Pension funds invested more than US$17bn in private equity in 2004, according to a survey published by Watson Wyatt in conjunction with Global Investor magazine.
The report looked at all the alternative asset classes, and found that the most popular destination for pension funds was property, with US$30bn invested last year. Funds-of-hedge-funds received US$16bn.
Roger Urwin, global head of investment consulting at Watson Wyatt, said: “Pension funds continue to reduce their reliance on equities as they find suitable alternative sources of risk. The message of diversification is definitely getting through.”
Private equity assets worldwide total US$193bn, an increase of 14% from 2003. Seventeen percent of new cash inflows from pension funds was into the private equity class.
Urwin said: “Private equity is slowly gaining acceptance among pension funds globally as a logical addition to their portfolios. However, the governance budget required to be successful with private equity remains large.”