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UK equities
are still an attractive long-term investment option despite the
current market volatility, says Newton Investment Management.
Research suggests that holding UK equities for a period of more
than eight years during the last 108 years has not only produced
higher real returns than gilts, but with lower deviation.
Jeff Munroe, chief investment officer at Newton, commented: “In
times of high volatility many investors may consider whether equities
remain an appropriate investment vehicle for their savings and pension
plans. However, it’s a fundamental principle of long-term
investing that if you want to achieve higher returns, you must be
able to accept higher risk and volatility along the way. This is
why investors should be thinking about investing through market
cycles and not trying to pick the best time to invest. As hard as
it is at certain times, it is advisable to avoid the herd mentality,
which inevitably sees investors piling in at the top of the market
and selling at the bottom.”
Consultants at Aon Consulting agree that tactical investment is
not a desirable option for pension funds.
At a briefing, consultants at Aon Consulting outlined three areas
for consideration, citing corporate bonds, distressed hedge funds
and buy-out opportunities as the key options for pension schemes
in the wake of the past debilitating year.
Investment consultant and actuary at Aon, Daniel Peters, also believes
that the biggest lesson to come out of the credit crunch is that
of the importance of strategic issues.
“There is much more scope now”, he said, and pension
schemes are showing increased interest in alternative investments
instead of depending on poorly-performing equities.
He cited timeframe as the most important factor in strategic issues,
adding: “A pension scheme with a solid covenant can take a
longer-term view, stay back and ride it out.”
Peters warned however that they will advise clients against taking
tactical views of selling poor performing assets and then looking
to buy them back if and when the market recovers.
- Pensions
Age August 2008
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