The annual Pensions and Lifetime Savings Association (PLSA) conference in Edinburgh brought together leaders of the pension industry from trustees to investment managers, and addresses the biggest challenges faced by the industry with the aid of key guest speakers and expert knowledge.
This year’s focus was on cost transparency, regulation, and diversity, and below are some of my personal highlights.
Gaining the public's trust again
The pension industry gaining more public trust was a key theme of the conference, with reference to a focus on cost transparency. Costs are an obviously important issue for investors; however I feel there should be concentration on the best value manager, not the cheapest.
Remembering the financial crisis
Nick Clegg, former Deputy Prime Minster in the years of the financial crisis, was one of the key speakers and discussed the notion that people are already starting to forget the way that imbalances, exposures, and liabilities can brew in a financial system, as during the 2007/8 financial crisis, if left unchecked. I believe he was making reference to senior members of systemically important firms (such as banks) having left their businesses or retired from work, leaving people who did not experience the crisis in their previous positions in charge.
The impact of advances in technology
Advances in technology were also alluded to – firms now have access to blockchain technology to help reduce costs trading (although this isn’t yet widely used), however there is concern with this in that firms will need to share information which will probably cause a greater delay than getting the technology.
Ethical/impact investing was mentioned often. Ethical investments are not just about ethical investing, but also about reducing the risk in a portfolio - for example, challenges facing tobacco firms due to increased regulation will reduce sales and therefore share price. Ethical investing is more aligned with long-term investing, allocating to things such as renewable energy.
A panel discussion was held on asset bubbles because of equity markets being at all time highs. It was debated that given the high valuations of equities it would not be unimaginable for the US equity markets to halve in value based on P/E ratios, and counter-argued that other valuation techniques don’t consider them to be overvalued at all. I struggle to see the where the growth in equites will come from given the rise of interest rates in the US.
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