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Pensions That Make Risk-Related Changes Predominantly Favor Alternatives

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NEW YORK (–Corporate and public pension plans polled by JP Morgan Fleming Asset Management are more decisive than they were last year about shifting their asset allocation and are more inclined to use alternatives to achieve their goals.

Asked about their asset allocation plans, 35% of the 80 participants in the U.S. pension plan outlook poll said they will change their regular allocation either to enhance returns or to reduce risk, while 46% said they are not making changes. Only 19% were undecided, down from 40% the year before.

Among those reworking their portfolios in order to reduce risk, 65% are doing so by adding alternative investments. Last year this statistic was 46%. And of those making changes to enhance returns, nearly half are taking the alternative investment route. Alternatives were defined as hedge funds, private equity and real estate.

The survey also shows that while pension fund prospects have improved thanks to the 2003 stock market rally, the median plan still is only 79% funded and the bottom 20% of plans are merely 59% funded.

Poll organizer JP Morgan has a New York-based fund of funds operation that currently oversees US$6.7 billion in hedge fund assets. Headed by Joel Katzman, this group recently experienced fast growth, with US$925 million in net inflow during 2003, US$240 million of it in the fourth quarter.

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