The dominance of diversified asset allocation strategies in the UK defined contribution pension default fund landscape has been underlined by an exclusive finding in Cerulli Associates’ institutional report, European Defined Contribution Markets 2013: Winning With a Targeted Approach.
In the survey of European asset managers conducted for this report, two-thirds (66.7%) of managers expected diversified growth/asset allocation strategies to be the most popular choice, followed by lifestyle strategies (20%).
Target-date funds, which have been launched in Europe by some US-headquartered investment managers, were mentioned by fewer asset managers (6.7%), but interest in this sector is expected to grow. Blended funds, with a significant portion of active and passive approaches, were also mentioned.
“Getting one’s default fund strategy right is crucial for managers in the UK and Continental markets, because default funds take in the bulk of DC pension contributions,” said David Walker, associate director at Cerulli Associates in London.
Laura D’Ippolito, a senior analyst at the firm, added: “Setting up a target-date strategy in the United Kingdom is much more complex than simply bringing over a successful strategy from the United States.”