Ask any asset management expert how they will remember the past decade, and the answers will be unsurprisingly grim. I heard about the end of the defined benefit plan, the swift unwinding of retirement security and the "lost decade".
Fidelity’s Mark Miller said to me, “Fifty to 60 years of retirement provision was unwound in the space of a decade”.
But the last ten years provided some valuable lessons, particularly around risk management. As Global Pensions reports this month, one of the most drastic changes we’ll see in pension funds’ behaviour over the next ten years will be an increased understanding of risk, an understanding that will be embedded in portfolio creation and asset allocation decisions. Click here to view article
How long can this last? An optimist would argue there has been a permanent change in the way investors chase returns; that the lure of the outsized and esoteric has faded. There are already signs of this happening. Pension funds are getting back to basics and funnelling their investments in assets they understand.
In reality, though, I come back to a comment by BNY Mellon Asset Management’s vice chairman Jonathan Little, who simply said, “People have short term memories. Each crisis that occurs is different, but it’s not that different.” He said the lesson only lasts until the guy who remembers the last crisis retires.
We’ve all heard the refrain, “Fool me once, shame on you. Fool me twice, shame on me”. I hope decades down the road, investors won’t be playing the fool.
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