Local authorities are seeking greater security for their pension funds, following recent stock market volatility. According to a Fidelity International survey, almost two-thirds (57%) of councils used fixed income, principally as a diversification, or risk-spreading tool. This was a ‘recent and dramatic' shift. In 2004, 44% used fixed income as a diversifier and the figure was only 47% in the 2006 survey. The shift in equity markets had affected pension funds, resulting in this move towards fixed-income diversification. Although income returns could be slower, fixed-income bonds, and a shift away from investment in equities guaranteed stable growth and a guaranteed return on investments. These ‘safer investments', according to a Fidelity International spokesman, could help income grow. ‘The last year has seen a big change in the way local authorities use their fixed-income allocations,' said Mark Miller, executive director of defined benefit business development at Fidelity International. ‘Diversification, always a popular use of bonds, is now the key focus, much more so than liability matching. It shows fixed-income portfolio managers need to step up to the plate and offer local authority clients greater access to diversified opportunities.'