(June 5, 2013) — Inflation is the least of pension fund managers’ worries, according to a poll of more than 100 investors in London.
Attendees at the Russell Investments Annual Pension Conference cited three other headaches as top priorities over inflation and how governing bodies were planning to curb it.
In the first panel of the day, observing a theme of “Enriching Austerity”, around a third of attendees each voted for either low economic growth and low investment returns or low interest rates and the dilemma about whether to hedge as their most pressing concern.
A quarter of them said the search for yield and current trust/mistrust of credit market was their major worry, leaving just 11% citing inflation-or controlling it-as keeping them awake at night.
Last month the UK’s inflation rate fell to 2.4%, from 2.8% in the two previous months. It was the first dip since autumn last year, but remains the highest in Western Europe, according to the OECD.
There was no drill-down into the motives behind the responses at the conference, but a survey conducted by pension insurance specialists Pension Corporation last month suggests some investors may have already dealt with the issue.
The company said 45% of 250 UK pension respondents had already implemented some sort of strategy to combat any rise in prices. That said, the same number said inflation was a “minor” concern to them.
More globally, the movement of inflation one way or another looks set to come back on investors’ radars as monetary policy makers take steps to unwind desperate measures installed during the financial crisis.
Luca Paolini, chief strategist for Pictet Asset Management, said this week that the investment landscape would change dramatically over the next five years, and globally, inflation was one of the major themes.
“A sharp rise in inflation, a decline in corporate profit margins – courtesy of higher wages and taxes – and a long and deep bear-market in government bonds will each represent disruptive new trends that will have major implications for investors,” Paolini said. “Economic upheaval in the Eurozone and emerging markets is also on the horizon, and may prove just as disorienting.”
Investors all over the world should be aware of the actions in international central banks, Paolini said, as global financial markets are susceptible to shockwaves.
“With unconventional monetary policy and shifts in the political climate likely to continue to have a major bearing on financial market returns over the five-year investment horizon, we find it difficult to identify asset classes that we would classify as ‘cheap’ or ‘attractively priced’ in absolute terms,” he concluded.
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