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PLSA Investment Conference 2018: Who said what

James Morgan

A summary of the main issues from the Edinburgh conference

MHP’s Financial Services team, which represents 10% of the UK’s defined benefit schemes and whose asset management clients have combined assets over £2.5 trillion, was in Edinburgh for the Pensions and Lifetime Savings Association’s (PLSA) annual Investment Conference.

Against the backdrop of a market environment with an intriguing future, the pressing issues across the industry were debated throughout the week and we outline here our take on what proved to be an interesting and insightful week.

ESG – material progress

Environmental, Social and Governance (ESG) investing was a prominent theme throughout the week, as was climate change risk – both from an investment risk and stewardship perspective. This was reflected in Wednesday afternoon’s session on ‘Forecasting the next big risk’, with Elizabeth Fernando from USS citing climate change as being the “single-biggest risk” to investments and portfolios.

What was especially encouraging was the sense that not only are these considerations actually filtering into investment strategies, but there was meaningful work being done to implement ESG into all asset classes, beyond the traditional confinement to listed equities – and indeed beyond traditional “sin stocks” related to unethical or immoral corporates (e.g. tobacco, munitions, gambling, porn industry etc.).

In an entertaining session to open Thursday morning, BNP Paribas’ Helena Viñes Fiestas highlighted food production as a sector where far more engagement is needed by asset owners; all of this sitting under the objective of creating a financial system far more focused on sustainability and positively impacting the behaviour of companies.

Risky business

Management of risk was an undercurrent which filtered into almost all conversations throughout the week, whether expected to have material impacts in the immediate or longer-term.

One of the standout sessions tackled frothing markets and the challenge of identifying – and protecting portfolios against – bubbles. Competing views were expertly presented  by Man GLG’s Ben Funnell and AXA IM’s David Page. The session was filled with data and insight, leading Funnell to proclaim that “…water is seeping up through the drains – there’s almost nowhere where there isn’t a bubble.”

Trustees were also pushed to do more regarding cashflow risk and faced scrutiny in ensuring that schemes’ risk management processes are handled responsibly and well. J.P. Morgan’s head of EMEA pensions solutions, Sorca Kelly-Scholte, likened the current situation to “trying to fill up the bathtub with the plug out,” stressing the need for action to be taken now, given the complexities and time required to get it right.

Pensions free of politics

SNP MP Ian Blackford laid out his thoughts on political meddling within the pensions market, highlighting his concerns at the constant changes being made by the UK Government to the pensions system, with those involved in the decisions having little/no direct experience in the industry. Blackford was explicit in highlighting the issues this raises in getting younger people to engage with saving and value its importance. His recommendation to remove the dialogue from Westminster and replace it with a dedicated commission on pensions which takes a longer-term wider view, will have resonated well with many delegates, and echoed a call made by the then NAPF back in 2004.

Gina Miller on reputational issues facing the industry

Of particular interest was Gina Miller’s last-day address which, amongst a plethora of insights, touched on reputational issues facing the pensions and asset management industry; a sector which has been “tarred with the brush of the wider financial services industry,” as Miller put it.

Recently, the Financial Services team here at MHP undertook its own research into these reputational issues, and our findings corroborate Miller’s views; just 34% of consumers are positive about the reputation of pension funds.

As Ms Miller elaborated, there is a clear need for trustees and managers to be more proactive in addressing these reputation challenges and misconceptions, ensuring that they communicate consistently and effectively with members and wider public (i.e. the end-saver).

To find out more about MHP’s Financial Services team and how we could help you please contact james.morgan@mhpc.com