Sunday, May 26, 2013

How to allocate a £1 billion of pension assets?

Picture is from an unusual meeting held recently with other members of Newham Pension Committee on fund "asset allocation".

What types of investments you should allocate pension fund money into is arguably the most important decision that a board or trustees can make. Far more important than deciding who you employ to manage the funds day to day or even how much they charge.

Depending on your fund requirements, if you say decide to invest too much money in high risk equities rather than lower risk bonds it could have a devastating impact. Conversely if your fund really needs to take more risk and you think the economic outlook is right, then it can have a very negative effect if you opt for the safe options.

Newham decided that instead of having the usual type of review meeting meeting, where our fund advisers will  present  issues and options to the Committee who will then be expected to make a decision - to try something different. So the fund officers organised a special "round table" meeting and invited different City professionals and the Committee members (including the trade union reps) to debate and argue what should be our asset allocation fundamentals.

There was  a robust but productive wide exchange of views and I think all committee members went away with a much better understanding of the problems and possible solutions than a dry presentation. Good stuff. I recommend other pension schemes should consider doing the same. (picture of me with Cllr Ayesha Chowdhury and UNISON pension rep Gloria Hanson)
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