UK – Pension schemes are facing a dilemma about whether to stay in equities in current subdued markets, and are letting asset managers be more free in the search for returns, asset manager Schroders says.

“UK pension funds faced with a dilemma,” said Richard Buxton, head of UK equities at the firm. He said the current level of the equity market was not a good place to move out of the asset class and so “lock in” gains.

Equities returning three percent was “not a level to kick-start a major bull market” he told a briefing for journalists. “Within equities people are loosening performance objectives and restraining managers less to eke out returns.”

Asked by IPE if schemes were looking at alternative assets such as hedge funds and commodities, he said: “All of the above.” Schroders has seen its own hedge fund assets double to over a billion dollars, spokesman Julian Samways has told IPE.

“A lot of hot money has been playing the only game in town – metals and oil,” Buxton said. He added there was a continued allocation to property, which was reflected in yields.

“The institutions are back,” the firm said in a separate release. “Following years of neglect they have been the biggest net buyers of UK property in 2004.”

“Prospects over the next few years look very attractive – and with good reason. Property is the best performing asset class over one, three, five, 10 15 years.”

Samways says the firm has had a 400 million-pound net inflow into property this year, taking its assets under management in the class to 4.5 billion pounds.