The United Kingdom’s Pension Insurance Corporation (PIC) is beginning to re-evaluate how it thinks about US Treasuries and developed market government bonds as safe-haven assets. It’s not only the recent sell-off in US Treasuries, which usually offer welcome shelter for investors in times of volatility, that has CIO Rob Groves concerned.

Echoing other institutional investors, he says Western economies including France and the UK have long-term growth, productivity, and demographic challenges brewing that raise the risk of these government bond prices falling in value too.

“It will play out slowly, but major western economies face long term challenges,” he says in conversation with Top1000Funds.com after markets plummeted following President Trump’s rewriting of global trade norms in April.

He expects investors will be increasingly mindful of  governments demonstrating “real fiscal discipline” to avoid the risk of another “Liz Truss moment” when the former UK Prime Minister’s short-lived government policies triggered a run on the gilt market (and leveraged LDI strategies added fuel to the fire.)

“The Chancellor, Rachel Reeves, has a challenging fiscal position to manage,” says Groves.

Some 80 per cent of PIC’s portfolio is invested in low-risk investment-grade fixed income spanning corporate and UK government bonds, largely managed in-house – at the end of 2024, 92 per cent of the portfolio was rated investment grade. Matching assets with liabilities – so that if its assets fall, liabilities also fall at the same time – is strictly regulated for the insurer, which is restricted on where it can and can’t invest.

PIC takes on offloaded corporate DB schemes either through a buyout model whereby pension fund members become policyholders, or a buy-in model where trustees can secure the pension payments to their members through a contract with PIC.

“Think of it like an M&A process where we take on the responsibility of DB schemes which wind up and cease to exist. We manage the portfolio and pay the pensions and seek long-term stable secure cash flows that give the best returns and help us secure new business,” explains Groves.

Opportunity in corporate credit slow to emerge

Long-term PIC is focused on Western government solvency. In the short term, Groves is ready and waiting to take advantage of the current volatility in markets.

PIC has significantly de-risked its portfolio over the last 18 months on the basis that assets are expensive and investors have not been significantly rewarded for the risk. The insurer took on around £8 billion ($10.5 billion) in new liabilities through 2024 but has been slow to deploy the money because it is wary of locking in a smaller return relative to what it can earn on gilt yields. It leaves the PIC sitting on record liquidity and solvency levels – it currently has a solvency ratio of 237 per cent compared to 211 per cent in 2023.

“Going into the crisis we were about as well prepared as it was possible to be,” says Groves.

But despite market turmoil, opportunities to buy have not manifested in investment-grade corporate credit where PIC particularly hunts for opportunities. Around 40 per cent of assets are in the US, home to the largest and most liquid corporate bond market in the world, and opportunities for PIC open up when investment-grade credit spreads become more attractive.

Although prices have fallen on the screen, there is very little liquidity.

“Traders are marking their books down, but there is not much inventory to buy,” says Groves. “There is no forced selling which is a feature of a crisis. However, if tariffs aren’t rolled back there could be an extended period of market turbulence.”

Any further leg down in markets could be triggered by negative hard data in growth numbers and corporate earnings, he suggests.

Growth in private markets

If volatility returns and credit spreads increase, Groves also expects to see more opportunities to invest in higher-yielding private assets too. PIC focuses on UK infrastructure debt and housing particularly; lending is inflation-linked and comes with good terms like covenants and at attractive prices. Private assets also provide valuable support on “filling the gaps” on cash flows out, he says.

To date, PIC have invested almost £14 billion in the UK in sectors like social and affordable housing, urban regeneration projects,  renewable energy, and the UK’s universities.

On the equity side, PIC has a new stake in the build-to-rent sector where the investor works with developers to build flats that it owns and rents out over the years. New investments include a new residential community adjacent to Manchester Victoria train station.

However, Groves notes that originating private assets that work for the insurer has become more challenging in the last 18 months. He returns to the point that, unlike other asset owners, PIC is not an absolute yield or return investor but a spread investor – when PIC deploys money taken on from the schemes it manages, it sells gilts and buys credit.

“It’s not the absolute level of return we care about it’s the spread and how much extra return we can earn on the credit over gilts,” he explains. “Credit spreads are very low, and asset prices are expensive which makes a difficult investment environment for us. Take a typical borrower like a Housing Association. They care about the cost of the debt, not the credit spread. They think it’s expensive to borrow because of higher interest rates but we think it’s expensive to lend. Neither party is getting good value.”

Although annuity providers dominate long-term debt provision in the UK, he cites other challenges crimping investment opportunities too. In social housing, investors are challenged to retrofit existing property in order to meet new energy-efficiency and other regulatory requirements, for example.

“In the current market, a nice infrastructure lending opportunity will be five times oversubscribed – there is no shortage of capital to invest. However, it’s difficult to get projects off the ground because planning and regulations are impediments to these projects.”

PIC doesn’t have a strategic asset allocation but looks for opportunities on a deal-by-deal basis. “When we are pricing up a new pension scheme, we look for things we can invest in on a line-by- line basis,” he says.

The 100-person investment team (grown from 16 when he joined) is split into different teams. One manages the assets and liabilities and is responsible for pricing new business and optimising the current portfolio as well as interest rate and inflation hedging. A trading team execute all trades, and a public credit team manages the corporate bond portfolios in a strategy that is being gradually insourced, supported by a credit research team that evaluates and assigns credit ratings and interacts with borrowers. Other departments manage private debt origination and a strategic equity team hunts for interesting long-term income-generating assets.

PIC also runs a small £3 billion Alternative Fund portfolio that has allocations to hedge funds, a little private equity and healthcare royalties.

“It’s a really stable producer of returns,” he says.

Produced in partnership with T. Rowe Price.

The next six to 18 months are a critical period for asset allocators and will highlight the value of diversification, particularly geographical diversification, according to Sébastien Page, chief investment officer and head of global multi-asset at T. Rowe Price.

While geographically diverse portfolios have suffered in recent years, due to the dominant performance of US equities, diversification is starting to pay off and this will continue, at least in the short term, Page tells Top1000funds.com.

“For the past 10 to 15 years, US large cap equities have dominated the world and, at the moment, looking out six to 18 months, portfolio diversification is going to work, it has been working,” he says, citing T. Rowe Price’s tilt towards non-US stocks including Europe and emerging markets.

“We’re not calling for a large overweight to emerging markets as there are structural issues in some markets, which makes us cautious and we’re being selective but, broadly speaking, we’re in favour of diversification and believe [emerging markets] should be part of a diversified portfolio.”

“We’re comfortable continuing to add non-US stocks but not because we see an end to US exceptionalism or think investors should make a major strategic asset allocation shift. This is a tactical call because our long-term view is still that the US economy will continue to be the engine of growth for the world.”

Page rejects the suggestion that the market’s sudden and severe reaction to the US administration’s additional tariffs in early April, and the recent sell-off of the US dollar, signalled a potential regime change that challenged the position of the US as a global safe haven.

He believes the US will deliver strong capital growth for investors with a time horizon of 10 years or longer, despite a potential short-term valuation advantage for non-US stocks and bonds.

“The dynamism, risk-taking, entrepreneurship and sheer size of the US capital market, and the liquidity of that market, makes it a meaningful force,” he says, acknowledging that US equity valuations currently appear high.

T. Rowe Price has been trimming its exposure to US equities, and equities in general, but remains modestly overweight equities, supported by solid earnings growth and potential for pro-growth fiscal policies.

According to Page, the $1.61 trillion manager is taking a more cautious stance in the current economic environment, listing heightened trade policy angst, subdued US growth expectations and reaccelerating inflation as key risks to the resilience of global growth.

Cautious of ‘fat tails’

For Page, the biggest concern is not overinflated equity valuations or the risk of inflation eroding long-term real returns. Rather, he’s most concerned about “fat tails,” referring to extreme and unexpected market swings and black swan events.

Given the unpredictability of extreme events and the magnitude of fat tails, they can have a severe impact on portfolio returns.

“Geopolitical headlines are driving day-to-day market volatility and we’re seeing extreme days on the upside and the downside, and these fat tails are unpredictable,” Page says, careful not to use the word uncertain to describe the current situation.

Based on an analysis of recent media articles, Page says the word uncertain or uncertainty has been used more in the past few months than in any other period, including during the COVID-19 pandemic.

Under more normal market conditions, T. Rowe Price would see a sharp market downturn as an opportunity to buy the dip, assuming the fundamentals have not been impaired, but the firm is not doing that right now.

“We tend to be contrarian so [ordinarily] we’d be buying stocks but we’re not which is saying something,” Page says.

“We bought a lot during COVID; $3 billion of stock exposures on the way down and on the way back up, but right now we’re neutral between stocks and bonds because the tails are fat and you can get really sharp counter rallies.”

“This is not the time to be a hero. We just want to make our tactical asset allocation bets. We’re being active in our portfolio diversification, being overweight Europe, overweight value and overweight real assets.”

In times like these, Page believes institutional investors, including pension funds and asset managers, can play a leadership role in helping clients and investors navigate markets, accept a degree of stress, and stay on course.

“You don’t want to miss [market rallies] but you don’t want to panic and sell [at the bottom] either, that’s not the strategy,” he says.

Following the release of his third book in April, The psychology of leadership, Page says stress is an unavoidable part of life and essential for optimal performance.

“Stress and resilience are super important topics for me and I wrote this book because I was feeling stressed at work,” he says.

“I think we all have to stop stressing about stressing, and accept that optimal performance does not happen at a zero-stress level.”

Drawing on the field of sports psychology, Page says stress boosts performance but only up to a point, after which it can be detrimental to one’s health.

“When you’re overstressed you don’t make the right decisions but we shouldn’t go through life trying to live with zero stress because it’s impossible and that doesn’t lead to optimal performance,” he says.

After two difficult years for private equity in 2022 and 2023, investment activity and exits picked up in 2024 fanned by inflation and interest rates finally appearing to stabilise.

Fast forward to today, however, deal volume has eased back to lower than normal levels again because of the uncertain market.

Speaking during the $57 billion Arizona State Retirement System’s March investment committee meeting and before further volatility rocked markets in early April, Samer Ghaddar, deputy CIO, spelt out the challenges in private equity which accounts for around 12 per cent of total assets under management to Arizona’s nine-member board of trustees.

Ghaddar explained that although IPO activity has slightly improved, it remains sluggish compared to historical levels. Moreover,  the majority of private equity exits are concentrated in sponsor-to-sponsor deals as well as strategic sales. It means liquidity remains “a tough nut to crack” for many LPs and the percentage of net asset value realised has fallen to the lowest level in over ten years.

Although liquidity pressures mean many LPs have had to retrench from making new investments, they are committed to meeting capital calls. Ghaddar said that last year the level of capital calls and distributions at Arizona was almost level in an “extremely helpful” pattern that is reflective of the maturity of the portfolio which dates from 2006.

However, between January and March this year, the fund saw a higher number of capital calls linked to the spike in private equity deal flow. “Capital calls have been the highest in Q1 since 2006,” he said.

Ghaddar noted that the availability of private credit is spurring M&A activity and private equity deal flow. In contrast to recent years, there is now an abundance of credit in the market.

“I’ve never seen such M&A activity and there is a lot of credit in the market. Twelve months ago, if you wanted to fund a deal it was really hard to get funding, but now you get a lot of term sheets,” he said, referencing the documents that outline the key terms and conditions of a potential loan or investment. He said private debt investors had been sitting on the sidelines but have been encouraged into the market because of the stability in interest rates and favourable M&A valuations.

The importance of manager selection

Ghaddar also reflected on the importance of manager selection on Arizona’s private equity returns.

“Underwriting is extremely important,” he said. “The difference between a first and fourth quartile manager is around 20 per cent in IRR.” Arizona has prioritised choosing top-tier managers since a portfolio reboot in 2019, and the impact will start to appear in the returns.

Arizona has its largest private equity allocations with Vista Equity Partners and Veritas Capital.

Ghaddar detailed how the pension fund favours investing with sector-focused managers, particularly healthcare and industrials in strategies focused on operational improvements rather than financial engineering. The investor “stays away” from leverage because of the impact higher interest rates have on borrowing costs. “If interest rates go against you, returns will go against you,” he said.

The mature private equity portfolio is focused on the mid-market. Historically the allocation was primarily large and mega cap, but this was changed on the belief that large funds can erode returns. Moreover, more companies in the US and Europe sit in the mid-market space and the capital availability for these companies is lower and the opportunity for operational value creation is higher.

Arizona’s 12.8 per cent allocation exceeds its 10 per cent strategic asset allocation target for private equity but remains within the allowable policy range of 7-13 per cent. The allocation has outperformed its benchmark on both an absolute basis and in terms of excess return (net of fees) over 5-year, 10-year, and since-inception periods.

However, despite positive absolute returns, it has underperformed its benchmark by 26.1 per cent over the 1-year period and 0.12 per cent over the 3-year period.

The significant 1-year underperformance primarily reflects the exceptionally strong public equity returns incorporated into the investor’s private equity benchmark. When measured against the MSCI Private Equity North America & Europe benchmark, a dollar-weighted IRR peer benchmark, the portfolio’s underperformance is more moderate at 2.35 per cent below the peer group median.

Ghaddar said that the fund is strategically aligned to leverage an expected market easing phase that could reinvigorate public market IPO activity, creating enhanced exit opportunities and improved private equity performance.

Singapore’s two largest asset owners, GIC and Temasek, see attractive investment opportunities in climate adaptation solutions – an area relatively underfunded but equally important as decarbonisation which received the bulk of climate-conscious capital in recent years.  

In two separate reports released in the same week, the funds – which collectively manage an estimated $1.1 trillion in assets according to consultancy Global SWF – said climate adaptation is an investment theme understudied by private investors due to the fact that the public sector has accounted for most of its funding in recent years and it is seen as a government responsibility. But adaptation covers a broad range of commercial subsectors including weather intelligence, wind and flood-resistant building materials, indoor cooling and water storage. 

Authors of the GIC paper, senior vice president Wong De Rui and assistant vice president Kim Kee Bum in the sustainability office, told Top1000funds.com that the fund has selectively invested in adaptation solutions but is still in the “early stage” of evaluating the broader universe of opportunities.  

Across 14 climate adaptation solutions examined, the GIC report estimates that the corresponding opportunity set in public and private debt and equity could increase from $2 trillion today to $9 trillion by 2050. 

Some more bullish analysts are already saying climate adaptation strategies could deliver better returns than mitigation strategies – which focus on reducing greenhouse gas emissions – in the short term. Jefferies estimated that over a one-year horizon climate adaptation strategies could bring 13.5 per cent extra return than mitigation strategies, and 21.1 per cent over a three-year horizon, based on an analysis of 300 companies across sectors. 

But the return comparison is not so straightforward for Wong and Kim. “Our report highlights that many adaptation solutions also contribute to emissions mitigation, making it challenging to draw a clear distinction between the two,” they said. 

“We view climate adaptation as a significant and complementary investment theme alongside decarbonisation. Rather than prioritising one theme over the other, we focus on exploring investible opportunities in both.” 

Wong and Kim said GIC is conscious that climate adaptation is a rapidly evolving space and is carefully assessing the economic viability and scalability of any potential investment.  

“Understanding climate adaptation opportunities requires an interdisciplinary approach of blending scientific evidence with traditional industry knowledge; this, coupled with the variability in standards and taxonomies for adaptation solutions further complicate investment decisions,” they said.  

Tale of two in PE 

Temasek’s report focuses on breaking down private equity opportunities in climate adaptation. Investors in the asset class could help plug the significant gap in climate adaptation projects’ financing needs, which is projected to grow to between $0.5 trillion and $1.3 trillion a year by 2030, it said.  

But at the moment, PE investors often must choose between two types of strategies: investing in pureplay adaptation solution companies which tend to be early-stage targets with higher risks, or larger growth or buyout targets where adaptation only accounts for a small portion of the overall revenue. 

“These dynamics mirror the climate mitigation industry in its early days. Private investors approached that market by buying into large companies with legacy businesses that can provide cashflows as a way of investing in decarbonisation-focused companies,” the report said.  

“Similarly, many established players are (re-)aligning their strategies with Climate A&R (adaptation and resilience) as a growth vector.” 

The report also notes that many of the adaptation solutions are tailored to local climate needs but have the potential to be applied globally. For example, several wildfire management providers, which was a market almost entirely confined in North America, are experiencing growth outside of the US due to wildfire incidents in Europe.  

“The localised nature of Climate A&R markets allows investors to enter at lower valuations before market expansion can be fully priced in,” the report said.  

“Private equity firms have the opportunity to invest in areas where climate risks are still underappreciated.” 

Both asset owners are headquartered in Singapore where there is urgent need for climate adaptation solutions. Sitting on the Southern tip of the Malay Peninsula, the city-state faces challenges such as sea level change, which could have a mean rise of 1.15m by the end of the century, according to Singapore’s National Climate Change Study in 2024.  

Coupled with high tides and storm surges, some estimates suggest that one-third of Singapore will be vulnerable to coastal flooding.  

Wong and Kim from GIC noted the physical risks locally are “severe and imminent” but stressed that they will intensify across all regions, and climate response needs to be coordinated on a global scale.  

“Our research indicates that the adaptation investment opportunity remains significant regardless of the climate scenario, so investors can build conviction in this space without having to predict the specific climate pathway that will unfold,” they said. 

“This analysis reinforces our view on the growing importance and potential of adaptation investments.” 

The GIC and Temasek reports were conducted in conjunction with Bain & Co and BCG respectively.  

The investment team at the $10 billion Kentucky County Employees Retirement System (CERS) had their hopes of making an additional investment in an oil and gas fund run by investment manager Kayne Anderson dashed at a specially convened board meeting at the end of April.

Broadcast on Facebook from the fund’s Frankfort offices, the board and investment committee meeting process not only revealed trustees’ new reticence towards oil and gas assets in the current economic climate. In a show of tension between the board and investment staff, it also highlighted trustees’ concerns about their ability to conduct robust due diligence in a hurried timeframe and lacking input from the pension fund’s external consultant, Wilshire Advisors.

CERS – like its smaller, severely underfunded sister fund the Kentucky Employees Retirement System (KERS) – is managed by the Kentucky Public Pensions Authority (KPPA). However, governance at CERS and KERS was formally separated in 2021 and each pension fund now operates with its own independent board of trustees.

KERS approved the same investment at its board meeting the day before.

KPPA staff CIO Steve Willer and deputy CIO Anthony Chui laid out compelling reasons to invest in the fund which boasts commitements from a raft of other US public pension funds like the Teacher Retirement System of Texas and San Bernardino County Employees’ Retirement Association. They described its differentiated strategy, favourable risk-adjusted return and low correlation to other real return investments in the public and private portfolio.

CERS has invested with the manager before, but the previous strategy was more venture-focused and backed teams to buy acreage and explore. This time, CERS would be tapping into an asset that is already producing high levels of income. In contrast to other private market investment where capital calls can sometimes take several years, CERS capital would also be called quickly.

The strategy hedges production – currently “in the $70s” – three to five years out in a rolling approach that lowers investors’ exposure to volatile commodity markets and “makes it look like fixed income.” Oil is currently around $60 a barrel.

Willer and Chui argued that the lack of capital flowing into energy due to “investment restrictions” on many pension funds also means that those investors who do provide capital to fossil fuels can earn a significant return.

“There is underinvestment in the traditional energy space,” said Willer.

However, CERS trustees poured cold water on the strategy. They voiced concerns about the oil price, arguing it could come under pressure because of demand uncertainties prompted by tariffs as well as boosted production flowing into the market from the Middle East. Despite the hedged strategy, if oil and gas prices are subdued for any length of time it would effect the overall return. Moreover, the strategy breaks even with oil priced at $60 a barrel, yet the assets could require additional investment and costs to maintain production because they are not new wells.

“We don’t understand [the impact of the tariff issue] on industries like this,” said Merl Hackbart who serves on both the investment committee and board of trustees, adding: “There is a  history of continuing these investments [in established wells] for longer than what is intended.”

Board frustrations

Committee members also expressed their frustration with the staff because the special meeting to review the investment had been called at short notice. It meant board and investment committee members were absent, yet a full board (of six members) must be present to make investment decisions.

One member struggled to hear the conversation because he had joined the meeting whilst driving his car.

“Why have we got to make a decision so quickly? How long have you known about this opportunity?” asked Backhart.

“The other issue that stood out for me was the short timeframe we were given to look at this,” agreed George “Lisle” Cheatham, chairman of the CERS board of trustees.

Staff responded that they had been exploring the opportunity for a “long time” but had only recently taken reference calls and “done the leg work” on contract terms. Now they needed to “act quickly” because it was the final close date for capital commitments.

The investment committee also expressed concerns at the lack of input from the pension fund’s consultant Wilshire Advisors, asking why the advisors had “not [been] brought in earlier” to provide insights and expertise.

“What other opportunities are there out there compared to energy and how do they stack up,” asked Cheatham, who said the investment had “a lot of” unanswered questions. “There are probably better opportunities in different areas – what are they? Given the market uncertainty now, is real return one we should be looking at compared to others?”

Trustees also raised concerns about the allocation taking CERS over its strategic asset allocation of 7 per cent to real assets. If 100 per cent of funds were called today, the allocation would be overweight by around 8 per cent.

“Hopefully at the next opportunity to get everyone together [we will be] aware of what we are looking at,” concluded Backhart.

Whenever Yolanda Blanch is making decisions, she thinks of the Cobra Effect. Blanch is the chair of Spain’s largest corporate pension fund, the €7 billion ($7.9 billion) pension fund for Caixa Bank employees (Pensions Caixa 30).

Also known as the “law of unintended consequences”, it refers to how attempts to solve a problem can often end up making it worse. It often occurs when an incentive, meant to encourage positive behaviour, inadvertently encourages the opposite.

The story goes that to deal with an excess of cobras attacking people, the Indian government offered a bounty for every dead one. People began breeding cobras to pick up the payment, and when the government cancelled the bounty, farmed cobras were released into the wild, exacerbating the problem.

“The Cobra Effect is an example of not implementing systems thinking in a complex and interconnected world,” says Blanch, whose leadership of the 25-year old pension fund since 2023 (she worked as an FX options trader at Caixa Bank for 20 years before that) aims to follow a systems approach which seeks to understand the relationships and interconnections within a system rather than just its individual parts.

A systems approach requires systems leadership, and Blanch invests a lot of energy in ensuring employees are thriving so the investor can tap into all the knowledge and talent it has available. She says systems leadership involves creating the conditions for others to think and express themselves clearly, ensuring psychological safety in an atmosphere of collaboration, communication and trust.

“In a complex world, no one can know about everything. I think the days of a leader who knows everything and decides everything is over. Now leadership is much more about being of service to others,” she reflects.

Systems Leadership in practice

Caixa’s 15-member supervisory board administers the fund, decides the investment policy and approves performance and return expectations in a wide-ranging and active remit.

Blanch views the rest of her board as a source of unique individual talent and ideas. “I try to approach everyone with humility and curiosity, and encourage debate,” she says.

Elsewhere, the parameters of board meetings have been laid out after guidelines were established to shape the kind of meetings the organisation wanted and protect against the risk of unruly meetings muddying decision-making.

“We’ve agreed that creating space for everyone to contribute without interruptions, and keeping our interventions concise, ideally under three minutes, helps us reach better outcomes,” she says. “In a complex world, we need to make room for diverse perspectives. We value what each person brings to the table, and believe that thoughtful listening and inclusive dialogue are essential to finding the most balanced and effective solutions.”

Blanch also bases her leadership on an acceptance of the reality we live in and approaches every day from a place of trust, not fear.

“Most human beings want to create a better world. What’s challenging is that we don’t always agree on how to get there,” she says, adding that she is encouraged by the strong example of soft skills in pension fund leadership.

Over the years, the pension fund has honed a reputation for excellence in investment governance. In 2016, trustees drew up seven investment beliefs to improve decision-making and achieve better outcomes, and in 2018 it approved eight SRI-related investment beliefs.

More recently, trustees carried out a deep dive into the asset allocation, centred around analysis of the distribution of accumulated assets across the current and forecast membership, and the risks implied by the various drawdown methods that the scheme offers its members.

Board discussions currently focus on shifting geopolitics, the beginning of a new era away from globalisation, and the potential for more collaboration in European capital markets. Elsewhere, she wants to begin exploring plan members’ appetite for lower returns vis-à-vis sustainable investment, a conversation she believes needs to be had because maximising returns at all costs increasingly conflicts with sustainability.

“One of the important challenges we face is the tension between the demand for continued economic growth and the environmental limits of a finite planet. As fiduciaries, our responsibility remains to deliver strong, long-term returns for plan members.”

Should circumstances ever evolve in a way that requires reflecting on how sustainability and financial performance interact, we would of course take careful account of members’ views and sensitivities. So far, sustainability and profitability have often aligned well, but we are aware that future scenarios could be more complex and will require thoughtful, balanced consideration.”

 Other longer-term projects include exploring impact investment in the illiquid allocation that will complement sustainable investments in thematic equities and fixed income via a social bonds portfolio.

The board re-evaluate the pension fund’s strategic asset allocation every year (it isn’t modified every year) and also closely follows tactical decision making. All investment is managed by Caixa’s fiduciary manager VidaCaixa, Spain’s largest asset manager, also owned by Caixa Bank

“We are really close to the investment process,” she says.

The portfolio is divided between equities (30 per cent), illiquid assets (20 per cent) and fixed income (50 per cent) “Global equity has proven resilience in the long run,” she says.

The investment objective of the Pension Fund is to achieve an annual return (measured on an annualised basis over 5 years) in line with the 3-month Euribor + 2.75 per cent. At the end of 2023, the 15-year return was 5.46 per cent and the 5-year return was 5.81 per cent. The level of risk associated with this objective should be in the region of 10% (measured through annual volatility).

“When we reach a certain age in life, usually professional ambition and ego no longer primary focus, I think institutional investors understand the challenges and contradictions on the table. ”