Our investment committee members had quite a few questions at the final meeting of 2016. Brexit, Trump, the equities rally, long-bond yields, emerging markets: the trustees kept the topics coming thick and fast.
In short, we at Wasserdicht’s Dutch pension fund were caught unawares by the post-Brexit drop in government bond yields and, of course, by the Trump victory. But, overall, we had a good 2016, despite the equity market volatility in the first part of the year.
We profited from an overweight to US equities, which we based on our expectations of relative economic strength rather than any political factors, and have been steadily increasing our allocation to illiquid, long-term debt assets.
Just before Christmas I catch up with my international pension colleagues on the phone together with my colleague Geert in the investment department. Clive in London is happy that Brexit has moved down the scale of importance since the Trump election in early November.
‘Here in the US we’re keeping an open mind about what Trump will mean for markets,’ Jim in our Boston office says. ‘What about the prospects for US infrastructure?’ Hans in Frankfurt asks. ‘We certainly need to improve it,’ replies Jim, ‘The emerging consensus is that this could be good for the US. It’s just unclear what the opportunities will be for institutional investors.’
Clive can’t dodge the inevitable Brexit question. ‘Sorry chaps, but there’s not much to add from the last time we spoke,’ he says. ‘Economy’s in reasonable shape but then Brexit hasn’t happened and no-one seems to know what it will look like when it does. Not likely to be positive for the UK in the long run, though. We’ve done pretty well out of our foreign currency holdings, given the slide in the pound, it has to be said.’
The second part of the call involves a change of tack. Since we decided not to merge our pension and risk management functions globally, as our management consultants suggested at one point, we have been looking at ways to pool information and resources.
‘We are all overwhelmed with approaches from asset managers,’ I say. ‘So I propose we should share a single electronic template for pitches and proposals from asset managers. Geert and I have been working on a prototype.
Geert continues: ‘It’s very simple. Asset managers will all be encouraged to send in the information using a standardised questionnaire, which will be instantly shared between us with a comment facility. We have used an economic project management software system partly developed in-house by our IT department.’
‘Great idea, says Cliff in Toronto. ‘But to make sure potential future service providers know we are serious I suggest that the very first question should be about the product fee!’
Pieter Mullen is investment director at Wasserdicht Pension Funds