U.S. pension funds and endowments continue to shift assets into alternative investments and international equities and out of domestic equities, according to Greenwich Associates.
Private equity investments made up 3.8% of U.S. institutional assets in 2006, up from 3.6% in 2005. Over the same period, hedge funds grew to 2.1% of total assets from 1.9%.
The growth in international equity was even more pronounced. Average institutional allocations increased to 15% from 13.9% over the 12-month period.
Meanwhile, average allocations to domestic stocks declined to 44.7% of total assets in 2006 from 46.7% in the year-ago period. Fixed income allocations, while essentially unchanged from year to year, are down nearly 5% from 2002 levels.
“Based on plan sponsors’ expectations for future changes,” says Greenwich Associates consultant Chris McNickle, “there is every reason to believe that allocations to fixed income and domestic equity will continue to decline.”
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