The ability to act as a long-term investor has been “shattered” by the 2008 credit crisis, according to Dutch fiduciary manager MN.
Jeroen Trip, senior client portfolio manager at the €90bn Dutch fiduciary manager, said it has proven difficult to hold a long-term view when most models used to predict future outcomes were proven wrong.
He said that while there had been a number of “major” financial events in the past – such as the 1987 crash or the dotcom bubble at the turn of the last decade – no previous crisis made the investment community “doubt the future” as much as the credit crisis had done.
He told delegates at the WorldPensionsSummit in Amsterdam: “We are still in unknown waters, unknown territory, and that has profound implications for the decision-making process.
“In the Netherlands, a strategic asset allocation process was – and perhaps is – dominating pension funds’ [thought process]. When we look at the long-term strategic asset allocation, then there is an implicit, or perhaps sometimes explicit, use of a long-term world view.”
Trip questioned how investors should come to decisions on long-term investing, given the developments in the financial markets since 2008.
“The credit crisis shattered beliefs in long-term modeling in a way that you really can’t be certain whether your long-term view can be relied on.”
He said there were several ways for investors to react.
One was to become more short-termist, identifying bubbles and changing asset allocation accordingly – a short-term, tactical approach that was “undesirable” for a number of reasons, most notably the time associated with each change.
Alternatively, investors could seek to improve modeling, but Trip said creating evermore complex models would only serve to complicate reading results clearly.
“We do face a challenging environment, and we need to re-invent our investment policy,” he said.
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