US - Attracting and retaining key talent in the current operating environment is as big a concern for chief investment officers of public pension funds as generating sufficient returns in the downturn, research shows.
Jordan Gershuny, executive director, co-head of public funds and member of the strategic client advisory team at MSIM, said: "Reflecting the significant hurdles inherent in the current investment climate, about one-quarter of the chief investment officers participating in the survey pointed to a lack of resources and difficulties of attracting and retaining staff as the main challenge facing public funds today.
"This equals the percentage of CIOs who said that simply hitting return targets in a lower-return environment was the most pressing challenge facing their funds."
The rising complexity of investments has led more and more CIOs to seek external advice, especially in terms of specialised assets such as derivatives. Despite limitations in terms of skills, 74% of funds said they used derivatives.
In terms of allocations, alternative assets looked the most likely to see further investments, with private equity, real estate and hedge funds among the top asset classes, respondents said.
Some 13% of funds surveyed increased their total limit on alternatives to almost a third for the entire portfolio (30%), while the average allocation was 16%.
Increasing diversity had also made risk control a priority for CIOs, with 80% saying credit risk was the most important type of risk, followed by manger risk and market risk.
Despite falling equity values, only 61% said shortfall risk was their highest risk-related priority, while 49% said liquid risk was the most important factor.
Doug McNeeley, managing director, co-head of public funds and member of the strategic client advisory team at MSIM, added: "The demands associated with the increased volatility and complexity of today's financial markets have put considerable strain on US public fund resources."
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