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BT slashes equities in hedge move

BT’s decision to slash the equity exposure of its 36bn pension scheme has met with a mixed reaction from investment specialists.

The firm is cutting a third of its UK equity allocation, valued at 3bn, and doubling its exposure to alternative assets, including hedge funds and private equity from 7 per cent to 15 per cent of the portfolio. The shift away from UK equities is understood to be an attempt by BT’s pension fund manager Hermes to achieve higher investment returns and reduce risk by diversifying the BT portfolio. Hermes says the move is not a reaction to forecasts of a bear market.

Bestinvest head of communications Justin Modray says: “One of the main principles of good portfolio management is diversification. More progressive funds would have done this years ago. The thing about these huge elephant funds is they can take a staid approach. It is not going to cause a stockmarket crash but dumping more equities on the market will not help it in the short term.”

Churchill Investments head of research Warren Perry says: “Quite a few funds are moving away from equities to reduce risk. But returns from hedge funds have not set the world on fire and they have been volatile over the summer. There is a risk this could produce lower returns and mean people retiring on lower pensions.”

Hargreaves Lansdown head of research Mark Dampier says: “Putting money in hedge funds and other assets such as private equity is just another way of running equity.”

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