GLOBAL - The majority of pension funds remain confident on quantitative (quant) management, despite the losses suffered by quant strategies in the wake of August's market turbulence, show the results of the latest Global Pensions 100 Panel.
A clear majority – 85% – of respondents to the panel claimed the poor performance suffered by quant strategies in the wake of the credit crunch would not cause them to rethink their allocation to quant managers.
However, that does not mean that pension funds have not paid attention to the poor performance and negative press.
“Recent performance hasn’t led us to re-think our allocation (yet), but it has certainly dented our confidence,” said one respondent.
Of the 15% of respondents who said they were rethinking their allocation to quant strategies, one commented:
“August proved that a lot of managers and their models are not so well equipped for a sudden downturn in the markets.”
Quant managers themselves have answered back to criticism that their models were not prepared to deal with sudden fluctuations in the market.
Professor Thierry Post, head of quant strategies, Robeco, argued: “Most humans didn’t foresee recent market movements either and many would handle the crisis situation no better or worse than the models did.”
Managers and consultants alike urged pension funds not to react too hastily.
Andy Barber, global head of research, Mercer, said: “Clients are right to be slightly concerned as to what is going on, but if quant managers are able to explain what happened to their process and what, if anything, they intend to do and why, that should be enough.”
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.