DC Multi Asset – Discussion
A bit more dynamism in investment strategies will be necessary if there is going to be
more volatility. Jos North Investment director Ruffer LLP
to help manage risk and deliver better outcomes.
That is important for older savers, where there are going to be some pretty turbu- lent markets to navigate. I don’t think we can have faith that a low-cost world is going to provide adequate levels of protec- tion. To me, paying a little bit more is pro- tection, or insurance as we call it in day- to-day life. It feels right to consider paying a bit more if we can do better than -15% for older members. Kirkwood: That is where we want to get to, but it needs to be in parallel with the development of investment platforms. We need to avoid pricing errors. Every time we have a pricing error, it is bad news for our members. At the moment, a lot of platforms are going to struggle to do what you want. Stewart: We need to put them under the lens and change them. Kirkwood: There needs to be a seismic shift in the capabilities of a platform. Fearn: What would drive that change? For master trusts it would be more business. But that is not going to work because if it costs more money, they are not going to win more business. Stewart: This is where employee benefit consultants have a role to play. If we are
evaluating the provider market, one of the aspects we should be evaluating is plat- form capability. If there is a capability that is inferior to the rest of the market, then that should be reflected in our view. Fearn: We do that, but there are still employers who just go for the cheapest option. Even if you advise a client that this might be a bit more expensive but it will be worth it, you still get employers going for the cheapest.
There has to be a market shift. We have moved into a different investment envi- ronment, and with that comes cost. If you are going to do ESG then you are going to need to think about more active investments, more active analysis. But it is difficult for a provider to breakaway and win business. Kirkwood: This is not how it should be. It should be that you are the value player, you are good and everybody should flock to you. But you are just seen as expensive. Stewart: The pace of change has been quite slow and painful in some areas. If we agree that change needs to happen then we need to drive it. We need to empower policymakers with the information, knowledge and evidence that they need to change the regulations
around this and have a freer framework to operate within. North: The platform issue is important. If I can talk about it from a portfolio lens, a bit more dynamism in investment strate- gies will be necessary if there is going to be more volatility. If you look back to last year, broadly over the whole year, you had a period of high inflation. But actually, in the first nine months, you had bond yields rising, bond prices falling and equities falling but then it switched in October and the dynamics changed. We were having a conversation with a cli- ent yesterday who wanted to implement a new investment strategy and the pipeline was 18 months. We are talking about need- ing to change investment strategies quick- ly. You could do it within days by allocating to some active managers, but even at the strategy level, being able to move things around within a month is never going to happen within the existing infrastructure. We don’t know what is going to happen in the next 10 years. But I can say with a high degree of confidence that we are going to need to be much more flexible, much more dynamic in all investment strategies to move quickly once a deci- sion has been made.
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