LONDON Pension Corp, the specialist insurer, is making a first foray into property and has upped its hedge funds exposure as part of a broad effort to diversify a largely fixed-income and cash-oriented strategy.
Rob Sewell, chief financial officer, told Reuters the group could invest up to 100 million pounds in its first allocation to property.
"We look at (real estate) as a market that is beginning to recover. As an asset class, it is one we are beginning to look at as somewhere we could at least dip our toe in 2010," he said.
The insurer, which takes on assets from pension schemes as part of deals to insure pension liabilities, has 3.5 billion pounds under management. It has also beefed up its private equity and hedge fund investment to 100 million pounds from an original allocation of about 20 million in 2008.
Pension Corp now has a 10 percent allocation to hedge funds and private equity.
The diversification is a departure from the insurer's traditional investment model and sets it apart from other players in the pensions insurance market, which mainly rely on fixed income and cash.
The move towards real estate, hedge funds and private equity shows a desire to reap investment returns in different market environments and echoes a broad pension industry trend to widen out the asset base to protect against volatility and seek returns to help pay pensioners who are living longer.
For most of 2008, Pension Corp had less than 25 percent invested in corporate bonds, with the balance in cash and gilts.
It has now cut its exposure to cash, gilts and government-backed securities to around 35 percent, with the bulk of the balance invested in sterling-denominated corporate bonds.
"It is good to have diversification, but we still maintain a large amount of cash and gilts. Our portfolio will remain a portfolio which has a strong showing for gilts and liquidity, because we like it," Sewell said.
The company does not plan any expansion in its equity portfolio, which stands at about 20 million pounds, he added.
Sewell predicted the insurer's business will return to pre-crisis levels in 2010, writing new policies on "at least" 1.6 billion pounds worth of assets, after slipping to 1.1 billion in 2009 as the market was impacted by the crisis.
(Editing by Raji Menon and David Holmes)