GLOBAL - While the effects of the sub-prime crisis and credit crunch rumble on in the world's financial markets, some 65% of the pension funds surveyed in this month's Global Pensions 100 Panel have claimed they will "sit tight and ride out the storm".
One panel member belonging to the 20% to have adopted a more defensive strategy added this comment: "Whilst selecting the third option, we should remember that storms occur both in buoyant and recessionary markets.
"Astute pension funds with long term investment horizons will seek opportunities that fit their profile. Those that sit and do nothing are at the mercy of the market, [which is] never a good thing."
However, at a time when asset managers are reporting some outflows from "riskier" investments, it seems the majority of pension funds is refusing to give in to wholesale panic and sitting tight on existing portfolios.
Nonetheless, comments from some panel members made it clear they were responding to the sub-prime crisis. One member said the fund had opted for "more hedged instruments" and "total return investments".
Another said: "I believe pension funds are now approaching strategy more dynamically and reviews/updates are happening on a rolling basis. So the prime focus is the long term, but shorter term finessing of strategy is appropriate during times of volatility."
Some are actively seeking to exploit the crisis Ð one respondent commented they were working to "increase exposure to credit opportunities that have been created in the dislocation".
That pension funds should be taking advantage of the crisis where they can was a point also raised by John Conroy, UK-based principal at consultancy P-Solve.
He warned: "The reaction to 'sit on one's hands" is entirely understandable in the context of such an unusual market experience. The real issue, though, that challenges many funds is how to deal with the buying opportunities presented by these conditions.
"Perhaps the real fear is not how bad it is from here, but how much regret there will be in two years' time that advantage was not taken of a clear over-reaction in certain asset classes."
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