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    Howard - my comments was not restricted to UK pension funds, the problem is world-wide.

    Nevertheless pension funds do need to diversify their bond holdings internationally and it actually reduces risk that way. I was answering your scenario of all highly indebted countries defaulting not just 'club med'.

    In all portfolios you will mix higher yielding more risky investments and lower risk, lower yielding investments. It is the balance that is important. I expect, however, that UK pension funds have a low level of 'club med' holdings, if any at all. Remember - your question was about 'all highly indebted' countries defaulting and the UK is one such and that is where most UK pension funds will have a significant proportion of their investment.

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