UK - Pension funds cannot use equities as inflation hedging assets in a deflationary environment such as the one currently being experienced, investment bankers say.
"However, with companies posting very low or no dividends this is not the case definitely for this year."
By contrast, she added credit is seen as the new equity, not only because of the attractiveness of prices in the current market environment, but also due to the fact bond holders receive the payment of the coupon independently of companies' profitability.
Despite a general consensus on opportunities in the credit space, Hurrel warned about the difficulties for pension funds to take advantage of them. She explained: "Right now cash is very expensive, therefore pension funds wishing to invest in index-linked bonds are most likely to 'take a hit' to liquidate the assets they have."
On the pension buyout front, JP Morgan Pension ALM Advisory managing director Guy Coughlan said there seemed to be only three active players in this industry in the UK: Prudential, Legal & General and the Pension Corporation.
In a sluggish buyout environment, Coughlan said both pension plans and sponsors were increasingly considering to lock down their liabilities through longevity hedges as an alternative to buyout solutions.
He added: "In the buyout industry, the reinsurance sector has been the one ultimately holding the risk but there start to be capacity issues. In this framework, we see funds entering the market by investing in life expectancy related products."
Morgan Stanley head of UK fixed income and pensions Barry Kenneth concluded pension funds should now concentrate in setting up recovery strategies and defining the potential constraints.
He added: "Corporates will have more of a say in the decisions regarding their pension scheme and this will result in more robust pension fund strategies going forward."
Jonathan Stapleton asks whether newly-accredited professional trustees should be a statutory fixture on pension scheme boards.
Savers are being warned by the Insolvency Service to guard their pension pots from investment scammers and negligent trustees as it winds up 24 companies.
Respondents say they should only be required in certain situations as the system is not broken.