On the go: Quantitative easing has destabilised pension finances and is at the point of reducing returns, according to research from Create-Research and asset manager Amundi.
Published on Tuesday, the report ‘Quantitative easing: The end of the road for pension investors’ pointed out that QE initially delivered many benefits.
Two-thirds (67 per cent) of respondents from 153 pension funds – with €1.88tn (£1.6tn) assets under management – and 38 pension consultants agreed the stabilisation of financial markets after the Lehman Brothers collapse can be attributed to the introduction of this monetary policy.
Despite 58 per cent of respondents citing that QE has helped boost returns on risker assets, its effectiveness is now in question.
One survey participant said: “Problems in Europe and Japan are structural. QE can’t fix them. It can only act like an anaesthetic before surgery.”
The majority of respondents (nearly 80 per cent) agreed that QE has inexorably inflated global debt and sown the seeds of the next crisis.
Two-thirds of pension fund professionals believe that the monetary policy has overinflated pension liabilities via zero-bound interest rates, while half said governments have used QE as an excuse to backslide on growth-friendly, supply-side reforms.
While QE lasts, the majority of respondents (58 per cent) said they will favour equities.
Professor Amin Rajan of Create-Research, who led the project, said: “QE is currently at the point of diminishing returns and has undermined the finances of pension plans. So deeply is it now entrenched in investor psyche, QE will be very hard to unravel without huge market volatility.”
Pascal Blanqué, group chief investment officer at Amundi, noted: “Pension plans are facing a host of challenges in this post-QE environment. As volatility rises and markets fall, liquidity management has become paramount, as has capital preservation for pension investors.”
