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De-risking and fiduciary duty

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De-risking and fiduciary duty

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De-risking and fiduciary duty


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Sanlam’s Institutional Insights conference offers top global perspectives to guide fiduciaries

In a landscape of continuous change and disruption, and in an investment environment marked by low growth and geopolitical instability, retirement fund trustees have to find new ways to meet their fiduciary responsibilities, said Azola Zuma, chief executive of Sanlam Investment Management at the 2017 Sanlam Investments Institutional Insights conference in Johannesburg this week. Leading fellow fiduciaries agreed they may have no option but to consider retirement funding solutions outside traditional asset classes, while carrying a new perspective on fiduciary responsibility and risk.

That was the theme of the Sanlam Investments Institutional Insights conference which gave the floor to leading experts from the UK and US, as well as local practitioners who have had to apply their minds to meeting their fiduciary responsibilities in a rapidly changing environment.

Opening the floor, Chief Executive Azola Zuma said the need for optimal outcomes-based retirement solutions necessitated a look at alternative asset classes such as unlisted property, private equity, hedge funds, and infrastructure instruments. Such alternatives stood to deliver higher yields as traditional asset categories such as equities, bonds, listed property and cash stagnated in a low-growth global environment.

“Pension fund legislation allows funds to allocate up to 15% of their assets in a combination of private equity and hedge funds (maximum 10% each), yet on average retirement funds have invested only 3.7% in such assets. One has to ask if trustees are embracing change enough in order to deliver on their fiduciary responsibility in a low-yield environment,” said Zuma.

In a global context, US economist and political adviser Pippa Malmgren bemoaned the fact that so many fund managers were ignorant of the real world, depending more on mathematics and hard data when they compiled their portfolios.

“They are blind to the geopolitical economy. That’s why so many of them missed Brexit, missed Trump, missed the slowdown in China. You can’t quantify everything, which is why imagination remains the single most important quality for a fund manager.”

Malmgren said too many market participants remained fixated on risk, rather than looking for opportunities thrown up by geopolitical change. Instead of being terrified by cryptocurrencies like Bitcoin, investors should look at the possibilities thrown up by quantum-powered blockchain and who will profit from it.

“China is moving fast in terms of computing power; the processing of information. It’s the new arms race. You have to open both eyes to see it — not everything is reflected in market data. With the right framework, the right imagination, investors can take advantage of the future.”

Despite the superficially distressing spectre of conflict in Syria, North Korea and the Ukraine, there are far better things to worry about, said Malmgren.

These are just some of the key insights trustees could leverage to deliver positive retirement outcomes for their members. Institutional Insights has become a popular and dynamic platform, where delegates come together to discuss the ongoing challenges facing fiduciaries, and we look forward to continue sharing rich insights and global perspectives.

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