What’s subsequent for US authorities and school retirement plans?
In our 2018 global fixed income study, around 50% of all respondents said that the duration of their investment deals did not match the risks of their investment portfolio and expected investment outcomes. As some of the world’s largest wealth owners and investors, government and college retirement plans have become increasingly complex as they continue to grow portfolios, asset classes and managers, and bring management in.
Investment activities are often fragmented. Data, technology solutions and capabilities, and reporting are segregated, and integration across asset classes and portfolios is often lacking. Gaps can be due to rapidly evolving asset compliance requirements, increased reporting requirements, the shift towards more active implementation styles, and the introduction of separately managed accounts and direct investments. Additionally, the market volatility over the past year coupled with the increasing focus on long-term sustainability underscores the need for comprehensive and timely data analysis that leads to improved decision-making.
Operating with insufficient investment security is a risky approach, especially in an age of increasing public scrutiny and in the face of growing expectations of governance and fiduciary services. Executives must ask themselves: Are we sufficiently focused on strategic and operational risks related to investment business? And if the answer is no, how are these gaps affecting investment risks and results today and tomorrow?
Recently, several leading government and college retirement plans have teamed up to transform their investment activities to increase resilience and transparency. There are growing efforts to improve front, middle and back office skills and enhance data and technology solutions across traditional or real asset classes. In addition, we see an increase in the review and tightening of governance of investment managers or asset servicing relationships and interactions.
Carrying unnecessary risks to plant operations that potentially limit investment decision-making may seem counterintuitive in a volatile and profitable future. Executives should align and transform the maturity and resilience of the investment business while properly focusing on the risks of the investment business.