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Pension funds need to cast a wider net

As we face the prospects of a stop-start economic recovery, could flexible mandates with a ‘go-anywhere’ remit be the optimal approach?

The early ‘tenties’ was a golden era for multi-asset credit (MAC), with multiple investment funds launching to meet growing demand. The format was particularly popular among UK defined benefit (DB) pension schemes, with the investment strategy complementing their ‘de-risking journey’.

But economic conditions have changed considerably since then. Central banks and governments have released tremendous amounts of market support in response to Covid-19 and this in turn has impacted asset prices.

While in the long run assets always find their ‘right price’, over the medium term opportunities will likely shift more sharply between different parts of the credit market. As such, these DB schemes would do well to re-assess how they approach their MAC strategy.

In our view, casting a wide net is one way of responding to what may be a multi-year, stop-start economic recovery.

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