UK - Long-term balanced mandates have come under fire by a leading fund manager for their "inability to make strong and dynamic asset allocation" and their high-risk exposure.
Baring Asset Management claims that, compared to targeted return strategies, many traditional long-term balanced pooled funds offer similar projected returns but with double the risk.
It said that target return asset allocation strategies could give pension funds more asset diversification, similar returns and up to half the risk, compared to index or peer group methods.
Head of strategic policy group Percival Stanion said: “With asset allocation an important part of portfolio performance, the effects of globalisation and current monetary policies mean that investors need more diversification between assets than 10 years ago.
“Portfolios need more exposure to alternative investments, including property and the less correlated equity markets of Asia. Active fund managers should now be making more dynamic asset allocation decisions for long-term balanced mandates,“ he said.
The fund manager also warned of a “summer shower” and said that it had moved institutional portfolios to an underweight position in equities, adding to cash instead.
Stanion said that the combination of rising GDP growth in the US and likely rise in US interest rate might cause problems this summer for many equity markets.
Most respondents in this week's Pensions Buzz do not think businesses should be able suspend AE contributions if in financial distress.
Former BHS owner Dominic Chappell has lost the appeal against his section 72 conviction and sentence for failing to hand over information to The Pensions Regulator (TPR).
This week's top stories include Marsh and McLennan Companies agreeing to buy JLT, and the home secretary calling for AE to be scrapped in a no-deal Brexit scenario.
Lesley Titcomb says the watchdog wants closer interactions with pension funds to spot problems sooner and act before having to use its more stringent powers