In order to lock in profits, Britain’s $2.9 trillion pension fund industry is pulling out of equities at a rapid pace, Bloomberg reports.
“Triggers are going off constantly,” Justin Arter, head of BlackRock Inc.’s institutional client business for the UK, Middle East, and Africa, told the publication. “There is hardly a week that goes by when a pension fund isn’t redeeming part of their equity portfolio.”
While Bloomberg speculates as to whether the en-masse stock exits are man or machine efforts, the reaping does connect the dots with money managers’ fears of an impending bear market, especially with economists projecting alarming chances of a 2018 market correction. According to a survey by Nataxis Investment Managers, 64% of UK respondents are expecting their performances to be hindered by asset bubbles.
According to the MSCI World Index, global equities have been on a rampaging bull run, rocketing the World Index a full 21% in the black over the past year. Bloomberg reports that this is due to a combination of low interest rates and growing interest in commodity and technology companies. “Triggers take the emotion out of the decision-making,” Paul McGlone, a partner at Aon Hewitt, a consulting firm that’s a unit of Aon Plc., told the business site, who says McGlone adds that half of the UK’s near-6,000 pension plans have at least one trigger in place compared to 2013, where only 30% were prepped to de-risk.
A recent survey by consulting firm Mercer revealed that the deficit of the UK’s 350 largest listed companies’ defined benefit (DB) pension plans had decreased 9% to £76 billion ($103.1 billion) at the end of 2017, compared to £84 billion at the end of 2016. The research also recommended pension plans prepare for any 2018 market shock.
Similarly, a report from London-based consulting firm Lane Clark & Peacock also projected a spike in 2018 de-risking strategies.