UK - Executives managing corporate pension schemes have been warned pension scheme deficits are an important factor when considering which companies to invest in, according to Fidelity’s figurehead investment expert Anthony Bolton.

Speaking at the National Association of Pension Funds (NAPF) investment conference in Edinburgh, Bolton, now president of investments at Fidelity Investments International, said whereas in the past the most common reason for him losing money as a fund manager was poor balance sheets, in the current investment climate the balance sheet of a company is “one of the most important things to understand”, and warned “pension deficits are part of that equation, so you have to include them”.

Bolton told attendees that people “forget about the negative in a bull market and forget about deficits”, then in a bear market they start to notice the liabilities again, so he argued “the real world hasn’t changed, only the perception”.

He pointed out investors have to look at the assets, liabilities and the assumptions behind them and warned “the pension fund situation is important when looking at a share” although it is “something that’s been ignored in good times” he revealed the size of the pension liabilities was always something that put him off investing in companies like BT and British Airways.

That said, Bolton also suggested there are “very tentative early signs there is improvement in the air” and he predicted equity markets may be nearing the bottom, though he warned it is “certainly early days” and the “crucial time is in the next quarter when we expect to see more [positive] news” such as relaxing standards in bank lending and less negative business and consumer sentiment indicators.

He claimed potential sectors that he would consider moving to overweight positions in, if investing, are consumer cyclicals , technology stocks, value stocks and financial.

At the same time, he said he would prefer to invest in non-life insurers as this market is expected to benefit from a shortage of capital, while he suggested if an investor buys a “basket of banks today they will do very well over the next few years”.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

 

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