Part 6 of the Asset Class ‘Back to the Future’ series. Head of DB Pensions, Dan Mikulskis, looks at four key themes from the 2015 edition of Asset Class – what’s changed for pension schemes?
What were some of the key themes of Asset Class 2015 and how have they fared in the two years since?
What did we say?
Investing in illiquid assets has continued to be a theme for UK pension schemes.
Deficits had widened, the search for returns had become more pressing and trustees had become comfortable with the complexity.
This theme continues.
The approach to illiquid investing that we advocated in the 2015 asset class (“Stay Ahead of the Illiquid Curve”) focussed on the illiquidity premium at any given time. We believe this is somewhat innovative.
For each illiquid asset class, we calculate the illiquidity premium. We do this by reference to l ...
Part 5 of the Asset Class ‘Back to the Future’ series. series. Head of Manager Research, Pete Drewienkiewicz, looks at how liquid and illiquid opportunities have evolved since we produced Asset Class 2013.
Asset Class 2013 discussed, as ever, a wide range of opportunities.
From the liquid (Risk Parity, Trend Following)...
...to the less so (Commercial Real Estate Debt, Private Finance Initiative Debt, and Middle Market Lending).
We also revisited a couple of previously mentioned asset classes. Namel ...
Part 4 of the Asset Class ‘Back to the Future’ series. Karen Heaven looks at the 2012 Asset Class’s approach to opportunities in infrastructure and whether those opportunities remain.
What we said...
In Autumn 2012, Asset Class focused on opportunities for pension schemes in infrastructure.
Namely, a subset of what we call “Flight Plan Consistent Assets” (or “FPCAs”).
FPCAs are assets that provide stable, long-dated, often inflation-linked, cashflows. They offer an illiquidity premium and hence have chara ...
Part 3 of the Asset Class ‘Back to the Future’ series. Chief Investment Officer, Philip Rose, reflects on the 2011 Asset Class and our approach towards illiquid assets.
What we said...
Investors need a clear process on two levels:
1. At the strategic asset allocation level
The key consideration is that an allocation to illiquid contractual asset should “do no harm”. It should not compromise other strategic objectives, whether they be increasing expected returns or reducing funding level volatility.
The dis ...
As an industry we all know we have a challenge to create a truly diverse workforce. Diversity is not a one dimensional challenge. It’s not just about having more women, or a workforce that looks more like our society. At Redington we focus a lot on cognitive diversity, yet we felt there was more we could do to attract women into senior roles across the firm. We wanted to specifically find women who had taken a career break, and could bring broader life experience to our firm.
So I was excited to work with Dominie Moss from The Return Hub to talk about a retur ...
Today The Pensions Regulator has published new Investment Guidance for Defined Benefit Pensions Trustees.
They have set their guidance out in six sections:
2. Investing to fund defined benefits
3. Matching assets
4. Growth assets
In summary, the guidance is all very sensible and we are delighted to see a very strong alignment with the approach we have been using with our clients. Specifically, we would ...
Part 2 of the Asset Class ‘Back to the Future’ series. The Autumn 2010 edition of Asset Class looked at attractive investment opportunities for pension schemes as traditional investors began looking elsewhere
In the Autumn of 2010, Asset Class focussed on attractive investment opportunities that were starting to draw the gaze of pension schemes.
Traditional investors, like banks and insurance companies, had become far less active in certain areas.
This was not because these assets were low quality.
Rather, they had become far less ...
Adjust your interview approach
When we were interviewing for the program we met some incredibly capable individuals. But while they had skills and experience we thought the business could benefit from, we didn't always have defined existing role vacancies.
On the one hand, this presented a great opportunity to think big-picture and add roles to the business for which there is a clear need.
But it also presented a practical problem in an interview. You can't approach it with the standard interview mindset of “here’s a role, let me try and u ...
Part 1 of the Asset Class ‘Back to the Future’ series. Robert Gardner revisits seven strategies from the original Spring 2010 Asset Class and asks what has changed.
In order to help pension schemes achieve their goals, we believed asset classes could offer three things that could help fund deficits;1. growth e.g. equities and private equities;2. risk control e.g. Liability Driven Investment (LDI);3. cashflow matching e.g. Investment Grade Credit (IGC)
We felt there were asset classes that offered all three benefits.
I’ll admit, when I was first approached about the concept of taking on a “returner”, I can remember harbouring doubts.
I was concerned about the practicalities of taking on experienced hires (albeit often experienced in different fields) into an intense, technical and hectic environment on a temporary basis.
Would they be able to contribute? What if they weren’t able to work the same hours as everyone else? Would they learn quickly enough?
For me there was a specific challenge - the ability of the “returners” to participate evenly i ...
Prior to Kelly joining Redington, I had some misgivings about a “Returner” joining the Investment Consulting team, despite being very supportive of the "return to work" program and having been involved in the Returner recruitment process.
The Investment Consulting team is client-facing, requires specific technical knowledge across a wide range of finance topics, and has a very lumpy workload in line with the quarterly meeting cycle.
To me, this presented a challenge.
Namely finding enough interesting and useful things for our R ...
Mum, wife, fitness fan, finance professional, and now Returner. Spent most of my career in Investment Management, in product development and project management, before deciding to have some time out. During that break travelled the world as a family for 6 months experiencing the New England Fall, beaches of Hawaii and life on the road in New Zealand and Australia. My two young girls’ independent personalities are reflected in their fancy dress choice - Spiderman vs. Elsa. I have always believed I could be, or achieve, anything; my job now is that they go out into the wor ...
After more than ten years in private wealth management at Citibank and J.P. Morgan Chase in New York, I gave up my career when my husband’s job took us, along with our two-year old son, to Hong Kong. After the arrival of a second son in Hong Kong, I returned to the workforce in consulting, starting the day Lehman folded. Several years later, with the arrival of a third son and another global relocation on the horizon, I resigned yet again, this time to move our family to London. Not easily deterred from having a career, I joined the Credit Suisse returnship program in Lo ...
I started my career 1989 at Citicorp running a long/short Japanese equity derivative hedge fund before moving to the Japanese equity team at JP Morgan in 1996. In search of a better work life balance I moved to Mercer in 1998 and became the head of Manager Research for Europe in 2000. I really enjoyed the work and the people, but in 2003 when my daughter was born I decided to take a career break. Although I continued to monitor the markets I didn’t end up going back to work, until now. When the opportunity of the returnship at Redington arose, it provided a great chance ...
I began my career in 1998 in investment banking. Since then, I have worked in financial services in San Francisco, Boston and London in roles ranging from investment management to disputes and investigations consulting. I have three boys, ages 1, 3 & 5 years old. After having my first child, I returned to work for a year until having my second child. Instead of returning to work after my second maternity leave, my family and I relocated abroad due to my husband’s overseas posting. Upon returning to the UK and after having my third child, I decided to return to w ...
What were the key takeaways from the Green Paper? Well, that probably depends which summary you read. While the headlines focused on the shock of potential changes, many in the industry actually saw this as a balanced and sensible account of the industry.
Let’s step back for a second - in a race to get column inches it’s easy to feed mainstream press with stats and headlines that would suggest the government has opened the floodgates for destroying the value of Defined Benefit pensions and allowing companies to change the promises made. The pensions industry could ( ...
This is an article I wrote in 2003. Thirteen years later, the debate is still raging! Original article can be found here.
There can be little doubt that the defined benefit pension scheme business is going through a bad time, with UK and Irish pension schemes still underperforming. To address this problem, going forward, pension schemes and their sponsors should establish a platform to understand, monitor and control their short-term exposure to both the assets and the liabilities
Did they see it coming? - For the most part, no. While both pension schemes and insurance companies ...
28 June 2005 – Market Diary
Avid readers of this column will know that ten days ago, with the real yield at a June ‘05 high of 1.56%, we drew a trend line and tentatively predicted that those levels wouldn’t last.
It’s not that the market believes the 2% 2035 index linked gilt is fundamentally too cheap at 120.03; this asset’s price is driven by supply and demand.
The five storey early 1800s Victorian home in Belgravia costs £15m, not because the price of bricks has gone up in Central London, but because the buyers have decided Eaton Squa ...
Redington welcome the PLSA DB Taskforce’s work and focus on the challenges facing DB schemes.
Click to tweet >> Redington welcome @thePLSA DB Taskforce work. Read our thoughts on the DB landscape here: http://bit.ly/2cF10rY via @Redington
We have replied to the Taskforce’s Call for Evidence with our own views and experiences from working with schemes. Below is a summary of the key points from our response.
Schemes face many challenges in a volatile macro environment. Generating the returns and contributions to give members financial security in retirement ...
On Friday, June 24th, Britain voted to leave the European Union. It’s fair to say this surprised a lot of people (on both sides), including the markets. Falling interest rates, a weaker pound and political uncertainty has left a lot of people feeling on edge.
For those of us responsible for managing pension funds, can it be useful to reflect on the “VUCA” of our time.
Volatility, Uncertainty, Complexity and Ambiguity
Derived from the US military and now used in corporate strategy, VUCA is a term used to describe extreme conditions. For those of us in the w ...
The ramifications for investors of the UK’s referendum decision will take some time to materialise.
We are entering uncharted territory - nobody knows precisely how Brexit will be implemented or its consequences.
What is clear is the result will herald a period of considerable uncertainty and market volatility.
If we have learnt anything from history, it is that these kinds of major events happen surprisingly regularly. Which is why it is so important to design and implement a robust, risk-managed and well-diversified investment strategy for the long term. And why it so imp ...
What are the economic implications, potential market impact, and consequences for UK pension schemes of Brexit?
In my previous post, I discussed the timeline for Brexit, should it happen, and split it into three periods: pre-referendum, post-referendum negotiations and post-negotiations.
The purpose of establishing these divisions was to emphasize that leaving the EU would not elicit an immediate step-change for the UK economy. The change would be gradual and the economy would behave differently in each period.
With that in mind, let’s consider (briefly!) the economic impli ...
At Redington we read with great interest the pension regulator’s DB funding statement 2016. I thought the four key takeaways from an investment perspective were:
1. Acknowledge the importance of negative cashflow, and plan for it.
“As schemes mature, liquidity planning is becoming an important consideration, especially where the cash flow requirements represent a significant proportion of the scheme assets. Market developments may mean that schemes are forced to sell assets at lower than expected prices in order to meet cash flow demands. This could put increased pr ...
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