UK pension funds hedge against AI rally and Big Tech selloff
Leading UK pension funds are cutting the share of U.S. stocks in their portfolios as worries grow about an “AI bubble” and heavy market concentration in a handful of tech giants.
Funds that manage more than £200 billion on behalf of millions of British workers have been repositioning in recent months. Some money is flowing out of the U.S. into the UK and Asia, while another part goes into protection against a pullback through gold, short‑duration bonds and various hedging strategies.
The main trigger is the Nasdaq rally. The index has more than doubled since the start of 2023, largely thanks to the so‑called “Magnificent Seven”: Nvidia, Alphabet, Meta and other AI heavyweights. Such a sharp rise keeps raising the question of whether retirement savings depend too much on just a few names.
Standard Life says tariff risks and market concentration are now more visible. The company has reduced its equity allocation to take advantage of opportunities in UK government bonds and at the same time ease some of the anxiety around the AI boom. It stresses this is not yet an obvious bubble, but that scenario comes up in conversations more and more often.
Fidelity, which runs the FutureWise strategy, is not exiting the U.S. market but is reshaping its exposure. The focus shifts toward more resilient companies, with gold added to the mix and bond duration cut back to soften any potential hit to the tech sector. The state‑backed Nest pension fund, which oversees tens of billions of pounds, is also looking for ways to reduce how much younger savers depend on a single high‑growth story.
Some managers, such as the Border to Coast consortium, are acting more surgically. They are revisiting the weights of individual Big Tech names rather than closing off access to U.S. equities altogether.
At the same time, regulators (including the ECB, the Bank of England and the IMF) are speaking more frequently about stretched valuations in AI‑related stocks. Caught between fears of a bursting bubble and fear of missing further gains, pension funds are trying to strike a balance that protects their clients without walking away from one of the strongest market themes of recent years.
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