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CDI – Feature


(NOT SO)


EASY MONEY


The last recession hit investors by surprise. In 2007, the Fed’s then chair, Ben Bernanke, confidently predicted that troubles in the subprime loan sector would not affect the broader hous- ing market. The rest is history.


In contrast, rarely has a recession been as widely anticipated as the next crisis. The risk of an economic slowdown has been identified as the number one threat in Aon’s Global Risk Man- agement Survey. More than 80% of institutional investors believe another reces- sion is likely to happen within the next five years, according to Natixis Investment Management. This doesn’t bode well. In 2008, average pension fund growth fell by almost 20%,


according to Moneyfacts. A decade on, pensions schemes are still grappling with the consequences. Add to that the life cycle of the average defined benefit (DB) scheme in the UK. Only 11% of the more than 5,000 such schemes in the Pension Protection Fund’s (PPF) universe are open to new members, while more than half are in deficit, according to the PPF, highlighting institutional investors’ growing need for cash to pay members’ benefits. Holding a lot of cash could be a safe haven during a market downturn. Value investor Warren Buffett seems to think so. His investment firm, Berkshire Hathaway, sat on a record $122bn (£94.2bn) of cash last year. The ultra-rich are doing the


Issue 91 | March 2020 | portfolio institutional | 43


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