Pensions and protests demands action

Sitting on the steps of St Paul’s Cathedral, London, looking over the sea of tents “occupying” the forecourt, I wondered what 2011 would be remembered for. Certainly this movement is highlighting that the people on the street see a disconnect between the financial and real economies. But what are pension funds doing to take action?

Some funds managers in “The City” were joking about how the tents were empty at night as the demonstrators went back to their homes in South Kensington – I’m interpreting this as the British sense of humour, although most humour does have some element of truth to it. Regardless, these people are taking action.

Jokes, and cynicism aside, if you take a step back it seems the world is in a bit of a mess. The leaders of the “free world” walk and talk in circles, in an attempt to bail their countries, regions and banks out of financial crises; while the leaders of war-driven territories are frozen like deer in headlights, caused to suffer and slaughtered in public humiliation. Neither scenario paints a picture of a world I want to live in, of people driven by humanity.

So what will 2011 be remembered for? Financial crisis. Countries – yes, countries – on the brink of bankruptcy! You don’t learn about that scenario, hypothetical or otherwise, in an economics degree. Governments unable to pay their pension promise. Leaders lacking courage and know-how to lead. Record youth unemployment. Record numbers of people in poverty. Record numbers of people starving.

I’m not sure how the world is going to get out of this mess. Refocusing policy on people, not money, is a start; and collaboration and coordination of policies could help. But I do know institutional investors can play a role in making the world one in which our children would want to live, or one in which we want to live. And perhaps it’s time for the industry to step up, and take some action of its own. Together.

Institutional investors must invest in climate change technology and innovation. They must invest for the long term. They must invest with sustainability as a driving force. And they must enforce their beliefs on their funds managers and other outsourced partners. If that is done, a realignment of the real and financial economies is possible.

Sponsored Content

Money is at the core of the pension fund business – pension funds are about providing an income for members in retirement. But it seems money has taken over as a driving force of every decision (this is true also of politics), creating a short-termism that may not be in the best interests of the beneficiaries – which, by the way, are not just numbers but real, living, breathing people: citizens of the world. Institutional investors can take action.

 

 

Leave a Comment

Sort content by

How to estimate the equity risk premium

Given the importance of equity risk premium, it is surprising how haphazard the estimation of equity risk premiums remains in practice. This paper by Aswath Damodaran at the New York University Stern School of Business examines a number of different approaches to determining the equity risk premium and why different approaches yield different values. It

Are there enough credit opportunities to go around?

Investors are all talking about the same thing –that alpha will come from selective opportunities and implementation techniques within sectors, and the next year will be less about strategic or beta bets. Specifically credit opportunities remain front and centre of the collective investors’ radar. Managers, it turns out, are all also talking about the same

Integrating ESG in private equity

The PRI has launched a guide for ESG integration among general partners in private equity,  looking at ESG within a GP organisation and within its investment process. The guide provides suggestions on how to incorporate ESG factors into ownership practices and processes, including seeking appropriate disclosure from these companies on ESG risks and opportunities and

What consolidation means for the AP funds

The five Swedish AP buffer funds will be reduced to three, a new responsible body will be set up to formulate long-term return targets and a reference portfolio, and limits on unlisted investments will be lifted under the new plan put forward by the Swedish Government. These are the findings of The Pension Group, which

Predicting equity returns with rising rates

The impact of higher rates on equity returns is a concern for investors and to some extent an unknown. But by applying the concept a threshold correlation, as done with bond portfolios with a duration targeting framework, it is possible to better understand the complex interactions between equity returns and interest rate movements. The latest

Funds must embrace data to win

Superannuation funds in Australia are not putting enough emphasis on data and technology as a tool to strengthen member engagement or as a platform for their business. There is plenty they can learn from Rayid Ghani, chief scientist for the Obama for America 2012 campaign, who was the keynote at the Conference of Major Superannuation Funds

Previous