Taking a break from your investment worries

So what are the key worries and how can you deal with them? 

We appear to be exiting the storm caused by the global financial crisis. For example, central banks in the UK and US are moving closer to raising interest rates. However, if history is any guide, the next crisis is never far away.

There remain both economic and political risks, which could derail this recovery. In Europe, there is a battle against deflation that could potentially spill over to the UK and beyond.

Tensions in the Middle East and eastern Europe continue to boil over. Despite this, markets remain wary but calm – equities are at all-time highs while equity market volatility as measured by the Vix index remains close to its all-time low.

Is this the calm from the last storm, or the calm before the next one?

In addition to these headwinds, finding asset returns to meet the growth needs to fund pension deficits is becoming harder.

With so many investors chasing the same assets, and the value of those assets rising, the return we expect from them becomes lower.

Do you find yourself with limited time to deal with everything on your plate? Does your pension fund need to use its governance resources in a more efficient way?

Have you missed attractive market opportunities? Is there a need to understand and act upon them in a timely and controlled manner? How do you anticipate the education and training needs to get these new asset classes approved by the trustee board?

This year there has been a growing interest in risk-focused approaches to asset allocation. For example, several pension funds are switching their equity exposure to one that balances investment growth and affordable downside protection.

Also in the spotlight are less liquid assets, which potentially provide a higher income than traditional corporate bonds and will increasingly make up the final asset allocation as the pension fund reaches full funding.

The key to taking advantage of these opportunities, while dealing with the Pensions Regulator’s new guidance on integrating your fund's key risks – covenant, funding and investment – is to begin with the end in mind.

This allows all stakeholders to develop a framework that clearly lays out the fund's objectives and constraints. Let the framework be your guide and use it to assess opportunities, make decisions, and monitor your progress to full funding.

After all, if you only know where you have been but not where you’re going or what’s in the way, how can you expect to reach your destination on time and without any worry?

Rob Gardner is co-founder and co-CEO at Redington