Investors with investment decision-making processes that embrace uncertainty and manage risk will be the investment winners in the next five years, according to global chief investment officer of Mercer, Tim Gardener, who believes institutional investors need to revamp their decision-making processes.
By adopting a contrarian approach to rebalancing which takes account of both assets and liabilities, pension funds could enhance long-term returns and reduce the volatility within their portfolios, new research reveals.
Rebalancing Revisited, a paper by Syd Bone, former chief executive of VFMC, and Andrew Goddard, an ex-Russell investment veteran, advocates super funds rebalance to a preset target, for example an investment return target of CPI +5 per cent per annum.
Continuing its expansionist aims, the Abu Dhabi Investment Corporation (ADIC) has lured an investment banker from Rothschild to focus on cross-border merger and acquisition (M&A) activity, which it expects to spike as the financial crisis wears on.
Bond markets might be offering comparable returns to equities and a higher place in the capital structure, but they should be approached cautiously as they lack what institutions around the world are trying to maintain – liquidity.
European pension schemes are increasing their allocations to non-traditional asset classes as a way to manage risk as a result of turbulent market-prompted investment reviews, according to Mercer’s annual European Asset Allocation Survey.
UniSuper, the $23 billion Australian pension fund for those working in higher education and research, has developed an in-house risk budgeting and factor analysis program that monitors the extent to which the fund deviates from its strategic asset allocation, and ensure the fund’s active risk is allocated appropriately between managers.