UK - Pension funds are facing a dilemma in that de-risking is expensive and not getting cheaper. Instead, they should take on more risk in the current climate, delegates at this year's Professional Pensions Show heard.
In a panel debate chaired by GP editor Raquel Pichardo-Allison, Mercer global chief investment officer Andrew Kirton told the PP Show schemes are looking broadly at de-risking their liability-matching assets beyond gilts and credit to absolute return and inflation-linked strategies, such as ground rents and buying freeholds.
However, he added schemes currently see de-risking as expensive.
Investec Asset Management global executive officer Hendrik du Toit (pictured) said pension funds are now thinking on an individual basis rather than en masse and encouraged them to take on more risk.
"Add risk when people are running away from it and take it away when they are running towards it," he said. "We will have to take on risk to fund schemes, whether in DB or DC. In times like these, take on risk."
He added it is wise for funds to have their assets in markets that are priced globally so they are not heavily correlated with each other because as risk goes up so does correlation.
AXA Investment Managers head of consultant relations Tim Gardener agreed. He said: "If everyone is selling equities, now is a good time to buy as DC investors do not care about what is going to happen in one month."
However, he warned index weightings have been left behind and active management will develop as trustees take a top-down approach to investment.
Aon Hewitt principal investment consultant John Belgrove said pension funds were taking on a higher degree of hedging, reducing equity exposure and allocating more to alternatives - but it was difficult to generalise as all schemes are on an individual journey.
Meanwhile, Goldman Sachs head of global portfolio solutions Charles Baillie said low risk assets were difficult to find and with four-fifths of schemes being about 90% funded "the only way back is to take on more risk".
Elsewhere, the panel observed the current bubble in the bond market following huge flow of money into bond markets.
AXA IM's Gardener said: "There is a bubble... equity investment has gone down and money gone into the bond market. It is not the tech bubble but when is it going to burst?"
Pension freedoms could generate as much as £1.9bn a year in tax revenue for the next 10 years, according to research by the Pensions Policy Institute (PPI).
The Pension Protection Fund (PPF) has conceded it does not have "all the data we need to calculate" the impact of last month's ruling that some benefits may be unlawful.
A looming court decision on gender equalisation of pension schemes could hit FTSE 100 profits by up to £15bn, Lane Clark and Peacock (LCP) says.
Dutch custodian KAS Bank has created a fintech solution to help schemes save on costs and improve transparency of currency hedging strategies.