3/6/2013 12:16:10 PM

Tony Blair: How Pensions are a Lot Like Politics

The UK’s former Prime Minster explains the conundrum of short-term decisions and long-term strategy.

(March 6, 2013) -- Short-term decisions often sit at odds to policies needed for the long term, Tony Blair, the former head of the UK government, told attendees at the National Association of Pension Funds (NAPF) Investment Conference in Edinburgh this afternoon.

Opening the conference as the keynote speaker, Blair explained it was often the case in politics that decisions were made to solve a problem in the immediate aftermath of its discovery but were opposite to the solutions needed over the long term.

This theme resonated with the 900-strong audience, including representatives from 120 pension funds, who face similar decisions on their asset and liability management.

He said that in the UK and other developed markets, the challenge of solving the debt burden and economic concerns had led to short-term discussions pitting left and right wing factions against each other.

"If you analyse at lot of what is being said in the UK, the US, and in the elections in Europe at the moment, it's very much about left vs right…The truth about debt reduction is that it is right vs wrong," said Blair. "You've got to have a deficit reduction plan in place; on the other hand, you have to calibrate that in such a way that you do not damage the prospects for growth."

He said politicians had to manage short-term spending, while keeping in mind the long term and how actions taken today could affect tomorrow. He added that crises do not come along sequentially and that leaders often had to deal with several at a time - more issues that chimed with the experience of pension investors.

He said that the real challenge facing policy makers and politicians was structural reform - something with which pension funds have been wrangling for some time.

"The truth about the financial crisis is that there are many causes of it…but what it has done is not create a need for structural reform and change, but exposed the need for it and accelerated the need for it," said Blair. "Those reforms were necessary anyway, but as a result of the financial crisis they are more obvious, more immediate and more urgent, but the need was there anyway."

Drawing on his recent experience in the Middle East, Blair said strong leadership was key to ensuring the wider community was engaged.

"Even though these short term pressures are great, I still think…people respond to leadership and would prefer to go for long-term policies, not short-term politics if it is properly explained," he said.

Another similarity between pension fund investment and political success is "a very crucial attitude", which Blair highlighted.

"We have succeeded when, in the face of challenge and change, we have been open-minded. Open to new ideas, innovation and open to other people…When we have cut with the grain of change, rather than go against it," he concluded.

The annual NAPF Investment Conference runs until Friday afternoon.

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Contact the writer of this story:Elizabeth PfeutiElizabeth PfeutiEuropean Editor, aiCIO(44) 207 397 3816epfeuti@assetinternational.comFollow on Twitter at @ai_CIO