Over the next few years the €180 billion ABP will invest 2 per cent of capital to innovative assets and strategies under the broad direction of innovation. One such investment has been an allocation to the incubator company, IMQubator, which invests in investment managers with innovative ideas and strategies. Amanda White spoke with chief investment officer of IMQubator, Rikard Lundgren, about supporting managers in the search for alpha and how pension funds can benefit.
Bigger appetites for absolute return strategies, new attitudes to risk and governance, and the onset of major regulation – these were the forces for change identified in Watson Wyatt’s 2008 study, Defining Moments. But the social fallout from the financial crisis has sparked another phenomenon that could heavily impact institutional investors, according to Tim Hodgson senior investment consultant and founding member of the Thinking Ahead Group, who co-authored the paper. He spoke with Simon Mumme.
The $9.3 billion Los Angeles City Employees Retirement System will tilt its asset allocation to hedge against inflation and will discuss altering its investment policy to explicitly address inflation at each annual asset allocation review.
A number of new research articles have deunked two universally held beliefs in the investment industry, that shares are a good long-term bet and that economic growth is good for equities. Dr Arjuna Sittampalam, Research Associate with the EDHEC-Risk Institute and editor, Investment Management Review, examines the research.
A recently completed report by a special commission into the appropriateness of the Massachusetts retirement system contemplated the defined benefit versus defined contribution benefit design, concluding that the existing defined benefit structure was optimal, in part because it put the portfolio management in the hands of professionals.
The report entitled, The Special Commission to Study the Massachusetts Contributory Retirement Systems, concluded that a defined benefit structure assured participants of the most secure source of retirement income and puts the portfolio management in the hands of professionals, thereby circumventing the widespread tendency of individual investors to make basic errors investment decisions.
The special commission met 10 times between March and October with a process of review that began with extensive background analysis identifying the principles underlying an efficient and effective system and then comparing the Massachusetts system to that.
From this process it adopted 32 proposals to improve the system, create a fairer and more effective system, share retirement costs between employers and employees as well as improving the funding.
Two of the more interesting recommendations include more resources dedicated to system administration and to require judges to, finally, contribute to their schemes.
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The status quo of ‘passive’ equity investment, ranking companies by market capitalisation, is delivering lower returns for higher volatility than a beta strategy which blends a cap-weighted approach with two of its competitors – minimum variance and fundamental indexing. Michael Bailey spoke to Lazard Asset Management’s Asia Pacific chief, Rob Prugue, about a paper co-written with Research Affiliates which claims to prove it is so.