A mass move by pension funds away from investing in equities towards bonds could cut UK corporate profits by billions of pounds, according to consulting firm Pension Advisor Review.

Pension Advisor said the wholesale move to bonds could happen as investment managers look to liability-driven investing. However, the switch could result in lower returns and therefore smaller profits.

PAR managing director Keith Faulkner explained his company’s calculations in a letter to the Financial Times: If, therefore, these pension schemes switched their equity holdings into bonds the expected rate of return on overall assets would fall by about 2.8% of the current equity holdings, or GBP3.8 billion every year.

Extrapolating all UK pension schemes, we estimate that this translates into a total profit drop of about GBP11 billion. Using a price-earnings multiple of…ten implies a potential drop in market values of GBP110 billion.