IPE AWARDS - Risk management, member education and regulatory constraints were some of the common issues identified by the international panel at the IPE Awards seminar in Monaco yesterday.
Damian Hill, chief executive of the Retail Employees Superannuation Trust in Australia, said: “Our strong investment belief is to make most of the money by not losing it when others do.”
He added his fund had a “slightly more conservative view” because young people starting out might lose faith in the system if they have a bad experience at the start.
“Especially DC members value absolute return over relative return, and real assets delivering real returns like real estate,” Hill said. “Quality equities and opportunities in credit markets are the best way we can try to find absolute return.”
REST had shifted from 58% growth assets and 42% defensive assets to 73% defensives, 27% actives in 2009, with the share of internally managed assets having been increased to 25%.
In a similar move, the CAD13bn (€9.7bn) Bell Pension Fund in Canada had flipped its strategy around in 2009 from 58% equities and 42% fixed income.
Mike Boychuk, chief executive at BIMCOR, the company managing the pension fund, said: “We took a lower risk because of our liability driven investments, and at the end of the day, the biggest issue is the funding ratio and how much the company has to pay into the fund over the strict five-year recovery period granted by the regulator.”
Janet Cowell, state treasurer of North Carolina, noted the US state had hired a risk manager as well as an internal auditor for its pension scheme to step up risk management. It is also considering lowering its target return of 7.25% - one of the lowest in the US.
Philippe Desfosses, director at France’s EFRAP, stressed that pension benefits made had been under-priced for too long and that pension funds should act “more responsibly on their liability side”.
In a TED poll conducted during the IPE seminar in Monaco yesterday, 86% of the delegates in the audience noted they changed their assumptions in their approach to asset allocation and risk budgeting in the wake of the crisis.
All panel members agreed member education was one of the major problems with defined contribution schemes.
“There is a lot changing in the regulatory framework as authorities are focusing on simplifying funds that have become too complicated with too many investment options,” Hill said of the situation in Australia.
However, he noted he was optimistic about the future of the national pension system, which has amassed a pension savings pool amounting to around 100% of GDP, and 95% of the workforce is covered by supplementary pension schemes.
The only problem Hill sees is that, given its size, the pension pool might become a “political football”.
Boychuk, on the other hand, noted his outlook for the pensions in the Canadian private sector was “not very encouraging” as “everything possible is done to kill DB”.
He added: “We are continuously fighting the regulators - there is no flexibility.”