UK - A quarter of UK pension funds have delegated investment decisions to a third party provider or are currently considering such an approach, according to a survey by Aon Hewitt.

The consultancy’s Delegated Investment survey for 2011 found that around 40% of responses cited the speed with which investment decisions could be reached as a reason delegated investment teams were appointed.

Conducted before the stock market volatility in August, the number of respondents expressing an interest in the fiduciary management approach did not rise noticeably, with 17% stating they had already implemented such mandates, while a further 8% expressed an interest in the approach.

Last year’s survey found that about a quarter of respondents were either interested or engaged in fiduciary management within the UK.

John Rushen, UK head of investment consulting at Aon Hewitt, said governance structures sometimes risked undermining trustees’ ability to act swiftly.

“But the opportunity cost of sluggish execution is only heightened by periods of significant market volatility, such as we are currently seeing,” he said.

The consultant was also critical of the amount of diversification in UK schemes, as well as the time spent on investment matters.

“It’s disappointing that there has been little movement in the hours spent on investment issues or number of investment experts on trustee boards since last year’s survey,” he said.

“When you are spending less than 20 hours a quarter on investment matters, trying to reduce market exposure through wider asset allocation can be a daunting prospect. Putting more assets in the mix requires greater monitoring and judgement.”

In other news, deficits of UK defined benefit schemes rose noticeably last month on back of stock market volatility, with the Pension Protection Fund (PPF) index reporting a £50bn (€58bn) increase in the funding shortfall.

According to the PPF, the end of August also saw funding ratios fall below 90% for the first time in 2011 on back of a fall in total assets, combined with an increase in liabilities across the 6,500 schemes.

The lifeboat scheme added that both the funding ratio and deficit figures were not only up over the previous month, but also compared with this time last year.

In August 2010, all schemes still reported an average funding ratio of 92.6%, compared with the current 89.2%, while last year’s deficit stood at £74bn.

However, the PPF stressed that any like-for-like comparisons with last year were complicated by changes to valuation guidelines that increased liabilities by 3.6% in April.

Despite the 42% increase in average deficits, the number of schemes in deficit only rose by 5 percentage points to 76.7% over the previous month.

The PPF noted last month’s 7.5% fall in the FTSE All-Share index over the course of last month, while liabilities rose by more than 2% on falling UK gilt yields.