Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • September 2018
09

Most pension funds shifting towards more complex investment portfolios

Open-access content Wednesday 19th September 2018 — updated 5.50pm, Wednesday 29th April 2020

The majority of institutional investors like pension funds are increasing overhauling their portfolios in search of greater returns, with two-thirds having added at least one new asset class over the last three years.

2


That is according to a global study of investors with around £6trn in assets by consultancy firm bfinance, which finds that private debt, infrastructure and real estate are among the most popular new additions to portfolios.

Almost half of investors have increased their allocations to private markets, although a lack of attractive opportunities and delays in capital calls were cited as reasons for many still being off their long-term targets.

It was also found that, despite greater use of alternative investments, most investors have managed to reduce fees paid to external managers, with only a quarter having seen total costs increase as a percentage of assets.

Fee renegotiation, consolidating mandates with fewer managers, and conducting fee benchmarking studies using external consultants, were mentioned as the main belt-tightening tactics used by investors.

"Asset owners have been remarkably successful at improving overall efficiency while simultaneously adding complexity, illiquidity and new asset classes, as well as overhauling risk management," study author, Kathryn Saklatvala, said.

"However, visible changes of this type should also raise new questions around governance, and specifically, the governance of implementation decisions."

Approximately two-thirds of the institutional investors studied were pension funds, although foundations, sovereign wealth funds, insurers, healthcare institutions, family offices and others were analysed.

It was found that almost a third have moved towards passive management of assets over the past three years, although most investors still expect active management to outperform passive over the next 12 months

Nearly half said active management would be needed for good environmental, social and governance (ESG) considerations, with 39% saying this was a "high priority" for their institution, particularly for large investors.

"There is a gulf between the returns that many investors require and the widespread expectations for what a traditional portfolio may be expected to deliver through the coming decades," bfinance CEO, David Vafai, said.

 "With investors making substantial changes to improve long-term risk-adjusted returns, the job of the chief investment officer is getting harder, and successful delivery is becoming increasingly reliant on the quality of implementation decisions."


Sign up to our free newsletter here and receive a weekly roundup of news concerning the actuarial profession

This article appeared in our September 2018 issue of The Actuary.
Click here to view this issue
Filed in
09

You might also like...

Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Life Actuarial Trainee

England
Up to £55000.00 per annum
Reference
145815

Catastrophe Manager - Top Performing Syndicate

England, London
£70000 - £94000 per annum
Reference
145814

Senior Pricing Analyst

London, England
£40000 - £80000 per annum
Reference
145813
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ