile, 60% of pension funds in Europe, the Middle East and Africa (EMEA) intended to do so, compared with 45% in the Asia Pacific region.
The latter region was home to the greatest interest in boosting hedge fund investment, with 57% of pension funds there aiming to increase their allocation.
In the Americas and EMEA, however, that percentage was 21% in the research.