UK pension funds’ “tendency to herd” in and out of asset classes could contribute to market volatility and price swings during times of financial stress, according to the latest research into the issue of systemic risk outside the banking industry.

A report published by the Bank of England on Thursday found limited evidence of large-scale investment shifts by pension funds having impacted the wider market. The central bank said that, historically, defined benefit schemes run by local authorities and corporates had run counter cyclical to the market - buying as prices fall and selling as they rise.