UK - A flight to bonds is short-term thinking, according to Chris Hitchen, chairman of the National Association of Pension Fund's investment council.
Speaking at the NAPF Investment Conference in Edinburgh, Hitchen told the roughly 781 delegates it was important to diversify pension fund investment portfolios.
He stated that investment in bonds for long-term investors might be necessary for some, but not all. He added that long-term investors should "be prepared to think differently".
According to Hitchen, the government needs to borrow roughly £60bn from the market this year. He added that while the government has been urged to borrow more due to low interest rates, he does not think they should do so.
Hitchen – who is also chief executive of the Railways Pension Trustee Co. - stated that UK pension schemes are diversifying their investment strategies, and added that allocation to UK equities may dip even lower.
"My own scheme is on the path to this," he said. "There is a clear trend there."
Speaking on the sidelines of the conference, Hitchen told IPE: "Diversifying strategy is the right thing to do." Railpen has roughly 60% allocated to equity with approximately 27% in UK equity.
He explained that there would be some "lopping off" of the scheme's UK equity portfolio resulting in increased investment in hedge funds and private equity.
The scheme currently has 20% allocated to bonds, about 5% in private equity and hedge funds, and roughly 7% in property. "We have not done commodities yet," said Hitchen.