How challenging conventional thinking can lead to improved outcomes
Success is within reach for UK pension schemes, whether defined benefit or defined contribution, but the path to success is not always obvious. Some long-standing beliefs may need to be turned on their heads for the way to become clear.
In five concise presentations over the course of 75 minutes, we challenge accepted thinking on risk, interest rates and post-retirement DC.
"When the facts change..."
We open our 2015 roadshow by looking at what happens when received wisdom turns out not to be true. We consider both changes in investing “facts” as well as external influences such as regulatory change, and ask the question – how do we deal with uncertain certainties?
"All that is gold does not glitter"
No matter how skilful the manager, the difference in its performance in different market conditions can be remarkable. Your apparently worst active manager may actually be rather good – and vice versa. A closer look at investment style can lead to better decision-making and improve your governance process.
"De-risking can increase your risk"
The focus of pension schemes seems to be to reduce risk, almost at the expense of everything else. But could de-risking actually damage a pension scheme's chances of paying its members' benefits in full? A better understanding of the interaction between the scheme's investment and non-investment risks can help trustees obtain the return they need and manage their risk.
"Hedging's other purpose"
Liability hedging is used to neutralise the impact of changing interest rates and inflation on funding levels. And an important factor is the direction of rates. But that’s not the end of the story. Liability hedging can actually make a pension scheme money.
"Apocalypse now and then"
We conclude the session with a focus on perhaps the most certain uncertainty – changes in politico-regulatory policy. DC arrangements have been turned upside down by 2014's Budget announcement. But could that change have been anticipated? And is a regulatory change now coming to the DB pension world?
Company: River & Mercantile Date added: 11-05-2015
Categories: Economic Outlook
River & Mercantile River & Mercantile
River and Mercantile Group (R&M) was formed by the merger of leading institutional adviser P-Solve Limited (“P-Solve”) and leading equity solutions provider River and Mercantile Asset Management LLP (RAMAM) on 27 March 2014.
R&M is an advisory and asset management business with a broad range of services, from consulting and advisory to fully-delegated fiduciary and fund management.
Its advisory and investment solutions serve a large client base predominantly in the UK, primarily institutional pension schemes, with the remainder being retail financial intermediaries and insurance firms.