Engaged Investor’s research into the top 100 DB schemes finds trustees are looking internationally for better returns

In its recent winter update, the BP pension fund showed why it was willing to allocate nearly a third of its defined benefit investments in UK equities: returns were 22.3%. The Top 100 shows that its overall assets grew 14.24% to more than £19bn last year. John Bearman, who heads BP Investment Management, noted that “emerging market equities were less impressive”.

Yet many trustees retain faith that stock investments in nations that are on the cusp of western living standards are better bets in the longer term as they continue to catch up with the traditional European and North American economic powerhouses.

Paul Fox, the Liberal Democrat councillor who chairs the Avon Pension Fund Committee, says: “We had an investment review and were rebalancing the portfolio. The change with equities was about diversifying, with more property on the margin. The FTSE itself is pretty internationally diversified, but looking across the globe we wanted to move into BRIC – Brazil, Russia, India and China – type of economies that go for longer-term growth.

Simon Kew, director of pensions at Jackal Advisory, says that some trustees are being pushed towards riskier investments that even in the pre-credit crunch boom years they would have instinctively avoided.

Download the full report here