Released on: December 3, 2007, 10:30 pm

Press Release Author: Iain Martin

Industry:

Press Release Summary: Almost a third of pension funds (30%) reallocated over 5% of
their investment portfolio during 2006 as the impact of scheme closures and
increased maturity affected investment strategy. This is according to research
released today by Aon Consulting, a leading pension, benefits and HR consulting
firm.

Press Release Body: Almost a third of pension funds (30%) reallocated over 5% of
their investment portfolio during 2006 as the impact of scheme closures and
increased maturity affected investment strategy. This is according to research
released today by Aon Consulting, a leading pension, benefits and HR consulting
firm.

However, increased volatility in markets over 2006 and the continued focus on bond
yields has meant that the priority for many UK defined benefit scheme sponsoring
employers has not just been about assets but on how those assets relate to scheme
liabilities. Aon Consulting's research highlights the way in which employers and
trustees have pursued more diverse and risk-controlled investment strategies.

According to the research, 14% of pension funds have invested to diversify their
growth assets over the past year, with the intention of being less exposed to a
single volatile asset class. This builds on investments by funds into such assets
made in earlier years. The greatest shift in 2006 was the continued return to favour
of the property sector with 50% of schemes diversifying growth assets using
property. However, absolute return vehicles such as hedge funds (17%) and global
tactical asset allocation (11%) are also becoming popular forms of growth
investments.

Paul McGlone, principal and senior actuary at Aon Consulting, said:"The improved
investment returns achieved by most schemes in recent years is going some way to
alleviating the rising deficit levels experienced by almost all pension funds during
the last decade. However, while most trustees and employers still believe that
equity returns should outperform other asset classes over the long term, many find
themselves in a shorter term game. For those not wanting to give up long term
return, diversified growth assets offer one option. Interest in wider asset classes
has accelerated and is expected to build on this over the next 12 months."

The use of other strategies to reduce risk is also continuing to grow. Over a tenth
(11%) of employers indicated that their schemes have adopted some form of Liability
Driven Investment (LDI) strategy in the past 12 months, to enable their scheme to
better match movements in assets and liabilities. The change expected to have the
biggest potential impact in 2007 is the increased use of contingent assets for
scheme funding. A sixth (17%) of schemes in the survey are already using such
assets in their portfolios, with another 20% considering such assets. Parent
companies and/or group guarantees are the most popular form of contingent funding
being implemented (17%) or considered (20%), with escrow accounts (1% / 19%), charge
over assets (2% / 14%) and letters of credit (2% / 12%) being the next most popular
considerations.

McGlone continued:"The implementation of LDI strategies remains somewhat limited,
with a key factor being the perceived cost of such a strategy. In the meantime, the
use of contingent assets is growing quickly. While such assets do not generally
remove risk from the employer, they can help to manage the volatility, and should
make trustees more relaxed about any short term investment underperformance. They
can also free capital to be invested directly in the business rather than the
pension fund, which will hopefully pave the way for a more integrated approach to
funding and investment across the business, to the benefit of all stakeholders."

Notes to editors:

1. The research surveyed 150 UK companies operating defined benefit pension
schemes between November 2006 and February 2007.

Of the companies surveyed:

* 26.5% operated schemes that were open to new members and accrual
* 59.1% operated schemes that were closed to new members but continued to accrue
benefits
* 14.4% operated schemes that were closed to new members and accrual

About Aon Consulting

Aon Consulting is a leading human capital consultancy, helping organisations of
every size to attract and keep the employees they need. We advise on all aspects of
employment, including health-related insurance and risk; employee compensation and
pensions; human resource strategy planning; job design and change management; and
staff assessment and legal issues. Aon Consulting is a division of Aon, one of the
UK's largest insurance brokers and providers of risk management services and a major
force in reinsurance and the UK human capital consulting market. Aon Consulting
Limited is authorised and regulated by the Financial Services Authority.entertainment
and media liability insurance

Aon UK is ranked by A.M. Best as the number one global insurance brokerage based on
brokerage revenues and voted best insurance intermediary, offering classic car
insurance, high value home insurance, entertainment
and media insurance and construction site insurance.


Web Site:
http://www.commercialservices.aon.co.uk/commercialservices/microsites/entertainment/


Contact Details: directory@vandelay.co.uk