Blow to City as pension provider Scottish Widows prepares to cut its exposure to UK equities
Pension provider Scottish Widows is preparing to cut its exposure to UK equities in a fresh blow to the City.
The company, which is owned by Lloyds Banking Group, manages £72billion of workplace pension assets in its default funds.
It is reducing the allocation to London-listed shares in its highest-growth portfolio from 12 per cent to 3 per cent, according to a document seen by the Financial Times.
The move comes as ministers and City grandees battle to encourage pension schemes to invest more in British assets to reverse an exodus of companies from the London stock market.
A major shift in retirement fund portfolios from British stocks is seen as a key factor in holding back valuations of UK-listed companies.
Many have left for Wall Street – with fintech firm Wise the most recent example – or are being snapped by bargain-hunting overseas predators, as in the case of Alphawave, which is being acquired by America's Qualcomm.
And a dearth of flotations means departing companies are not being replaced.
The Government has responded by persuading 17 pension providers to pledge to invest at least 5 per cent of their default funds in UK private market assets.
However, Scottish Widows did not, and it has now told clients it would adopt a 'more globally-diversified approach' with the ambition of 'capturing more growth opportunities in high-performing international markets', the FT reported.
US markets have delivered much better returns over the past decade than the FTSE 100, making it more attractive to investors on this side of the pond – though, more recently, the uncertainty created by Donald Trump's erratic policy-making has sowed doubts.
Sources close to Scottish Widows, which has total assets under administration of £230billion, say it is already heavily weighted to the UK.
Of the £165billion in 'discretionary' funds run for clients, more than a fifth is invested in the UK.
And out of £72billion default pension investments, £5.5billion is in London-listed equities.
The switch from UK equities relates to a sub-fund that it is being moved to a 'baseline' allocation to global equities already widely used by other providers.
It is expected to be completed by December or January. Scottish Widows said it would review the allocations annually and 'where appropriate may include a home bias'.
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