Britain’s largest pension fund has hoarded cash reserves in anticipation of additional market uncertainty as firms and nations grapple with the fallout of coronavirus.Nest, the UK state-backed pension scheme with 9m members, making it Britain’s largest, stated its allocation to cash in its predominant funding funds stood at about 5 per cent, in contrast with 1 to 2 per cent usually.Mark Fawcett, chief funding officer on the £10.5bn pension fund, stated that whereas he didn’t know “which direction the market will go”, there was a “bunch of risks the market seems to be feeling fairly benign about”.These dangers included the potential for a second wave of outbreaks and the fast unfold of the virus in rising markets equivalent to Brazil, in addition to an absence of readability concerning the tempo of restoration and whether or not folks would proceed to remain at dwelling even when economies had been opened up.“We just don’t believe a V-shaped recovery is very likely,” he stated, referring to a quick uptick in development. “Clearly if a viable vaccine is found that changes things and reduces those downside risks. But it will take a while to vaccinate the world.”He stated the pension fund had taken the chance to scale back some holdings, equivalent to in high-grade credit score, to construct cash reserves. The pension pot has a gentle stream of cash coming into it from members and has chosen to place a few of that apart quite than make investments.Mr Fawcett added that the allocation to cash at 5 per cent was “probably as high as we would ever get”.“If we see some of these risks manifest themselves, we have the ability to increase holdings where we think we need them,” he added. Jan Erik Saugestad, chief govt of Storebrand Asset Administration, the Nordic fund home that oversees giant chunks of pension property, shared Mr Fawcett’s issues, saying a U-shaped restoration was extra probably. He stated that whereas financial stimulus from governments would work, it could take time. “We are cautious, given the levels and risks we are seeing right now,” he added.In keeping with a survey of fund managers from Bank of America this month, simply 10 per cent anticipated a V-shaped restoration, whereas 75 per cent anticipated a U- or W-shaped one.The ballot discovered that managers had been holding giant quantities of cash, with allocations at 5.7 per cent, effectively above the 10-year common of 4.7 per cent.However others struck a extra optimistic notice. Elliot Hentov, head of coverage analysis with the worldwide macro coverage analysis group at State Avenue World Advisors, the world’s third-largest asset supervisor, stated he was “slightly more optimistic than the consensus” and according to how fairness markets had been pricing a restoration. He added that he anticipated important breakthroughs over the summer time, whether or not in remedies, contact tracing or different areas that would assist forestall a second lockdown.Nest’s Mr Fawcett stated it was a problem to run the fund throughout such market uncertainty. “It is clearly tough, because we have to make sure our members have enough exposure to growth assets that we can build a good pot for them over years, but we don’t want to give them excessive volatility,” he stated.