The experience of the coronavirus pandemic and central banks’ and governments’ response has meant that “pension plans now prize portfolio resilience above all else,” according to a new study.

Published by CREATE-Research and Amundi, the analysis is based on a survey of 158 respondents from 17 pension markets across public and private sectors, and aims to shed light on how pension plans worldwide are responding “as the world economy struggles to recover from what is the economic equivalent of a massive cardiac arrest”.

When asked whether the pandemic crisis would mark a turning point in how they would do investing, 33% said ‘very unlikely’, 37% ‘maybe’, and 30% ‘very likely’.

According to Amin Rajan, project leader and author of the report, the latter two groups had one common objective: “build resilient portfolios that cover strategies with strong intrinsic worth that can withstand high volatility and deliver good risk-adjusted returns, while pursuing accelerating structural themes centred on the key growth points in the post-pandemic world”.

In addition to risk factor diversification, portfolio robustness was now targeted by a much stronger reliance on two tools to prevent a permanent loss of capital, he said.

According to the survey, greater scenario planning will be the preferred approach used by plans to manage risk in portfolios over the next decade (61%), while 57% will rely primarily on liquidity management.

Other findings include that most respondents felt it was likely that central banks would lose their independence from their governments (84%) and inflation would follow deflation after the current crisis is over (77%).

Pascal Blanqué, group CIO at Amundi, said: “COVID-19 has forced governments and central banks to embark on a ‘whatever it takes’ wartime-type monetary response. The long-term impacts on financial markets only become evident in hindsight. Faced with such uncertainty, portfolio resilience and antifragility will be the new guiding star for pension investors.”

To find out more about the research, tune in to the opening day of IPE’s Conference & Awards 2020 and open the December issue of IPE magazine, out tomorrow via our website.

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