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Trustees face challenges
Superannuation trustees will be faced with some new challenges with respect to asset allocation and investment manager selection, according to the latest research released by Watson Wyatt.
The research suggests rapid changes in superannuation fund investment strategies will result in a strong decline in traditional low-risk, long-only mandates, leading to further significant changes at investment management organisations.
The research claimed the race for assets in new areas such as unconstrained and absolute return investing would result in a convergence of organisation types, with hedge funds moving into the long-only space while traditional fund managers moved into the long-short space.
It said the findings suggested a continuation in the trend of institutional investment funds using more fund managers and expanding the diversity of their asset classes.
Watson Wyatt senior investment consultant said crating value through advanced investment strategies and the implementation of sophisticated risk-management programs were now top priorities for many institutional investment funds.
“This has resulted in funds moving some of their assets away from benchmark-sensitive approaches to make meaningful allocations to alternative assets and absolute return products,” he said. “In addition, a growing number of defined benefit and insurance funds are turning to the bond and derivatives markets to implement liability driven investment strategies.”
Watson Wyatt’s analysis said the research emphasised the need for trustee boards to be clear about their governance resources before embarking on complex investment models involving significant asset diversity and skill-based strategies.
AUTHOR
Mike Taylor
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