Investment Strategy for Defined Benefit and Defined Contribution Pension Funds 2017

Chair’s Introduction

Yally Avrahampour, LSE

09.10-10.00

The Past, Present and Future of Investing

The world of investing is going through a period of exponential development due to the advancements in passive investing and computational power. I will discuss these developments; providing insights into how investment managers managed client money in the past, what is being done today and where the industry will eventually shift.

Adam French, Scalable Capital

Life-Cycle Investing with Direct Application to Designing Target-Dated Funds

In this talk, we will review current approaches to designing a glide path for target-dated funds.  We will suggest that most of these approaches overallocate to equities.  We argue this using a small model of the macro environment estimated on quarterly data from 1970- 2015.  The model captures the essence of the time-variation of real interest rates , equity risk premiums and the real aggregate wage over the cycle. We then ask what the ideal glide-path would be for a household saving in this environment. Our findings are that bonds hedge our household against both a fall in real wages and interest rates over the economic cycle; equities do not. As result our allocation gives a far greater weight to bonds than is typical in current target dated funds, particularly for younger investors. We also find there are significant opportunities to tactically time risk premiums and this can significantly improve expected performance.

James Sefton, Imperial College London 

Bracing for Brexit
According to the Article 50 procedure, the UK will cease to be a member of the EU only eighteen months from now.  It would take a unanimous decision of the EU Council of Ministers to prolong the process further.  What economic effects will Brexit have? What impact on UK growth and inflation is the prospect of Brexit already having?  How serious are the implications of Brexit for the UK life assurance and pensions industry?

Stephen Lewis

Private Credit Investment

UK insurance companies have significantly increased their investments in private credit over recent years. And accessing the returns available on these alternative income investments is a key driver of success for insurers operating in the Bulk Purchase Annuity market.

The Private Credit for Insurers Working Party was set up to share emerging best practice with respect to managing, valuing, and rating these investments, and assessing the appropriate capital requirements.

In this session, we will explore insurers' future appetite for these investments within an evolving regulatory environment insurance, and the potential implications for pension fund investment.

Iain Forrester

Expected Returns and Prudent Returns
Against the backdrop of very low risk-free interest rates, many pension funds are revisiting their approach to setting their Technical Provisions discount rates. In this session we explore different approaches to assessing expected returns and prudent returns in the current climate, and consider their strengths and weaknesses.

Hemal Popat, Mercer

Trustee Decision Making, Costs, Fees, and Value for Money in Investment Management
This session will examine trustee decision making with respect to pension fund investment and whether the salience of costs and fees is understood in the investment decisions of trustees. In addition, the session will look at the relationships that exist between trustees and their fund managers and investment consultants, with a particular focus on what trustees look for in these two crucial players in pension fund investment i.e. what do trustees value.

Iain Clacher, Leeds University Business School

Futures Perfect? Pension Investment in Futures Markets

Futures are among the most liquid and transparent instruments available to investors. Futures markets span equity, bonds, interest rates, commodities and currencies, with underlying assets from the Australian Dollar to zinc. The presentation will discuss the mechanics, benefits and risks to pension investors of using futures.

Mark Greenwood, Old Mutual Global Investors