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Aon survey shows alternatives not gaining ground in DC investment

Aon publishes in a press release:

” Aon, a leading global professional services firm providing a broad range of risk, retirement and health solutions, has said that results from the UK Defined Contribution Pension Survey 2020 show that presently a mere 6% of schemes would like to extend their range of investment options to incorporate additional asset classes beyond those currently available from the DC platform.

The “How do you measure up? UK Defined Contribution Pension Survey 2020” gathered responses from over 200 UK defined contribution (DC) schemes, covering more than half a million members and
£50 billion in assets, and asked questions on how they assess the effectiveness of various key aspects of their DC schemes.

Chris Inman, head of DC Investment Advisory at Aon said: “The finding that the vast majority of DC schemes are comfortable with the current asset classes and strategies available to them came as a surprise given the industry’s focus on exploring ways in which DC members can benefit from a more diversified set of investment opportunities. “The diversification, inflation linkage and downside protection that some of these strategies – such as infrastructure and private debt – can provide are currently missing from the ‘DC friendly’ universe of assets.” Alternative assets are areas that have been identified as lacking from DC strategies in the UK, especially when compared with more mature markets around the globe. There may be various reasons for this.

“Adding alternative asset classes to a DC scheme’s range of investments can seem extremely challenging. Some schemes may feel that their current governance structures or knowledge levels are not suited to monitoring these types of investments effectively. There may also be concerns about potential delays in accessing illiquid investments when schemes need to pay benefits. “Schemes should be confident that these issues can all be solved by discussing and getting a better understanding of how alternatives can fit into their DC investment strategy – and will help improve diversification and outcomes for their members.””

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Aon Hewitt

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