Policy response inevitable, says PRI
PRI has developed an Inevitable Policy Response (IPR) that lays out a realistic forecast of how governments will respond with policy to try and navigate climate risk by 2025.
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Hiding behind diversification
Modern portfolio theory has created the impression that diversification is always a good thing, but asset owners could benefit from a more sceptical attitude. This article suggests over-diversification favours managers at the expense of returns to investors.
Global uncertainty requires risk rethink
Chief risk officer at the World Bank Group, Lakshmi Shyam-Sunder, says the extreme uncertainty of the global economy requires a new risk management framework, and investors should not take anything for granted in scenario planning. The World Bank has revised down its estimates for global growth to below 3 per cent.
Texas Teachers revamps AA, adds leverage
The board of the $154 billion Teacher Retirement System of Texas has approved changes to its strategic asset allocation as a result of its latest five-year study, increasing its allocation to private markets, risk parity and introducing leverage.
Different ways to navigate risk
Institutional investors are navigating the different risks that can impact their portfolios in different ways, explained chief risk offers speaking at the Fiduciary Investors Symposium in Cambridge. Arjen Pasma, chief risk officer at Dutch asset manager PGGM noted how risks span investment risk, counterparty risk, liquidity risk and ESG risk. Measuring ESG risk in the manager’s large allocation to private markets where each deal is scored on ESG and climate risk is particularly important, he said.
Factors are useless without the research
Product providers cite all manner of factors behind the performance of their products but unless those factors adhere to what academics have replicated and standardised, it’s folly for investors to expect persistent returns from them.
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