Improving longevity among pension fund members means the majority of pension funds will fail to reach their long-term investment goals, according to an investor survey by Swiss fund manager GAM.
At a conference last week 78 institutional and wholesale investors were surveyed, with 78% casting doubt on the long-term viability of pensions’ investment strategies.
The respondents also said regulation could hamper investment success, as 64% said regulation needed to change to allow more flexibility in asset allocation.
“The investment backdrop has changed dramatically in recent years as monetary policy has begun to diverge and we believe that the markets have reached an inflection point.” —Alexander Friedman, GAMSeveral organizations have issued stark warnings about the impact of increasing life expectancy on liabilities in the past 12 months. The Organization for Economic Co-operation and Development said in December that pension policymakers had yet to fully confront the effects of demographic change, adding that it would take “many years” to push through changes to address these problems.
New mortality tables in the US added $29 billion to the liabilities of 19 of the country’s biggest corporate plans when introduced in March, according to research by Russell Investments.
Elsewhere in GAM’s survey, respondents said geopolitical risk, a stalling economic recovery, and the path of interest rates were the top three biggest risks currently faced by investors. Less than a third (29%) said Greece exiting the Eurozone was one of the top risks, while 21% highlighted a hard landing in China.
“The investment backdrop has changed dramatically in recent years as monetary policy has begun to diverge and we believe that the markets have reached an inflection point,” said Alexander Friedman, GAM’s group CEO. “The indiscriminate market rally in risk assets is coming to an end and investors have to take a truly active approach to identify the sources of alpha for the coming years.”
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