The global financial crisis has served to teach the financial market some important lessons that should not soon be forgotten, according to Bank of New York Mellon Asset Management senior market strategist Robert Jaeger.
Jaeger, who has been visiting Australia this month, told Super Review that investors had plenty to learn from the meltdown and, in doing so, could improve their future portfolio construction.
He drew on the words of economist John Maynard Keynes in suggesting that markets can remain irrational longer than investors can remain solvent and added that liquidity had also been proved to be key, even for long-term investors.
Jaeger said the reality that had emerged was that if you did not have short-term liquidity, you could not be an effective long-term investor because you could not buy during panics and you might even become a forced seller.
“Even sovereign wealth funds, which have long time horizons and no specific spending requirements, should have ‘emergency funds’ to hand,” he suggested.
Jaeger also suggested that many of the disasters to emerge from the global meltdown had come from what had been regarded as “conservative investing” in circumstances where AAA bonds had blown up and securities lending programs had run into difficulties.
He said the current environment had created extraordinary investment opportunities but investors had to be aware that there was still no such thing as a free lunch and that the unpredictability of the market had still not gone away.
The research house has offered a silver lining after super fund returns saw the end of a five-month streak last month.
A survey of almost 6,000 fund members has identified weakening retirement confidence, particularly among those under 55 years of age, signalling an opportunity for super funds to better engage with members on their retirement journey.
The funds have confirmed the signing of a successor fund transfer deed, moving closer to creating a new $29 billion entity.
A number of measures, including super on Paid Parental Leave, funding to recover unpaid super, and frameworks to encourage investment in the energy transition, have been welcomed by the superannuation industry.
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