Guernsey's fund industry has the potential to benefit substantially from trends within the global pension funds sector, according to new research by State Street.
Guernsey-based Gerald Hough, Managing Director of State Street Global Services, Channel Islands, said recent figures suggesting that pension funds are increasing their exposure to alternative assets – particularly private equity – faster than any other investor group as weak investment returns, combined with longer life expectancy for retirees, have left many funds facing a funding gap.
"Alternative assets traditionally made up just a small part of pension funds' portfolios compared with equities and fixed income products, but that is changing," said Mr Hough.
State Street research, based on a global survey of 134 senior executives in the pension fund industry, found that 77% of respondents expect their institutions' investment risk appetite to increase over the next three years. Private equity topped the list of alternative assets that pension funds are using to accelerate their growth. Three-fifths of respondents plan to increase existing allocations to private equity, which has seen strong returns in recent years. Infrastructure funds (39%) and real estate (45%) are also popular.
"Growth in the administration of alternative assets has become a major part of sustaining the strength of the funds sector in the Channel Islands, now valued in the region of £450 billion, so any global trends that indicate a rise in the use of alternatives should be welcomed," said Mr Hough.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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