Multi-manager Investment Solutions said that diversification would protect them from further equity market falls – it is commonly reported that smaller pension funds have been slow to diversify and have some of the highest holdings of equities.
The warning comes as the Investment Solutions SME pension funding level index shows average funding currently at 62%, a steep fall since a 100% funding level in July 2007.
Chetan Ghosh, head of liability-driven investment at Investment Solutions, said: “It will be an interesting time to monitor how trustees react.
“Many are convinced that equities will rebound and it is a bad time to sell equities to derisk. However, the impact of the global recession is starting to show that this kind of mean-reversion thinking could be flawed in the current environment.
“Funding levels are likely to get worse before they get better and immediate diversification is a good way to dampen the downside.”
