(March 14, 2011) — Representatives attending a Swiss pension conference agreed that risk-taking is a smart source of return.
“There is no such thing as risk-free return, just return-free risk,” Peter Blum, head of tactical asset allocation and research at the $32.5 billion SUVA fund of the state insurance scheme, told IPE.com, adding that he would rather have too much risk as opposed to sub par returns. The conference panel agreed that risk needs to be rewarded. Yet, they disagreed on which risks were sufficiently rewarded.
“Everyone is talking about EM debt,” Marco Bagutti, head of asset management at the Swiss default fund AEIS, told the news service, “but when there is too much money flowing into one asset class, the question is whether it is sustainable.”
The views on risk-taking among representatives of various Swiss Pensionskassen follow Pyramis’ most recent survey of some of the largest defined benefit plans that showed changing investment outlooks and continued caution given recent experiences with above average market volatility and a low‐return investment environment. The study that focused on 160 private occupational and public pension schemes in the UK, the Netherlands, Switzerland and Nordic countries showed European schemes are increasingly implementing volatility-related strategies.
The survey noted that pension fund managers are leaning toward dynamic asset allocation strategies. “It is clear that defined benefit pension scheme leaders are beginning to act upon the lessons they believe they learned from the 2008‐2009 financial crisis and the volatile investment markets that followed,” Young D. Chin, chief investment officer, Pyramis Global Advisors, said in a release. “We think this year’s survey results suggest European pension schemes may be reassessing the risk and return trade‐offs for their portfolios and weighing a variety of strategies to help enhance returns in an uncertain environment.”
Pyramis’ findings found that European pension schemes are willing to return to riskier asset classes in search of higher returns. Nearly 70% of plans in the UK, 64% of those in the Netherlands, 59% of plans in the Nordic countries, and 58% of those in Switzerland plan to increase their exposure to emerging market equities.
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