Non-matching assets greatest risk in diversification

Non-matching assets are the key danger to diversification, according to industry figures debating investment strategy at this year’s UK Leadership Pension Summit. 

Remco van Eeuwijk, UK managing director of Mn Services, cited emerging market debt and property as the two most hazardous asset allocations for pension fund investors.

He said an “economic barometer” was needed to regularly assess their diversified portfolios.

Nicola Ralston, director of PiRho Investment Consulting, warned against “lumping in high investment bonds, as when you are taking a risk, that risk can turn round and bite you”.

Timing is critical to effectively hedging a pension fund’s liabilities, said the speakers in the panel discussion on investment strategy.

“Timing is important in terms of the value that you get,” said Steve Mingle (pictured), director of Isinglass Consulting.

He warned against pension fund investors following a “casino logic” in their diversification approach, and advised them to stay mindful of pension-specific risks.

“Mortality risk will always cause concern,” he added.