Fund managers shifted their asset allocation towards bonds from equities last year although the move was disguised by asset price movements, according to a recent survey by the Investment Management Association.The split between bonds and equities was about the same at the start of 2004 as at the end. However, since equity prices rose over the year while bond prices fell, managers must have allocated a rising proportion of their assets to fixed interest. The main shift came in the pensions sector, as managers began to move away from equities in favour of bonds in 2004, according to the IMA’s 2004 Asset Management Survey. The IMA estimates that, with the proportion of pension assets allocated to equities falling from 60% to 56% over the year, 40bn of assets were shifted towards bonds in 2004. The group predicts that the sector will move 150bn from equities to bonds over the next three to five years. In spite of this, the value of assets allocated to equities and bonds was virtually unchanged from 2003. Last year the FTSE 100 was up 11% and the FTSE All-Share increased 13%, while yields on UK 10-year gilts and US 10-year treasury bonds rose by only a percentage point. Several asset managers also shifted towards using a passive as opposed to a customised benchmark last year. Overall, 48% of assets were managed against a customised benchmark, down 6% from 2003, while the use of passive benchmarks was up 5.3% to 23.3%. Less than 1% of IMA members surveyed use an absolute-return benchmark. The recently released report, which surveyed 133 members of the IMA in June 2004, examines the UK asset management industry in terms of size, ownership and asset allocation. The market share of the five largest groups in the industry remained at 28%, unchanged from 2003. However, total assets managed in Britain by IMA members rose 9% to 2.16trn, up from 1.99trn last year. Global assets managed by IMA members or their parent groups also climbed to 7.87trn from 6.97trn in 2004, according to the report. Retail funds remained the third largest source of assets managed in Britain in 2004, with 14%, behind insurance funds and pension funds.