IPE Awards: Experts warn against changing tack during financial storm
EUROPE - Pension experts have argued that schemes should stay the course when it comes to their asset allocation, rather than re-assessing during a financial crisis.
Speaking at the IPE Awards seminar in Monaco, the chief executive of Belgium's Amonis pension fund argued that any such changes were unnecessary and unwise.
During a panel that examined chief executives' attitudes toward the future, Hugo Lasat said: "In terms of asset allocation, we didn't change a lot. In fact, it's a bit like changing the steering wheel of your car when you ride inside. It's not necessarily appropriate."
Michael Taylor of the London Pension Fund Authority (LPFA) added that his scheme's investment board had found itself confirmed in its strategy and worked within it during the crisis.
However, he did concede that the scheme had re-evaluated its investment strategy more often than usual, without introducing changes.
"In an ideal world, we would review our asset allocation strategy every three years, coinciding with the valuation of the fund," he said.
"More recently, it seems we have been reviewing our asset allocation strategy every six to 12 months, which is reflective of the problems the board and the investment committee are seeing in the outside world."
Taylor said concerns remained about the problems facing European countries on the periphery of the euro-zone.
"Where do you put your cash if it's going to be safe?" he asked "Should we be investing in sovereign bonds across the peripheral euro states?
"These are the key questions for us, which is implying for me that the crisis is not over as far as Europe and the banking sector is concerned."
The uncertainty was reflected by the seminar atteendees, who in a straw vote overwhelmingly predicted the crisis would continte into 2011, with only 14% predicting the economy would return to normal in the next few weeks.
However, Charles Vaquier of UMR Corem said the crisis offered them the opportunity to buy assets, while also allowing them to target newer economies that would grow over the next three to four decades, in line with the retirement of their members.
"Therefore," he said, "we decided to reallocate, specifically in equities, to invest more in the so-called emerging markets that are not emerging markets anymore.
"They are huge markets, with some of them taking some leadership against the Old World economic market."
Examining the role of liquidity, Taylor said it had become an ever-more important issue for the LPFA, adding that illiquidity for the scheme was any asset that could not be sold in three months or less, encompassing some of its diversified portfolio of property, infrastructure and private equity.
"I don't think liquidity was that much of an issue four or five years ago," he said. "It is an issue now, and it's something that's monitored very closely."
He added that the scheme would not need to sell any assets in the near future to make pension payments.