GLOBAL - Applying some form of ‘trigger point' at which investment returns could be collected might be a way of derisking pension schemes and removing the emotional draw some trustees attach to certain assets, suggests consulting firm Lane, Clark & Peacock.
Clay Lamboitte, partner of the investment practice at LCP, told delegates of the firm's Global Pensions Briefing earlier this week that gains could be saved by setting trigger targets on investments and on asset managers at which excess returns should be withdrawn.
More specifically, he said when working with one pension fund board to derisk a scheme, officials were more willing to accept they should divest some assets if they could see a clear target had been hit and monies could then to reinvested elsewhere.
"We have put in place targets to withdraw the excess when surplus returns have been achieved and we are using the excess market returns to put in place de-risking, said Lamboitte.
"The point of the exercise was not to call the top of the market. It was more about putting in place a framework and achieving their de-risking in a controlled manner. It can be done an instruction to the investment manager. And if you have asked the client do you want to sell some equity now, in 2007 they would have said not really. This takes the emotion out of it," he added.
Looking at other issues of investment, Lamboitte said the firm's own research showed unconstrained equity mandates and actively-managed emerging markets equities "seem to have more consistent returns" in equities than other sectors.
Similarly, LCP is advising clients to look to inflation-linked bonds given the risk of short- to medium-term inflation, as well as infrastructure investing, as officials believe the sector could benefit from stimulus packages set down by governments during the economic downturn.
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