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Editorial
ASSETS FOR A NEW ERA
This could be a year of change. We entered 2023 with inflation at a four-decade high but could leave it with a higher cost of capital. To cut the cost of goods and services, central banks have warned that interest rates will have to rise. The question is, by how much?
The answer to this question could determine how institutional investors adjust their portfolios to position themselves for a new era. This month’s cover story looks at their options (pages 16-19). We also look at defined contribution, which is being primed to be the future of the Brit- ish pensions system by the government and employers alike. More than a decade has passed since the introduction of auto-enrolment and the level of assets managed by workplace pensions is catching up with those in the defined benefit market. As markets are entering a more challenging phase, so must defined contribution pen- sion schemes, which until now have largely been exposed to passive strategies. The level of growth of the assets under management along with new guidance on the way from the regulator concerning value for money, means that the industry is entering a new chapter. Read our take on the issue from page 20.
Elsewhere, ESG has arguably become a mainstream investment strategy as pension schemes seek to use the funds under their stewardship to protect our ecosystem and climate as well as reduce inequality. Unfortunately, standards of corporate disclosure on their non-financial performance appear to have not kept pace with the demand for such strategies. The quality of ESG data is inconsistent and sometimes unverified, while the conclu- sions of independent rating providers rarely appear to agree on how sustainable a par- ticular asset is. Such a lack of data has been named as the biggest barrier to building sustainable portfolios. From page 32 we look at how investors can navigate such inconsistencies.
Despite a strong start to the year, which saw the FTSE100 breach the 8,000 barrier for the first time, equities are predicted to have a difficult 2023.
The S&P500 retreating at the time of writing could be a sign that the good start to the year for major indices is short lived. Yet institutional investors do not appear to be ditching the asset class. Andrew Holt finds out why from page 42. In this edition, we also sit down with the duo hired to oversee the West Yorkshire Pen- sion Fund’s investment strategy. Euan Miller and Leandros Kalisperas explain why two heads are better than one from page 12. Finally, Railpen’s Chandra Gopinathan discusses his approach to sustainable owner- ship. Read the three-page interview from page 28.
Mark Dunne Editor
m.dunne@portfolio-institutional.co.uk Issue 121 | March 2023 | portfolio institutional | 3
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