Inflation fears see schemes flock to commodities

Research from the provider today (30 August) revealed 57% of the 201 pension fund managers surveyed are predicting “dramatic” increase to inflation over the next 12 months.

Many of the schemes included within the research – themselves responsible for a collected $1.9trn (£1.6trn) in assets under management – have already made significant changes to asset allocation to mitigate against this inflation risk. 

While 56% have switched investments to commodities, the same amount have also moved monies into inflation-linked bonds and 51% have made additional allocations to infrastructure.

“It’s impressive to see how confident pension fund managers are about the impact of inflation on pension schemes,” said managing director of pension strategy Marnix Engels. “Many schemes have already re-allocated to certain asset classes in order to help inflation-proof their portfolio.”

The actions mean almost all (98%) pension fund managers in the research, which ranges across the UK, the Netherlands, Switzerland, the US, Canada, Australia and the Nordics, believe they are well-hedged.

Engels said: “By modelling and mapping ahead, schemes are able to weather the storm, and overcome any short-term risks while still achieving their long-term objectives.”

In the next 12 months, 53% of research respondents said they planned to increase allocations to inflation-linked bonds, while 49% will switch to commodities and 49% to real estate investment trusts.

Ortec Finance’s research comes after similar findings from Aviva Investors earlier this year and the most recent inflation rise which saw Consumer Prices Index figures come in at 10.1% on 17 August for the month of July.

See more: How to protect assets from rising inflation

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