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Survey finds regulation is limiting sufficient returns on pension funds


The majority of professional investors believe that most pension funds will not reach their long-term investment targets given increased longevity, according to a new survey conducted by fund manager GAM.

Some 78 per cent of professional investors held that view, believing that regulation is a key barrier to generating sufficient returns and satisfying liabilities, with 64 per cent of respondents agreeing that regulation needs to change to allow retirement schemes more flexibility in their asset allocation decisions.
Half of respondents anticipate that they will increase their allocation to active products over the next three years, with only 13 per cent planning to increase their investment in passive products. 38 per cent plan to increase portfolio allocations to alternative investments during the second half of 2015, 35 per cent to European equities and 27 per cent to emerging market equities.
 Geopolitical risk, failure in the economic recovery and interest rate movements are perceived as the main risks for investors. However, only 34 per cent of respondents expect a Greek exit from the Eurozone in the next 12 months, and even fewer, just 9 per cent, believe that Great Britain will exit the EU under the new government.
Alexander Friedman, GAM Group CEO, said: “It is clear that politics and possible policy errors remain a key near-term risk for markets, however economic fundamentals should support the on-going recovery. The investment backdrop has changed dramatically in recent years as monetary policy has begun to diverge and we believe that the markets have reached an inflection point; the indiscriminate market rally in risk assets is coming to an end and investors have to take a truly active approach to identify the sources of alpha for the coming years.
“Investors are rightfully concerned about how retirement liabilities will be met and believe that a flexible investment approach is required to remedy this. The key challenge for fund managers is to offer clients strategies which are differentiated and add meaningful value. Passive investments cannot be relied upon in the current market conditions – investors want to see high conviction from the managers they allocate to and at GAM we believe this is essential for delivering attractive returns.”

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