Fund manager Schroders has urged pension fund trustees to consider alternatives to equity investments.
It is advising clients to diversify into alternative asset classes such as property, hedge funds and private equity.
The firm argues that pension funds have been historically overexposed to equities and that the three-year bear market has wiped hundreds of billions of pounds off the value of UK pension funds.It is also advocating that the equity part of pension fund portfolios needs to be more actively managed.
"The good news is that if the market is likely to track sideways through a series of shallow bull and bear phases. A good active manager will be able to trade this volatility," said a spokesman. "Higher added value from active management will be of proportionately greater value in an era of low returns."
The firm says that equity returns over the next decade will be "modest at best" and investors have to be realistic about what to expect from the stock market.