Fund chiefs from around the world comment on the lessons they have learnt from the GFC.
Craig Dunn is the managing director and chief executive officer of AMP Limited, a prominent investment firm headquartered in Australia that does business with the superannuation funds. Craig has had a long career with AMP and was appointed its CEO in January 2008.
• In finance, the center of gravity is shifting from West to East. An illustration is HSBC’s recent decision to relocate the investment bank’s chairman from London to Hong Kong.
• It’s important to pause and think about what needs to change both in terms of public policy and investments.
• Sustainable social safety nets are central to a government’s responsibility to its citizens. By the same token, institutional investors should be allocating more to Asia, especially Asian equities.
David Denison is president and chief executive officer of the Canada Public Pension Investment Board. The CPPIB is a Crown corporation established by Parliament in 1997 to manage and invest on behalf of the contributors and beneficiaries of the Canada Pension Plan. David oversees the organization and its investment activities.Lessons learned include:
• It is vital that a fund maintain absolute clarity when it comes to strategic investment objectives. A crisis is a time to be resolute, not a time to question and second-guess strategies. For CPPIB this translated into short-term tactical changes and rebalancing over the course of the crisis.
• A fund must insure its underlying liquidity. Because CPPIB followed this rule, it ended up providing liquidity during the dark days of the crisis. This meant the fund could earn attractive spreads when acquiring distressed assets.
• The fund did not veer from its “total fund approach” with its emphasis on diversification by risk and return streams rather than specific asset classes.
Sun Chung Kim is chief investment officer of the National Pension Service, Korea. NPS manages the operations and investments of the National Pension Fund and the National Pension system. Mr. Kim was named to his position in 2008.
• The crisis represented volatility in the extreme for NPS, particularly for its equities and currency holdings. Their solution was to hedge back to the won and thereby diminish the impact.
• Between 2004 and 2008, NPS averaged 5% return on its investments. In 2008, the rate of return was 0%.
Antoine de Salins is the chief executive officer of the French Pension Reserve Fund. The Reserve Fund is a publicly-owned, state-funded agency operating under the French minister in charge of social security and the minister in charge of the economy and budget. Antoine also chairs the Reserve Fund’s asset managers selection committee.
• Government must support the investment policy. Trust between key government officials and the investment officers is key to establishing that support.
• There can be no black box. The fund must be transparent in all its dealings and aware of the importance and value of education.
• The Reserve Fund rebalanced on a regular basis during the course of the crisis. But going forward, it will move toward a more dynamic asset allocation.
Yngve Slyngstad, chief investment officer of the Norges Bank Investment Management, was replaced on the panel by Geir Vestrum, chief representative officer at the Norges Bank, Shanghai office. NBIM, charged with managing the assets for the Government Pension Fund Global, is the world’s second largest pension fund and enjoys a long reputation for transparency and shareholder activism. Geir is NBIM’s former senior portfolio manager for equities.
• With US$440 billion in assets under management, NBIM recently increased its allocation to equities from 40% to 60%.
• NBIM describes its investment strategy as similar to that of endowments. Its overall allocation is now: 60% equities; bonds, 35%, down from 60%; real estate, 5%, up from zero.
• NBIM has a QFII license and is in the process of applying for an increase in the cap on allowable investments.
Xiao Feng is founder, vice chairman and president of Bosera Asset Management Co. Bosera was established in July 1998 as one of the first five asset management companies to be set up in China and is one of the largest managers for the NCSSF and China’s enterprise annuity funds.
• The focus of Bosera’s investments is value.
• Its approach is similar to the long-term approach of endowments.
• As an investor, Bosera does not seek a non-correlated asset allocation.
These comments were expressed by roundtable participants at the annual Asian conference of the Pacific Pension Institute, held in Bangkok