GREENWICH, Conn. (HedgeWorld.com)–A new report from Greenwich Associates Inc. details the forces pushing U.S. institutional investors toward international equities and alternative asset classes.
The report said that U.S. public and private pension plan sponsors, endowments and foundations reduced their average fixed-income holdings from 26.8% to 23.7% of total portfolio assets from 2003 to 2004 because such holdings simply don’t seem likely to meet their future funding needs.
That money isn’t going into domestic stocks, though. The domestic equity holdings remained at approximately 47% of plan assets through 2003 and 2004–a level that itself represents a reduction from the 52% reported in 2000.
“Twelve percent of U.S. plan sponsors tell Greenwich Associates that they expect to make significant cuts to their actively managed U.S. equities over the next three years, and another 13% plan cuts in passive domestic equities,” said Dev Clifford, a Greenwich Associates consultant, in a statement accompanying the report.
International equity holdings among the surveyed institutional investors grew from slightly more than 11% of total fund assets in 2003 to more than 13% in 2004.
The general conclusion of the report is that U.S. funds are reliant upon investment returns to overcome persistently low funding and solvency ratios.