Things pension investors would like to get to the bottom of – Part 1

The conference season is up and running again. We’ve attended and delivered some presentations in the recent week at conferences for investors and trustees. What is on their agenda? We cover two debates:

  • The right exposure with the right benchmark
  • Liability Driven Investments.

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Deciding whether to manage your fund active or passive

This week, the LDI (Liability Driven Investments) Congress 2011 was hosted in Amsterdam, were I was invited to hold a small talk on the enduring active vs. passive management debate. The presentation covers familiar grounds. Several attendees were interested in the final sheets, where I attempt to arrive at a practical checklist. Definitely something to expand in a future blog.

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How long, and how consistent should you hold on to a conviction?

That’s the million-dollar question in any industry, but definitely a billion-dollar question in the investment industry. Jeremy Grantham of GMO makes an excellent case in point. He has a conviction, and stood by it. Jeremy helped co-found Grantham Mayo Van Otterloo (GMO), a Boston-based asset management firm, one of the largest managers of such funds in the world, with more than US $104 billion under management. Grantham’s investment philosophy can be summarized by “reversion to the mean.”
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Benefits of developing investment beliefs

Which company makes it its mission to inspire moments of optimism and happiness, to create value and make a difference? Unfortunately, not a pension fund. This is the mission statement from Coca-Cola. However, the largest pension funds are aspiring do something similar – writing up their investment beliefs and strategy and communicating them. More pension funds should follow their lead to improve investment governance and long-term performance. Continue reading

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Jelle Mensonides on risk management

The assets of pension funds have plummeted during the crisis. With a huge drop in both share prices and interest rates, liabilities of the pension funds went up dramatically as well. Many funds got into serious trouble, and needed to come up with emergency measures. Jelle Mensonides, financial advisor and former CIO of investments at ABP pension fund, explains what led up to these problems and moreover what lessons pension funds should learn from this. Many failed to properly asses all risks, as they mainly approached the problem from the investment side.

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