UK pension funds ditch UK shares in '07-BNY Mellon

LONDON, March 31 (Reuters) - UK pension fund investment in UK equities fell to a record low in 2007, according to research published on Monday by BNY Mellon Asset Servicing.

Their weighting to these assets fell to 28.7 percent from 34.4 percent in 2006, as the FTSE 100 share index .FTSE swung wildly in the second half of 2007 on whether the U.S. subprime crisis would tip the U.S. economy into recession.

"While UK equities has been declining as a major asset class for UK pension funds over the last few years, 2007 saw the largest fall to date," said Alan Wilcock, performance and risk analytics director at BNY Mellon.

Their allocation to global equities fell to 55.1 percent, from 62.7 percent in 2006, an eighth consecutive annual fall.

Pension funds moved their money out of volatile equities and into relatively safer bonds and index-linked investments, pushing their overall allocation to UK bonds above UK equities for the first time, BNY Mellon said.

The overall weighting of bonds in pension funds' asset portfolios rose to 27.6 percent, from 23.9 percent in 2006.

Despite jittery markets, pension funds made a weighted average return of 6.4 percent, in line with the 10-year average.

Their allocation to alternative investments, such as hedge funds and private equity, rose to 1.6 percent from 0.8 percent.

Pension funds' overall allocation to these investments remained low, however. Just one in eight funds invested in them and their typical commitment was around 6 percent of assets. (Reporting by Simon Challis; Editing by David Hulmes)