In this research report Watson Wyatt asserts the long-term outlook for emerging economies will impact positively on emerging market investments, but it warns that choice of asset class and implementation route are not obvious. The report suggests exposure to the macroeconomic dynamics of emerging markets will be most readily obtained in emerging market equities, debt and currencies, and discusses how emerging market economies will continue to grow strongly, due to a mix of rising productivity, economic and financial reforms, and favourable demographics. However, it states that institutional investors face significant complexity and potentially high fees when trying to build a portfolio that captures this long-term trend and should also recognise the governance implication of following such a strategy.
Research
GIC, Temasek eye trillions of growth in climate adaptation market
Singapore’s two largest asset owners, GIC and Temasek, see attractive opportunities in climate adaptation solutions – a relatively underfunded area compared to decarbonisation. The former has already made selective adaptation investments and said the opportunity set across public and private debt and equity could increase to $9 trillion by 2050.
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Taking the long view
Governments are among the few agencies that can help the private sector hedge against the increasing problem of aggregate longevity risk. David Blake, Tom Boardman, Andrew Cairns and Kevin Dowd from the Pensions Institute at Cass Business School urge governments to issue longevity bonds as soon as possible mrec4inarticleinline Sponsored Content scnative1 scnative2 scnative3
Does ‘2 and 20’ still exist?
New research of hedge funds managers by Preqin shows it is clear the idea of a ‘2 and 20’ fee structure is outdated and, although less succinct, a more accurate reflection would be a “1.63 and 17.21” formula. mrec4inarticleinline Sponsored Content scnative1 scnative2 scnative3
A framework for ESG considerations in portfolio design
The inherent breadth and ambiguity of environmental, social and governance issues has resulted in the integration of ESG considerations into portfolio design remaining largely a philosophical push, without clarity on the direct and indirect impacts on shareholder value. In this working paper, AQR Capital Management’s Jeff Dunn, outlines a simple framework for considering the impact
Macro factors – the update: Watson Wyatt
For the first time since 2006, Watson Wyatt has written a report that revisits the macro-economic factors that may affect global returns over the next decade. It highlights the increasing influence of public policy and emerging wealth on the investment agenda, and draws some tentative conclusions regarding the implications for investment portfolios. mrec4inarticleinline Sponsored Content
Costs, competition and crisis conspire against DC governance
The financial crisis has placed defined contribution (DC) pension provision firmly under the spotlight. The dramatic falls in fund values observed for most members during 2008 have been drawing attention to the risks inherent in DC pension provision and focusing attention on how employees, employers and plan fiduciaries can better manage their DC pension plans.
Focus on medium-term, too, can add 1-1.5% to returns
As institutional investors have been hit hard by events of the past 18 months, there has been a surge of interest in the adoption of an additional, mid-term, time frame in which to provide investment targets. Watson Wyatt believes pension funds should allocate between 5 and 15 per cent of their risk budget to dynamic
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