Opportunistic Investment Still Part of Investment Strategy for Pension Funds

An independent global survey of asset managers from Create-Research, commissioned by Citi’s Global Transaction Services (GTS) and Principal Global Investors, has found that, despite the severity of the current crisis, there is still an appetite for opportunism, particularly from defined benefit (DB) or final salary pension clients.

The report showed that 60% and 30% of the 225 asset managers surveyed expected DB and defined contribution (DC) clients, respectively, to engage in opportunistic investment as part of a ‘core and explore’ investment strategy.

Professor Amin Rajan, chief executive of Create-Research, said: “Simplicity, safety and quality are now the watchwords underpinning clients’ investment goals. While funds consequently recognise the need to adopt a pragmatic approach to investment, managers are finding the dislocated debt markets attractive, where the savagery of the downturn is creating value opportunities.”

However, this opportunism will occur against a backdrop of changing priorities, with asset managers predicting that DB clients will favour mainstream asset classes, with 60% expected to increase allocations to global equities and 53% to investment grade bonds. Sixty-seven percent of asset managers also expect DB clients to increasingly favour liability driven investment strategies.

DC clients are also expected to favour mainstream asset classes as they seek capital protection, with 61% of respondents predicting that the emphasis on debt and equities will continue worldwide.

Other key findings from the research include:

Expected priorities for DB schemes:

  • 50% of DB schemes will require a manager fee structure, which delivers greater value for money.
  • 45% of DB schemes are expected to cite uncorrelated absolute return as a key three-year requirement.
  • 40% of DB schemes will be searching for less complexity and risk in products and better liquidity.

Expected priorities for DC schemes:

  • 44% of DC schemes will require less complexity and risk in products.
  • 44% of DC schemes will require greater value for money from external asset managers.
  • 31% of DC schemes will have more focus on capital protection.


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