Given how quickly things seem to be moving, I thought it would be helpful to provide a summary of some of the key themes discussed on mallowstreet.com this week.
The Political Landscape
What a week. Theresa May took up residence in Number 10 and wasted no time forming a new Government. The Labour Party now has two members challenging Jeremy Corbyn for the leadership, and the content is expected to be wrapped up at the end of September. As of this weekend, we have a new Pensions Minister. Looks like it is going to be a long, hot summer.
Brexit means Brexit
There is agreement that the decision to leave the EU has introduced a period of uncertainty and volatility. The other interesting emerging trend is that almost all responses have referenced the phrase ‘keep calm and carry on’, and encouraging trustees and pension funds to avoid ‘knee jerk’ reactions. Two key questions include:
- Is now the right time to hedge, and what is the future direction of interest rates?
- What type of assets should I be considering investing in now, and where are the opportunities?
However, it is important to remember that both defined benefit and defined contribution pension funds and under stress and face a risk of failure if no action is taken.
Sustainability, Responsible Investment, and ESG continue to appear as some of the most frequent search terms on mallowstreet. Trustees are increasingly understanding the importance, and recognising the challenges, of incorporating ESG into pension scheme portfolios. As one member put it: for ESG to really work on a commercial valuation basis it has to be based on a long-term approach, and we all need to work together to think in this way. This was also an interesting question.
- Why should our asset managers think long-term when we measure them on a quarterly basis and one quarter or poor performance can put a mandate at risk?
One thing is clear: we live in extraordinary times. I believe no one person has the right answer to this incredible challenge, but by bringing the industry together, the answers will start to surface. See you on www.mallowstreet.com.